US SERVIS, INC.
414 Eagle Rock Avenue
West Orange, New Jersey 07052
(201) 731-9252
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD
AUGUST 27, 1996
To the Stockholders of US Servis, Inc.:
You are cordially invited to attend the Annual Meeting of Stockholders of US
Servis, Inc., a Delaware corporation (the "Company"), which will be held on
Tuesday, August 27, 1996, at 10:00 a.m., local time, at 414 Eagle Rock Avenue,
West Orange, New Jersey, for the following purposes:
1. To elect seven directors to serve until the 1997 Annual Meeting of the
stockholders of the Company;
2. To consider such other matters as may properly come before the meeting
or any adjournment thereof.
Only stockholders of record at the close of business on July 23, 1996 will be
entitled to notice of and to vote at the meeting and at any adjournment thereof.
Accompanying this notice is a Proxy Statement, a form of proxy and a copy of our
Annual Report on Form 10-K, as filed with the Securities and Exchange
Commission.
We hope you attend the meeting in person, but, if you cannot, please sign, date
and promptly return the enclosed proxy in the envelope provided so that your
shares may be voted at the meeting.
By Order of the Board of Directors
/s/ MICHAEL B. LOSCALZO
MICHAEL B. LOSCALZO,
Secretary, Treasurer and Vice President, Finance,
Planning and Administration
West Orange, New Jersey
July 25, 1996
<PAGE>
US Servis, Inc.
414 Eagle Rock Avenue
West Orange, NJ 07052
PROXY STATEMENT
The Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of US Servis, Inc., a Delaware corporation (the
"Company"), to be voted at the Annual Meeting of Stockholders of the Company
referred to in the foregoing Notice. All proxies received pursuant to this
solicitation will be voted in accordance with the instructions indicated
thereon. A majority of the shares having voting power (3,898,069 shares)
represented at the meeting in person or by proxy will constitute a quorum for
the transaction of business. Stockholders who execute proxies may revoke them at
any time before they are voted by submitting a later dated proxy or by written
notice delivered to the Secretary of the Company. Personal attendance at the
meeting without submitting a later dated proxy or a written notice of revocation
to the Secretary shall not serve to revoke any proxy, unless the stockholder
attends and votes at the meeting.
The Company has appointed Registrar and Transfer Company, the Company's
registrar and transfer agent, as inspector of elections for the annual meeting
for the purpose of calculating the number of votes present in person or by proxy
at the annual meeting and tabulating the vote for proposals submitted to a vote
of stockholders at the annual meeting. Shares owned by stockholders who are
present in person, or which are represented by proxy, at the annual meeting will
determine whether or not a quorum is present. The election inspectors will treat
abstentions as shares that are present and entitled to vote for purposes of
determining the presence of a quorum but as not voted for purposes of
determining the approval of any matter submitted to the stockholders for a vote.
If a broker indicates on the proxy that it does not have discretionary authority
as to certain shares to vote on a particular matter, those shares will be
considered as present but not entitled to vote with respect to that matter. The
Company anticipates mailing of the proxy materials to stockholders will commence
on or about July 25, 1996.
The expenses of this solicitation will be borne by the Company. Solicitation
will be primarily by use of the mails. Executive officers and other employees of
the Company may solicit proxies, without extra compensation, personally and by
telephone and other means of communication. The Company will also reimburse
brokers and other persons holding Common Stock in their names or in the names of
their nominees for their reasonable expenses in forwarding proxies and proxy
materials to beneficial owners.
RECORD DATE OF VOTING SECURITIES
Only holders of the Company's Common Stock and Series A Convertible Preferred
Stock (the "Series A Shares") of record at the close of business on July 23,
1996 are entitled to notice of and to vote at the meeting. On that date the
Company had outstanding and entitled to vote 6,296,137 shares of Common Stock
and 1,500,000 Series A Shares. Each outstanding share of Common Stock and each
outstanding Series A Share entitles the record holder to one vote on each matter
to be acted upon at the meeting.
<PAGE>
The Certificate of Designation authorizing the Series A Shares provides that the
holders of the Series A Shares shall have the right to elect one director of the
Corporation. The remaining directors are elected by a plurality of the votes
cast in the election. The affirmative vote of the holders of a majority of the
shares voted with respect to any other proposal presented at the meeting is
required to approve such other proposal.
ELECTION OF DIRECTORS
(ITEM #1 on the PROXY CARD)
A Board of Directors consisting of eight individuals is to be elected at the
Annual Meeting. Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the nominees named below, other than Mr. Cowie. Mr.
