<PAGE>
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
Filed by the registrant [X]
Filed by a party other than the registrant [_]
Check the appropriate box:
[_] Preliminary proxy statement
[X] Definitive proxy statement
[_] Definitive additional materials
[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FIRST USA PAYMENTECH, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
FIRST USA PAYMENTECH, INC.
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[_] Fee computed on table per Exchange Act Rules 14a-6(i)(4) and 0-11.
<PAGE>
LOGO
FIRST USA PAYMENTECH, INC.
1601 ELM STREET
DALLAS, TEXAS 75201
--------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1996 Annual Meeting of the Stockholders of First USA Paymentech, Inc.
will be held at the offices of the Company, 1601 Elm Street, 47th Floor, in
Dallas, Texas on Wednesday, October 23, 1996, at 10:30 a.m., Central Standard
Time, for the following purposes:
1. To elect two Class I directors to serve until the expiration of their
terms and until their successors are elected and qualify;
2. To authorize the adoption of the First USA Paymentech, Inc. 1996 Stock
Option Plan;
3. To authorize the adoption of the First USA Paymentech, Inc. 1996
Restricted Stock Plan;
4. To authorize the adoption of the First USA Paymentech, Inc. Employee Stock
Purchase Plan;
5. To authorize the adoption of the First USA, Inc. Deferred Compensation
Plan; and
6. To transact whatever other business may properly be brought before the
meeting.
Stockholders of record at the close of business on September 2, 1996 by
order of the Board of Directors are entitled to notice of and to vote at the
meeting.
[SIGNATURE OF PAMELA H. PATSLEY APPEARS HERE]
Pamela H. Patsley
President and Chief Executive
Officer
September 19, 1996
--------
Please mark, sign, date and return promptly the proxy in the enclosed
envelope even if you plan to attend the meeting. If you attend the meeting and
wish to vote in person, you may then withdraw your proxy.
<PAGE>
FIRST USA PAYMENTECH, INC.
1601 ELM STREET
DALLAS, TEXAS 75201
PROXY STATEMENT
First USA Paymentech, Inc. (the "Company") is a Delaware corporation, which,
through its wholly owned subsidiary, First USA Merchant Services, Inc.
("Merchant Services"), is the third largest payment processor of bankcard
transactions in the United States. In addition, through its wholly owned
subsidiary, First USA Financial Services, Inc. ("Financial Services"), the
Company, in fiscal 1996, began marketing and issuing to businesses and other
entities credit and charge cards that facilitate centralized business-to-
business payment systems and reporting, replacing traditional direct payment
methods.
This Proxy Statement is furnished in connection with the solicitation by the
Company of proxies to be voted at its Annual Meeting of Stockholders to be
held at 10:30 a.m., Central Standard Time, on Wednesday, October 23, 1996, at
the offices of the Company, 1601 Elm Street, 47th Floor, in Dallas, Texas, and
at any adjournment thereof. This Proxy Statement was first mailed or given to
stockholders on September 19, 1996.
Solicitation of proxies may be made by mail, personal interview, telephone
and telegraph by directors, officers and employees of the Company. Expenses
for such solicitation will be borne by the Company. Brokers and others will be
reimbursed for their reasonable expenses in forwarding the proxy material to
their customers who have beneficial interests in stock of the Company
registered in names of nominees.
Any proxy may be revoked by a stockholder at any time prior to its use by
execution of another proxy bearing a later date, by written notice to the
Secretary of the Company at the address set forth above or by oral or written
statement at the meeting. Shares represented by any proxy properly executed
and received prior to the meeting will be voted at the meeting in accordance
with the proxy or, if the proxy does not specify, in accordance with the
recommendation of the Board of Directors.
Stockholders of record at the close of business on September 2, 1996 are
entitled to notice of and to vote at the meeting. On the record date the
Company had 31,702,681 shares of common stock of the Company (the "Common
Stock") outstanding. Of that total, 24,411,081 shares (or 77%) were
beneficially owned by First USA, Inc. ("First USA"). Each share of Common
Stock outstanding on the record date is entitled to one vote. There is no
provision for cumulative voting.
Under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), publicly held corporations are generally precluded from deducting
compensation in excess of $1 million paid to the Chief Executive Officer or
any of the four most highly compensated other executive officers for federal
income tax purposes for a taxable year. Exceptions are made for, among other
things, qualified performance-based compensation. In order to ensure that
compensation paid or deemed paid by the Company to its executive officers will
be treated as qualified performance-based compensation and will, therefore,
not be subject to the limitation of Section 162(m) of the Code, stockholders
are requested to approve the Company's adoption of the First USA Paymentech,
Inc. 1996 Stock Option Plan (the "1996 Option Plan") and the First USA
Paymentech, Inc. 1996 Restricted Stock Plan (the "Restricted Stock Plan") at
the annual meeting.
In addition, in order to qualify the First USA Paymentech, Inc. Employee
Stock Purchase Plan (the "Purchase Plan") under Section 423 of the Code,
thereby enabling participants in the Purchase Plan (all of which will be full
time employees of the Company) to obtain favorable tax treatment resulting
from their participation in the Purchase Plan, stockholders are requested to
approve the Company's adoption of the Purchase Plan at the annual meeting.
1
<PAGE>
Pursuant to the rules of the New York Stock Exchange, stockholders of the
Company are also requested to approve the Company's adoption of the First USA,
Inc. Deferred Compensation Plan (the "Deferred Compensation Plan") at the
annual meeting.
A quorum for the meeting requires the presence in person or by proxy of
stockholders entitled to cast a majority of the votes entitled to be cast at
the meeting. The election of directors requires a plurality of the votes cast
by the holders of Common Stock at the meeting. The approval of the 1996 Option
Plan, the Restricted Stock Plan, the Purchase Plan and the Deferred
Compensation Plan each require the affirmative vote of the holders of a
majority of the voting power of the shares of Common Stock present or
represented and entitled to vote at the meeting. First USA has informed the
Company that it intends to vote FOR each of the matters described above at the
annual meeting.
Stockholders will vote at the meeting by ballot and votes cast at the
meeting in person or by proxy will be tallied by the Company's Transfer Agent
and Registrar, the Bank of New York. Shares held by stockholders present at
the meeting in person who do not vote and ballots marked "abstain" or
"withheld" will be counted as present at the meeting for quorum purposes. With
respect to the items submitted for approval, abstentions will have the effect
of a vote against the proposal and broker non-votes will be disregarded and
will have no effect on the outcome of the vote. There are no rights of
appraisal or similar dissenter's rights with respect to any matter to be acted
upon pursuant to this proxy statement.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information believed by the Company
to be accurate based on information provided to it concerning the beneficial
ownership of Common Stock by each stockholder who is known by the Company to
own beneficially in excess of 5% of the outstanding Common Stock as of the
latest practicable date, and by each director, the Company's Chief Executive
Officer, each of the Company's other four most highly compensated executive
officers and all officers and directors as a group, as of August 31, 1996.
Except as otherwise indicated, all persons listed below have (i) sole voting
power and investment power with respect to their shares, except to the extent
that authority is shared by spouses under applicable law, and (ii) record and
beneficial ownership with respect to their shares. The shares and percentages
set forth below include shares of Common Stock which were outstanding or
issuable within 60 days upon the exercise of options outstanding as of August
31, 1996.
<TABLE>
<CAPTION>
COMMON STOCK
---------------------
NUMBER OF PERCENTAGE
NAME OF BENEFICIAL OWNER SHARES OF CLASS
- - ------------------------ ---------- ----------
<S> <C> <C>
First USA, Inc. (a)...................................... 24,411,081 77%
Gene H. Bishop(b)(c)..................................... 25,000 *
Pamela H. Patsley(b)(c).................................. 185,100 *
Rupinder S. Sidhu(b)(c)(d)............................... 25,000 *
John C. Tolleson(b)(c)................................... 210,000 *
Richard W. Vague(b)(c)................................... 210,000 *
Michael P. Duffy(c)...................................... 43,200 *
Susan H. Cerpanya(c)..................................... 55,000 *
Raymond J. McArdle(c).................................... 55,000 *
Elena R. Anderson(c)..................................... 50,000 *
All executive officers and directors as a group (14
persons)(c)(d).......................................... 954,125 3.0%
</TABLE>
- - --------
* Less than 1.0%
(a) The address of First USA is 1601 Elm Street, 47th Floor, Dallas, Texas
75201. The record owner of such shares is First USA Financial, Inc., a
wholly owned subsidiary of First USA.
(b) Gene H. Bishop, Pamela H. Patsley, Rupinder S. Sidhu, John C. Tolleson and
Richard W. Vague are directors of the Company.
(c) The shares include shares subject to options exercisable within 60 days of
August 31, 1996 as follows: Mr. Bishop, 5,000 shares; Ms. Patsley, 35,000
shares; Mr. Sidhu, 5,000 shares; Mr. Tolleson, 10,000 shares; Mr. Vague,
10,000 shares; Mr. Duffy, 10,000 shares; Ms. Cerpanya, 10,000 shares; Mr.
McArdle, 10,000 shares; and Ms. Anderson, 10,000 shares; all executive
officers and directors as a group, 126,500 shares. The address for Messrs.
Bishop, Sidhu, Tolleson and McArdle, and Ms. Patsley, Anderson and
Cerpanya is c/o First USA Paymentech, Inc., 1601 Elm Street, Dallas, Texas
75201. The address for Mr. Vague is c/o First USA Bank, Three Christina
Centre, 201 North Walnut, Wilmington, Delaware 19801. The address for Mr.
