<PAGE>
As Filed with the Securities and Exchange Commission on December 12, 1996
Registration No. 333-_____
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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USCS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-1727009
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2969 Prospect Park Drive
Rancho Cordova, California 95670
(Address of Principal Executive Offices) (zip code)
EMPLOYEE STOCK OWNERSHIP PLAN
(Full Title of the Plans)
JAMES C. CASTLE, Ph.D.
Chief Executive Officer
USCS INTERNATIONAL, INC.
2969 Prospect Park Drive
Rancho Cordova, California 95670-6184
(Name and address of agent for service)
916-636-4500
(Telephone number, including area code, of agent for service)
With a copy to:
GILLES S. ATTIA, ESQ.
Graham & James LLP
400 Capitol Mall, Suite 2400
Sacramento, California 95814
(916) 558-6700
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of maximum maximum
securities Amount offering aggregate Amount of
to be to be price per offering registration
registered registered share(1) price(1) fee
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Common Stock,
par value $0.05
and related
Preferred
Stock Purchase
Rights (the
"Rights")(2) 3,941,647 Shares(3) $15.38 $60,622,530 $18,370.46
------ ----------- ----------
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(h) and Rule 457(c) under the Securities Act of 1933
based on average of the high and low prices of a share of Common Stock of
the Company reported for trading on the Nasdaq National Market System on
December 6, 1996.
(2) The Rights are attached to and trade with the Common Stock.
(3) Pursuant to Rule 416(c) under the Securities Act of 1933, this Registration
Statement covers an indeterminate amount of interests to be offered or sold
pursuant to the Employee Stock Ownership Plan.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents which have heretofore been filed by USCS
International, Inc. (the "Registrant" or the "Company") with the Securities and
Exchange Commission (the "Commission") pursuant to the Securities Exchange Act
of 1934, as amended (the "1934 Act"), are incorporated by reference herein and
shall be deemed to be a part hereof:
(a) Registrant's Prospectus filed with the Commission on June 21,
1996 pursuant to Rule 424(b)(4) of the Securities Act of 1933.
(b) Registrant's Quarterly Reports on Form 10-Q for the fiscal
quarters ended June 30, 1996 and September 30, 1996, filed
pursuant to Section 15(d) of the 1934 Act.
(c) The description of Common Stock contained in the Registration
Statement on Form 8-A filed with the Commission on June 18, 1996,
by which the shares of Common Stock of the Company were
registered under Section 12 of the 1934 Act.
All documents subsequently filed by the Registrant with the Commission
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment to this Registration Statement which
indicates that all securities offered hereby have been sold or which deregisters
all securities then remaining unsold, shall be deemed to be incorporated by
reference in this Registration Statement and made a part hereof from the date of
filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
The firm of Graham & James LLP has given an opinion as to the
securities being registered pursuant to this Registration Statement. Certain
attorneys of Graham & James LLP, counsel to the Registrant, own an aggregate of
5,845 shares of the Registrant's Common Stock.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a court
to award, or a corporation's Board of Directors
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to grant, indemnity to directors and officers in terms sufficiently broad to
permit such indemnification under certain circumstances for liabilities
(including reimbursement for expenses incurred) arising under the 1933 Act.
The Company's First Amended and Restated Certificate of Incorporation and
Bylaws provide for expanded indemnification of directors and officers of the
Company and limits the liability of directors of the Company. The Bylaws
provide that the Company shall indemnify each person who is or was an officer or
director of the Company, or is or was serving as an officer, director, employee
or agent of any other corporation, partnership, joint venture, trust or other
enterprise at the request of the Company, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement (if such settlement is
approved in advance by the Company, which approval shall not be unreasonably
withheld) actually and reasonably incurred by him or her in connection with such
action, suit or proceeding if he or she acted in good faith and in a manner he
or she believed to be in or not opposed to the best interests of the Company,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his or her conduct was unlawful. Such right to indemnification
includes the right to advancement of expenses incurred by such person prior to
final disposition of the proceeding, provided that such director or officer
shall provide the Company with an undertaking to repay all amounts so advanced
if it shall ultimately be determined by final judicial decision that such person
is not entitled to be indemnified for such expenses. The Bylaws also provide
that the Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Company to procure a judgment in its favor by
reason of the fact that he or she is or was a director, officer, employee or
agent of the Company, or is or was serving at the request of the company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection with the defense or
settlement of such action or suit, if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Company, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Company unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper. No person shall be indemnified
by the Court for any expenses or amounts paid in settlement with respect to any
action to recover short-swing profits under Section 16(b) of the Securities
Exchange Act of 1934, as amended. The First Amended and Restated Certificate of
Incorporation provides that if the Delaware General
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Corporation Law is amended to further eliminate or limit the personal liability
of directors, then the liability of a director of the Company shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended. The Company has also entered into agreements to
indemnify its officers and directors in addition to the indemnification provided
for in the Company's Bylaws.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
The following exhibits are filed with this Registration Statement.
Number Description of Exhibit
------ ----------------------
4.1 First Amended and Restated Certificate of Incorporation of
the Company dated April 23, 1996.*
4.2 Certificate of Designation of Rights, Preferences and
Privileges of Series A Stock.*
4.3 Shareholder Rights Agreement dated December 30, 1988 among
U.S. Computer Services, Westar Capital and Enterprise
Partners.*
4.4 Stockholder Rights Plan between the Company and Trustee.*
4.5 By-laws of the Company.*
5.1 Opinion of Graham & James LLP regarding legality of the
shares of Common Stock.
23.1 Consent of Graham & James LLP (incorporated by reference to
Exhibit 5.1 hereof).
23.2 Consent of Price Waterhouse LLP.
24.1 Power of Attorney (see page II-6).
99.1 Employee Stock Ownership Plan, as amended.*
99.2 Employee Stock Ownership Plan Summary Plan Description.
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* Incorporated by reference to Registrant's Registration Statement on Form
S-1, Registration No. 333-3842, filed pursuant to Section 5 of the
Securities Act of 1933, as amended.
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The Registrant hereby undertakes that the Registrant has submitted the U.S.
Computer Services Stock Ownership Plan ("ESOP") and any amendment thereto to the
Internal Revenue Service ("IRS") in a timely manner and has made or will make
all changes required by the IRS in order to qualify the ESOP.
ITEM 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes to file, during any
period in which offers or sales are being made, a post-effective amendment to
this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement.
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8 and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(b) The undersigned Registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time to be the initial bona fide offering.
(c) The undersigned Registrant hereby undertakes to remove from
registration by means of a post-effective amendment any of the securities being
registered which remain unsold at the termination of the offering.
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(d) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the Delaware Corporation Law, the First
Amended and Restated Certificate of Incorporation of the Registrant, the Bylaws
of Registrant and the indemnification agreements described above in Item 6,
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of expenses
incurred or paid by a director, officer or controlling person of Registrant in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Rancho Cordova, County of Sacramento, State of California, on the
12th day of December, 1996.
USCS INTERNATIONAL, INC.
By: /s/ James C. Castle
------------------------------------
James C. Castle,
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints James C. Castle and Douglas L.