Cowie has been nominated by the holders of a majority of the Series A Shares and
his nomination will be voted upon by the holders of Series A Shares. In the
event that any nominee of the Company is unable or declines to serve as a
director at the time of the Annual Meeting, the proxies will be voted for any
nominee who shall be designated by the present Board of Directors to fill the
directorship. The term of office of each person elected as a director will
continue until the next annual meeting of stockholders or until his or her
successor has been elected and qualified.
The names of the nominees and certain information about them are set forth
below.
<TABLE>
<S> <C> <C>
Name Age Position
Graham O. King 56 Chairman of the Board and Chief Executive Officer
S.M. Caravetta 70 Vice Chairman of the Board
James A. Pesce 53 President and Director
Frederick R. Blume 54 Director
Stanford J. Goldblatt 57 Director
Robert E. King 60 Director
Robert C. Bowers 50 Director
James E. Cowie 41 Director
</TABLE>
GRAHAM O. KING joined the Company on October 12, 1994 as the Company's Chief
Executive Officer. He was appointed Chairman of the Board of Directors at a
Board of Directors meeting held on October 28, 1994. He was formerly with Shared
2
<PAGE>
Medical Systems, Inc., a healthcare information service company, from October 1,
1986 until October 31, 1993, where he served as its President from April 1987.
From October 31, 1993 until joining the Company, he was a partner with Salt
Creek Ventures, a private investment company. Mr. King and Mr. Robert E. King,
another director of the Company, are brothers.
S. M. CARAVETTA was the Chairman of the Board of Directors, and Chief Executive
Officer from its organization in 1976 through October 28, 1994. He became
Vice Chairman of the Board of Directors on October 28, 1994. Mr.Caravetta
has been a director of the Company since 1976.
JAMES A. PESCE has been the President and a Director of the Company since 1982.
FREDERICK R. BLUME has been a director of the Company since 1993. He has been a
Managing Partner of Capital Health Venture Partners, a healthcare venture
capital firm, since June 1986. Prior to founding Capital Health, Mr. Blume was a
Managing Director of Paine Webber Group specializing in corporate healthcare
financing. He is presently a director of Cytyc Corporation, Oculon Corporation
and Washington National Corporation.
STANFORD J. GOLDBLATT has been a director of the Company since April 20, 1995.
Since 1979, Mr. Goldblatt has been a partner in the law firm of
Hopkins & Sutter, counsel to the Company.
ROBERT E. KING has been a director of the Company since April 20, 1995.
Mr.King is a partner in Salt Creek Venture, a private investment company, and
Chairman of the Executive Committee of COLLEGIS, Inc., an outsourcer of
information services for colleges and universities. For a twelve year period
prior to October 1994, Mr. King was a director and Chief Executive Officer of
CA Newtrend Inc., the general partner of Newtrend, L.P. (and its partnership
and corporate predecessors), a software, service and outsourcing
provider in the financial institutions market. Mr. King and
Mr. Graham O. King are brothers.
ROBERT C. BOWERS has been a director of the Company since April 20, 1995.
Since May 1996, Mr. Bowers has been Vice President and Chief Financial
Officer of COLLEGIS, Inc. Between June 1995 and May 1996, Mr. Bowers served
as Vice President and Chief Financial Officer of HTE, Inc., a software
service company in the state and local government market. From June 1985
through October 1994, Mr. Bowers was Senior Vice President and Chief Financial
Officer of CA Newtrend Inc., the general partner of Newtrend, L.P.
(and its partnership and corporate predecessors).
3
<PAGE>
JAMES E. COWIE has been a director of the Company since July 18, 1995.
Mr.Cowie has been a general partner of Frontenac Company, a Delaware general
partnership that is the general partner of Frontenac VI Limited Partnership
("Frontenac VI") and other venture capital partnerships, since 1989.
He also serves on the boards of directors of PLATINUM technology, inc.,
U.S. Robotics, Inc. and Open Environment Corporation.
Concerning the Board of Directors
Prior to October 1994, outside directors of the Company received up to $1,000
per meeting for their services to the Company in such capacity. Effective
October 1994, outside directors of the Company were granted stock options under
the Company's 1994 Non-Employee Director Stock Option Plan (the "1994 Plan") in
lieu of cash compensation. Under the 1994 Plan, the Board of Directors of the
Company is authorized to grant options to purchase up to 350,000 shares of
Common Stock to certain non-employee directors. Under the terms of the 1994
Plan, a non-employee director is granted options to purchase 50,000 shares of
Common Stock at the market price on the day he or she becomes a director or, in
the case of outside directors that were in office during October 1994, the date
of adoption of the 1994 Plan. The options vest at the rate of 10,000 shares per
year, expire if not exercised within ten years from the date of grant, and are
non-transferrable by option holders during an option holder's lifetime. Under
circumstances set forth in the 1994 Plan, the options may be exercised within
six months following termination of service to the Company, or within one year
in the event of death or total disability. In January 1995, each of Mr. Bowers
and Mr. Robert King, as consideration for his agreement to serve as a consultant
to the Company, was issued options under the Company's Amended 1993 Stock Option
Plan. Neither Mr. Bowers nor Mr. King received options under the 1994 Plan upon
his appointment as a director of the Company. Neither Mr. Goldblatt nor Mr.