Duffy is c/o First USA Paymentech, Inc., 4 Northeastern Blvd., Salem, New
Hampshire 03079.
(d) The shares exclude 50,000 shares held by a limited partnership, for which
Mr. Sidhu is the President of the general partner, a limited liability
company. Mr. Sidhu disclaims beneficial ownership of such shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors and
persons who own more than ten percent (10%) of a registered class of the
Company's equity securities (collectively, the "Reporting Persons") to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "Commission") and to furnish the Company with copies of these
reports. The Company believes that all filings required to be made by the
Reporting Persons during the fiscal year ended June 30, 1996 were made on a
timely basis.
3
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors has proposed Pamela H. Patsley and Rupinder S. Sidhu
as nominees for reelection as Class I directors to serve for three-year terms
and until their successors are elected and qualify. A plurality of the votes
cast at the meeting is required to elect each nominee. Shares represented by
proxies will be voted for the election of the nominees named below unless
authority to do so is withheld. If, at the time of the annual meeting, any
nominee should be unable to serve, the shares represented by a proxy may be
voted for a substitute nominee to be designated by the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- - ---- --- --------
<S> <C> <C>
Pamela H. Patsley....... 39 President, Chief Executive Officer and Director of the Company
Rupinder S. Sidhu....... 40 Director of the Company
</TABLE>
Pamela H. Patsley. Ms. Patsley has been President, Chief Executive Officer
and a Director of the Company since December 1995. She has also served as
President and Chief Executive Officer of Merchant Services since December 1991
and Executive Vice President and Manager since July 1990, and as Chairman of
the Board of Financial Services since August 1994. Ms. Patsley has also served
as Executive Vice President and Secretary of First USA since July 1989. She
has been a Director of First USA Bank since November 1993 and a Director of
First USA Federal Savings Bank ("First USA FSB") since March 1996. Ms. Patsley
was Chief Financial Officer of First USA and its predecessor from January 1987
to April 1994 and a Senior Vice President prior to such time. Ms. Patsley
originally joined First USA's predecessor, MNet Corp., as its Vice President
and Controller in February 1985. Ms. Patsley currently serves on the VisaNet
Services Advisors' Committees of Visa USA, Inc. and Visa International, Inc.
Ms. Patsley is also a Director of First Virtual Holdings, Inc.
Rupinder S. Sidhu. Mr. Sidhu has been a Director of the Company since
December 1995. He has also been a Director of First USA since August 1989. Mr.
Sidhu has been President of Merion Capital Management LLC, a private
investment company, since 1994. From 1993 to 1994, Mr. Sidhu was a Partner of
Stonington Partners, Inc. (formerly known as First Capital Partners, Inc.), a
private investment firm. Mr. Sidhu has been a member of the Board of Directors
of Merrill Lynch Capital Partners, Inc., a private investment firm affiliated
with Merrill Lynch & Co., since 1987. He is also a Director of Eckerd
Corporation, Wherehouse Entertainment, Inc. and CMI Industries, Inc.
A plurality of the votes cast by the holders of Common Stock at the meeting
will be required to reelect the nominees as Class I directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH NOMINEE FOR CLASS I
DIRECTOR.
4
<PAGE>
INCUMBENT DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION
- - ---- --- --------
<S> <C> <C>
Gene H. Bishop......................... 66 Director of the Company
John C. Tolleson....................... 48 Chairman of the Board of the Company
Richard W. Vague....................... 40 Director of the Company
</TABLE>
Gene H. Bishop. Mr. Bishop has been a Director of the Company since December
1995. He has also been a Director of First USA since September 1992. Mr.
Bishop also served as Chairman and Chief Executive Officer of Life Partners
Group, Inc. from November 1991 until October 1994. From October 1990 until
November 1991, he was Vice Chairman and Chief Financial Officer of Lomas
Financial Corporation and President and Chief Operating Officer of Lomas
Mortgage USA, a wholly owned subsidiary of Lomas Financial Corporation. From
March 1975 to July 1990, he was Chairman and Chief Executive Officer of MCorp,
a bank holding company. Mr. Bishop is also a Director of Southwest Airlines
Co., Liberte Investors, Southwestern Public Service Co. and Drew Industries,
Inc.
John C. Tolleson. Mr. Tolleson has been Chairman of the Board of the Company
since December 1995, and Chairman of the Board of Merchant Services since May
1985. Mr. Tolleson has also served as Chairman of the Board and Chief
Executive Officer of First USA since August 1989, and of First USA's
predecessor since its formation in May 1985. Mr. Tolleson has been a Director
of First USA Bank since May 1985 and a Director of First USA FSB since March
1996. Mr. Tolleson currently serves on the Boards of Visa USA, Inc., Visa
International, Inc., Capstead Mortgage Corporation and Jayhawk Acceptance
Corporation and on the Executive Board of the Cox School of Business at
Southern Methodist University.
Richard W. Vague. Mr. Vague has been a Director of the Company since
December 1995. Mr. Vague has also served as President of First USA since June
1990 and as a Director of First USA since August 1989. Mr. Vague has also been
Chairman of the Board and Chief Executive Officer of First USA Bank since
October 1995 and was a Director from May 1985 through October 1995. Mr. Vague
also served as President and Chief Executive Officer of First USA Bank from
1987 through October 1995. Mr. Vague has been Chairman of the Board of First
USA FSB since March 1996. Mr. Vague also serves on the Visa Marketing
Committee, the Visa International Card Products Committee and the MasterCard
Marketing Committee, and was co-founder of First USA's predecessor with Mr.
Tolleson. Mr. Vague is also a Director of Physician Support Systems, Inc.
The Board of Directors of the Company is divided into three classes serving
staggered three-year terms. Directors for each class will be elected at the
annual meeting of stockholders held in the year in which the term for such
class expires, and will serve for three years. The terms of Pamela H. Patsley
and Rupinder S. Sidhu will expire at the 1996 annual meeting and, if
reelected, at the 1999 annual meeting; the terms of Richard W. Vague and Gene
H. Bishop will expire at the 1997 annual meeting; and the term of John C.
Tolleson will expire at the 1998 annual meeting. The Board of Directors held
two meetings during the last fiscal year. Messrs. Bishop and Sidhu serve on
the Company's Compensation Committee (the "Compensation Committee") and Audit
Committee (the "Audit Committee"). The Company has no nominating committee.
The Audit Committee reviews and evaluates the Company's internal accounting
and auditing procedures, recommends to the Board of Directors the firm to be
appointed as independent accountants to audit the Company's financial
statements, reviews with management and the independent accountants the
Company's year-end and quarterly operating results, and reviews the scope and
results of the audit with the independent accountants. The Audit Committee met
two times in fiscal 1996.
The Compensation Committee reviews compensation arrangements for executive
officers. The Compensation Committee also administers the Company's stock
option and restricted stock plans, and except with respect to grants of
options to outside directors, has full authority to determine the persons to
whom and the times at which options shall be granted, the number of option
shares to be granted and the price and other terms of options. The
Compensation Committee met one time in fiscal 1996.
5
<PAGE>
EXECUTIVE COMPENSATION
The following tables set forth certain information concerning compensation
of, and stock options held by and restricted stock granted to, the Company's
Chief Executive Officer and the other four most highly paid officers in
respect of fiscal 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------ ----------------------------------------
NUMBER OF
SECURITIES
FISCAL RESTRICTED STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) AWARDS(2) OPTIONS(3) COMPENSATION
- - --------------------------- ------ -------- -------- ---------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Pamela H. Patsley....... 1996 $280,000 $300,000 $ -- 275,000 $3,388(4)
President and Chief 1995 225,000 168,750 443,750 25,000 3,617(4)
Executive Officer
Michael P. Duffy(5)..... 1996 130,000 100,000 -- 80,000 1,013(6)
Group Executive
Susan H. Cerpanya....... 1996 135,000 75,000 -- 80,000 2,025(6)
Group Executive 1995 125,000 62,500 221,875 10,000 1,875(6)
Raymond J. McArdle...... 1996 135,000 75,000 -- 80,000 1,965(6)
Group Executive 1995 115,500 57,750 221,875 10,000 1,733(6)
Elena R. Anderson....... 1996 120,000 75,000 -- 80,000 1,800(6)
Group Executive 1995 95,500 50,000 221,875 10,000 1,433(6)
</TABLE>
- - --------
(1) Bonuses for fiscal 1996 were approved by the Board of Directors of the
Company on July 16, 1996 and paid on July 31, 1996. Bonuses for fiscal
1995 were approved by the Board of Directors of First USA on July 19, 1995
and paid on July 31, 1995. The amount for Mr. Duffy represents bonus
payments made during fiscal 1996 to Mr. Duffy with respect to the period
from January 1, 1995 through June 30, 1996.
(2) No awards of restricted Common Stock had been issued to the named
executive officers with respect to fiscal 1996. Awards of First USA
restricted stock for fiscal 1995 were approved by the Board of Directors
of First USA on July 19, 1995. The awards were made in recognition of the
Company's and First USA's performance and as incentive for future
performance, and entitle the recipient to all dividends paid on such
shares. The values shown for restricted stock awards granted in fiscal
1995 are shown by multiplying the number of shares granted by $44.375, the
closing price of First USA's common stock on the last trading day of
fiscal 1995. Except as set forth below, the number and value of shares of
restricted stock of First USA held by the named executive officers on the
last day of fiscal 1996 (based upon the closing price of $55 for First
USA's common stock on the last trading day of fiscal 1996) were: Ms.