Shurtleff, and each of them, his true and lawful attorneys-in-fact and agents,
each with full power of substitution, each with power to act alone, to sign and
execute on behalf of the undersigned any amendment or amendments to this
Registration Statement and to perform any acts necessary in order to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, and each of the undersigned does hereby
ratify and confirm all that said attorneys-in-fact and agents, or their or his
substitutes, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
Dated: December 12, 1996 /s/ James C. Castle
----------------------------------------
James C. Castle
Chief Executive Officer and
Chairman of the Board of Directors
(Principal Executive Officer)
Dated: December 12, 1996 /s/ George L. Argyros, Sr.
----------------------------------------
George L. Argyros, Sr.
Director
Dated: December 12, 1996 /s/ George M. Crandell, Jr.
----------------------------------------
George M. Crandell, Jr.
Director
II-6
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Dated: December 12, 1996 /s/ Charles D. Martin
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Charles D. Martin
Director
Dated: December 12, 1996 /s/ Michael F. McGrail
----------------------------------------
Michael F. McGrail
Director
Dated: December 12, 1996 /s/ Larry W. Wangberg
----------------------------------------
Larry W. Wangberg
Director
Dated: December 12, 1996 /s/ Douglas L. Shurtleff
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Douglas L. Shurtleff
Senior Vice-President of Finance
and Chief Financial Officer
(Principal Financial Officer)
Dated: December 12, 1996 /s/ Arthur O. Hawkins
----------------------------------------
Arthur O. Hawkins
Vice-President and Treasurer
(Principal Accounting Officer)
II-7
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INDEX TO EXHIBITS
Number Description of Exhibit
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4.1 First Amended and Restated Certificate
of Incorporation of the Company dated
April 23, 1996.*
4.2 Certificate of Designation of Rights,
Preferences and Privileges of Series A
Stock.*
4.3 Shareholder Rights Agreement dated
December 30, 1988 among U.S. Computer
Services, Westar Capital and
Enterprise Partners.*
4.4 Stockholder Rights Plan between the
Company and Trustee.*
4.5 By-laws of the Company.*
5.1 Opinion of Graham & James LLP regarding
legality of the shares of Common Stock.
23.1 Consent of Graham & James LLP
(incorporated by reference to
Exhibit 5.1 hereof).
23.2 Consent of Price Waterhouse LLP.
24.1 Power of Attorney (see page II-6).
99.1 Employee Stock Ownership Plan, as amended.*
99.2 Employee Stock Ownership Plan Summary Plan Description
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* Incorporated by reference to Registrant's Registration Statement on Form
S-1, Registration No. 333-3842, filed pursuant to Section 5 of the
Securities Act of 1933, as amended.
<PAGE>
EXHIBIT 5.1
[LETTERHEAD]
December 12, 1996
USCS International, Inc.
2969 Prospect Park Drive
Rancho Cordova, California 95670
Ladies and Gentlemen:
You have requested our opinion as counsel for USCS International, Inc., a
Delaware corporation (the "Company"), in connection with the registration under
the Securities Act of 1933, as amended (the "Securities Act"), and the Rules and
Regulations promulgated thereunder, of an aggregate of 3,941,647 shares (the
"Shares") of the Company's common stock, par value $0.05 per share (the "Common
Stock"), issuable in connection with the Company's Employee Stock Ownership Plan
(the "Plan").
This opinion is rendered pursuant to Item 601(b)(5)(i) of Regulation S-K
promulgated under the Securities Act.
For purposes of this opinion, we have examined the Registration Statement on
Form S-8 to be filed with the Commission on or about December 12, 1996 (the
"Registration Statement"). We have also been furnished with and have examined
originals or copies, certified or otherwise identified to our satisfaction, of
all such records of the Company, agreements and other instruments, certificates
of officers and representatives of the Company, certificates of public officials
and other documents as we have deemed it necessary as a basis for the opinions
hereafter expressed. As to questions of fact material to such opinions, we
have, where relevant facts were not independently established, relied upon
certifications by principal officers of the Company. We have made such further
legal and factual examination and investigation as we deem necessary for
purposes of rendering the following opinions.
In our examination we have assumed the genuineness of all signatures, the legal
capacity of natural persons, the correctness of facts set forth in certificates,
the authenticity of all documents submitted to us as originals, the conformity
to original documents of all documents submitted to us as certified or
photostatic copies, and the authenticity of the originals of such copies. We
have also assumed that such documents have each been duly authorized, properly
executed and delivered by each of the parties thereto other than the Company.
We are members of the bar of the State of California. Our opinions below are
limited to the laws of the States of California, Delaware and the federal
securities laws of the United States.
<PAGE>
USCS International, Inc.
December 12, 1996
Page 2
Based on the foregoing, it is our opinion that all of the Shares, when issued
and delivered in accordance with the terms of the Plan, will be legally and
validly issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement on Form S-8.
Very truly yours,
/s/ Graham & James LLP
GRAHAM & JAMES LLP
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated March 4, 1996, except for Note 13
which is dated as of June 20, 1996, appearing on page F-2 of USCS International,
Inc.'s Registration Statement on Form S-1 for the three years ended December 31,
1995.
/s/ Price Waterhouse LLP
Sacramento, CA
December 12, 1996
<PAGE>
Exhibit 99.2
USCS INTERNATIONAL, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
SUMMARY PLAN DESCRIPTION
DECEMBER 12, 1996
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NAMES, ADDRESSES AND OTHER DATA
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NAME OF THE PLAN
The name of the Plan is:
USCS International, Inc.
Employee Stock Ownership Plan
In this Summary Plan Description we will refer to the plan as the Plan or as the
Employee Stock Ownership Plan. The Plan has been in continuous existence since
September 1, 1972.
NAME AND ADDRESS OF THE EMPLOYERS
The name and address of the Employers are:
USCS International, Inc. CableData, Inc.
2969 Prospect Park Drive 11020 Sun Center Drive
Rancho Cordova, California 95670 Rancho Cordova, California 95670
International Billing
Services, Inc.
5220 Robert J. Mathews Parkway
El Dorado Hills, California 95762
EMPLOYER IDENTIFICATION NUMBER OF THE PLAN SPONSOR
The employer identification number assigned by the Internal Revenue Service to
the Plan Sponsor is 94-1727009.
PLAN NUMBERS
The Plan number assigned to the Plan by the Plan Sponsor is 002.
TYPE OF PLAN
The Plan is an employee stock ownership plan.
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TYPE OF ADMINISTRATION
The Company self-administers the Plan and the Company acts as the Plan
Administrator.
PLAN ADMINISTRATOR
The name, business address and business telephone number of the Plan
Administrator is:
USCS International, Inc.
2969 Prospect Park Drive
Rancho Cordova, California 95670
(916) 636-4500
AGENT FOR SERVICE OF LEGAL PROCESS
The name of the person designated as agent for service of legal process is the
ESOP Administrative Committee and the address at which process may be served on
the agent is:
USCS International, Inc.
2969 Prospect Park Drive
Rancho Cordova, California 95670
Legal Process may also be served on the Plan Trustee or the Plan Administrator.