Cowie, upon being appointed as a director of the Company, accepted any options.
The option holdings of the directors are set forth under "Voting Securities and
Principal Holders Thereof" below. Directors are also reimbursed for their
reasonable travel expenses incurred in attending meetings.
The Board of Directors met or took action without a meeting eight times during
the fiscal year ended March 31, 1996. There is no present director nominated for
election who attended fewer than 75% of the aggregate of the total number of
meetings of the Board of Directors and the total number of meetings held by all
committees of the Board of Directors on which he served.
The Board of Directors maintains an Executive Committee, an Audit Committee, an
Option Committee, a Nominating Committee and a Compensation Committee.
During the fiscal year ended March 31, 1996, the members of the Executive
Committee were Messrs. Graham King, Robert King, Bowers, Blume, Cowie and
Goldblatt. The Executive Committee met or took action without a meeting five
times during fiscal 1996.
4
<PAGE>
The Audit Committee discusses matters of concern to the independent auditor
resulting from the audit; reviews changes in accounting principles in the
financial statements; and reviews non-auditing services performed for the
Company by the independent auditor. During the fiscal year ended
March 31, 1996, the members of the Audit Committee were Messrs. Bowers,
Goldblatt and Robert King. Although the Audit Committee did not meet formally
during the fiscal year ended March 31, 1996, the members did meet informally to
discuss the selection of an independent auditor and the Company's financial
statements in connection with Executive Committee meetings. The Audit Committee
held a meeting on July 25, 1996.
The Option Committee administers the 1993 Stock Option Plan. During the fiscal
year ended March 31, 1996, the members of the Option Committee were Messrs.
Cowie and Goldblatt. The Option Committee met or took action without a meeting
two times during fiscal 1996, and all members of the Option Committee were
present at each meeting.
During the fiscal year ended March 31, 1996, the members of the Compensation
Committee were Messrs. Blume and Cowie. The Compensation Committee took action
without a meeting one time during fiscal 1996.
During the fiscal year ended March 31, 1996, the members of the Nominating
Committee were Messrs. Graham King, Caravetta and Blume. The Nominating
Committee met twice during fiscal 1996, and each member of the committee was
present at the meeting. The Nominating Committee will consider director nominees
submitted by the stockholders of the Company. Submissions should be made in a
writing addressed to the attention of the Nominating Committee at the Company's
principal executive offices.
The Company has agreed with each director of the Company that the Company shall
indemnify the director against certain claims that may be asserted against him
by reason of serving on the Board of Directors.
Mr. Graham King is a party to an Employment Agreement with the Company that
extends from year to year unless terminated for cause or upon notice by either
party. This agreement and certain other terms of Mr. King's employment with the
Company are discussed under "Discussion of 1996 Executive Officer Compensation
and Employment Contracts" below.
Mr. King and Mr. Caravetta have signed an agreement to the effect that each
will vote for the other as a director of the Company. Mr. Caravetta has also
agreed, among other things, to vote in favor of the slate of directors
nominated by the Nominating Committee.
Mr. Caravetta is a party to a Senior Consulting Agreement with the Company. This
agreement extends through April 1, 1998. On October 12, 1994, the Company
entered into a Senior Consulting Agreement with Mr. Caravetta. This agreement
was amended by letters dated November 11, 1994 and July 5, 1995. The Senior
5
<PAGE>
Consulting Agreement replaced and superceded a prior employment agreement
between Mr. Caravetta and the Company. The agreement provides for a salary of
$275,000 per annum. An agreement to provide a split dollar life insurance policy
on the lives of Mr. and Mrs. Caravetta in the face amount of $2,000,000 through
April 1, 1998 was terminated by letter agreement dated July 5, 1995, and the
split dollar policy (with a cash value of approximately $60,000) was transferred
to Mr. and Mrs. Caravetta. Pursuant to the Senior Consulting Agreement, a stock
option for 150,000 common shares granted to Mr. Caravetta by the Company was
canceled.
