<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
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
USCS INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
NOT APPLICABLE.
- --------------------------------------------------------------------------------
(Name of Person Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(I)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total Fee paid: .
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary material:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing party:
-----------------------------------------------------------------------
(4) Date filed:
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<PAGE>
[USCS LOGO]
April 17, 1997
Dear Stockholders,
You are cordially invited to attend the Annual Meeting of stockholders of
USCS International, Inc. which will be held at the Sheraton Sunrise Hotel, 11211
Point East Drive, Rancho Cordova, California, on May 21, 1997, at 10 a.m. I look
forward to seeing you at the meeting.
Details of the business to be conducted at the Annual Meeting are given in
the attached Notice of Annual Meeting and Proxy Statement.
Whether or not you attend the meeting, it is important that your shares be
represented at the meeting. Therefore, I urge you to sign, date, and promptly
return the enclosed proxy in the enclosed envelope. If you decide to attend the
annual meeting and vote in person, you will of course have that opportunity.
On behalf of the Board of Directors, I would like to express our
appreciation for your continued interest in the affairs of the Company.
Sincerely,
/s/ James C. Castle
--------------------------------------
James C. Castle
Chairman and Chief Executive Officer
<PAGE>
USCS INTERNATIONAL, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 21, 1997
------------------------
To the Stockholders:
The Annual Meeting of stockholders of USCS International, Inc. will be held
at the Sheraton Sunrise Hotel, 11211 Point East Drive, Rancho Cordova,
California, on May 21, 1997, at 10 a.m. for the purpose of considering and
acting upon the following:
To elect two Class I directors.
To ratify the appointment of Price Waterhouse LLP as the Company's
independent accountants for 1997.
To transact such other business as may properly come before the meeting.
Information regarding the matters to be acted upon at the Annual Meeting is
contained in the Proxy Statement accompanying this Notice. Stockholders of
record at the close of business on April 7, 1997 are entitled to notice of, and
to vote at, the Annual Meeting.
By Order of the Board of Directors,
/s/ Mary G. Jordan
--------------------------------------
Mary G. Jordan, Corporate Secretary
Rancho Cordova, California
April 17, 1997
IMPORTANT
The presence in person or by proxy of stockholders representing a majority
of the shares entitled to vote at the Annual Meeting shall constitute a quorum.
Whether or not you expect to attend in person, you are urged to sign, date, and
return the enclosed proxy at your earliest convenience. This will ensure the
presence of a quorum at the meeting. PROMPTLY SIGNING, DATING AND RETURNING THE
PROXY WILL SAVE THE COMPANY THE EXPENSES AND EXTRA WORK OF ADDITIONAL
SOLICITATION. An addressed envelope is enclosed for that purpose. Sending in
your proxy will not prevent you from voting your stock at the meeting if you
desire to do so, as your proxy is revocable at your option.
<PAGE>
USCS INTERNATIONAL, INC.
2969 PROSPECT PARK DRIVE
RANCHO CORDOVA, CALIFORNIA 95670
------------------------
PROXY STATEMENT FOR ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD MAY 21, 1997
This Proxy Statement, which was first mailed to stockholders on April 17,
1997, is furnished in connection with the solicitation of proxies by the Board
of Directors of USCS International, Inc. (the "Company"), to be voted at the
Annual Meeting of the stockholders of the Company, which will be held at 10:00
a.m. Pacific Time on May 21, 1997 at the Sheraton Sunrise Hotel, 11211 Point
East Drive, Rancho Cordova, California, for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders, as follows:
To elect two Class I directors.
To ratify the appointment of Price Waterhouse LLP as the Company's
independent accountants for 1997.
To transact such other business as may properly come before the meeting.
Stockholders who execute proxies retain the right to revoke them at any time
prior to the exercise of powers conferred thereby, by delivering a signed
statement to the Secretary of the Company at or prior to the Annual Meeting or
by executing another proxy dated as of a later date. There are no appraisal or
similar rights of dissenters associated with any matter to be acted upon. The
cost of solicitation of proxies is to be borne by the Company.
Stockholders of record as of the close of business on April 7, 1997 will be
entitled to vote at the meeting on the basis of one vote for each share held. On
March 10, 1997, there were 23,117,761 shares of Company Common Stock
outstanding, held of record by 186 stockholders.