TRUSTEE OF THE PLAN
The name, title and address of the principal place of business of the Trustee of
the Plan is:
Imperial Trust Company
456 Montgomery Street, Suite 600
San Francisco, California 94101
(415) 954-5082
ESOP ADMINISTRATIVE COMMITTEE
The members of the ESOP Administrative Committee are:
Andrew B. Beard
Deborah S. Beitz
Calvin R. Gorrell
Arthur O. Hawkins
Mary G. Jordan
Donald L. Shurtleff
2
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PROSPECTUS
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THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, WITH RESPECT TO
THE SHARES TO BE ISSUED UNDER THE COMPANY'S EMPLOYEE STOCK OWNERSHIP PLAN; AND
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE
SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY TO
ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
OFFER OR SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE
DATE HEREOF.
The date of this Prospectus is December 12, 1996.
3
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act "), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission can be inspected
without charge at the Commission's principal office in Washington, D.C., or can
be obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company has filed with the Commission in Washington, D.C. a
Registration Statement on Form S-8 (herein together with all amendments thereto
called the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities covered by this
Prospectus. This Prospectus does not contain all of the information set forth
in the Registration Statement, certain items of which are contained in exhibits
to the Registration Statement as permitted by the rules and regulations of the
Commission. For further information, reference should be made to the
Registration Statement, including the exhibits filed or incorporated as a part
thereof.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company has incorporated by reference into the Registration Statement
the following documents and information previously filed with the Commission
which are hereby incorporated by reference in this Summary Plan Description:
1. The Company's Prospectus dated June 20, 1996, filed pursuant to Rule
424(b) of the Securities Act.
2. The Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended June 30, 1996 and September 30, 1996, filed pursuant to Section
15(d) of the Exchange Act; and
3. The description of the Company's Common Stock, par value $.05 per
share, contained in the Registration Statement on Form 8-A filed with
the Commission on June 18, 1996, including any amendment or report
filed for the purpose of updating such description.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 and
15(d) of the Exchange Act after the date of this Prospectus and prior to the
filing of a post-effective amendment to the Registration Statement which
indicates that all securities offered hereby have been sold or which deregisters
all securities then remaining unsold, shall be deemed to be incorporated by
reference in this Prospectus, and to be a part thereof from the date of filing
such documents.
5
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The Company will also provide without charge to each Participant in the
Plan copies of the foregoing documents and any documents that may be made part
of this Prospectus for purposes of updating the description of the Plan, a copy
of the Company's annual report to security holders and a copy of any other
communications distributed to its security holders without charge and upon
written or oral request from the Secretary of the Company, generally no later
than the date such material is sent to security holders generally. Such
requests should be directed to Mary G. Jordon, Vice President, General Counsel
and Secretary, USCS International, Inc., 2969 Prospect Park Drive, Rancho
Cordova, California 95670; (916) 636-5833.
6
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DEFINITIONS
- --------------------------------------------------------------------------------
In order to understand how our Employee Stock Ownership Plan works, it is very
important that you understand the words used by the Plan. This list of
definitions will apply for any reference made to these words or phrases. Other
definitions are periodically set forth in this Summary Plan Description. If you
have any questions concerning any of the definitions or other words or phrases
used in the Summary Plan Description, please ask the Plan Administrator.
ELIGIBLE EMPLOYEE -- Eligible employees are all employees other than those whose
employment and retirement benefits are governed by a collective bargaining
agreement (unless the terms of the collective bargaining agreement specifically
provide for participation in the Plan).
ANNIVERSARY DATE -- The Anniversary Date of our Plan is December 31. This is
also the date of the end of the year for purposes of maintaining the Plan's
fiscal records.
PLAN YEAR -- January 1 to December 31.
NORMAL RETIREMENT AGE -- Age 65.
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COMPENSATION -- The amount paid to you by your Employer during the Plan Year and
reported as "wages, tips, other compensation" on your Wage and Tax Statement
(Form W-2) while you are an Eligible Employee including commissions, bonuses and
overtime, but not including any relocation assistance payments, any payments
made to or on behalf of an employee to reimburse him or her for additional costs
and expenses associated with working outside the United States, and any amount
over $150,000 (as adjusted after 1996 for cost of living increases).
Compensation under the Plan is determined on a cash basis. Compensation will
include your 401(k) Savings Contributions to the USCS International, Inc. 401(k)
Retirement Plan for the Plan Year and any amount you elect to have withheld
under a qualified cafeteria plan.
HOUR OF SERVICE -- In general, an Hour of Service is each hour for which you are
paid or entitled to be paid by your Employer for the performance of duties.
These hours are credited to you for the period to which the award or agreement
pertains and not the period in which you actually receive payment.
You will also receive credit for Hours of Service for each hour for which you
are paid for reasons other than for the performance of duties such as Paid-Time-
Off (PTO), holidays, bereavement, incapacity, layoffs, jury duty, military duty
or leave of absence. These hours are credited to you in the period during which
no duties are performed occurs. However, you cannot be credited with more than
501 Hours of Service on account of any single continuous period during which you
performed no duties. Furthermore, you cannot duplicate crediting of Hours of
Service under more than one of these rules.
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<PAGE>
In determining the number of Hours of Service to be credited to you during any
Plan Year, the Plan Administrator may either count your actual Hours of Service,
using available payroll records, or use an equivalency method specified in the
Plan, which has been approved by the Internal Revenue Service.
COMPANY -- USCS International, Inc.
COMPANY STOCK - Company Stock are shares of Common Stock, par value $.05 per
share, issued by the Company. Company Stock is publicly traded and therefore,
the per share value will fluctuate daily. You may determine the daily per share
value by referring to the NASDAQ National Market quotations reported in most
newspapers.
The Company has entered into a Stockholders' Rights Plan (the "Rights Plan") by
and between the Company and Chase/Mellon Shareholder Services, LLC, as rights
agent. Under the Rights Plan, the Board declared and distributed a dividend of
one right ("Right") for each outstanding share of the Common Stock to the
stockholders of record as of June 20, 1996 and each share of Common Stock issued
thereafter (subject to certain limitations). Currently, the Rights trade with
the Common Stock. The Rights, when exercisable, entitle their holders (other
than those held by an acquiring person or group) to purchase 1/1,000th of a
share of Series A Preferred Stock (subject to adjustment) or, in certain
instances, other securities of the Company. The Rights Plan is intended to
encourage a potential acquiring person or group to negotiate directly with the
Board, but
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<PAGE>
may have certain anti-takeover effects. The Rights Plan could significantly
dilute the interests in the Company of an acquiring person or group. The Rights
Plan may therefore have the effect of delaying, deferring or preventing a change
in control of the Company.
10
<PAGE>
ELIGIBILITY
- --------------------------------------------------------------------------------
WHAT ARE THE REQUIREMENTS TO BECOME A PARTICIPANT IN THE PLAN?
To become a Participant in the Plan you must meet all of the following
requirements:
- You must have been an Eligible Employee prior to February 19, 1993.
- You must be employed on any December 31st.