Mr. Caravetta's Senior Consulting Agreement includes a change of control clause
that provides that, in the event of a change of control of the Company during
the term of Mr. Caravetta's agreement, the Company shall pay him an amount equal
to 2.0 times the average annual base compensation paid to him during the five
fiscal years of the Company immediately preceding the change of control; and, if
such change of control takes place between April 1, 1997 and March 31, 1998, the
Company shall pay him an amount equal to 1.5 times the average annual base
salary and incentive compensation. The aforesaid payment shall be made to him in
twelve or, at his election, in twenty-four, equal monthly installments,
commencing on the first day of the month following the change of control. Other
than the change of control payments, Mr. Caravetta shall not be entitled to any
other salary or consulting payments under the Senior Consulting Agreement after
a change of control. Mr. Caravetta has agreed that a change of control in favor
of Mr. King or persons affiliated with Mr. King shall not be deemed a change in
control for purposes of his Senior Consulting Agreement.
The Company has agreed to maintain a term life policy in the face amount of
$500,000 on the life of Mr. Caravetta through March 31, 1998. The Company has
designated Rosemarie Caravetta or her estate as the beneficiary of this policy.
After March 31, 1998, the Company will transfer the policy to Mr. Caravetta, and
he will be responsible for premiums required to keep the policy in force.
Mr. Caravetta's agreement also contains clauses that provide for medical
insurance coverage for the remainder of his and his wife's life (at her expense
following his death).
Mr.Goldblatt is a partner in the law firm of Hopkins & Sutter. Hopkins & Sutter
received legal fees and reimbursement for disbursements from the Company for
legal services provided to the Company by Hopkins & Sutter during the fiscal
year ended March 31, 1996. The Company has continued to employ the services of
Hopkins & Sutter; no estimate of the legal fees for the 1997 fiscal year can
be made at this time. Mr. Goldblatt is also a member of the Advisory
Committee of Frontenac Company, a Delaware general partnership that is
the general partner of Frontenac VI. Frontenac VI holds equity representing
approximately 18% of the Company. Mr. Goldblatt is also a trustee of a trust
established for the benefit of members of Mr. Goldblatt's family, which trust is
a limited partner in Frontenac VI. Hopkins & Sutter provides legal services to
Frontenac VI, Frontenac Company and Robert E. King on a regular basis, although
it has not provided legal services to Frontenac VI, Frontenac Company or Mr.
King with regard to any transactions with the Company.
6
<PAGE>
Mr. Bowers and Mr. Robert E. King began serving as paid consultants to the
Company in January 1995, and may from time to time in the future act as paid
consultants to the Company. For their services as consultants during the
fiscal year ended March 31, 1996, each of Mr. King and Mr. Bowers was
compensated for consulting services provided.
Mr. Cowie is a general partner of Frontenac Company, which is the general
partner of Frontenac VI.
The Company maintains a directors and officers liability insurance policy
covering all directors of the Company.
EXECUTIVE COMPENSATION
The following table summarizes the annual and long-term compensation of certain
of the Company's executive officers for fiscal 1996, 1995 and 1994.
<TABLE>
<S> <C> <C> <C>
Long-Term Comp. All Other
Annual Compensation Options (Shares) Comp.
Name/Position Restricted Securities
Stock Underlying
Age Year Salary Bonus Awards(3) Options
Graham O. King, 1996 $239,000 $105,000 0 0 $3,756(4)
Chairman and CEO(1) 56 1995 100,197 56,427(2) $1,050,000 1,000,000 939(4)
1994 N/A N/A N/A N/A N/A
James A. Pesce 53 1996 189,000 30,000 0 0 10,798(5)
President 1995 180,000 0 0 133,000 11,041(5)
1994 179,654 0 0 0 9,981(5)
Stephen G. Sullivan 46 1996 170,000 18,000 0 75,000(7) 24,667(8)
Vice President - Marketing 1995 170,000 18,000 0 0 24,667(8)
and Business Development(6) 1994 170,000 18,000 0 0 24,387(8)
Michael B. Loscalzo 1996 175,000 37,500 0 10,000 None
Secretary, Treasurer and 1995 10,096 0 0 125,000 None
Vice President, Finance, 1994 N/A N/A N/A N/A N/A
Planning & Administration(9)
Robert E. Van Metre 55 1996 100,000 22,500 0 50,000 None
Vice President, Accounting 1995 N/A N/A N/A N/A N/A
and Finance(10) 1994 N/A N/A N/A N/A N/A
</TABLE>
(1) Mr. King joined the Company as its Chief Executive Officer on
October 12, 1994.
(2) Includes $30,000 paid in fiscal 1996 applicable to fiscal 1995.
7
<PAGE>
(3) The amounts shown in the table represent the market price on the date of
grant of awards of restricted stock.
(4) Represents the premium on term life insurance maintained for Mr. King by the
Company.