Patsley, 20,000 shares, $1,100,000; Mr. Duffy, no shares; Ms. Cerpanya,
10,000 shares, $550,000; Mr. McArdle, 10,000 shares, $550,000; and Ms.
Anderson, 10,000 shares, $550,000. The amounts in this column and footnote
do not reflect any shares of restricted stock of First USA granted to the
named executive officers following the March 1996 initial public offering
of the Common Stock (the "Initial Public Offering"). Such shares of First
USA restricted stock were granted as compensation in recognition for
services rendered to First USA.
(3) Annual stock option grants for fiscal 1996 were approved by the Board of
Directors of the Company on July 16, 1996. Fiscal 1995 amounts represent
the number of options to purchase First USA common stock. Stock option
grants for fiscal 1995 were approved by the Board of Directors of First
USA on July 19, 1995. The awards were made in recognition of the Company's
performance and as incentive for future performance. Fiscal 1996 amounts
represent the number of options to purchase Common Stock granted to such
individuals as follows: Ms. Patsley 75,000 annual award shares, 100,000
Initial Public Offering shares and 100,000 stock loan shares; Mr. Duffy,
25,000 annual award shares, 25,000 Initial Public Offering shares and
30,000 stock loan shares; Ms. Cerpanya, 25,000 annual award shares, 25,000
Initial Public Offering shares and 30,000 stock loan shares; Mr. McArdle,
25,000 annual award shares, 25,000 Initial Public
6
<PAGE>
Offering shares and 30,000 stock loan shares; and Ms. Anderson, 25,000
annual award shares, 25,000 Initial Public Offering shares and 30,000 stock
loan shares.
(4) The amount represents employer matching contributions to the First USA
Savings Restoration Plan.
(5) Mr. Duffy joined the Company in fiscal 1996 and was with Litle & Company,
Inc. prior to joining the Company.
(6) The amounts represent employer matching contributions to the First USA
Retirement Savings Plan.
OPTION GRANTS
The following table sets forth information concerning stock option grants
made with respect to fiscal 1996 to the named executive officers to purchase
Common Stock.
OPTION GRANTS WITH RESPECT TO LAST FISCAL YEAR--COMPANY COMMON STOCK
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------- ANNUAL RATES OF
NUMBER OF STOCK PRICE APPRECIATION
SECURITIES % OF TOTAL FOR OPTION TERM(2)
UNDERLYING OPTIONS EXERCISE -------------------------
OPTIONS GRANTED TO PRICE PER EXPIRATION
GRANTED EMPLOYEES(1) SHARE DATE 5% 10%
---------- ------------ --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Pamela H. Patsley....... 75,000 3.60% $36.00 7/16/2006(3) $1,698,000 $4,303,500
100,000 4.80% 19.53 3/22/2006(3) 1,228,000 3,113,000
100,000 4.80% 19.53 4/21/1996(4) N/A N/A
Michael P. Duffy........ 25,000 1.20% 36.00 7/16/2006(3) 566,000 1,434,500
25,000 1.20% 19.53 3/22/2006(3) 307,000 778,250
30,000 1.44% 19.53 4/21/1996(4) N/A N/A
Susan H. Cerpanya....... 25,000 1.20% 36.00 7/16/2006(3) 566,000 1,434,500
25,000 1.20% 19.53 3/22/2006(3) 307,000 778,250
30,000 1.44% 19.53 4/21/1996(4) N/A N/A
Raymond J. McArdle...... 25,000 1.20% 36.00 7/16/2006(3) 566,000 1,434,500
25,000 1.20% 19.53 3/22/2006(3) 307,000 778,250
30,000 1.44% 19.53 4/21/1996(4) N/A N/A
Elena R. Anderson....... 25,000 1.20% 36.00 7/16/2006(3) 566,000 1,434,500
25,000 1.20% 19.53 3/22/2006(3) 307,000 778,250
30,000 1.44% 19.53 4/21/1996(4) N/A N/A
</TABLE>
- - --------
(1) Represents percentage of total options granted to employees of the Company
with respect to the fiscal year.
(2) The dollar amounts under these columns are the result of calculations at
5% and 10% compounded annual rates set by the Commission, and therefore
are not intended to forecast future appreciation, if any, in the price of
Common Stock. The potential realizable values illustrated at 5% and 10%
compound annual appreciation of the options which expire on July 16, 2006
assume that the price of the Common Stock increases to $58.64 and $93.38
per share, respectively, over the 10-year term of the options; and the
potential realizable values illustrated at 5% and 10% compound annual
appreciation of the options which expire on March 22, 2006 assume that the
price of the Common Stock increases to $31.81 and $50.66 per share,
respectively, over the 10-year term of the options.
(3) The first and second set of options listed for each of the named executive
officers vest in increments of 20% on the date of grant and each
anniversary of the date of grant, or earlier, upon a change in control of
the Company. The first set of options listed for each of the named
officers represents annual option grants and the second set of options
represents option grants made in connection with the Initial Public
Offering.
7
<PAGE>
(4) The third set of options listed for each of the named officers were
special 30-day options granted pursuant to a stock loan program in
connection with the Initial Public Offering (the "Stock Loan Program") and
vested 100% on the date of grant. First USA made loans to the named
executive officers in connection with the exercise of such options. Each
loan is evidenced by an eight-year, full recourse promissory note to First
USA that bears interest at 5.38% per annum. See "Adoption of the First USA
Paymentech, Inc. 1996 Stock Option Plan--Stock Loan Program". These
options expired on April 21, 1996. The closing price of the Common Stock
on the New York Stock Exchange on April 19, 1996, the last trading day
prior to the option expiration date, was $39.50. Because the term of such
options has expired, the potential realizable values illustrated at 5% and
10% compound annual appreciation of the options have not been provided.
EXERCISE OF OPTIONS
The following table sets forth information concerning the exercise of stock
options to purchase Common Stock by the named executive officers during fiscal
1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUE--COMPANY COMMON STOCK
<TABLE>
<CAPTION>
NUMBER OF
VALUE REALIZED UNEXERCISED VALUE OF UNEXERCISED
SHARES (MARKET PRICE OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
ACQUIRED AT EXERCISE YEAR END AT FISCAL YEAR END(2)
ON LESS EXERCISE ------------------------- -------------------------
NAME EXERCISE (1) PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---- ------------ -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Pamela H. Patsley....... 100,000 $ 0 35,000 140,000 $469,400 $1,877,600
Michael P. Duffy........ 30,000 0 10,000 40,000 122,350 489,400
Susan H. Cerpanya....... 30,000 0 10,000 40,000 122,350 489,400
Raymond J. McArdle...... 30,000 0 10,000 40,000 122,350 489,400
Elena R. Anderson....... 30,000 0 10,000 40,000 122,350 489,400
</TABLE>
- - --------
(1) The options listed for each of the named officers were special 30-day
options granted pursuant to the Stock Loan Program in connection with the
Initial Public Offering. See "Adoption of the First USA Paymentech, Inc.
1996 Stock Option Plan--Stock Loan Program".
(2) Calculated on the basis of the closing sale price per share for the Common
Stock on the New York Stock Exchange of $40 on June 28, 1996.
The following table sets forth information concerning the exercise of stock
options to purchase First USA common stock by the named executive officers
during fiscal 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUE--FIRST USA COMMON STOCK
<TABLE>
<CAPTION>
NUMBER OF
VALUE REALIZED UNEXERCISED VALUE OF UNEXERCISED
SHARES (MARKET PRICE OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
ACQUIRED AT EXERCISE YEAR END AT FISCAL YEAR END(1)
ON LESS EXERCISE ------------------------- -------------------------
NAME EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---- -------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Pamela H. Patsley....... 22,592 $1,144,600 140,496 48,000 $6,319,691 $1,033,500
Michael P. Duffy........ -- -- -- -- -- --
Susan H. Cerpanya....... 16,000 733,000 21,600 21,400 704,400 479,475
Raymond J. McArdle...... 8,000 308,575 9,200 20,800 289,300 467,700
Elena R. Anderson....... 2,500 107,406 11,000 17,000 318,625 364,500
</TABLE>
- - --------
(1) Calculated on the basis of the closing sale price per share for First USA
common stock on the New York Stock Exchange of $55 on June 28, 1996.
8
<PAGE>
PENSION PLANS
Pension Plan
The Company has a noncontributory, tax-qualified defined benefit, "cash
balance" retirement plan (the "Pension Plan") that provides retirement
benefits for eligible employees of the Company. Each participant's cash
balance account is credited with an amount equal to 4% of the participant's
compensation plus interest. Each participant becomes fully vested in benefits
under the Pension Plan after 5 years of employment with First USA or the
Company. Prior to that time, no portion of a participant's benefits is vested.
Benefits may be paid under the Pension Plan, subject to limitations and
conditions imposed by the Code, upon a participant's termination of
employment, retirement (early, normal or late) or death. The Pension Plan
specifies various options that participants may select for the distribution of
their accrued balance, including forms of annuity payments and lump sum
distributions. The Pension Plan does not permit loans or in-service
withdrawals by participants. Contributions to the Pension Plan will be
actuarially determined and therefore cannot be attributed to individual
participants. As of July 1, 1996, the estimated annual benefit payable under
the Pension Plan to the named executive officers upon normal retirement age
(assuming the executive continues to work to age 65 at the same rate of
compensation) for Ms. Patsley, Mr. Duffy, Ms. Cerpanya, Mr. McArdle and Ms.