When you have met the eligibility requirements, you will become a Participant in
the Plan as of December 31st of the Plan Year in which you SATISFY the
eligibility requirements.
If you become a Participant in the Plan and if you then terminate your service
with your Employer, it is not necessary for you to once again satisfy the
eligibility requirements if you are rehired by the Employer. Rehired Employees,
who were Participants in the Plan, reenter the plan as of the date of their
reemployment.
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CONTRIBUTIONS
- --------------------------------------------------------------------------------
WHO MAKES THE CONTRIBUTIONS TO THE PLAN?
The Employer makes all the contributions to the Plan. Participants are neither
permitted nor required to contribute any of their own funds to the Plan.
HOW MUCH WILL THE COMPANY CONTRIBUTE TO THE PLAN EACH YEAR?
For Plan Years after 1991, the Company will make no further contributions to
this Plan. Instead, the Company will make contributions to the USCS
International, Inc. 401(k) Retirement Plan.
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TRUST ASSET INVESTMENTS
- --------------------------------------------------------------------------------
HOW ARE THE TRUST ASSETS INVESTED?
The USCS International, Inc. Employee Stock Ownership Trust is designed so that
the Trustee may invest the Trust assets primarily in shares of Company Stock.
The Trustee is authorized to invest up to 100% of the Trust assets in shares of
Company Stock. In the event the Trustee does not invest 100% of the Trust
assets in Company Stock, the balance of the Trust can be invested in savings
accounts, bonds, other stocks, notes, insurance contracts and other types of
investments.
You will have the right to direct the voting of any shares of Company Stock that
are allocated to your Company Stock Account on all matters presented for a vote
of shareholders. You will be furnished with the proxy materials and other
information provided to Company shareholders in connection with a shareholder
meeting, along with a form on which to give your confidential voting
instructions. If you do not provide voting instructions with respect to those
shares of Company Stock which you are entitled to vote, such shares will be
voted in the manner determined by the ESOP Administrative Committee.
The ESOP Administrative Committee directs the Trustee in regard to all Trust
investments.
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IN-SERVICE WITHDRAWALS AND DIVERSIFICATION ELECTIONS
- --------------------------------------------------------------------------------
MAY I MAKE WITHDRAWALS FROM THE PLAN?
Prior to your termination of employment, you may not make a withdrawal from the
Plan (with the exception of the Diversification Election discussed below).
DO I HAVE A RIGHT TO DIVERSIFY MY INVESTMENTS?
Once you have attained age 55 and completed at least ten years of participation
in the Plan, you will be eligible to elect to have a portion of the shares of
Company Stock held in your Account converted to cash and transferred to the USCS
International, Inc. 401(k) Retirement Plan and invested among the investment
funds that are available under that Plan. If you become eligible to make this
election, the ESOP Administrative Committee will notify you and will provide you
with further details regarding this election.
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<PAGE>
BENEFITS
- --------------------------------------------------------------------------------
WHAT BENEFITS DOES THE PLAN PROVIDE?
Since the Plan is an Employee Stock Ownership Plan, your benefits are measured
by the value of your account. The amount you will actually receive will largely
depend on the following factors:
- The performance of the Plan's investments. Since a major portion of
the Plan's assets will be invested in Company Stock, the future
performance of the Company Stock will be very important to all the
Participants.
- The amount of forfeitures from Employees of the Company who terminate
their employment prior to becoming fully vested. Such forfeitures are
allocated to each active Participant on a pro rata basis based on each
Participant's Compensation compared to total Compensation of all
Eligible Employees.
- The length of time you are a Participant.
- Your "vested" interest in your account.
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<PAGE>
VESTING
- --------------------------------------------------------------------------------
UNDER WHAT CIRCUMSTANCES WILL MY BENEFITS BECOME VESTED?
Vesting is the process whereby your benefits become free of any risk of
forfeiture. Under the Plan, you will automatically become 100% vested and your
benefits will not be subject to any risk of forfeiture if, while you are still
in the employ of the Employer when:
- You reach Normal Retirement Age; or
- Your death occurs; or
- You become disabled. The Plan provides that a Participant shall be
considered disabled and shall be entitled to disability benefits under
the Plan if, and only if, he or she is eligible to receive primary
Social Security benefits as a disabled employee under the Social
Security Act.
In all other circumstances, you become vested in accordance with the Plan's
vesting schedule. The Plan's normal vesting schedule is as follows:
16
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YEARS OF SERVICE PERCENTAGE VESTED
---------------- -----------------
1 0
2 0
3 30
4 40
5 60
6 80
7 100
For purposes of vesting, a "Year of Service" means a Plan Year during which a
Participant has completed 1,000 Hours of Service. If you terminate your
employment with the Employer and are later rehired, you may or may not receive
credit for prior years of Service for purposes of vesting. The provisions
setting forth the rules for prior service credit are very complex and are
explained in detail in the Plan.
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<PAGE>
FORFEITURES
- --------------------------------------------------------------------------------
WHEN CAN BENEFITS BE FORFEITED?
Under the Plan, benefits which are not vested will be forfeited if you incur a
one-year Break-in-Service.
You will incur a one-year Break-in-Service if, during a Plan year, you have not
completed more than 500 Hours of Service and you are not employed by the
Employer on the last day of the plan year.
If you are reemployed, in some circumstances your nonvested benefit will be
restored to you.
EXAMPLE: The Plan Year runs from January 1 to December 31. Assume that on
February 1, 1996, you permanently terminate your employment in
the Company, and you do not have 501 Hours of Service by that
time for the Plan Year ending December 31, 1996. You would have
incurred a one-year Break-in-Service during the Plan Year ending
December 31, 1996.
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<PAGE>
WHAT HAPPENS TO THAT PORTION OF A PARTICIPANT'S ACCOUNT BALANCE WHICH IS
FORFEITED?
Any forfeitures are reallocated to the accounts of the remaining plan
Participants who are eligible to share in the allocation of contributions in
proportion to their Compensation for the Plan Year in which the forfeitures
occur.
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DISTRIBUTIONS
- --------------------------------------------------------------------------------
WHEN WILL YOUR BENEFITS BE DISTRIBUTED TO YOU?
Your benefits under the Employee Stock Ownership Plan must be distributed no
later than 60 days following the end of the calendar year during which the later
of the following events occurs:
- You attain the age of 65 years.
- You terminate your service with the Company.
These limitations are imposed by law and have always been a part of the plan.
The ESOP Administrative Committee's distribution policy allows for a more prompt
method of distribution without impairing the cash assets of the Plan. When you
receive your distribution will depend, in part, upon the amount of your
distribution. The distribution policy is summarized as follows:
- If your vested benefits in the Plan are $3,500.00 or less, your vested
benefits will be distributed in a single payment within a reasonable
period following your termination of employment. Your nonvested
benefits will be forfeited.
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<PAGE>
- If your vested benefits in the Plan exceed $3,500.00, your vested
benefits will be distributed in a single payment within a reasonable
period following your termination of employment if you voluntarily
elect to receive your distribution. Otherwise, your vested benefits
will remain in the Plan until you elect to receive a distribution or
you reach age 65 (whichever is earlier).
