EX-20
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
CONCORD EFS, INC.
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
To Be Held on May 20, 1999
To the Stockholders of
Concord EFS, Inc.
Notice is hereby given that the Annual Meeting of Stockholders of
Concord EFS, Inc. ("Concord" or the "Company") will be held at Colonial Country Club, 2736 Countrywood
Parkway, Memphis, Tennessee on May 20, 199924, 2001 beginning at 9:30 a.m. local time,CST, for the
following purposes:
1. To elect directors to serve for the ensuing year;
2. To approve the Amendment to the Certificate of Incorporation to increase
the number of authorized shares of Common Stock;
3. To approve the Amendment to Concord's 1993 Incentive Stock Option Plan to
permit optionees to transfer options to family members and increase options
granted annually to non-employee directors.
4. To transact such other business as may properly come before the annual
meeting and any adjournments thereof.
The Board of Directors has fixed the close of business on March 18, 199916,
2001 as the record date for determination of the stockholders entitled to notice
of and to vote at the Annual Meeting. TheConcord's By-Laws of the Company require that the holders
of a majority of all stock issued, outstanding and entitled to vote be present
in person or represented by proxy at the meeting in order to constitute
a quorum.transact business.
By Order of the Board of Directors
Richard M. Harter
Secretary
April 9, 19996, 2001
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING,
PLEASE SIGN AND RETURN THE ENCLOSED PROXY.
No postage is required if mailed in the United States.
CONCORD EFS, INC.
PROXY STATEMENT
April 9, 19996, 2001
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Concord EFS, Inc. ("Concord" or the "Company") of proxies for use at theits Annual
Meeting of Stockholders to be held on May 20, 199924, 2001 and any adjournments thereof.
Shares as to which proxies have been executed will be voted as specified in the
proxies. A proxy may be revoked at any time by notice in writing received by the
Secretary of the CompanyConcord before it is voted. A majority in interest of the
outstanding shares, whether represented at the meeting in person or by proxy,
shall constitute a quorum for the transaction of business. Votes withheld from
any nominee, abstentions and broker "non-votes" are counted as present or
represented for purposes of determining the presence or absence ofwhether a quorum is present for the
meeting. A "non-vote" occurs when a nominee holding shares for a beneficial
owner votes on one proposal, but does not vote on another proposal because the
nominee does not have discretionary voting power and has not received
instructions from the beneficial owner. Abstentions are included inAt the number of shares present or represented andAnnual Meeting, the voting on each matter. Broker
"non-votes" are not so included.will
be by voice vote unless any stockholder entitled to vote requests that voting be
by ballot.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The Company'sConcord's only issued and outstanding class of voting securities is its
Common Stock, par value $0.33 1/3 per share. Each stockholder of record on March
18, 1999 is
entitled to one vote for each share registered in suchthat stockholder's name.name on
March 16, 2001. As of that date, the Company'sour Common Stock was held by approximately
15,80054,000 stockholders.
The following table sets forth, as of March 18, 1998,16, 2001, the ownership of
the
Company'sour Common Stock by each person who is known by the Companyto us to own beneficially more than
5% of the Company'sour outstanding Common Stock, by each director who owns shares and by all
of our directors and officers of the Company as a group.
Amount and Nature
of Beneficial Percent of
SharesOwnership Outstanding
Beneficial Owner (1) Owned Shares (2)
- ---------------------------------- ---------- ------------------------------------------------------- -------------------- --------
Dan M. Palmer, (3), Chairman 2,300,622 1.8%of the Board & CEO 5,105,775 (3) 2.1%
Edward A. Labry III, (4), Director 1,838,234 1.4%
Joyce Kelsoand President 4,422,192 (4) 1.8%
Edward T. Haslam, Chief Financial Officer 95,250 (5), Director 260,398 0.2%
Richard P. Kiphart (5), Director 3,678,355 2.9%
Richard M. Harter *
Vickie Brown, Chief Operations Officer 56,561 (6), Director 86,366 0.1%
Jerry D. Mooney (6), Director 41,916 0.0%
David C. Anderson (6), Director 21,759 0.0%
J. Richard Buchignani (6), Director 21,825 0.0%
Paul Whittington (6), Director 19,228 0.0% *
William E. Lucado, Sr. Vice-President 89,737 (7) *
Douglas C. Altenbern, Director 12,000 0.0%
16,750 (8) *
J. Richard Buchignani, Director 40,274 (9) *
Ronald V. Congemi, Director 239,706 (10) *
Richard M. Harter, Director and Secretary 121,550 (9) *
Richard P. Kiphart, Director 5,239,282 (11) 2.2%
Jerry D. Mooney, Director 60,612 (9) *
Paul Whittington, Director 34,593 (9) *
All officers directors and nomineesdirectors as a group (1015,522,282 (12) 6.4%
(12 persons) (7) 8,280,703 6.3%
William Blair & Company, LLC (8) 13,189,581 10.3%L.L.C.