PROPOSAL NO. 1: ELECTION OF DIRECTORS
Pursuant to the First Amended and Restated Certificate of Incorporation of
the Company, effective June 21, 1996, upon the closing of the initial public
offering of the Company's Common Stock, the directors of the Company were
divided into three classes, designated Class I, Class II and Class III. The term
of office of the initial Class I directors will expire at the stockholders'
meeting to be held on May 21, 1997, the term of office of the initial Class II
directors will expire at the 1998 Annual Meeting of the stockholders, and the
term of office of the initial Class III directors will expire at the 1999
meeting of the stockholders. At each Annual Meeting of stockholders, commencing
with the 1997 meeting, each of the successors elected to replace the directors
of a Class whose term expired at such Annual Meeting is elected to hold office
until the third Annual Meeting next succeeding his or her election and until his
or her respective successor shall have been elected and qualified.
<TABLE>
<CAPTION>
TERM OF SUBSEQUENT TERMS OF
INITIAL DIRECTORS IN CLASS INITIAL DIRECTORS IN CLASS DIRECTORS IN CLASS
--------------------------- ------------------------------ --------------------
<S> <C> <C> <C>
Class I Directors James C. Castle until May 21, 1997 3 years 1997-2000
Charles D. Martin
Class II Directors Larry W. Wangberg until Annual Meeting 1998 3 years 1998-2001
George M. Crandell, Jr.
Class III Directors George L. Argyros, Sr. until Annual Meeting 1999 3 years 1999-2002
Michael F. McGrail
</TABLE>
1
<PAGE>
Two Class I directors are to be elected at the 1997 Annual Meeting, to hold
office until the third Annual Meeting after his or her election and until his or
her respective successor has been elected and qualified. The accompanying proxy
will be voted in favor of the following persons to serve as Class I directors
unless the stockholder indicates to the contrary on the proxy. Management
expects that each of the nominees will be available for election, but if any of
them is not a candidate at the time the election occurs, it is intended that
such proxy will be voted for the election of another nominee to be designated by
the Board of Directors to fill any such vacancy.
NOMINEES
JAMES C. CASTLE, Ph.D., 60, joined the Company as Chairman of the Board,
Chief Executive Officer and Director in August 1992. Prior to joining the
Company, Dr. Castle served as Chief Executive Officer and Director of Teradata
Corporation, a manufacturer of high performance parallel processing database
systems, from August 1991 until April 1992. Dr. Castle served as President and
Chief Executive Officer of Infotron Systems Corporation, a manufacturer of data
and voice transmission equipment, from October 1987 until August 1991 and was
named Chairman of the Board in May 1989. Prior to October 1987, Dr. Castle held
various senior management positions with TBG Information Systems, Inc., Memorex
Corporation, Honeywell, Inc. and General Electric. Dr. Castle is also a Director
of PAR Technology Corp., Leasing Solutions, Inc., and ADC Telecommunications,
Inc. Dr. Castle received his B.S. from the U.S. Military Academy at West Point
and a M.S.E.E. and Ph.D. in Computer and Information Sciences from the
University of Pennsylvania.
CHARLES D. MARTIN, 60, has been a Director of the Company since November
1990. Mr. Martin has been a general partner of Enterprise Partners, a Southern
California-based venture capital firm, since its formation in 1985. He has also
been a general partner of Westar Capital Associates, which is the sole general
partner of Westar Capital L.P., since its formation in 1987. Mr. Martin also
serves on the Board of Directors of Apria Healthcare, Inc., Premier Ambulatory
Systems, Pages Software, Tecstar, Inc., All Post, Inc., Dogloo, Inc.,
ObjectAutomation and El Dorado Communications. He is also a Director and
stockholder of Vedax Sciences Corporation, a firm that operates the TEC
Organization, the largest proprietary membership program in the nation for
company Presidents and Chief Executive Officers. Mr. Martin also serves as a
Trustee of Chapman University and the Newport Harbor Art Museum and is Chairman
of the Board of Trustees of the Orange County Museum of Art.
PROPOSAL NO. 2: INDEPENDENT ACCOUNTANTS
On March 5, 1997, the Board of Directors appointed Price Waterhouse LLP as
independent accountants for the Company for fiscal 1997. The stockholders will
be asked to ratify this appointment at the Annual Meeting. Price Waterhouse LLP
has been the independent accountants for the Company since 1993. Representatives
of Price Waterhouse LLP will be present at the Annual Meeting and will be
available to respond to appropriate questions. The Company is not legally
required to obtain stockholder ratification of the appointment of the Company's
independent accountants, but it has been the Company's practice to seek such
ratification. If the specified vote is not obtained, the matter will be returned
to the Board of Directors for consideration of alternatives.