Under any of these options, the nonvested portion of your benefits will be
forfeited after you incur a one-year break-in-service. The ESOP Administrative
Committee has the right to change the distribution policy.
In addition to these general rules, the Internal Revenue Code also sets forth
other specific distribution rules which are now included in the Plan. If you
are a 5% owner of Company Stock, payment of your benefits must commence not
later than April 1 of the calendar year following the year in which you attain
the age of 70 1/2, even if your employment has not been terminated.
WHAT DO YOU RECEIVE WHEN YOU GET YOUR BENEFITS FROM THE PLAN?
The portion of your Account that is invested in Company Stock will be
distributed in whole shares of Company Stock, with the value of any fractional
share paid in cash. The portion of your Account that is not invested in Company
Stock will be distributed to you in cash. However, you have the right to demand
that your distribution be made entirely
21
<PAGE>
in whole shares of Company Stock with only the value of any fractional share
paid in cash. If you elect to receive your distribution entirely in Company
Stock, the Trustee will use the cash portion of your Account to purchase shares
of Company Stock. This will cause a delay in the distribution of your benefits
and your Account will be charged for any applicable costs related to the
purchase of shares on your behalf. The shares of Company Stock distributed to
you will be readily tradable on the public market.
IN WHAT FORM WILL YOUR BENEFITS BE PAID TO YOU?
The manner of paying your benefits will normally be a lump sum after
consultation with you or, in the event of your death, with your beneficiary.
The ESOP Administrative Committee has the right, however, to decide that
benefits will be paid in installments.
In certain circumstances, you may elect to transfer your benefit directly to an
individual retirement account (IRA) or annuity or another Employer's qualified
retirement plan which accepts such transfers.
ARE THERE ANY RESTRICTIONS ON RESALE OF COMPANY STOCK?
Generally, shares of Company Stock distributed from the Plan to Participants who
are not "affiliates" of the Company may be resold at any time without
restriction under the federal securities laws. Resales by "affiliates" (as such
term is defined under the Securities Act), however, may not be made unless a
registration statement is in effect with respect to the shares of Company Stock
to be sold or unless the subject resales satisfy the requirements of Rule 144
under the Securities Act or some other exemption from registration. To the
extent that this document serves as a prospectus under the Securities
22
<PAGE>
Act, it is not available for reoffers or resales of Company Stock acquired by
affiliates of the Company pursuant to the Plan.
Section 16(b) of the Exchange Act and the regulations promulgated thereunder
also provides limitations on the ability of certain officers, directors and 10%
beneficial shareholders of the Company to retain any profits from certain
transactions in the Company's equity securities where any purchase and sale, or
sale and purchase, of such securities by such persons take place within six
months of each other.
In view of the aforementioned restrictions imposed upon officers, directors and
10% beneficial shareholders of the Company as "affiliates" or otherwise, such
persons should consult with their legal advisors prior to reselling any shares
of Company Stock obtained pursuant to the Plan.
WHO WILL RECEIVE BENEFITS UPON YOUR DEATH?
Upon a Participant's death, his or her vested benefits will be paid to his or
her surviving spouse or, if there is no surviving spouse, to a beneficiary
designated by the Participant on forms provided for this purpose by the ESOP
Administrative Committee.
If a Participant has a surviving spouse, benefits may be paid to a designated
beneficiary instead of such spouse if the spouse has consented to the designated
beneficiary in
23
<PAGE>
writing, the spouse's consent acknowledges the effect of the designation of such
other beneficiary and the consent is witnessed by a Notary Public.
If a Participant dies without a surviving spouse, and if no other beneficiary
designation is then in effect, the beneficiary shall be the Participant's
estate.
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<PAGE>
GENERAL INFORMATION
- --------------------------------------------------------------------------------
WILL I RECEIVE A STATEMENT OF MY ACCOUNTS?
Each Plan Year, you will be given a statement on the activity in your Accounts
under the Plan.
ARE PLAN LOANS TO PARTICIPANTS PERMITTED UNDER THE PLAN?
No, the Plan does not permit the Trustee to make any loans to Plan Participants.
MAY I ASSIGN OR TRANSFER MY BENEFIT?
Your interest in the Plan normally cannot be sold, assigned or transferred prior
to distribution to you. An exception is made for a "qualified domestic
relations order." Furthermore, prior to distribution, your interest is not
subject to any debts or claims against you.
HOW ARE PLAN BENEFITS TAXED?
You are not subject to federal or state income tax on your ESOP Account balance
while it is held by the Plan. Distributions you receive from the Plan will be
subject to federal and state income taxes. Distributions made to you before you
reach age 55 may be subject to an additional 10% federal tax and an additional
state tax. Distributions made to you after your termination of employment may
be eligible for certain favorable tax treatment, the taxation of distributions
may differ if you receive shares of Company Stock instead of cash and the
taxation of eligible distributions may be deferred by "rolling over" the
25
<PAGE>
distribution into an individual retirement account or another qualified employee
benefit plan. You should consult a qualified tax advisor before making any
election permitted by the Plan so as to be fully informed of all tax
consequences arising from your participation in the Plan. For more information
regarding the taxation of benefit distributions, please refer to Appendix A of
this Summary Plan Description.
MAY THE PLAN BE AMENDED OR TERMINATED?
The Company reserves the right to amend or terminate the Plan at any time in the
future. No amendment may retroactively reduce your vested rights. You will be
advised if any material amendments are made to the Plan.
WHO SUPERVISES THE PLAN?
The ESOP Administrative Committee administers the Plan for the exclusive benefit
of participants (and their beneficiaries). The ESOP Administrative Committee is
composed of individuals appointed by the Board of Directors of the Company. The
ESOP Administrative Committee makes all rules, regulations, computations and
other necessary decisions concerning the administration of the Plan.
HOW ARE PLAN ASSETS HELD?
A trust has been established to hold the assets of the Plan. The trust is a
separate legal entity, with the Trustee having the responsibility to hold and
invest the assets for your benefit in accordance with the terms of the Plan.
The Company has appointed Imperial Trust Company as the Trustee of the Plan.
26
<PAGE>
PLAN DOCUMENTS GOVERN
This Summary Plan Description is intended to be an accurate description of the
major features of the USCS International, Inc. Employee Stock Ownership Plan.
However, please remember that this description does not take the place of the
actual Plan documents, which govern at all times. If you have any questions,
please contact the ESOP Administrative Committee.
ARE PLAN BENEFITS INSURED?
The Employee Retirement Income Security Act of 1974 created a new governmental
agency called the Pension Benefit Guaranty Corporation (PBGC). One of the
purposes of the PBGC is to provide plan benefit insurance. However, this
insurance is only available to defined benefit pension plans and our Plan is a
defined contribution plan. Therefore, benefits under the Plan are not insured
with the PBGC since such insurance is not available.
27
<PAGE>
CLAIMS PROCEDURE
- --------------------------------------------------------------------------------
Upon your retirement, death, disability or other termination of participation in
the Plan, or at such other time when you (or, in the event of your death, your
beneficiary) believe that you are entitled to receive a benefit under the Plan,
you shall deliver a request for such benefit in writing to the ESOP
Administrative Committee or any member thereof. The ESOP Administrative
Committee will review your request and shall notify you of its decision as
follows:
- If the ESOP Administrative Committee approved your request, it will
notify you of its approval and your benefits will be distributed to
you in accordance with the terms of the Plan.