Anderson was $65,547, $42,253, $38,976, $11,119 and $61,851, respectively.
First USA Supplemental Executive Retirement Plan
Eligible employees of the Company also receive benefits under the First USA
Supplemental Executive Retirement Plan (the "SERP"), which operates in
conjunction with the Pension Plan to provide eligible employees with benefits
that cannot be provided under the terms and conditions of the Pension Plan due
to Code limitations on the amount of compensation that may be considered under
the Pension Plan and Code limitations on the annual benefits that may be
provided under the Pension Plan. Contributions to the SERP will be actuarially
determined and therefore cannot be attributed to individual participants. As
of July 1, 1996, the estimated annual benefit payable upon normal retirement
age (assuming the executive continues to work to age 65 at the same rate of
compensation) for Ms. Patsley, Mr. Duffy, Ms. Cerpanya, Mr. McArdle and Ms.
Anderson was $84,009, $9,092, $8,383, $1,817 and $6,269, respectively.
COMPENSATION OF OUTSIDE DIRECTORS
Members of the Company's Board of Directors who are not employees of the
Company or its affiliates receive cash compensation as follows: a $20,000
annual retainer and $1,000 for each Board meeting attended and $500 for each
committee meeting attended (chairpersons receive $1,000 per committee
meeting). Such members of the Board of Directors are also eligible to receive
options under the 1996 Option Plan. See "Adoption of the First USA Paymentech,
Inc. 1996 Stock Option Plan".
9
<PAGE>
COMPENSATION COMMITTEE REPORT
The following report is submitted by the Compensation Committee. Each member
of the Compensation Committee is a non-employee director. The Compensation
Committee is responsible for establishing the direction for the Company's
executive compensation strategy. Underlying the Compensation Committee's
decisions is the firm belief that the actions of the Company's executive
officers directly impact the short-term and long-term performance of the
Company, and such officers should be rewarded in a manner consistent with the
Company's financial and non-financial results.
EXECUTIVE COMPENSATION PHILOSOPHY
The Company's executive compensation program has been designed to provide
competitive levels of compensation that are linked to the performance of the
Company, recognize achievement of annual and long-term goals, reward above
target performance, and help attract and retain qualified executives.
Consistent with this philosophy, the executive compensation program provides
annual cash compensation through base salary and annual bonus, and a long-term
component through stock options and restricted stock awards. The program
supports a performance-oriented environment by providing incentive
compensation that changes in a consistent and measurable way with both the
financial performance of the Company and management performance in support of
strategic objectives.
The Compensation Committee determines annual salaries, bonuses and long-term
incentives for senior executive officers. Salaries are based primarily on
experience, responsibility, and Company and individual performance. Bonuses
are determined pursuant to the Company's Annual Incentive Plan (the "Annual
Incentive Plan"). Equity-based compensation is oriented toward the achievement
of increasing shareholder value over the long term and is determined pursuant
to the 1996 Option Plan and the Restricted Stock Plan.
BASE SALARY
The Compensation Committee establishes base salaries each year at a level
intended to be between the median and 75th percentile range ("market range")
of comparable companies. In addition to the competitive market range, many
factors are considered in determining actual base salaries, including the
duties and responsibilities assumed by the executive, the scope of the
executive's position, length of service, individual performance, internal
equity considerations and special expertise beneficial to the Company. The
Compensation Committee also reviews relevant financial results and the success
of the management team in areas of performance that are not easily captured
through accounting measures, such as business strategies and introductions of
new products and services. During fiscal 1996, as recommended by the
Compensation Committee, base salaries for the executive officer group
increased an average of 5%.
ANNUAL INCENTIVE COMPENSATION
The Annual Incentive Plan is intended to provide incentives to achieve
financial and individual objectives, and to reward exceptional performance.
Under the Annual Incentive Plan, executive officers are eligible to receive
cash awards based on the extent to which aggressive earnings goals are
attained during the fiscal year. If earnings goals are not achieved, awards
are not paid to the executive officer group. The Compensation Committee
establishes the individual bonus opportunities at levels intended to be
between the median and 75th percentile range of comparable companies. The
Compensation Committee also makes an assessment of performance by considering
such factors as the economic environment, performance comparisons against
competitors, the quality of earnings, the balance between short- and long-term
objectives and the stability of the Company. For fiscal 1996, the Company far
exceeded its goals for the performance year and the Compensation Committee
believed it was important to grant the executive officers annual bonuses near
or at the maximum individual bonus opportunity levels.
10
<PAGE>
EQUITY-BASED COMPENSATION
One of the Compensation Committee's priorities is for executive officers to
be stockholders so that their interests are aligned with the interests of the
Company's other stockholders. The Compensation Committee continues to believe
that this strategy motivates executives to remain focused on the overall long-
term performance of the Company. Consequently, stock options are granted under
the 1996 Option Plan and restricted stock awards are granted under the
Restricted Stock Plan.
Under the 1996 Option Plan, stock options may be granted to executive
officers with an exercise price equal to the fair market value of the Common
Stock on the date of the grant. If there is no appreciation in the Common
Stock, the option holders receive no benefit from the stock options. Such
stock options are generally exercisable between the date granted and ten years
from the date granted. Stock options are normally granted annually to the
executive officer group and, in support of the Compensation Committee's
ownership objectives, are intended to be granted at levels at the 75th
percentile or higher of the competitive market range for comparable companies.
Stock options were granted to the executive officer group during fiscal 1996
at levels that positioned total compensation competitively.
Under the Restricted Stock Plan, restricted stock may be granted to
executive officers with such performance criteria as set by the Compensation
Committee. The performance criteria is based on financial goals of the
Company. If the goals are not achieved, then the executive officer forfeits
the restricted stock. No restricted stock of the Company was granted in
respect of fiscal 1996.
CHIEF EXECUTIVE OFFICER COMPENSATION
During fiscal 1996, the Company's most highly compensated executive officer
was Pamela H. Patsley, President and Chief Executive Officer. Ms. Patsley
participates in the same executive compensation program provided to the other
executive officers as described above. The Compensation Committee's approach
to establishing Ms. Patsley's compensation is to be competitive with
comparable companies and to have a major and significant portion of her
compensation depend on the achievement of financial and non-financial
performance criteria. All compensation actions relating to Ms. Patsley are
subject to the approval of the Board of Directors. Those actions which are
described in this report have been approved.
Ms. Patsley's cash compensation for fiscal 1996 was $580,000. Of this
amount, over 50% was earned under the Annual Incentive Plan. Ms. Patsley's
annual base salary was increased during fiscal 1996 to $300,000, a 33%
increase from her former base salary. Based on the Compensation Committee's
review of the salaries of other chief executive officers of similarly sized
organizations or competitor companies, as well as the increased responsibility
of leading a publicly traded company, the Compensation Committee recognized
that Ms. Patsley's base salary was below the competitive market range. The
Compensation Committee believes that Ms. Patsley's salary is now within the
competitive market range. In fiscal 1996, Ms. Patsley earned an annual bonus
award of $300,000 or 100% of her base salary due to excellent financial
results and individual performance for the year. The Compensation Committee
believes that Ms. Patsley's annual bonus is appropriate given the Company's
record performance and earnings growth of 80% from fiscal 1995 to fiscal 1996.
Under the 1996 Option Plan and in connection with the Compensation Committee's
strategy of motivating executives to remain focused on the long-term
performance of the Company, a total of 75,000 stock options were granted to
Ms. Patsley in July 1996. In addition, Ms. Patsley received 100,000 stock
options at the time of the Initial Public Offering in March 1996. At the same
time an additional 100,000 stock options were granted under the Stock Loan
Program of the 1996 Option Plan.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Code generally precludes a publicly held corporation
from a federal income tax deduction for a taxable year for compensation in
excess of $1 million paid to the chief executive officer or any of the four
most highly compensated other executive officers. Exceptions are made for,
among other things, qualified performance-based compensation. Qualified
performance-based compensation means compensation
11
<PAGE>
paid solely on account of attainment of objective performance goals, provided
that (i) performance goals are established by a compensation committee
consisting solely of two or more outside directors, (ii) the material terms of
the performance-based compensation are disclosed to and approved by a separate
stockholder vote prior to payment, and (iii) prior to payment, the
compensation committee certifies that the performance goals were attained and
other material terms were satisfied.
The 1996 Option Plan and Restricted Stock Plan are designed to be fully
deductible for income tax purposes and are in compliance with Section 162(m)
of the Code.
CONCLUSION
The Compensation Committee believes the mix of market-based salaries,
competitive variable cash incentives for short-term performance and the
potential for equity-based rewards for long-term performance represents an
appropriate balance of total compensation. This balanced executive
compensation program provides a competitive and motivational compensation
package to the executive officer team required to produce the results the
Company has historically achieved and strives to achieve in the future. The
Compensation Committee further believes that the executive compensation
program strikes an appropriate balance between the interest of the
stockholders, the needs of the Company in operating its business and the
executive team.
The Compensation Committee
Rupinder S. Sidhu, Chairman
Gene H. Bishop
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1996, Messrs. Sidhu and Bishop served as members of the
Compensation Committee. No member of the Committee is an employee, officer, or
former officer of the Company, and no such member had a relationship with the
Company during fiscal year 1996 requiring disclosure under Item 404 of
Regulation S-K. No relationship existed during fiscal year 1996 that
constituted a "Compensation Committee Interlock" within the meaning of Item
402(j) of Regulation S-K.