OTHER MATTERS
The Board of Directors does not intend to bring other business before the
meeting, and so far as is known to the Board, no matters are to be brought
before the meeting except as specified in the notice of the meeting. However, as
to any other business matter which may properly come before the meeting, it is
intended that proxies, in the form enclosed, will be voted in respect thereto in
accordance with the best judgment of the persons voting such proxies.
2
<PAGE>
VOTING TABULATION
Under the Delaware General Corporation Law, the election of the Company's
directors requires a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote, and the other
proposals described in the accompanying Notice to Stockholders require the
affirmative vote of the majority of the shares present in person or represented
by proxy at the meeting and entitled to vote. Votes cast by proxy or in person
at the meeting will be tabulated by ChaseMellon Shareholder Services.
SOLICITATION OF PROXIES
The proxy accompanying this Proxy Statement (see Appendix A) is solicited by
the Board of Directors of the Company. Proxies may be solicited by officers,
directors, and regular and supervisory and executive employees of the Company,
none of whom will receive any additional compensation for their services. Also,
the Company may engage the services of a proxy solicitation firm. Such
solicitations may be made personally, or by mail, facsimile, telephone,
telegraph, or messenger. The Company may pay persons holding shares of Common
Stock in their names or in the names of nominees, but not owning such shares
beneficially, such as brokerage houses, banks, the Company's Employee Stock
Ownership Trust and other fiduciaries, for the expense of forwarding
solicitation materials to their principals. All the costs of solicitation of
proxies will be paid by the Company.
ACTIONS TAKEN SINCE 1996 STOCKHOLDER MEETING
Administrative, eligibility and clarification changes to the Company's
Employee Stock Purchase Plan were approved in writing on September 13, 1996 by
holders of a majority of the issued and outstanding shares. The eligibility
period was reduced from one year to first of month after month of hire.
PROPOSALS OF STOCKHOLDERS FOR 1998 MEETING
Proposals of stockholders to be presented at the 1998 Annual Meeting of
stockholders must be received by the Company no later than January 30, 1998 to
be included in the Company's Proxy Statement and form of proxy related to that
meeting.
INFORMATION REGARDING THE BOARD AND ITS COMMITTEES
The Company's Board of Directors has an Audit Committee and a Compensation
Committee. There is no standing nominating committee.
Messrs. Argyros, Crandell and Wangberg serve on the Audit Committee. The
responsibilities of the Audit Committee include selection of the Company's
independent accountants, review of the independent accountants' report to the
Audit Committee, and review of the Company's financial reporting and accounting
systems. The Audit Committee met one time in fiscal 1996.
Messrs. Argyros, Martin and Wangberg serve on the Compensation Committee.
The responsibilities of the Compensation Committee include administration of the
Company's employee benefit plans, including stock option and stock purchase
plans, the setting of compensation levels for the Company's officers and
employees and, for purposes of the reporting requirements of the Securities
Exchange Act of 1934, the Compensation Committee is responsible for the
preparation of the Compensation Committee Report as required by Item 402 of
Regulation S-K, which includes, among other things, disclosure of the specific
relationship of corporate performance to executive compensation. The
Compensation Committee met three times during fiscal 1996.
The entire Board of Directors met five times in fiscal 1996.
In fiscal 1996, no director attended fewer than 75% of the total number of
meetings of the Board and the total number of meetings of the committees of the
Board on which they served, except that Mr. Wangberg attended 60% of the
meetings of the Board.
3
<PAGE>
Messrs. Castle and McGrail receive no cash compensation for serving on the
Board except for reimbursement of reasonable expenses incurred in attending
meetings. The other four directors are each paid $20,000 per year plus $1,500
for each Board meeting personally attended ($250 per Board meeting for
telephonic attendance) and $1,000 for each committee meeting attended on a day
other than a Board meeting day. During fiscal 1996, Messrs. Argyros, Crandell,
Martin and Wangberg each received an option to purchase 10,000 shares of Common
Stock pursuant to the 1996 Directors' Stock Option Plan approved by the
stockholders in May 1996. The exercise price of each option was the last market
price of the Company's Common Stock on the date of grant.
BENEFICIAL OWNERSHIP OF
PRINCIPAL STOCKHOLDERS, DIRECTORS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock by the Company's directors, the
Company's Chief Executive Officer and the four other highest paid executive
officers ("Named Executive Officers"), and the Company's directors and executive
officers as a group.