- If the ESOP Administrative Committee denies your request in whole or
in part, it will notify you of such denial and it will give you the
opportunity to review that decision. The review procedure is as
follows:
(1) Within 90 days of receiving your request, the ESOP Administrative
Committee will provide you with a written notice of its decision.
The written notice to you will also include:
28
<PAGE>
- The specific reason or reasons for the denial;
- Specific reference to the pertinent Plan provisions on which
the denial is based;
- A description of any additional material or information you
need to perfect your claim and an explanation of why such
material or information is necessary; and
- Appropriate information as to the steps to be taken if you
wish to submit your claim for review pursuant to
subparagraph (3) below.
(2) In the event written notice of a denial of your request is not
provided to you in the manner set forth in subparagraph (1)
above, your request shall be deemed denied as of the date on
which the ESOP Administrative Committee's time period for
rendering its decision expires.
(3) If your request for Plan benefits has been denied, in whole or in
part, you, or your authorized representative, may appeal said
denial by submitting to the ESOP Administrative Committee a
written request for a review of such denied request. Any such
29
<PAGE>
request for review must be delivered to the ESOP Administrative
Committee, or any member thereof, no later than 60 days from the
date you received written notification of the ESOP Administrative
Committee's initial denial of your request for plan benefits,
unless the ESOP Administrative Committee, upon the written
application by you or your authorized representative, shall, at
its discretion, agree in writing to an extension of said period.
(4) During the period prescribed in subparagraph (3) above for filing
a request for review of a denied claim, the ESOP Administrative
Committee shall permit you to review pertinent documents and
submit written issues and comments concerning your request for
Plan benefits.
(5) Upon receiving a request by you or by your authorized
representative for a review of a denied claim, the ESOP
Administrative Committee shall consider such request promptly and
shall advise you of its decision within 60 days from the date on
which said request for review was received by the ESOP
Administrative Committee, unless special circumstances require an
extension of time for reviewing said denied claim. The ESOP
Administrative Committee's decision shall be furnished to you in
writing and shall:
30
<PAGE>
- Be written in a manner calculated to be understood by you;
- Include specific reasons for the decision; and
- Include specific references to the pertinent plan provisions
on which the decision is based.
In the event special circumstances require an extension of time
for reviewing said denied claim, the ESOP Administrative
Committee shall, prior to the expiration of the initial 60-day
period referred to above, provide you with written notice of the
extension and of the special circumstances which require such
extension and of the date by which the ESOP Administrative
Committee expects to render its decision. In no event shall such
extension exceed a period of 120 days from the date on which your
request for review was received by the ESOP Administrative
Committee.
(6) The ESOP Administrative Committee may, at its discretion,
determine that a hearing is required in order to properly
consider your request for review of a denied claim. In the event
the ESOP Administrative Committee determines such a hearing is
required,
31
<PAGE>
such determination shall constitute special circumstances
permitting an extension of time in which to consider your request
for review.
- The claims procedure set forth in the Plan shall be strictly adhered
to by each Participant or beneficiary of the Plan and no judicial or
arbitration proceedings, with respect to any claim for Plan benefits
hereunder, shall be commenced by any Participant or beneficiary until
the procedures set forth in the Plan have been exhausted in full.
32
<PAGE>
STATEMENT OF RIGHTS UNDER ERISA
- --------------------------------------------------------------------------------
As a participant in the Plan you are entitled to certain rights and protections
under the Employee Retirement Income Security Act of 1974 ("ERISA"). ERISA
provides that all Plan participants shall be entitled to:
(1) Examine, without charge, at the Company's office, all Plan documents
and copies of all documents and reports filed with the U.S. Department
of Labor, such as annual reports of the Plan and Plan descriptions.
(2) Obtain copies of all Plan documents and other Plan information upon
written request to the Company. The Company may make a reasonable
charge for the copies.
(3) Receive a summary of the Plan's annual financial report. The Company
is required by law to furnish each participant with a copy of this
summary report.
(4) Obtain an annual statement telling you the value of your Accounts
under the Plan and your vested (nonforfeitable) percentage. This
statement must be provided to you free of charge. You will normally
receive this statement automatically once each year.
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<PAGE>
In addition to creating rights for Plan participants, ERISA imposes duties upon
the people who are responsible for the operation of the Plan. The people who
operate the Plan, called "fiduciaries," must perform their duties responsibly,
carefully and in the best interest of participants (and beneficiaries). No one,
including your employer or any other person, may fire you or otherwise
discriminate against you in any way to prevent you from obtaining a benefit
under the Plan or exercising your rights under ERISA. If your claim for a
benefit is denied, in whole or in part, you must receive a written explanation
of the reason for the denial. You have the right to have the ESOP
Administrative Committee review and reconsider your claim.
Under ERISA, there are steps you can take to enforce the above rights. For
instance, if you request materials from the Plan and do not receive them within
30 days, you may file suit in a federal court. In such a case, the court may
require the Company to provide the materials and pay you up to $100 a day until
you receive the materials, unless the materials were not sent because of reasons
beyond the Company's control. If you have a claim for benefits which is denied
or ignored, in whole or in part, you may file suit in a state or federal court.
If it should happen that Plan fiduciaries misuse the Plan's money, or if you are
discriminated against for asserting your rights, you may seek assistance from
the U.S. Department of Labor, or you may file suit in a federal court. The
court will decide who should pay court costs and legal fees. If you are
successful, the court may order the person you have sued to pay these costs and
fees. If you lose, the court may order you to pay these costs and fees; for
example, if it finds your claim is frivolous.
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<PAGE>
If you have any questions about your Plan, you should contact the Plan
Administrator. If you have any questions about this statement or about your
rights under ERISA, you should contact the nearest Area Office of the Pension
and Welfare Benefits Administration, U.S. Department of Labor.
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<PAGE>
APPENDIX A
USCS INTERNATIONAL, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
SPECIAL TAX NOTICE REGARDING ESOP PAYMENTS
This notice contains important information you will need before you decide
how to receive your benefit from the USCS International, Inc. Employee Stock
Ownership Plan ("ESOP").
SUMMARY
A payment from the ESOP that is eligible for "rollover" can be taken in two
ways. You can have ALL OR ANY PORTION of your payment either (1) PAID IN A
"DIRECT ROLLOVER," or (2) PAID TO YOU. A rollover is a payment of your ESOP
benefit to your individual retirement arrangement ("IRA") or to another employer
plan. This choice will affect the tax you owe.
If you choose a DIRECT ROLLOVER
o Your payment will not be taxed in the current year and no income tax
will be withheld.
o Your payment will be paid directly to your IRA or, if you choose, to
another employer plan that accepts your rollover.
o Your payment will be taxed later when you take it out of the IRA or
the employer plan.