12
<PAGE>
STOCK PERFORMANCE GRAPH
The following chart compares the total stockholder return (stock price
growth plus dividends) on the Common Stock from March 22, 1996 through June
30, 1996 with the total stockholder return for the same period of the S&P 500
Index and the S&P Computer Software and Services Index. The graph assumes that
the value of the investment in the Common Stock and each index was $100 on
March 22, 1996 and that all dividends were reinvested. The Company notes that
the Initial Public Offering occurred on March 22, 1996 and that the initial
offering price of $21.00 was used as the beginning price for the Company's
stock price on the performance graph. The Company also notes that the initial
offering price of $21.00 is different from the Company's initial trading price
of $32.50.
COMPARISON OF CUMULATIVE TOTAL RETURN
[GRAPH APPEARS HERE]
3/22/96 3/29/96 6/28/96
------- ------- -------
First USA Paymentech 100 167.86 190.48
S&P 500 100 99.25 103.7
S&P Computer Software
& Services 100 100.63 113.04
On June 30, 1996, the total stockholder return on the Common Stock had
increased from March 22, 1996 (using the initial offering price of $21.00) by
90.5%, compared with increases in the total returns on the S&P 500 Index and
the S&P Computer Software and Services Index of 3.7% and 13.0%, respectively.
13
<PAGE>
ADOPTION OF THE FIRST USA PAYMENTECH, INC.
1996 STOCK OPTION PLAN
GENERAL
On February 7, 1996, prior to the Initial Public Offering, the Company, with
the approval of its sole stockholder, adopted the 1996 Option Plan. The
affirmative vote of a majority of the shares of Common Stock present or
represented and entitled to vote at the annual meeting will be required to
approve such adoption.
A maximum of 4,000,000 shares of Common Stock has been reserved for issuance
under the 1996 Option Plan, subject to equitable adjustments upon the
occurrence of any increase in, decrease in or exchange of outstanding shares
of Common Stock through merger, consolidation, recapitalization,
reclassification, stock split, stock dividend or similar corporate
transaction.
The 1996 Option Plan is administered by the Compensation Committee, the
composition of which shall, unless otherwise determined by the Board of
Directors, at all times satisfy the provisions of Rule 16b-3 of the Exchange
Act, as from time to time in effect, and Section 162(m) of the Code.
DESCRIPTION OF 1996 OPTION PLAN
Grants of "incentive stock options," as such term is defined in Section 422
of the Code, and nonqualified stock options may be made under the 1996 Option
Plan to selected officers and key employees of the Company and First USA, in
the discretion of the Compensation Committee. Approximately 200 officers and
key employees of the Company are eligible to receive grants of options under
the 1996 Option Plan. Options for no more than 250,000 shares may be granted
to any optionee in any year. In addition, no more than $100,000 in value of
incentive stock options (measured based on the fair market value of a share of
Common Stock on the date of grant) may first become exercisable in any
calendar year. To the extent that stock options that are intended to be
incentive stock options fail to qualify as such, such options will be treated
for all purposes as nonqualified stock options. Unless otherwise determined by
the Board of Directors, the exercise price of a stock option must be at least
the fair market value per share of Common Stock on the date of grant. Option
agreements also contain noncompete provisions.
Options will become exercisable as determined by the Compensation Committee.
Options granted under the 1996 Option Plan will expire as determined by the
Compensation Committee, but in no event later than the tenth anniversary of
the date of grant. An option can be exercised only if an optionee has been an
employee of the Company or First USA continuously from the date of the
option's grant to the date of the option's exercise and is an employee on the
date of the option's exercise, except that (i) in the event of the termination
of the optionee's employment other than for "Cause" (as defined in the 1996
Option Plan), each stock option that is otherwise exercisable at the time of
such termination may, unless earlier terminated in accordance with its terms,
be exercised during the three-month period following the date of such
termination, and (ii) in the event of the termination of the optionee's
employment by reason of death or disability or in the event of the optionee's
death during the three-month period following a termination of employment
other than for Cause, each stock option otherwise exercisable at the time of
such death or disability may, unless earlier terminated in accordance with its
terms, be exercised at any time during the six-month period following the date
of such death or disability.
All options granted under the 1996 Option Plan that were not previously
exercisable will become fully exercisable upon a Change in Control of the
Company or First USA (so long as First USA owns or controls at least 25% of
the Company's outstanding voting stock). The Company and First USA are
collectively referred to as the "FUSA Companies". Under the 1996 Option Plan,
a "Change in Control" will be deemed to occur if (i) the "beneficial
ownership" (as defined in Rule 13d-3 under the Exchange Act), of securities
representing 25% or more of the combined voting power of either of the FUSA
Companies (but not including any securities acquired directly from either of
the FUSA Companies or any of their affiliates) is acquired by any "person" as
defined in Section 3(a)(9) of the Exchange Act, as such term is modified in
Sections 13(d) and 14(d) of the
14
<PAGE>
Exchange Act (other than either of the FUSA Companies or their affiliates, any
employee benefit plan of either of the FUSA Companies, any corporation owned,
directly or indirectly, by the stockholders of either of the FUSA Companies in
substantially the same proportions as their ownership of stock of the FUSA
Company or any underwriter temporarily holding securities pursuant to an
offering of such securities), (ii) a merger or consolidation of a FUSA Company
with another corporation is consummated or the stockholders of a FUSA Company
approve a definitive agreement to merge or consolidate the respective FUSA
Company with or into another corporation or to sell or otherwise dispose of
all or substantially all of its assets, or adopt a plan of liquidation, other
than certain types of mergers specified in the 1996 Option Plan, or (iii)
during any period of two consecutive years, individuals who at the beginning
of such period were members of the Board of Directors of a FUSA Company cease
for any reason to constitute at least a majority thereof (unless the election,
or the nomination for election by such company's stockholders, of each new
director was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of such period).
In the event of an extraordinary or unusual corporate event, the
Compensation Committee, in its discretion, may adjust the terms of outstanding
awards, including in the case of stock options, the exercise price, the number
of shares of Common Stock available for awards, and such other adjustments as
the Compensation Committee shall deem appropriate and equitable under such
circumstances.
The 1996 Option Plan may, at any time and from time to time, be altered,
amended, suspended, or terminated by the Board of Directors, in whole or in
part; provided, however, that, except as determined by the Board of Directors,
no amendment that requires stockholder approval in order for the 1996 Option
Plan to continue to comply with Rule 16b-3 under the Exchange Act or Section
162(m) of the Code will be effective unless such amendment has received the
requisite approval of stockholders. In addition, no amendment may be made that
adversely affects any of the rights of an optionee under any option or loan
theretofore granted, without such optionee's consent.
Members of the Board of Directors who are not employees of the Company or
First USA on the date they become a director receive an option to purchase
5,000 shares of Common Stock at an option price equal to the fair market value
of the Common Stock on the date of grant. Such directors also receive annual
grants of options to purchase 2,500 shares of Common Stock at an option price
equal to the fair market value of the stock on the date of grant. Options
terminate if not exercised within 90 days after the director ceases to be a
member of the Board of Directors.
Options may be granted under the 1996 Option Plan for a period of ten years
from the date of adoption.
CERTAIN FEDERAL INCOME TAX EFFECTS
The following discussion is a brief summary of the principal United States
federal income tax consequences under current federal income tax laws relating
to awards under the 1996 Option Plan. This summary is not intended to be
exhaustive and, among other things, does not describe state, local or foreign
tax consequences.
Nonqualified Stock Options. An employee generally will not recognize taxable
income upon the grant of a nonqualified stock option (a "NQSO"). Rather, at
the time of exercise of the NQSO (and in the case of an untimely exercise of
an incentive stock option), the employee will recognize ordinary income for
federal income tax purposes in an amount equal to the excess of the fair
market value of the shares purchased over the option price. The Company will
generally be entitled to a tax deduction at such time and in the same amount
that the employee recognizes ordinary income. Different rules may apply in the
case of an employee who is subject to the reporting requirements of Section
16(a) of the Exchange Act.
If shares acquired upon exercise of an NQSO (or upon untimely exercise of an
incentive stock option) are later sold or exchanged, then the difference
between the sales price and the fair market value of such stock on the date
that ordinary income was recognized with respect thereto will generally be
taxable as long-term or short-term capital gain or loss (if the stock is a
capital asset of the employee) depending upon whether the stock has been held
for more than one year after such date.
15
<PAGE>
Incentive Stock Options. In the case of an incentive stock option (an
"ISO"), an employee will not recognize taxable income upon the grant of the
ISO or upon its timely exercise. Exercise of an ISO will be timely if made
during its term and if the employee remains an employee of the Company or a
subsidiary at all times during the period beginning on the date of grant of
the ISO and ending on the date three months before the date of exercise (or
one year before the date of exercise in the case of a disabled employee).
Exercise of an ISO will also be timely if made by the legal representative of
an employee who dies (i) while in the employ of the Company or a subsidiary or
(ii) within three months after termination of employment. The tax consequences
of an untimely exercise of an ISO will be determined in accordance with the
rules applicable to NQSOs. See "--Nonqualified Stock Options".
If stock acquired pursuant to a timely exercised ISO is later disposed of,
the employee will, except as noted below, recognize long-term capital gain or
loss (if the stock is a capital asset of the employee) equal to the difference
between the amount realized upon such sale and the option price. The Company,
under these circumstances, will not be entitled to any federal income tax
deduction in connection with either the exercise of the ISO or the sale of
such stock by the employee.