The Company is not aware of any person who, on March 10, 1997, was the
beneficial owner of 5% or more of the Company's outstanding Common Stock, except
for the Company's Employee Stock Ownership Plan/Trust, Westar Capital, George L.
Argyros and Charles D. Martin. The following table sets forth certain
information known to the Company with respect to beneficial ownership of the
Company's Common Stock as of March 10, 1997. The number of shares beneficially
owned by each director or executive officer is determined under SEC rules. Under
such rules, beneficial ownership includes any shares as to which the individual
has the sole or shared voting power or investment power and also any shares
which the individual has the right to acquire within 60 days of March 10, 1997
through the exercise of any stock option or other right. Unless otherwise
indicated, each person has sole investment and voting power with respect to the
shares set forth in the following table.
SHARES BENEFICIALLY OWNED AS OF MARCH 10, 1997
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
OF COMPANY'S COMMON
NAMES STOCK AS OF 3/10/97 PERCENT OF CLASS (1)
- ------------------------------------------------------------------------ -------------------- ---------------------
<S> <C> <C>
Westar Capital.......................................................... 8,718,276(2) 37.7%
ESOP.................................................................... 3,907,805(3) 16.9%
George L. Argyros, Sr................................................... 8,761,366(4) 37.9%
Charles D. Martin....................................................... 8,775,264(5) 38.0%
George M. Crandell, Jr. (6)............................................. 0 0
Larry W. Wangberg (7)................................................... 0 0
James C. Castle, Ph.D. (8).............................................. 367,096(9) 1.5%
C. Randles Lintecum (8)................................................. 105,222(10) *
Michael F. McGrail (8).................................................. 96,033(11) *
Douglas L. Shurtleff (8)................................................ 27,510(12) *
Claudia D. Coleman (8).................................................. 19,950(13) *
Executive Officers and Directors as a group (9 persons)................. 9,387,075(14) 39.9%
</TABLE>
- ------------------------
* Less than 1.0%
(1) Applicable percentage of ownership is based on 23,117,761 shares of Common
Stock outstanding as of March 10, 1997. The number of shares of Common Stock
beneficially owned and calculation of percent ownership, in each case, takes
into account those shares underlying stock options that are exercisable
within 60 days after March 10, 1997, but that may or may not be subject to
repurchase rights.
4
<PAGE>
(2) Shares held of record by Westar Capital, a California limited partnership
whose address is Attn: Charles D. Martin, 950 South Coast Drive, Suite 165,
Costa Mesa, CA 92626 ("Westar"). The sole general partner of Westar is
Westar Capital Associates. GLA Financial, Charles D. Martin and John Clark
are general partners of Westar Capital Associates. George L. Argyros, Sr. is
sole shareholder of GLA Financial and a limited partner of Westar and Westar
Capital Associates. GLA Financial and Messrs. Argyros, Clark and Martin may
be deemed to have shared voting or dispositive power with respect to the
shares held by Westar. GLA Financial and Messrs. Argyros, Clark and Martin
disclaim beneficial ownership of shares held by Westar except to the extent
of their interests described above.
(3) Shares held of record by the USCS International Employee Stock Ownership
Trust for the Employee Stock Ownership Plan ("ESOP"). The business address
of the stockholder is: Imperial Trust Co., Trustee for USCS International,
Inc. Employee Stock Ownership Trust, 456 Montgomery Street, Suite 600, San
Francisco, CA 94101.
(4) Consists of 8,718,276 shares held by Westar, a private equity investment
firm, 6,534 shares held by the Argyros Foundation, 30,000 shares held by the
Argyros Children Trust and 6,556 shares held by Mr. Argyros. Mr. Argyros
disclaims beneficial ownership of the shares held by Westar, except to the
extent of his ownership interests in GLA Financial and Westar. Mr. Argyros
disclaims beneficial ownership of the shares held by the Argyros Foundation,
and the shares held by the Argyros Children Trust. Mr. Argyros' business
address is: Arnel & Associates, 950 South Coast Blvd., Suite 200, Costa
Mesa, CA 92626.
(5) Consists of 8,718,276 shares held by Westar, and 56,988 shares held by Mr.
Martin. Mr. Martin is a general partner of Westar Capital Associates, the
general partner of Westar. Mr. Martin disclaims beneficial ownership of the
shares held by Westar, except to the extent of his ownership interest in
Westar Capital Associates and Westar. Mr. Martin's business address is:
Enterprise Partners, 5000 Birch St., Suite 6200, Newport Beach, CA 92660.