(5) $9,600 represents an automobile allowance, with the balance representing
premiums on term life insurance maintained for Mr. Pesce by the Company.The
Company has also agreed that if Mr. Pesce dies while employed by the Company,
the Company shall pay to his irrevocably designated beneficiary $100,000 per
annum for a period of ten (10) years thereafter, payable in equal monthly
installments, commencing on the first day of the month following death. The
Company maintains a term life policy in the face amount of $500,000 on the
life of Mr. Pesce, which the Company believes when considering tax effects
will be sufficient to cover this plan.
(6)Mr. Sullivan joined the Company in 1991 when the Company acquired
Administrative Information Systems Corporation ("AISCorp."). Prior to its
acquisition, Mr. Sullivan served as majority stockholder and Chief Executive
Officer of AISCorp., a medical services company.
(7) Option price reduced from $18.52 to $4.00 on July 18,1995.Options originally
issued June 14, 1991.
(8) $10,800 represents an automobile allowance, $5,973 represents disability
insurance premiums paid by the Company on behalf of Mr. Sullivan, $2,012
represents the premium on term life insurance maintained for Mr. Sullivan by the
Company, and the balance represents automobile insurance premiums paid by the
Company on behalf of Mr. Sullivan.
(9) Mr. Loscalzo joined the Company in 1995.From 1993 to 1995, Mr.Loscalzo was a
Senior Vice President of Cain Brothers & Company, a New York based health care
investment banking firm. Mr. Loscalzo was a co-founder and, from 1988 to 1992,
Managing Director of The Hunter Group, a health care workout firm. Between 1988
and 1991, he served as either CEO or CFO for workout clients in Seattle,
Washington; St. Paul, Minnesota; Miami, Florida; and San Francisco, California.
Prior to the formation of The Hunter Group, Mr. Loscalzo served as Senior Vice
President of Finance for a Philadelphia teaching hospital. From 1978 to 1985, he
was a manager in Arthur Andersen & Co.'s Philadelphia health care audit
practice.
(10) Mr. Van Metre joined the Company in 1995. From 1987 through 1994,
Mr. Van Metre held several senior management positions with
Integrated Resources Life Companies, Inc. including, Senior Vice President
- -Chief Financial Officer, Executive Vice President, and President.
From 1982 through 1987, Mr. Van Metre was Executive Vice President-Chief
Financial Officer for the Daseke Group, Inc. Mr. Van Metre held a variety of
senior management positions with Household International (HFC) from 1973
to 1982. Prior to joining HFC, he was Administrator of Finance for the
Illinois State Toll Highway Authority. Mr. Van Metre's compensation
amounts do not include consulting payments paid to Mr. Van Metre by the
Company prior to his employment with the Company.
8
<PAGE>
DISCUSSION OF 1996 EXECUTIVE OFFICER COMPENSATION
AND EMPLOYMENT CONTRACTS
Mr. Graham O. King joined the Company as Chief Executive Officer on October 12,
1994. He became Chairman of the Board of Directors effective October 28, 1994.
Mr. King is a party to an Employment Agreement that has been extended through
March 31, 1997. Unless either party elects not to extend the agreement, it
automatically extends for one year terms thereafter. The agreement provides for
a salary of $239,000 per year with a performance bonus not to exceed fifty
percent (50%) of salary. Mr. King's salary can be increased at the discretion of
the Board of Directors. The agreement provides for one year severance unless
there is termination for cause or a voluntary resignation without good reason as
defined in his Employment Agreement. Mr. King was issued 300,000 shares of
Common Stock of the Company in lieu of a cash signing bonus. Mr. King has agreed
with the Company not to sell more than 33,333 of these shares plus any shortfall
from previous fiscal quarters in any fiscal quarter during Mr. King's
employment.
Mr. King was granted stock options to acquire 1,000,000 shares of Common Stock
of the Company at the market price ($3.50/share) on the date of the commencement
of his employment. Options for 400,000 shares vested on October 12, 1995 and
options for 600,000 shares vest on October 12, 2002, unless they have previously
become exercisable. Alternatively, these stock options vest whenever the stock
has traded at or above $5.00 on at least 30 of the 40 prior business days, or
upon a change of control. These options contain anti-dilution provisions
authorizing adjustments under certain circumstances. Mr. King's shares,
including those underlying options, are subject to a registration rights
agreement. The Company has also agreed to reimburse Mr. King for the cost of a
term life insurance policy for $1,000,000 on Mr. King's life for his benefit.
On June 14, 1995, the Company agreed to loan Mr. Graham King $157,800 in order
to allow Mr. King to pay the income taxes due in connection with a portion of
the restricted stock he received. The terms of the note evidencing the loan
provide that the loan is interest-free until 120 days after the Company
registers Mr. King's restricted stock for sale, that the loan bears interest at
a rate equal to the rate of return achieved by the Company on its cash reserves
plus 1% after such date, and that the Company may demand repayment at any time
after the note begins to accrue interest. As of March 31, 1996, the balance of
this loan was $42,450.