If you choose to have your ESOP benefit PAID TO YOU
o You may receive less than 100% of the payment, because the ESOP may be
required to withhold up to 20% of the payment and send it to the IRS
as income tax withholding to be credited against your taxes.
o Your payment will be taxed in the current year unless you roll it
over. You may be able to use special tax rules that could reduce the
tax you owe. However, if you receive the distribution before age 59
1/2, you also may have to pay an additional 10% tax.
o You can roll over the payment by paying it to your IRA or to another
employer plan that accepts your rollover within 60 days of receiving
the payment. The amount rolled over will not be taxed until you take
it out of the IRA or employer plan.
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<PAGE>
o If you want to roll over 100% of the payment to an IRA or another
employer plan, YOU MUST FIND OTHER MONEY TO REPLACE ANY AMOUNT THAT
WAS WITHHELD. If you roll over only the amount that you received, you
will be taxed on the amount that was withheld and that is not rolled
over.
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<PAGE>
MORE INFORMATION
PAGE
----
I. PAYMENTS THAT CAN AND CANNOT BE ROLLED OVER 38
II. DIRECT ROLLOVER 38
III. PAYMENT PAID TO YOU 39
IV SURVIVING SPOUSES, ALTERNATE PAYEES
AND OTHER BENEFICIARES 42
I. PAYMENTS THAT CAN AND CANNOT BE ROLLED OVER
Payments from the ESOP are "eligible rollover distributions," unless you
are a non-spouse beneficiary. This means that they can be rolled over to an IRA
or to another employer plan that accepts rollovers. Beginning in the year after
you reach age 70 1/2, if you are considered a "5% owner" or if you terminated
service with the employer and had not yet commenced distribution of your
benefit, however, a certain portion of your payment cannot be rolled over
because it is a "required minimum payments" that must be paid to you.
II. DIRECT ROLLOVER
You can choose a direct rollover of all or any portion of your payment that
is an "eligible rollover distribution," as described above. In a direct
rollover, the eligible rollover distribution is paid directly from the ESOP to
an IRA or another employer plan that accepts rollovers. If you choose a direct
rollover, you are not taxed on a payment until you later take it out of the IRA
or the employer plan. If you choose a direct rollover of a portion of the
eligible rollover distribution, the amount of the direct rollover must be at
least $500.
DIRECT ROLLOVER TO AN IRA. You can open an IRA to receive the direct
rollover. (The term "IRA," as used in this notice, includes individual
retirement accounts and individual retirement annuities.) If you choose to have
your payment made directly to an IRA, contact an IRA sponsor (usually a
financial institution) to find out how to have your payment made in a direct
rollover to an IRA at that institution. If you are unsure of how to invest your
money, you can temporarily establish an IRA to receive the payment. However, in
choosing an IRA, you may wish to consider whether the IRA you choose will allow
you to move all or a part of your payment to another IRA at a later date,
without penalties or other limitations. See IRS Publication 590, INDIVIDUAL
RETIREMENT ARRANGEMENTS, for more information on IRAs (including limits on how
often you can roll over between IRAs).
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<PAGE>
DIRECT ROLLOVER TO A PLAN. If you are employed by a new employer that has
a plan, and you want a direct rollover to that plan, ask the administrator of
that plan whether it will accept your rollover. An employer plan is not legally
required to accept a rollover. If your new employer's plan does not accept a
rollover, you can choose a direct rollover to an IRA.
III. PAYMENT PAID TO YOU
If you have the payment made to you, it is subject to 20% income tax
withholding. The payment is taxed in the year you receive it unless, within 60
days, you roll it over to an IRA or another plan that accepts rollovers. If you
do not roll it over, special tax rules may apply.
INCOME TAX WITHHOLDING:
MANDATORY WITHHOLDING. If any portion of the payment to you is an
eligible rollover distribution, the ESOP is required by law to withhold 20% of
that amount. This amount is sent to the IRS as income tax withholding. For
example, if your eligible rollover distribution is $10,000, only $8,000 will be
paid to you because the ESOP must withhold $2,000 as income tax. However, when
you prepare your income tax return for the year, you will report the full
$10,000 as a payment from the ESOP. You will report the $2,000 as tax withheld,
and it will be credited against any income tax you owe for the year.
VOLUNTARY WITHHOLDING. If any portion of your payment is not an
eligible rollover distribution but is taxable, the mandatory withholding rule
described above does not apply. In this case, you may elect not to have
withholding apply to that portion. To elect out of withholding, ask the ESOP
administrator for the election form and related information.
EMPLOYER STOCK. In computing the amount that the ESOP is required to
withhold, there are three special rules for a distribution from the ESOP that
includes employer stock. The first rule is that there is no withholding on the
increase in the value of the employer stock while it was held by the ESOP. The
second rule is that if the only cash you receive from the ESOP is in lieu of a
fractional share of $200 or less, no amount is required to be withheld. Even if
the cash you receive from the ESOP is for more than just a fractional share, the
third rule is that the ESOP will not withhold more than the amount of cash that
would otherwise be paid to you. These special rules mean that if you choose to
have your ESOP benefit paid to you, the amount that will be withheld may be less
than 20%.
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<PAGE>
NO WITHHOLDING ON SMALL AMOUNTS. If the amount of your eligible
rollover distribution is less than $200, the mandatory withholding rule
described above does not apply. In this case, no amount will be withheld from
your payment.
60-DAY ROLLOVER OPTION. If you have an eligible rollover distribution paid
to you, you can still decide to roll over all or part of it to an IRA or another
employer plan that accepts rollovers. You can also decide to sell the employer
stock you will receive and roll over the cash that you receive when you sell the
stock. If you decide to roll over, YOU MUST MAKE THE ROLLOVER WITHIN 60 DAYS
AFTER THE DISTRIBUTION DATE. The portion of your payment that is rolled over
will not be taxed until you take it out of the IRA or the employer plan.
You can roll over up to 100% of the eligible rollover distribution,
including an amount equal to the 20% that was withheld. If you choose to roll
over 100%, you must find other money within the 60-day period to contribute to
the IRA or the employer plan to replace the 20% that was withheld. On the other
hand, if you roll over only the 80% that you received, you will be taxed on the
20% that was withheld.
EXAMPLE: Your eligible rollover distribution is $10,000, and you choose to
have it paid to you. You will receive $8,000, and $2,000 will be sent to
the IRS as income tax withholding. Within 60 days after receiving the
$8,000, you may roll over the entire $10,000 to an IRA or employer plan.
To do this, you roll over the $8,000 you received from the ESOP, and you
will have to find $2,000 from other sources (your savings, a loan, etc.).
In this case, the entire $10,000 is not taxed until you take it out of the
IRA or employer plan. If you roll over the entire $10,000, when you file
your income tax return you may get a refund of the $2,000 withheld.
If, on the other hand, you roll over only $8,000, the $2,000 you did not
roll over is taxed in the year it was withheld. When you file your income
tax return you may get a refund of part of the $2,000 withheld. (However,
any refund is likely to be larger if you roll over the entire $10,000.)