(6) Mr. Crandell's business address is: Crandell Capital, 777 Campus Commons
Dr., Suite 200, Sacramento, CA 95825.
(7) Mr. Wangberg's business address is: Starsight Telecast, Inc., 39650 Liberty
St., 3rd Floor, Fremont, CA 94538.
(8) The business address for Messrs. Castle, McGrail, Lintecum, Shurtleff and
Ms. Coleman is: USCS International, Inc., 2969 Prospect Park Dr., Rancho
Cordova, CA 95670.
(9) Consists of 222,088 shares held by Dr. Castle and 145,008 shares issuable
pursuant to stock options within 60 days of March 10, 1997.
(10) Consists of 9,600 shares held by Mr. Lintecum and 95,622 shares issuable
pursuant to stock options within 60 days of March 10, 1997.
(11) Consists of 96,033 shares issuable pursuant to stock options within 60 days
of March 10, 1997.
(12) Consists of 8,200 shares held by Mr. Shurtleff and 19,310 shares issuable
pursuant to stock options within 60 days of March 10, 1997.
(13) Consists of 19,950 shares issuable pursuant to stock options within 60 days
of March 10, 1997.
(14) Includes 375,923 shares issuable pursuant to stock options within 60 days
of March 10, 1997.
INFORMATION REGARDING EXECUTIVE OFFICER COMPENSATION
CASH COMPENSATION
The following table sets forth the total compensation for the two fiscal
years ending December 31, 1996 and 1995 by the Company's Chief Executive Officer
and the four other Named Executive Officers:
5
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------------------- -------------
OTHER ANNUAL SECURITIES ALL OTHER
SALARY COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) BONUS ($) ($) OPTIONS (#) ($)
- --------------------------------------------- --------- ------------ --------- -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
James C. Castle, Ph.D........................ 1996 326,191 231,215 9,490(1) 420,000 39,434(2)
Chairman of the Board and Chief Executive 1995 300,000 102,337 57,146(3) 94,500 23,623(4)
Officer; Director
Michael F. McGrail........................... 1996 205,000 148,178 50,382(5) 154,770 30,500(6)
President of CableData, Inc.; Director 1995 168,311 97,033 100,484(7) -- 11,732(6)
C. Randles Lintecum.......................... 1996 205,000 145,660 9,490(1) 117,810 12,738(8)
President of International Billing Services, 1995 171,223 51,048 9,230(1) 18,900 11,012(9)
Inc.
Douglas L. Shurtleff......................... 1996 201,045 120,627 96,176(10) 43,050 25,825(11)
Senior Vice President, Finance and Chief 1995 111,000(12) 43,652 84,399(13) 94,500 2,243(14)
Financial Officer
Claudia D. Coleman........................... 1996 160,000 73,440 22,862(15) 21,000 12,286(16)
Vice President, Corporate Development 1995 --(17) -- -- 63,000 --
</TABLE>
- ------------------------------
(1) The amount represents a car allowance.
(2) The amount represents a contribution by the Company of $12,000 to the
Company's 401(k) Plan, $26,313 in imputed interest payable on deferred
compensation, and payment by the Company of a $1,121 life insurance premium.
(3) The amount represents a $24,839 relocation payment, $23,077 in lieu of paid
time off and a $9,230 car allowance.
(4) The amount represents a contribution by the Company of $12,000 to the
Company's 401(k) Plan, $10,699 in imputed interest payable on deferred
compensation, and payment by the Company of a $924 life insurance premium.
(5) The amount represents $35,132 of relocation expenses and $15,250 in imputed
income with respect to a leased vehicle.
(6) The amount represents contributions by the Company to Mr. McGrail's
self-funded pension plan.
(7) The amount represents $77,289 of relocation expenses, $15,780 in imputed
income with respect to a leased vehicle and $7,415 in lieu of paid time off.
(8) The amount represents a contribution by the Company of $12,000 to the
Company's 401(k) Plan, and payment by the Company of a $738 life insurance
premium.
(9) The amount represents a contribution by the Company of $10,536 to the
Company's 401(k) Plan, and payment by the Company of a $476 life insurance
premium.
(10) This amount represents an $86,686 relocation payment, and a $9,490 car
allowance.
(11) The amount represents a contribution by the Company of $11,693 to the
Company's 401(k) Plan, $13,408 in imputed interest payable on deferred
compensation, and payment by the Company of a $724 life insurance premium.