222 West Adams Street
Chicago, IL 60606 AMVESCAPP PLC and Subsidiaries (9) 7,439,355 5.8%
11 Devonshire Square
London EC2M 4YR England19,496,453 (13) 8.1%
(1) The address of each beneficial owner thatwho is also a director or officer is
the same as the Company's.Concord's.
(2) Percentage ownership is based on 128,157,354242,043,621 shares issued and outstanding
as of March 16, 2001, plus the number of shares subject to options exercisable
within 60 days fromafter the record date by the person or the aggregation of persons
for which such percentage ownership is being determined.
(3) Shares owned are unexercisedinclude 5,085,775 shares covered by stock options.options exercisable
within 60 days after the record date.
(4) Shares owned include 1,835,1564,387,575 shares covered by unexercised stock options.options exercisable
within 60 days after the record date.
(5) Shares owned include 4,50091,250 shares covered by unexercised stock options.options exercisable
within 60 days after the record date.
(6) Shares owned include 14,16656,560 shares covered by unexercised stock options.options exercisable
within 60 days after the record date.
(7) Shares owned include 4,215,60889,062 shares covered by unexercised stock options.options exercisable
within 60 days after the record date.
(8) BasedShares owned include 6,750 shares covered by stock options exercisable
within 60 days after the record date.
(9) Shares owned include 28,000 shares covered by stock options exercisable
within 60 days after the record date.
(10) Shares owned consist of shares covered by stock options exercisable within
60 days after the record date.
(11) Shares owned include 13,500 shares covered by stock options exercisable
within 60 days after the record date.
(12) Shares owned include an aggregate of 10,082,178 shares covered by stock
options exercisable within 60 days after the record date.
(13) The number of shares owned is based on aan amended Schedule 13G dated as of March 16, 1999, filed on
February 14, 2001 by William Blair &and Company, LLPL.L.C. ("Blair"). Includes 1,794,903 reflecting
ownership as of December 31, 2000. The amended Schedule 13G provides that such
number of shares asincludes 5,858,185 shares beneficially owned by principals of
Blair with respect to which Blair has sole
voting power and 13,189,581 shares as to which Blair has sole dispositive power. Blair disclaims beneficial ownership asand 13,638,268
shares held in client accounts at Blair with respect to 11,394,678 of such shares.
(9) Based on a Schedule 13G dated as of February 10, 1999, filed by AMVESCAP PLC
and Subsidiaries.which Blair disclaims
beneficial ownership.
ELECTION OF DIRECTORS
TenNine directors are to be elected to hold office until the next annual
meeting of stockholders and until their successors are elected and qualified.
Unless a proxy is executed to withhold authority for the election of any or all
of the directors, then the persons named in the proxy will vote the shares
represented by the proxy for the election of the following tennine nominees. If the
proxy indicates that the stockholder wishes to withhold a vote from one or more
nominees for director, such instruction will be followed by the persons named in
the proxy. All tennine of the nominees are now members of the Board of Directors.
The Board of Directors has no reason to believe that any of the nominees will be
unwilling or unable to serve. In the event that any nominee should be unwilling
to serve or not be available, the persons named in the proxies will vote for the
others and may vote for a substitute for such nominee. AnThe nine nominees
receiving the highest number of affirmative vote of a majority of the Company's
Common Stock represented in personvotes will be elected as directors.
Shares not voted, whether due to abstention, broker non-vote or by proxy at the meeting is necessary forotherwise, will
have no impact on the election of the individuals named below.directors.
Recommended Vote
The Board of Directors recommends that you vote "FOR" the election of
these tennine individuals as directors.
The following table lists the name of each proposed nominee; his/his or her
age; his/his or her business experience during at least the past five years,
including principalall positions and offices held with the CompanyConcord or a subsidiaryany of the Company; and the year
since which he/she has servedits
subsidiaries; his or her experience as a director of the Company.Concord; and any other
directorships held by him or her. There are no family relationships among the
nominees. Office With the Company, Business
NomineesAlso, there is no arrangement or understanding between any nominee and
Ages Experience and Year First Elected Director
- -------------------------- ----------------------------------------------------
Dan M. Palmer (56) Mr. Palmer became Chairman of the Boardany other person pursuant to which he or she is to be selected as a director or
nominee, except that, in February
1991. Mr. Palmer has been Chief Executive Officer
of the Company since August 1989, and a Director of
the Company since May 1987. Mr. Palmer has been
the Chief Executive Officer of EFS National Bank
(formerly EFS, Inc.) since its inception in 1982.
He joined Union Planters National Bank in June 1982
and founded the EFS operations within the bank. He
continued as President and Chief Executive Officer
of EFS when it was acquired by Concord in March
1985.
Joyce Kelso (57) Mrs. Kelso has been a Director since May 1991. She
was Vice President in charge of Customer Service
when EFS began operations. In August 1990, she was
elected Senior Vice President of the Company.
January 1, 1995, Mrs. Kelso semi-retired and on
January 1, 1997, she became fully retired.