If, however, stock acquired pursuant to the exercise of an ISO is disposed
of by the employee prior to the expiration of two years from the date of grant
of the ISO or within one year from the date such stock is transferred to him
upon exercise (a "disqualifying disposition"), any gain realized by the
employee generally will be taxable at the time of such disqualifying
disposition as follows: (i) at ordinary income rates to the extent of the
difference between the option price and the lesser of the fair market value of
the stock on the date the ISO is exercised or the amount realized on such
disqualifying disposition, and (ii) if the stock is a capital asset of the
employee, as short-term or long-term capital gain to the extent of any excess
of the amount realized on such disqualifying disposition over the fair market
value of the stock on the date that governs the determination of his ordinary
income. In such case, the Company generally will be entitled to a tax
deduction at the time of such disqualifying disposition in the amount taxable
to the employee as ordinary income. Any capital gain recognized by the
employee will be long-term capital gain if the employee's holding period for
the stock at the time of disposition is more than one year.
The amount by which the fair market value of the stock on the exercise date
of an ISO exceeds the option price will be an item of adjustment for purposes
of the "alternative minimum tax" imposed by Section 55 of the Code.
STOCK LOAN PROGRAM
In connection with the Initial Public Offering, the Company granted special
stock options under the 1996 Option Plan. Special stock options relating to an
aggregate of 745,000 shares of Common Stock were granted with an exercise
price equal to $19.53, the initial offering price per share for the Common
Stock, less the underwriting discount per share, and special stock options
relating to an aggregate of 45,000 shares of Common Stock were granted with an
exercise price equal to $30.625, the closing price of the Common Stock on the
New York Stock Exchange on the first day of trading in the Common Stock. All
of such special stock options were exercisable for a period of 30 days from
the date of consummation of the Initial Public Offering.
Pursuant to the Stock Loan Program, First USA made loans in connection with
the special stock options exercised during the period immediately following
the consummation of the Initial Public Offering to the recipients of such
options. Each such loan is evidenced by an eight-year, full recourse
promissory note to First USA that bears interest at 5.38% per annum. The notes
provide that the then outstanding principal amount thereof and all accrued
interest thereunder will become due and payable 60 days following the
optionee's termination of employment by the Company or First USA (other than
upon Retirement, as defined in the notes) or immediately upon demand following
such employee's termination for Cause, as defined in the notes (or, if
earlier, on the maturity date of the notes). The notes also provide that the
outstanding principal amount thereof and all accrued interest thereunder will
be forgiven ratably over a period of four years, beginning with the fifth
anniversary of the consummation of the Initial Public Offering or, if earlier,
upon the optionee's death or disability, the termination of the optionee's
employment upon Retirement or upon a Change of Control. Furthermore, the notes
16
<PAGE>
contain a noncompete provision. The following directors or executive officers
of the Company received loans from First USA pursuant to the Stock Loan
Program in the amounts indicated, each of which was outstanding as of August
31, 1996: Ms. Patsley, $1,953,000; Mr. Tolleson, $1,464,750; Mr. Duffy,
$585,900; Mr. Truetzel, $683,550; Mr. Baumgartner, $683,550; Ms. Cerpanya,
$585,900; Mr. McArdle, $585,900; Ms. Anderson, $585,900; and Mr. Vague,
$1,464,750.
Payments under the notes are secured by the shares of Common Stock acquired
upon exercise of the special options in connection with which the loans were
made. In the event of a repayment default under a note by an optionee
following a demand by First USA in accordance with the terms of such note,
First USA is entitled to retain the shares securing such note in an amount,
based on the current market price of the Common Stock, sufficient to repay the
outstanding balance of such note in full. In the event that the value of the
shares of Common Stock held by First USA as security for a note is
insufficient to repay the outstanding balance of such note following a
repayment demand, the optionee will remain liable to First USA for any
remaining balance. The application of shares of Common Stock to repayment of a
note will be deemed a sale of such shares of Common Stock by the optionee for
purposes of Section 16(b) of the Exchange Act.
Upon a note being forgiven by reason of the optionee's death or disability,
the termination of the optionee's employment upon Retirement or upon a Change
of Control, all of the shares of Common Stock then held by First USA as
security under such note will be delivered to the optionee or the optionee's
estate, as the case may be, and First USA's security interest therein will be
released. Upon any portion of a note being forgiven by First USA, a like
portion of the shares of Common Stock then held by First USA as security under
such note will be delivered to the optionee and First USA's security interest
therein shall be released.
Except for the loans made by First USA pursuant to Stock Loan Program,
neither the Company nor, to the Company's knowledge, First USA currently
intends to make loans in connection with stock options granted under the 1996
Option Plan in the future.
On September 6, 1996, the closing price of the Common Stock on the New York
Stock Exchange was $34.875.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE
FIRST USA PAYMENTECH, INC. 1996 STOCK OPTION PLAN.
17
<PAGE>
ADOPTION OF THE FIRST USA PAYMENTECH, INC.
1996 RESTRICTED STOCK PLAN
GENERAL
On February 7, 1996, prior to the Initial Public Offering, the Company, with
the approval of its sole stockholder, adopted the Restricted Stock Plan. The
affirmative vote of a majority of the shares of Common Stock present or
represented and entitled to vote at the annual meeting will be required to
approve such adoption.
The Restricted Stock Plan authorizes the granting of awards in the form of
restricted shares of Common Stock subject to risks of forfeiture which may be
eliminated over time based upon performance criteria. A maximum of 500,000
shares of Common Stock has been reserved for issuance under the Restricted
Stock Plan, subject to equitable adjustment upon the occurrence of any
increase in, decrease in or exchange of outstanding shares of Common Stock
through merger, consolidation, recapitalization, reclassification, stock
split, stock dividend or similar corporate transaction. There were no awards
made under the Restricted Stock Plan with respect to fiscal 1996.
The Restricted Stock Plan is administered by the Compensation Committee. The
Compensation Committee determines the persons to whom restricted stock is
awarded ("Award Recipients"), the number of shares of restricted stock awarded
to any person, and the specific terms and conditions applicable to the
restricted stock, including, but not limited to, the restrictions on such
stock and the conditions for the lapse of such restrictions.
DESCRIPTION OF RESTRICTED STOCK PLAN
Grants of restricted stock may be made under the Restricted Stock Plan to
selected officers and employees of the Company and First USA, in the
discretion of the Compensation Committee, but may not be made to directors who
are not employees of the Company or First USA. Approximately 20 officers and
key employees of the Company are eligible to receive grants of restricted
stock under the Restricted Stock Plan. No more than 150,000 shares of
Restricted Stock may be granted to any recipient in any performance period
specified by the Compensation Committee (generally, a period of one to three
years). Restricted stock are shares of Common Stock transferred to the Award
Recipient without payment to the Company, which shares are subject to certain
restrictions and to a risk of forfeiture. The lapse of such conditions may be
based upon achievement of performance goals set by the Compensation Committee.
No restricted stock awards were granted by the Company in respect of fiscal
1996.
All restrictions with respect to outstanding restricted stock will lapse in
the event of a Change of Control of either of the FUSA Companies. Under the
Restricted Stock Plan, a "Change in Control" will be deemed to occur if (i)
the "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act),
of securities representing 25% or more of the combined voting power of either
of the FUSA Companies (but not including any securities acquired directly from
either of the FUSA Companies or any of their affiliates) is acquired by any
"person" as defined in Section 3(a)(9) of the Exchange Act, as such term is
modified in Sections 13(d) and 14(d) of the Exchange Act (other than either of
the FUSA Companies or their affiliates, any employee benefit plan of either of
the FUSA Companies, any corporation owned, directly or indirectly, by the
stockholders of either of the FUSA Companies in substantially the same
proportions as their ownership of stock of the FUSA Company, or any
underwriter temporarily holding securities pursuant to an offering of such
securities), (ii) a merger or consolidation of a FUSA Company with another
corporation is consummated or the stockholders of a FUSA Company approve a
definitive agreement to merge or consolidate the respective FUSA Company, as
the case may be, with or into another corporation or to sell or otherwise
dispose of all or substantially all of its assets, or adopt a plan of
liquidation, other than certain types of mergers as specified in the
Restricted Stock Plan, or (iii) during any period of two consecutive years,
individuals who at the beginning of such period were members of the Board of
Directors of a FUSA Company cease for any reason to constitute at least a
majority thereof (unless the election, or the nomination of election by such
company's stockholders, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were directors at
the beginning of such period).
18
<PAGE>
The Restricted Stock Plan may, at any time and from time to time, be
altered, amended, suspended, or terminated by the Board of Directors, in whole
or in part; provided that no amendment which requires stockholder approval in
order for the Restricted Stock Plan to continue to comply with Rule 16b-3 or
Section 162(m) of the Code will be effective unless such amendment has
received the requisite approval of stockholders. In addition, no amendment may
be made that adversely affects any of the rights of an Award Recipient with
respect to restricted stock theretofore granted, without such Award
Recipient's consent.
Restricted stock may be granted under the Restricted Stock Plan for a period
of 10 years from the date of adoption.
Grants under the Restricted Stock Plan are generally made at the discretion
of the Compensation Committee and, therefore, the value or amount of such
benefits is not readily determinable.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a brief summary of the principal United States
federal income tax consequences under current federal income tax laws relating
to awards under the Restricted Stock Plan. This summary is not intended to be
exhaustive and, among other things, does not describe state, local or foreign
tax consequences.