(12) Mr. Shurtleff joined the Company in May 1995. Salary represents amounts
actually paid to Mr. Shurtleff during 1995.
(13) The amount represents $79,145 of relocation payments, and a $5,254 car
allowance.
(14) The amount represents payment by the Company of a $333 life insurance
premium, and $1,910 in imputed interest payable on deferred compensation.
(15) The amount represents a $13,914 relocation payment, and an $8,948 car
allowance.
(16) The amount represents a contribution by the Company of $11,746 to the
Company's 401(k) Plan, and payment by the Company of a $540 life insurance
premium.
(17) Ms. Coleman joined the Company in late December 1995.
6
<PAGE>
COMPENSATION PURSUANT TO STOCK OPTIONS
OPTION GRANTS DURING 1996
The following table sets forth for each of the Named Executive Officers
certain information concerning stock options granted during 1996.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS EXERCISE STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO PRICE PER FOR OPTION TERM (5)
OPTIONS EMPLOYEES IN SHARE EXPIRATION --------------------------
NAME GRANTED(#)(1) 1996(2) ($/SH.)(3) DATE(4) 5%($) 10%($)
- ------------------------------------- -------------- ------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
James C. Castle...................... 420,000 34.2% $ 12.50 4/12/06 $ 3,301,697 $ 8,367,148
Michael F. McGrail................... 154,770 12.6 12.50 4/12/06 1,216,675 3,083,294
C. Randles Lintecum.................. 117,810 9.6 12.50 4/12/06 926,126 2,346,985
Douglas L. Shurtleff................. 43,050 3.5 12.50 4/12/06 338,424 857,633
Claudia D. Coleman................... 21,000 1.7 12.50 4/12/06 165,085 418,357
</TABLE>
- ------------------------
(1) All options listed are incentive stock options granted pursuant to the 1996
Stock Option Plan and have ten year terms. The options vest over five years.
(2) In 1996, the Company granted options to purchase an aggregate of 1,229,074
shares.
(3) All options listed were granted prior to the Company's June 21, 1996 initial
public offering. In determining the fair market value of the Company's
Common Stock at the time of grant, the Board of Directors considered various
factors, including the Company's financial condition and business prospects,
its operating results, the absence of a market for its Common Stock at the
time, and the risks normally associated with high technology companies. The
exercise price may be paid in cash, check, or shares of the Company's Common
Stock.
(4) Options may terminate before their expiration dates if the optionee's status
as an employee is terminated or upon the optionee's death or disability.
(5) Potential Realizable Value is based on certain assumed rates of appreciation
pursuant to rules prescribed by the Securities and Exchange Commission.
Actual gains, if any, on stock option exercises are dependent on the future
performance of the stock. There can be no assurance that the amounts
reflected in this table will be achieved.
7
<PAGE>
AGGREGATED OPTION EXERCISES DURING 1996
AND YEAR-END OPTION VALUES
The following table provides information on option exercises in fiscal 1996
by the Named Executive Officers and the value of such officers' unexercised
options as of December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
NUMBER OF OPTIONS AT OPTIONS AT
SHARES DECEMBER 31, 1996 DECEMBER 31, 1996(2)
ACQUIRED ON VALUE -------------------------- ---------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------ ----------- ----------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
James C. Castle........................... 28,048 $ 262,882 46,022 560,130 $ 666,100 $ 3,734,559
Michael F. McGrail........................ -- -- 54,558 175,812 724,407 984,673
C. Randles Lintecum....................... 11,100 154,973 72,060 148,050 1,015,577 952,662
Douglas L. Shurtleff...................... 4,200 31,300 14,700 118,650 177,538 1,112,158
Claudia D. Coleman........................ -- -- -- 84,000 -- 858,001
</TABLE>
- ------------------------
(1) Market price at exercise less exercise price.
(2) Calculated by determining the difference between the fair market value of
the securities underlying the options at December 31, 1996 and the exercise
price of the Named Executive Officer's option. The fair market value on
December 31, 1996 was 17 1/8, the average of the high and low prices on
December 31, 1996.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company has an employment agreement with James C. Castle, Ph.D., the
Company's Chairman of the Board and Chief Executive Officer, terminable at will
by either the Company or Dr. Castle. The agreement provides for an initial base
salary of $22,500 per month and an annual bonus of up to 40% of base salary,
contingent on meeting certain performance targets. The agreement may be
terminated at any time by either the Company or Dr. Castle upon 30 days' notice.