The Company has in effect an employment agreement with Mr. Sullivan pursuant to
which Mr. Sullivan is paid an annual salary of $170,000 per year, plus a
mandatory bonus of $18,000 per year. The agreement terminates on May 31, 1997.
All officers hold office until their successors are duly elected or appointed
and qualified, or until their earlier resignation or removal.
9
<PAGE>
OPTION YEAR-END VALUE TABLE
The following table sets forth information concerning the value at March 31,
1996 of option grants during the year to each named executive officer. Options
vest as determined at the time of the grant and expire after ten years from the
date of grant. Vesting is contingent on continuing employment with the Company.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
OPTION GRANTS IN FISCAL 1996
Potential Realizable Value
Individual Grants at Assumed Annual Rates
of Stock Price Appreciation
for Option Term(1)
(a) (b) (c) (d) (e) (f) (g)
Percent of Total
Options Granted Exercise
Options to Employees in or Base Expiration
Name Granted Fiscal Year Price Date 5% 10%
Graham O. King 0 --- --- --- --- ---
James A. Pesce 0 --- --- --- --- ---
Stephen G. Sullivan 75,000(2) N/A $4.00 6/30/01 $102,029 $231,468
Michael B. Loscalzo 10,000 2.5% $4.25 1/30/06 $ 26,728 $ 67,734
Robert E. Van Metre 50,000 12.4% $3.375 6/26/05 $106,126 $268,944
</TABLE>
(1)Amounts reported in these columns represent amounts that may be realized upon
exercise of the options immediately prior to the expiration of their term
assuming the specified compounded rates of appreciation (5% and 10%) of the
Company's Common Stock over the term of the options. These numbers are
calculated based on rules promulgated by the Securities and Exchange Commission
and do not reflect the Company's estimate of future stock price increases.
Actual gains, if any, on stock option exercises and Common Stock holdings are
dependent on the timing of such exercise and the future performance of the
Company's Common Stock. There can be no assurance that the rates of appreciation
assumed in this table can be achieved or that the amounts reflected will be
received by the individuals.
(2)By action of the Board of Directors of the Company on July 18, 1995, the
exercise price for options to purchase 75,000 shares of the Company's Common
Stock was reduced from $18.52 to $4.00. These options were originally issued
June 14, 1991.
The following table sets forth information with respect to options exercised and
held by the named executive officers as of March 31, 1996:
10
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
AGGREGATED OPTION EXERCISES IN FISCAL 1996
AND MARCH 31, 1996 OPTION VALUES
(a) (b) (c) (d) (e)
Value of
Number of Unexercised
Shares Unexercised In-The-Money
Acquired on Value Options at Options at
Name Exercise Realized March 31,1995 March 31, 1996(1)
Graham O. King 0 --- 1,000,000 $375,000
James A. Pesce 0 --- 133,000 $116,375
Stephen G. Sullivan 0 --- 75,000 $0
Michael B. Loscalzo 0 --- 135,000 $46,875
Robert E. Van Metre 0 --- 50,000 $25,000
</TABLE>
(1)The value of options reflects the increase in market value of the Company's
Common Stock from the date of grant through March 31, 1996 (when the closing
price of Company Common Stock was $3.875 per share). The table includes both
options that are vested and options that are not vested. Value actually realized
by the executive officers will depend on the value of the Company's Common Stock
at the time of exercise.
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPANTS
Mr. Blume and Mr. Cowie comprise the Compensation Committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation policies adopted by the Company are designed to (i) attract and
retain valued employees capable of leading the Company to meet its business
objectives, (ii) motivate the Company's executives to enhance long-term
stockholder value and (iii) reward the Company's valued employees for prior
service to the Company. The executive compensation program has been administered
by the Compensation Committee without resort to particular standards other than
an overall review of the performance of the Company and the individual officers.
The annual compensation of the Company's executive officers including the
Company's Chief Executive Officer, consists of a combination of cash salary,
cash bonuses and stock options and grants. The Compensation Committee reviews
individual executive officer compensation in light of various information,
including Company performance, individual performance and comparative market
data. In general, the Company intends to set base compensation for executive
officers within a range which is believed to be comparable to the range of
compensation set by companies of comparable size in similar industries.
In addition to the general standards set forth above, two of the executive
officers of the Company are compensated pursuant to existing compensation
agreements. These agreements, covering Messrs. Graham King and Sullivan, are
discussed at "Discussion of 1996 Executive Officer Compensation and Employment
11
<PAGE>
Contracts" above. As discussed above, Mr. King's Employment Agreement provided
for the issuance to Mr. King of 300,000 shares in lieu of a signing bonus.