ADDITIONAL 10% TAX IF YOU ARE UNDER AGE 59 1/2. If you receive a payment
before you reach age 59 1/2 and you do not roll it over, then, in addition to
the regular income tax, you may have to pay an extra tax equal to 10% of the
taxable portion of the payment. The additional 10% tax does not apply to your
payment if it is (1) paid to you because you separate from service with your
employer during or after the year you reach age 55, (2) paid because you retire
due to disability, or (3) used to pay certain medical expenses. See IRS
Form 5329 for more information on the additional 10% tax.
15% EXCISE TAX ON EXCESS DISTRIBUTIONS. If the value of your distributions
during a calendar year from the ESOP (including any "net unrealized
appreciation," described below), any other qualified employee plans or
individual retirement accounts exceeds $150,000, you may be subject to a 15%
excise tax (in addition to regular federal income
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tax) on the excess. The $150,000 exemption from the excise tax may be increased
to $750,000 if you are eligible for and elect special averaging treatment
(described below). The $150,000 exemption from the excise tax may also
eventually be increased to reflect cost of living increases. The 15% excise tax
on excess distributions does not apply for the years 1997, 1998 and 1999.
If both the 10% additional tax on early distributions and the 15% excise
tax on excess distributions apply to a distribution, the 10% additional tax on
early distributions (to the extent attributable to the excess distribution) will
offset the 15% excise tax on excess distributions, so that the total additional
tax that may be imposed with respect to the excess distribution will not exceed
15%.
SPECIAL TAX TREATMENT. If your eligible rollover distribution is not
rolled over, it will be taxed in the year you receive it. However, if it
qualifies as a "lump sum distribution," it may be eligible for special tax
treatment. A lump sum distribution is a payment, within one year, of your
entire balance under the ESOP (and certain other similar plans of the employer)
that is payable to you because you have reached age 59 1/2 or have separated
from service with your employer. For a payment to qualify as a lump sum
distribution, you must have been a participant in the ESOP for at least five
years prior to the year of distribution. The special tax treatment for lump sum
distributions is described below.
FIVE-YEAR AVERAGING. If you receive a lump sum distribution after you
have reached age 59 1/2, you may be able to make a one-time election to
figure the tax on the payment by using "five-year averaging." Five-year
averaging often reduces the tax you owe because it treats the payment much
as if it were paid over five years. After December 31, 1999, this special
tax treatment is not available.
TEN-YEAR AVERAGING IF YOU WERE BORN BEFORE JANUARY 1, 1936. If you
receive a lump sum distribution and you were born before January 1, 1936,
you can make a one-time election to figure the tax on the payment by using
"ten-year averaging" (using 1986 tax rates) instead of five-year averaging
(using current tax rates). Like the five-year averaging rules, ten-year
averaging often reduces the tax you owe.
There are other limits on the special tax treatment for lump sum
distributions. For example, you can generally elect this special tax treatment
only once in your lifetime, and the election applies to all lump sum
distributions that you receive in that same year. If you have previously rolled
over a payment from the ESOP (or certain other similar plans of the employer),
you cannot use this special tax treatment for later payments from the ESOP. If
you roll over your payment to an IRA, you will not be able to use this special
tax treatment for later payments from the IRA. Also, if you roll over only a
portion of your payment to an IRA, this special tax treatment is not available
for the rest of the payment. Additional restrictions are described in IRS
Form 4972, which has more information on lump sum distributions and how you
elect the special tax treatment.
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EMPLOYER STOCK. There is a special rule for a payment from the ESOP that
includes employer stock. To use this special rule, the payment must qualify as
a lump sum distribution, as described above (or would qualify except that you do
not yet have five years of participation in the ESOP). Under this special rule,
you may have the option of not paying tax on the "net unrealized appreciation"
of the stock until you sell the stock. Net unrealized appreciation generally is
the increase in the value of the employer stock while it was held by the ESOP.
For example, if employer stock was contributed to your ESOP account when the
stock was worth $1,000 but the stock was worth $1,200 when you received it, you
would not have to pay tax on the $200 increase in value until you later sold the
stock.
Under this special rule, if you later sell the stock, the portion of the
sale proceeds attributable to net unrealized appreciation will be a long-term
capital gain (regardless of how long you hold the stock after the distribution).
Any sale proceeds attributable to an increase in the value of the stock after
the distribution will either be long-term or short-term capital gain depending
upon how long you hold the stock after distribution.
You may instead elect not to have the special rule apply to the net
unrealized appreciation. In this case, your net unrealized appreciation will be
taxed in the year you receive the stock, unless you roll over the stock. The
stock (including any net unrealized appreciation) can be rolled over to an IRA
or another employer plan either in a direct rollover or a rollover that you make
yourself.
If you receive employer stock in a payment that qualifies as a lump sum
distribution, the special tax treatment for lump sum distributions described
above (such as five-year averaging) also may apply. See IRS Form 4972 for
additional information on these rules.
IV. SURVIVING SPOUSES, ALTERNATE PAYEES AND OTHER BENEFICIARES
In general, the rules summarized above that apply to payments to employees
also apply to payments to surviving spouses of employees and to spouses or
former spouses who are "alternate payees." You are an alternate payee if your
interest in the ESOP results from a "qualified domestic relations order," which
is an order issued by a court, usually in connection with a divorce or legal
separation. Some of the rules summarized above also apply to a deceased
employee's beneficiary who is not a spouse. However, there are some exceptions
for payments to surviving spouses, alternate payees and other beneficiaries that
should be mentioned.
If you are a surviving spouse, you may choose to have an eligible rollover
distribution paid in a direct rollover to an IRA or paid to you. If you have
the payment paid to you, you can keep it or roll it over yourself to an IRA but
you cannot roll it over to an employer plan. If you are an alternate payee, you
have the same choices as the employee. Thus, you can have the payment paid as a
direct rollover or paid to you. If
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you have it paid to you, you can keep it or roll it over yourself to an IRA or
to another employer plan that accepts rollovers. If you are a beneficiary other
than the surviving spouse, you CANNOT choose a direct rollover, and you CANNOT
roll over the payment yourself.
If you are a surviving spouse, an alternate payee or another beneficiary,
your payment is not subject to the additional 10% tax described in section III
above, even if you are younger than age 59 1/2.
If you are a surviving spouse, an alternate payee or another beneficiary,
you may be able to use the special tax treatment for lump sum distributions and
the special rule for payments that include employer stock, as described in
section III above. If you receive a payment because of the employee's death,
you may be able to treat the payment as a lump sum distribution if the employee
met the appropriate age requirements, whether or not the employee had five years
of participation in the ESOP.
HOW TO OBTAIN ADDITIONAL INFORMATION
This notice summarizes only the federal (not state or local) tax rules that
might apply to your payment. The rules described above are complex and contain
many conditions and exceptions that are not included in this notice. Therefore,
you may want to consult with a professional tax advisor BEFORE you take a
payment of your benefit from the ESOP. Also, you can find more specific
information on the tax treatment of payments from qualified retirement plans in
IRS Publication 575, PENSION AND ANNUITY INCOME, and IRS Publication 590,
INDIVIDUAL RETIREMENT ARRANGEMENTS. These publications are available from your
local IRS office or by calling 1-800-TAX-FORM.
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