In connection with such agreement, Dr. Castle was granted an option to purchase
283,500 shares of the Company's Common Stock at an exercise price of $2.44 per
share, vesting over five years. Upon termination for any reason, Dr. Castle will
receive $0.35 per share for all unvested options. If Dr. Castle is terminated
without cause he will receive one year's salary, which will cease to be paid
upon Dr. Castle starting new employment. Upon a change of control, defined as a
sale of substantially all assets, certain mergers or acquisition by any person
of 50% or more of the Company's voting securities, such options immediately
vest.
The Company has entered into an agreement with Michael F. McGrail, President
of CableData, Inc. and a Director of the Company. The Company may terminate Mr.
McGrail's employment upon 12 months' notice, with or without cause. The Company
shall have the right to pay salary in lieu of any notice. Mr. McGrail may
terminate his employment with the Company at any time, with or without cause.
The Company has entered into severance agreements with C. Randles Lintecum,
Douglas L. Shurtleff and Claudia D. Coleman, the President of IBS, the Company's
Chief Financial Officer and the Company's Vice President, Corporate Development,
respectively, pursuant to which Mr. Lintecum, Mr. Shurtleff and Ms. Coleman are
entitled to receive certain benefits in the event of termination without cause
or upon a change of control. Benefits consist primarily of a lump-sum payment of
one year's compensation. Change of control is defined as sale of substantially
all assets, merger or acquisition of 50% of outstanding stock of the Company by
a person or entity other than Westar, Enterprise Partners, the ESOP or any
employee stock purchase plan.
In addition, all the Named Executive Officers are eligible for bonuses under
the Company's Management Bonus Plan.
8
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
The Compensation Committee, consisting of Messrs. Argyros, Martin and
Wangberg, establishes salaries, incentives and other forms of compensation for
officers and other employees of the Company and administers the incentive
compensation and benefit plans of the Company.
The Company is party to a letter agreement with Westar pursuant to which
Westar provides financial, management and strategic advisory services to the
Company for a monthly fee of $35,875 plus out-of-pocket expenses. The agreement
may be terminated at any time, with or without cause, by either the Company or
Westar. The Company paid Westar approximately $430,500 for such advisory
services during 1996. George L. Argyros, a Director of the Company, is sole
stockholder of GLA Financial, which is a general partner of Westar Capital
Associates, which is the general partner of Westar. Charles D. Martin, a
Director of the Company, is a general partner of Westar Capital Associates.
Messrs. Argyros and Martin are members of the Compensation Committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is party to a letter agreement with Westar pursuant to which
Westar provides financial, management and strategic advisory services to the
Company for a monthly fee of $35,875 plus out-of-pocket expenses. The agreement
may be terminated at any time, with or without cause, by either the Company or
Westar. The Company paid Westar approximately $430,500 for advisory services
during 1996. George L. Argyros, a Director of the Company, is sole stockholder
of GLA Financial, which is a general partner of Westar Capital Associates, which
is the general partner of Westar. Charles D. Martin, a Director of the Company,
is a general partner of Westar Capital Associates. George M. Crandell, a
Director of the Company, is a limited partner of Westar Capital Associates.
REPORT OF THE USCS INTERNATIONAL, INC.
BOARD OF DIRECTORS COMPENSATION COMMITTEE
The Company's compensation policy is to offer a package including a
competitive salary, competitive benefits, and an efficient workplace
environment. The Company also encourages employee ownership of the Company's
Common Stock through stock option plans in which selected employees are eligible
to participate and through an Employee Stock Purchase Plan in which all
employees are eligible to participate.
The Company's compensation policy for officers is similar to that for other
employees and is designed to promote continued performance and attainment of
corporate and personal goals.
The Compensation Committee of the Board of Directors (comprised entirely of
non-employee directors) reviews and approves individual officer salaries, bonus
plan financial performance goals, bonus plan allocations, and stock option
grants (excluding stock option grants to non-employee directors, which are
automatic under the terms of the 1996 Directors Stock Option Plan). The
Committee also reviews guidelines for compensation, bonus and stock option
grants for non-officer employees.