During the fiscal year ended March 31, 1996, the Compensation Committee
authorized an amendment to the Employment Agreement waiving certain of the
Company's forfeiture rights with respect to these shares.
Section 162(m) of the Internal Revenue Code of 1986, as amended ("Section
162(m)") limits to $1,000,000 the amount of compensation and benefits (other
than compensation and benefits that are performance based) that can be deducted
for federal income tax purposes in any fiscal year. The Company does not expect
to pay its executive officers compensation in excess of the Section 162(m)
deductibility limit. The Committee intends to take such further steps as it
deems advisable to allow the Company to deduct future compensation amounts paid
to its executive officers to the extent it may do so without compromising the
Company's ability to motivate and reward excellent performance. The Board of
Directors and the Committee will retain discretion to authorize the payment of
compensation that does not qualify for income tax deductibility under Section
162(m).
Respectfully submitted,
/s/ Frederick R. Blume /s/ James E. Cowie
Frederick R. Blume James E. Cowie
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<PAGE>
PERFORMANCE GRAPH
The following chart shows the Company's cumulative total stockholder return for
the last five years compared to the Total Return Index for The Nasdaq Stock
Market (U.S. Companies) and the Nasdaq Computer and Data Processing Service
Stocks as prepared for Nasdaq by the Center for Research in Security Prices at
the University of Chicago.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
MARCH 31:
1991 1992 1993 1994 1995 1996
US SERVIS, INC. 100 76.1 57.6 23.9 17.4 16.8
NASDAQ STOCK MARKET (US) 100 127.5 146.5 158.1 175.9 238.8
NASDAQ COMP & DATA PROC. STOCKS 100 147.7 165.1 169.1 227.9 322.8
</TABLE>
[GRAPH]
Prepared by the Center for Research in Security Prices
Produced on 07/17/96 including data to 03/29/96
13
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth information, as provided by the holders to the
Company, concerning beneficial ownership of Common Stock as of July 15, 1996, by
(i) all persons known by the Company to be the beneficial owners of five percent
or more of the issued and outstanding Common Stock of the Company, (ii) each of
the directors and named executive officers and (iii) the directors and executive
officers of the Company as a group. Except as noted, all addresses are 414 Eagle
Rock Avenue, West Orange, New Jersey 07052.
<TABLE>
<S> <C> <C>
No. of Shares Percentage of
Name of Beneficial Owner Beneficially Owned Ownership
S.M. Caravetta(1) 1,088,128 17.3 %
Frederick R. Blume(2), c/o American Healthcare Fund, 122 S. Michigan 370,812 5.9 %
Ave., Chicago, IL 60603
Graham O. King(3) 600,000 4.8 %
James A. Pesce(4) 181,500 2.9 %
Michael B. Loscalzo(5) 25,000 Less than 1 %
Robert E. Van Metre(6) 16,667 Less than 1 %
Stanford J. Goldblatt 0 Less than 1 %
Robert E. King(7,8) 185,000 2.8 %
Robert C. Bowers(7) 10,000 Less than 1 %
James E. Cowie(9), c/o Frontenac VI Limited Partnership, 1,415,000 18.4%
135 S. LaSalle St., Chicago, IL 60603
Stephen G. Sullivan(10) 403,116 6.4 %
David K. Vanco(11), c/o Management Data Services, 655 W. Grand Ave., 525,000 8.3 %
Elmhurst, IL 60126
All Executive Officers and Directors(1-10) as a Group (11 persons) 4,295,223 54.7 %
</TABLE>
(1) Includes 116,000 shares of Common Stock owned by the children of
Mr. Caravetta. Mr. Caravetta disclaims beneficial ownership of such
shares. Includes 212,128 shares of Common Stock owned by trusts, of which
the children of Mr. Caravetta are the beneficiaries and
Mr. Stephen J. Feinberg and the wife of Mr. Caravetta are trustees.
Mr. Caravetta disclaims beneficial ownership of such shares.
Mr. Caravetta may be deemed to be the promoter or founder of the Company as
such term is defined under the federal securities laws.
(2) Shares which are owned by American Healthcare Fund, L.P., of which Mr.Blume
is an affiliate and as to which Mr. Blume disclaims beneficial ownership.
Does not include options to purchase 40,000 shares which might be issued upon
exercise of stock options which have not yet vested. Includes 25,000 shares
issuable upon exercise of vested stock options.
(3)Includes 400,000 shares issuable upon exercise of vested stock options.
Does not include 600,000 shares issuable upon exercise of stock options which
are not currently exercisable. (See "Discussion of 1996 Executive
Officer Compensation and Employment Agreements.")