Generally, a grant of restricted stock has no federal income tax
consequences at the time of grant. Rather, at the time the shares are no
longer subject to a "substantial risk of forfeiture" under Section 83 of the
Code, the Award Recipient will recognize ordinary income in an amount equal to
the fair market value of such shares. An Award Recipient may, however, elect
pursuant to Section 83(b) of the Code to be taxed at the time of the grant on
the fair market value of the restricted stock. The Company generally will be
entitled to a deduction at the time and in the amount that the Award Recipient
recognizes ordinary income.
On September 6, 1996, the closing price of the Common Stock on the New York
Stock Exchange was $34.875.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE
FIRST USA PAYMENTECH, INC. 1996 RESTRICTED STOCK PLAN.
19
<PAGE>
ADOPTION OF FIRST USA PAYMENTECH, INC.
EMPLOYEE STOCK PURCHASE PLAN
DESCRIPTION OF EMPLOYEE STOCK PURCHASE PLAN
The Company has adopted, subject to the approval of its stockholders, the
Purchase Plan. The affirmative vote of a majority of the shares of Common
Stock present or represented and entitled to vote at the meeting will be
required to approve such adoption.
The Purchase Plan provides a means for full time employees of the Company to
purchase shares of Common Stock through payroll deductions at 85% of the
current market price of the Common Stock. The Purchase Plan will be
administered by the Compensation Committee.
Each eligible employee may have payroll deductions of any whole percentage
amount up to 20% of such employee's annual base salary (up to $21,250 per
year) used to purchase shares of Common Stock, provided that no employee may
purchase Common Stock through the Purchase Plan with a fair market value
greater than that permitted by law in any calendar year. The amounts deducted
will be accumulated, and at the end of each designated three month period the
accumulated amounts will be applied to the purchase of shares of Common Stock
at 85% of the fair market value thereof. Accumulated payroll deductions which
are insufficient to purchase a whole share will be carried into the next
purchase period.
The Purchase Plan will remain in effect until all shares authorized to be
paid under the Purchase Plan have been sold. An aggregate of 150,000 shares of
Common Stock have been authorized for issuance under the Purchase Plan.
The Board of Directors may from time to time amend or terminate the Purchase
Plan, provided that (i) no such amendment or termination may adversely affect
the rights of any participant without the consent of such participant and (ii)
to the extent required by Rule 16b-3 or any other law, regulation or stock
exchange rule, no such amendment shall be effective without the approval of
the Company's stockholders.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a brief summary of the principal United States
federal income tax consequences under current federal income tax laws relating
to awards under the Purchase Plan. This summary is not intended to be
exhaustive and, among other things, does not describe state, local or foreign
income and other tax consequences. For purposes of this discussion the right
to purchase shares under the Purchase Plan is described as an option.
The Purchase Plan is intended to qualify as an "employee stock purchase
plan" as defined in Section 423 of the Code. Assuming such qualification, a
participant will not recognize any taxable income as a result of participating
in the Purchase Plan, exercising options granted pursuant to the Purchase Plan
or receiving shares of Common Stock purchased pursuant to such options. A
participant may, however, be required to recognize taxable income as described
below.
If a participant disposes of any share of Common Stock purchased pursuant to
the Purchase Plan after the later to occur of (i) two years from the grant
date for the related option and (ii) one year after the exercise date for the
related option (such disposition, a "Qualifying Transfer"), or if he dies
(whenever occurring) while owning any share purchased under the Purchase Plan,
the participant generally will recognize compensation income, for the taxable
year in which such disposition occurs or the taxable year which closes upon
the participant's death, in an amount equal to the lesser of (i) the excess of
the market value of the disposed share at the time of such disposition over
its purchase price, and (ii) 15% of the market value of the disposed share on
the grant date for the option to which such disposed share relates. In the
case of a Qualifying Transfer, (a) the basis of the disposed share will be
increased by an amount equal to the amount of compensation income so
recognized, and (b) the participant will recognize a capital gain or loss, as
the case may be, equal to the difference between the amount realized from the
disposition of the shares and the basis for such shares.
20
<PAGE>
If the participant disposes of any share other than by a Qualifying
Transfer, the participant generally will recognize compensation income in an
amount equal to the excess of the market value of the disposed share on the
date of purchase over its purchase price. In such event, the Company will be
entitled to a tax deduction equal to the amount of compensation income
recognized by the participant. Otherwise, the Company will not be entitled to
any tax deduction with respect to the grant or exercise of options under the
Purchase Plan or the subsequent sale by participants of shares purchased
pursuant to the Purchase Plan. A transfer of shares purchased under the
Purchase Plan after the death of a participant by the estate of the decedent
has the same federal income tax effects on the Company as a Qualifying
Transfer.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE ADOPTION OF THE
FIRST USA PAYMENTECH, INC. EMPLOYEE STOCK PURCHASE PLAN.
21
<PAGE>
ADOPTION OF THE FIRST USA, INC.
DEFERRED COMPENSATION PLAN
GENERAL
First USA has adopted the Deferred Compensation Plan, effective as of June
1, 1996, with respect to its eligible employees and directors. The Deferred
Compensation Plan provides that eligible employees and directors of affiliates
of First USA, such as the Company, may participate in the Deferred
Compensation Plan upon its adoption by such affiliate pursuant to the terms of
the Deferred Compensation Plan. The Company has adopted the Deferred
Compensation Plan, effective as of June 1, 1996. The affirmative vote of a
majority of the shares of Common Stock present or represented and entitled to
vote at the annual meeting will be required to approve such adoption.
The purpose of the Deferred Compensation Plan is to recognize the value to
First USA and other participating entities of the past and present services of
individuals covered thereby, and to encourage and assure their continued
service with First USA or other participating entities, as the case may be, by
making more adequate provision for their future retirement security. The
Company has reserved 70,000 shares of Common Stock for issuance pursuant to
the Deferred Compensation Plan. The Deferred Compensation Plan is intended to
constitute an unfunded, unsecured plan of deferred compensation for a select
group of management or highly compensated employees.
DESCRIPTION OF DEFERRED COMPENSATION PLAN
The Deferred Compensation Plan will be administered by a plan administrator
(the "Administrator") appointed by the Board of Directors of First USA. The
Administrator will supervise the administration and enforcement of the
Deferred Compensation Plan according to the terms and provisions thereof and
will have such powers as are necessary to accomplish the purposes of the
Deferred Compensation Plan.
Officers and directors of the Company and its affiliates earning cash
compensation of at least $125,000 are eligible to participate in the Deferred
Compensation Plan. However, for the Deferred Compensation Plan's initial
period (June 1, 1996 to July 1, 1996) and for the Deferred Compensation Plan's
first full year, directors and otherwise eligible officers of the Company may
become participants only if so designated by the Administrator. For the
initial year, the Administrator has designated 22 directors and officers of
the Company and its affiliates as participants.
Under the Deferred Compensation Plan, participants may voluntarily elect to
defer all or a portion of their salaries and/or annual bonuses (or, in the
case of participants who are directors, of their annual fees). An election to
defer must generally be made prior to the commencement of the fiscal year in
which it will be earned. Once made, the election is generally irrevocable for
the duration of the deferral, which must be for a period of no less than five
years. Amounts deferred are credited to participants' accounts.
The deferred amounts will be deemed to be invested, pursuant to the election
of the participant, in such funds as the Administrator may from time to time
make available, including a fund investing in Common Stock and a fund
investing in First USA common stock. Investment designations for future
amounts to be deferred and for amounts already deferred may be changed,
subject to the terms and conditions of the Deferred Compensation Plan.
Additional restrictions may apply to investment decisions of participants who
are subject to the reporting requirements of Section 16(a) of the Exchange
Act. At least annually, the Administrator will determine the net income or
loss equivalents of each fund for the period elapsed since the next preceding
valuation date and allocate such equivalents to participants' accounts.
Because the amounts to be deferred under the Deferred Compensation Plan are
selected pursuant to the individual elections of participants, such amounts
are not currently determinable.
22
<PAGE>
Each deferral election will indicate the time (not less than five years
following the deferral) and form of payment for the amounts to be deferred
during the applicable fiscal year (and any net income or loss equivalents
allocated in respect of such amounts). Distributions will be made in cash to
the participant at the time irrevocably selected on the deferral form, or, in
the event of the participant's death, to the participant's designated
beneficiary. Early withdrawals are subject to a 10% penalty, except in the
event of unforeseeable financial emergencies. The Company may defer payment of
all or any portion of a distribution that it determines is likely not to be
deductible by the Company under applicable income tax provisions.
Each participant or beneficiary will be an unsecured general creditor with
respect to any payments due and owing to such participant pursuant to the
Deferred Compensation Plan.
The Board of Directors of First USA can amend or terminate the Deferred
Compensation Plan at any time, except that no amendment may be made that would
impair the rights of a participant with respect to amounts already deferred or
otherwise allocated to such participant's account.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal federal income tax
consequences of the Deferred Compensation Plan based upon current federal
income tax laws. The summary is not intended to be exhaustive and, among other
things, does not describe state, local or foreign tax consequences.
Amounts voluntarily deferred pursuant to the Deferred Compensation Plan
should not be taxable to the participant until a distribution is made to the
participant or to his or her beneficiary. A participant will recognize
ordinary income in an amount equal to the amount of cash received. The Company
will generally be entitled to take a corresponding tax deduction for the tax
year in which the Participant recognizes ordinary income.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE ADOPTION OF THE
FIRST USA, INC. DEFERRED COMPENSATION PLAN.
23
<PAGE>
CERTAIN TRANSACTIONS
The Company and First USA have entered into the following agreements and
transactions.