Officers of the Company are paid salaries in line with their
responsibilities. These salaries are in general structured to be within the
median range of salaries paid by competitors in the telecommunications and other
relevant industries. Competitors selected for salary comparison purposes differ
from the companies included in the Index which is used in the Performance Graph
that follows this report. Officers also participate in the Management Bonus
Plan. Each officer is eligible to receive a discretionary bonus of a
predetermined percentage of base salary, based on position level, individually
established performance goals, a graduated formula which takes into account
predetermined corporate profit goals and other factors, including revenue
growth, and, in the case of officers with profit and loss responsibility, group
profit goals. The Compensation Committee establishes aggressive profit and other
goals as an incentive for superior individual, group, and corporate performance.
Likewise, stock option grants to officers promote success by aligning employee
financial interests with long-term stockholder value. Stock option grants are
9
<PAGE>
based on various subjective factors primarily relating to the responsibilities
of the individuals, their expected future contributions and prior option grants.
The Company's compensation policy is primarily based on the practice of
pay-for-performance. Section 162(m) of the Internal Revenue Code imposes a
limitation on the deductibility of non-performance-based compensation in excess
of $1 million paid to Named Executive Officers. The Committee currently believes
that the Company should be able to continue to manage its executive compensation
program for Named Executive Officers so as to preserve the related federal
income tax deductions.
The Compensation Committee annually reviews and approves the compensation of
James C. Castle, the Chief Executive Officer. Dr. Castle also participates in
the Management Bonus Plan, with his bonus tied to corporate profits and other
factors, including revenue growth. The Committee believes Dr. Castle is paid a
reasonable salary, and his bonus is based on the same corporate financial goals
as the other officers of the Company. In addition, Dr. Castle is a stockholder
of the Company, and to the extent his performance as CEO translates into an
increase in the value of the Company's stock, all stockholders, including Dr.
Castle, share the benefits.
COMPENSATION COMMITTEE
George L. Argyros, Sr.
Charles D. Martin
Larry W. Wangberg
10
<PAGE>
PERFORMANCE GRAPH
Total Cumulative Stockholder Return for
June 21, 1996 through December 31, 1996*
<TABLE>
<CAPTION>
JUNE 21, 1996 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
USCS............................................................................ 100.00 99.26
NASDAQ (US)..................................................................... 100.00 109.65
NASDAQ Computer & Data Processing Index......................................... 100.00 107.05
</TABLE>
- ------------------------
* Return for USCS International, Inc. is based on its initial public offering
price of $17.00.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and holders of more than 10% of the
Company's Common Stock to file with the Commission initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of the Company. The Company believes, based on review of filings furnished to
the Company, that during the calendar year ended December 31, 1996, its
officers, directors and holders of more than 10% of the Company's Common Stock
complied with all Section 16(a) filing requirements.
DATED: April 17, 1997.
A COPY OF THE COMPANY'S FORM 10-K REPORT FOR FISCAL YEAR 1996, CONTAINING
INFORMATION ON OPERATIONS, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, IS
AVAILABLE UPON REQUEST. PLEASE WRITE TO:
INVESTOR RELATIONS DEPARTMENT
USCS INTERNATIONAL, INC.
2969 PROSPECT PARK DRIVE
RANCHO CORDOVA, CALIFORNIA 95670
11
<PAGE>
USCS INTERNATIONAL, INC.
2969 PROSPECT PARK DRIVE
RANCHO CORDOVA, CALIFORNIA 95670
APPENDIX A: FORM OF PROXY
PROXY
FOR ANNUAL MEETING OF STOCKHOLDERS OF USCS INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints JAMES C. CASTLE and MARY G. JORDAN, and each
of them, with full power of substitution, as proxies to vote the shares which
the undersigned is entitled to vote at the Annual Meeting of Stockholders of
USCS International, Inc. to be held at 11211 Point East Drive, Rancho
Cordova, California, on May 21, 1997, at 10 a.m. and any adjournments thereof.
(CONTINUED, AND TO BE MARKED, DATED, AND SIGNED, ON THE OTHER SIDE)
<PAGE>
Please mark your votes as indicated in this example. [X]
This proxy when properly signed will be voted in the manner directed herein by
the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2.
1. ELECTION OF TWO CLASS 1 DIRECTORS
James C. Castle
Charles D. Martin
[ ] FOR
[ ] NOT FOR
[ ] FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEE LISTED IN THIS
SPACE:
___________________________
2. RATIFICATION OF APPOINTMENT OF PRICE WATERHOUSE LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR 1997.
[ ] FOR
[ ] NOT FOR
[ ] ABSTAIN
Signature(s) Date
------------------------------- ----------------------
Print Name(s):
------------------------------
IMPORTANT--PLEASE SIGN AND RETURN PROMPTLY. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