(4)Includes 91,500 shares issuable upon exercise of vested stock options.Does
not include 41,500 shares which might be issued upon exercise of a stock
option which has not yet vested.
(5)Represents vested stock options. Does not include 110,000 shares which might
be issued upon exercise of a stock option which has not yet vested.
(6)Represents vested stock options. Does not include 33,333 shares which might
be issued upon exercise of a stock option which has not yet vested.
(7)Does not include 40,000 shares which might be issued upon exercise of a stock
option which has not yet vested. Includes 10,000 shares issuable upon exercise
of vested stock options.
14
<PAGE>
(8)Includes 18,000 shares held in trust for the benefit of Mr. King's children.
Mr. King disclaims beneficial ownership of such shares. Includes 16,500 shares
issuable upon exercise of a warrant, and 125,000 shares issuable upon conversion
of Series A Convertible Preferred Shares. Mr. King's "Percentage of Ownership"
is calculated assuming that the 141,500 shares of common stock issuable upon
exercise of the warrant and conversion of the Series A Convertible Preferred
Stock are issued and outstanding.
(9)Shares owned by Frontenac VI Limited Partnership. Mr. Cowie disclaims
beneficial ownership of such shares. Includes 165,000 shares issuable upon
exercise of a warrant and 1,250,000 shares issuable upon conversion of Series A
Convertible Preferred Shares. Mr. Cowie's "Percentage of Ownership" is
calculated assuming that the 1,415,000 shares of common stock issuable upon
exercise of the warrant and conversion of the Series A Convertible Preferred
Stock are issued and outstanding.
(10) Includes 75,000 shares issuable upon exercise of vested stock options,
and 559 shares held by Mr. Sullivan's wife.
(11) Includes 25,000 shares issuable upon exercise of vested stock options.
INDEPENDENT PUBLIC ACCOUNTANTS
No independent public accounting firm has yet been selected to report on the
Company's financial statements for the fiscal year ended March 31, 1997. Wiss &
Company, LLP completed the audits of the financial statements of the Company for
the fiscal year ended March 31, 1996. Representatives of Wiss & Company, LLP are
expected to be present at the meeting and will have the opportunity to make a
statement (if they so desire) and to be available to respond to appropriate
questions.
The Audit Committee is considering independent public accountants (including
Wiss & Company, LLP) to conduct an audit for the fiscal year ended March 31,
1997, and will make a recommendation to the Board of Directors when its
deliberations are completed.
Wiss & Company, LLP issued unqualified reports on the Company's financial
statements for the fiscal years ended March 31, 1995 and March 31, 1996, and to
date the Company has had no disagreements with Wiss & Company, LLP on any
matters of accounting principles or practices, financial statement disclosures,
or auditing scope or procedures.
SECTION 16 FILINGS
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and persons who own beneficially more than ten
percent of a registered class of the Company's equity securities to file with
the Securities and Exchange Commission ("SEC") initial reports of ownership and
reports of changes in ownership of such securities of the Company. Directors,
executive officers and greater than ten percent stockholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) reports they
file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and representations that no other reports were
required, all Section 16(a) filing requirements applicable to its directors,
executive officers and greater than ten percent beneficial owners were complied
with during the 1994 fiscal year.
15
<PAGE>
STOCKHOLDERS PROPOSALS
Any proposals by stockholders of the Company intended to be included in the
Company's 1997 Annual Meeting of the Stockholders must be in writing and
received at the Company, at its principal office, no later than March 27, 1997.
FINANCIAL AND OTHER INFORMATION
The Company's Audited Financial Statements for the fiscal years ended March 31,
1996 and March 31, 1995 are included in the Company's Annual Report on Form 10-K
for the Fiscal Year ended March 31, 1996, and are incorporated herein by
reference.
Management's discussion and analysis of the financial condition and results of
operations of the Company is included in the Company's Annual Report on Form
10-K for the Fiscal Year ended March 31, 1996 under the heading "Management's
Discussion of Financial Results," and is incorporated herein by reference.
A copy of the Annual Report on Form 10-K is being delivered with this Proxy
Statement.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to Certain Relationships and Related Transactions is
included herein under the headings "Concerning the Board of Directors" and
"Executive Compensation."
GENERAL
Management of the Company does not know of any matters other than the foregoing
that will be presented for consideration at the meeting. However, if other
matters properly come before the meeting it is the intention of the persons
named in the enclosed proxy to vote thereon in accordance with their judgment.
By Order of the Board of Directors,
/s/ Michael B. Loscalzo
Michael B. Loscalzo
July 25, 1996 Secretary, Treasurer and Vice President of Finance,
Planning and Administration
16