INTERCOMPANY AGREEMENT
License to Use the First USA Name and Certain Trademarks
The Company and First USA are parties to an Intercompany Services Agreement
(the "Intercompany Agreement") which, among other things, provides for the
grant by First USA to the Company of a license to use the name "First USA" and
certain trademarks (collectively referred to as the "Marks") in connection
with the Company's business. The Intercompany Agreement provides that the
Company will not, without First USA's prior written consent, take any action
with respect to (i) any litigation or proceeding involving the Marks, (ii) any
new use of the Marks or changes in the purpose for which the Marks are used,
(iii) any change in the Company's names, logos and other identifications which
might reasonably be expected to affect the Marks or (iv) if required by First
USA, any advertising campaigns or strategies which use the Marks or which
refer to First USA. First USA has the right to revoke the license to use the
Marks under certain circumstances if there is a change of control or a sale of
the Company. The Company does not believe that a revocation by First USA of
the license to use the Marks would have a material adverse effect on the
Company's ability to conduct its business.
Services and Facilities
Pursuant to the Intercompany Agreement (i) First USA provides the Company
with certain office space, (ii) First USA allows the Company to participate in
insurance coverage and certain benefit plans made available by First USA, and
(iii) First USA provides certain administrative services to the Company, at a
rate equal to First USA's costs. The Company believes that the rates charged
by First USA for such office space and services are consistent with prevailing
market rates.
Indemnification
The Intercompany Agreement provides that the Company indemnify First USA,
its subsidiaries and each of their respective officers, directors, employees
and agents against losses from third party claims based on, arising out of or
resulting from (i) the use of the Marks (but excluding any claim relating to
First USA's rights in the Marks), and (ii) any other acts or omissions arising
out of performance of the Intercompany Agreement.
The Intercompany Agreement provides that First USA indemnify the Company,
its subsidiaries and each of their respective officers, directors, employees
and agents against losses from third party claims based on, arising out of or
resulting from (i) any third party claims relating to First USA's rights in
the Marks, and (ii) any other acts or omissions arising out of performance of
the Intercompany Agreement.
INTERCOMPANY INDEBTEDNESS
The Company used $40.6 million of the proceeds from the Initial Public
Offering to repay a loan payable to First USA. At December 31, 1995, the loan
payable to First USA accrued interest at the rate of one month LIBOR plus
0.375% per annum and was primarily incurred in connection with the purchase of
merchant contracts and certain other assets from DMGT Corporation.
First USA loaned the Company $25 million in connection with the Company's
August 1996 acquisition of GENSAR Holdings Inc. Such loan accrues interest at
the rate of LIBOR plus 0.25% and is due on demand.
24
<PAGE>
REGISTRATION RIGHTS AGREEMENT
First USA and the Company are parties to a Registration Rights Agreement
(the "Registration Rights Agreement"). Pursuant to the Registration Rights
Agreement, First USA has the right to require the Company to use its best
efforts to register under the Securities Act of 1933, as amended, and the
securities or blue sky laws of any jurisdiction designated by First USA all or
a portion of the issued and outstanding Common Stock held by First USA (the
"Registrable Shares") for sale in accordance with First USA's intended method
of disposition thereof. Such demand rights would be subject to the condition
that the Company would not be required to effect more than four demand
registrations. First USA also has the right to participate, or "piggy-back,"
in certain equity offerings initiated by the Company, subject to reduction of
the size of the offering on the advice of the managing underwriter. The
Company and First USA will share equally all expenses relating to the
performance of, or compliance with, demand registration requests under the
Registration Rights Agreement and the Company will pay all expenses relating
to the performance of, or compliance with, "piggy-back" registrations under
the Registration Rights Agreement. However, in either case, First USA will be
responsible for underwriters' discounts and selling commissions with respect
to the Registrable Shares being sold and the fees and expenses of its counsel
in connection with such registration. First USA has advised the Company that
it currently has no plans to sell its shares of Common Stock.
The Registration Rights Agreement also provides that during any period in
which First USA owns at least 20% of the voting power of the outstanding
capital stock of the Company or in which First USA is required to account for
its investment in the Company under the equity method of accounting, the
Company will provide First USA with certain financial and other information.
OTHER TRANSACTIONS
The Company entered into a Tax Sharing Agreement (the "Tax Sharing
Agreement"), which governs tax related matters affecting taxable periods
ending prior to and subsequent to the Initial Public Offering, including
preparation and filing of tax returns, payment of taxes and indemnification
for tax liabilities. In general, under the Tax Sharing Agreement, the Company
is responsible for filing tax returns and paying taxes of the Company, other
than returns which are filed on a consolidated, combined or unitary basis with
First USA, in which case the Company is responsible for its proportionate
share of such taxes, determined as if the Company and its subsidiaries were a
separate consolidated group. The Tax Sharing Agreement provides that First USA
will retain control of audits affecting its consolidated, combined or unitary
returns which include the Company and its subsidiaries. The Company is allowed
to participate in, but not control any such audits with respect to matters for
which it may be required to indemnify First USA under such Tax Sharing
Agreement.
Financial Services from time to time engages in funding and investment
transactions with First USA Bank. The terms and provisions of such
transactions between Financial Services and First USA Bank are the same as the
terms Financial Services and First USA Bank provide to non-affiliated entities
in similar transactions.
INDEPENDENT AUDITORS
The Company retained Ernst & Young LLP as the Company's independent auditors
for fiscal 1996. Representatives of Ernst & Young LLP will attend the annual
meeting and, while they do not intend to make a statement, they will respond
to appropriate questions directed to them.
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Stockholder proposals to be included in the Company's proxy material for the
1997 annual meeting of stockholders must be received at the Company's
principal executive offices not later than May 22, 1997.
25
<PAGE>
A Company By-law provides that a nomination for election as a director may
be brought before an annual or special meeting of stockholders by any
stockholder provided the stockholder has given written notice of the
nomination to the Company's Secretary not less than 60 days nor more than 90
days prior to the anniversary date of the immediately preceding annual
stockholders meeting. If the annual meeting is not within 30 days before or
after such anniversary date, the stockholder notice must be received within 10
days following notice or publication of the date of the meeting. The notice
must include certain information concerning the nomination for director. A
copy of the By-law may be obtained from the Secretary of the Company at the
address set forth in the accompanying notice. The By-law will apply to the
1997 annual meeting of stockholders.
OTHER MATTERS
As of the date of this Proxy Statement, the Company does not intend to bring
any other matters before the meeting requiring action of the stockholders, nor
does it have any information that other matters will be brought before the
meeting. However, if any other matters requiring the vote of the stockholders
properly come before the meeting, it is the intention of the persons named in
the enclosed form of proxy to vote the proxy in accordance with their best
judgment in the interest of the Company.
[SIGNATURE OF PAMELA H. PATSLEY APPEARS HERE]
Pamela H. Patsley
President and Chief Executive
Officer
September 19, 1996
26
<PAGE>
Votes must be indicated (X) in Black or Blue ink. [_]
The Board of Directors recommends a vote FOR each item.
1. Election of Directors FOR all nominees [_] WITHHOLD AUTHORITY to vote
listed below for all nominees listed
below.
*EXCEPTIONS [_]
Nominees. Pamela H. Patsley and Rupinder S. Sidhu
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
*Exceptions
---------------------------------------------------------------------
2. Proposal to adopt the First USA Paymentech, Inc. 1996 Stock Option Plan.
FOR [_] AGAINST [_] ABSTAIN [_]
3. Proposal to adopt the First USA Paymentech, Inc. 1996 Restricted Stock Plan.
FOR [_] AGAINST [_] ABSTAIN [_]
4. Proposal to adopt the First USA Paymentech, Inc. Employee Stock Purchase
Plan.
FOR [_] AGAINST [_] ABSTAIN [_]
5. Proposal to adopt the First USA, Inc. Deferred Compensation Plan.
FOR [_] AGAINST [_] ABSTAIN [_]
6. The proxy is authorized to transact such other business as may properly come
before the meeting.
Change of Address and/ [_]
or comments Mark Here
(Please sign exactly as name appears hereon.
Joint owners should each sign. When signing
as attorney, executor, administrator,
trustee, guardian or other fiduciary, please
add that title.)
Dated: , 1996
-------------------------------
-------------------------------------------
Signature of Stockholder
-------------------------------------------
Signature of Stockholder
Please Mark, Date, Sign and Mail Your Proxy Promptly in the envelope Provided.
================================================================================
FIRST USA PAYMENTECH, INC.
Proxy solicited by the Board of Directors for the
Annual Meeting of Stockholders to be held on October 23, 1996
The undersigned hereby appoints John C. Tolleson, Pamela H. Patsley and
David W. Truetzel, and each of them, the true and lawful agents and proxies with
full power of substitution, to represent the undersigned at the Annual Meeting
of Stockholders of First USA Paymentech, Inc. to be held at the offices of the
Company, 1601 Elm Street, 47th floor, Dallas, Texas 75201, on October 23, 1996,
at 10:30 a.m., Central Standard Time, and at any adjournments thereof, for the
transaction of the business described on the opposite side of this card.
The Shares represented by this proxy will be voted as indicated on the
opposite side of this card. If no indication has been made, the Shares
represented by this proxy will be voted in favor of Proposals 1 through 5 and as
the named proxies deem advisable on such other business as may properly come
before the meeting.
Please sign, date and return this proxy promptly, using the enclosed return
envelope.
FIRST USA PAYMENTECH, INC.
P.O. BOX 11352
NEW YORK, N.Y. 10203-0352