Edward A. Labry III (36) Mr. Labry joined EFS in 1984. He was made Director
of Marketing in March 1987 and Vice President of
Sales in February 1988. In August 1990, he was
elected to Chief Marketing Officer of the Company.
In February 1991, he was elected Senior Vice
President of the Company. He became President of the
Company in October 1994, and President of EFS
National Bank in December 1994.
Richard M. Harter (62)* Mr. Harter has been the Company's Secretary and a
Director since the Company's formation. He is a
partner of Bingham Dana LLP, legal counsel to the
Company.
Jerry D. Mooney (46)* + Mr. Mooney has been a Director of the Company since
August 1992. Since August 1997, he has been
President and CEO of ServiceMaster Employer
Services, Inc. Prior to then he was President of
Healthcare New Business Initiatives and formerly
served as Chairman, President and CEO of Service-
Master Diversified Health Services, Inc. (formerly
VHA Long Term Care) since 1981.
David C. Anderson (56)* + Mr. Anderson has been a Director of the Company
since August 1992. Mr. Anderson was Senior Vice
President and Chief Financial Officer with Federal
Express in Memphis, Tennessee for seven years and
Executive Vice President and Chief Financial Officer
at Burlington Northern in Fort Worth, Texas for
three years prior to his retirement in 1995.
Richard Buchignani (50)* Mr. Buchignani has been a Director of the Company
since August 1992. He is a partner in the Memphis,
Tennessee office of the law firm of Wyatt, Tarrant &
Combs, who also serves as local counsel to the
Company. Mr. Buchignani has been affiliatedconnection with the law firm since 1995 when mostacquisition of the membersStar Systems, Inc.,
Concord agreed that its Board of his firmDirectors would elect Mr. Congemi to become a
director of 18 years joined Wyatt, Tarrant & Combs.
Paul L. Whittington (63)* + Mr. Whittington has been aConcord.
Office with Concord, Business
Nominees and Ages Experience and Year First Elected Director
- --------------------------- ----------------------------------------------
Dan M. Palmer (58) Mr. Palmer has been a director of Concord since May 1987, and
was appointed Chairman of the Board in 1991. He was named Chief
Executive Officer of Concord in 1990, and Chief Executive
Officer of EFS National Bank upon its formation in 1992. He
joined Union Planters National Bank in 1982 and founded the
bank's Electronic Fleet Systems (EFS) operation, which was later
acquired by Concord. He continued as President and Chief
Executive Officer of EFS following the acquisition in 1985.
Edward A. Labry III (38) Mr. Labry was named President of Concord EFS, Inc. and EFS
National Bank in 1994. Mr. Labry joined Concord in 1984 as a
salesman in Concord's trucking services division, assuming
responsibility for all sales and marketing in that unit in
1987. In 1990, Mr. Labry was named chief marketing officer for
all Concord companies, and was appointed senior vice president
in 1991. He is a member of the international Advisory Councils
for Visa and MasterCard, and serves as director on the board of
MS Carriers.
Douglas C. Altenbern (64)*+ Mr. Altenbern has been a director of Concord since February
1998. Mr. Altenbern served as Vice Chairman of First Financial
Management Corporation until 1989, at which time he resigned to
found Argosy Network Corporation, of which he served as Chairman
and CEO. In 1992 he sold his interest in Argosy and in 1993
founded Pay Systems of America, Inc. of which he served as
Chairman and CEO through December 1996. He currently is a
private investor and serves as a director on the boards of The
Bradford Funds, Inc., OPTS, Inc., Interlogics, Inc., CSM, Inc.
and Equitas.
Richard Buchignani (52)* Mr. Buchignani has been a director of Concord since August
1992. He is a partner in the Memphis, Tennessee office of the
law firm of Wyatt, Tarrant & Combs, LLP, who also serves as
local counsel to Concord. Mr. Buchignani has been affiliated
with the law firm since 1995 when most of the members of his
firm of 18 years joined Wyatt, Tarrant & Combs, LLP.
Ronald V. Congemi (54) Mr. Congemi was appointed director of Concord effective February
22, 2001. From 1975 to 1984, he served in a variety of
management positions at VISA International. In 1984, he joined
Star System, Inc. network as founding President. Mr. Congemi
became President and CEO of the newly merged HONOR Technologies,
Inc. and Star System, Inc. network (renamed Star Systems, Inc.)
in March 1999, and he continues to serve as President. He has
served on the board of directors of the Electronic Funds
Transfer Association and as member of both the Consumer Bankers
Association Committee on Electronic Funds Transfer and the BITS
Infrastructure Review Group.
Richard M. Harter (64)* Mr. Harter has been Concord's Secretary and a director of
Concord since Concord's formation. He is a partner of Bingham
Dana LLP, legal counsel to Concord.
Richard P. Kiphart (58)* Mr. Kiphart has been a director of Concord since March 1997. In
1972 he became a principal of William Blair & Company, L.L.C.
He served as head of Equity Trading from 1972 to 1980. He
joined the Corporate Finance Department in 1980 and was made
head of that department in January 1995.
Jerry D. Mooney (48)*+ Mr. Mooney has been a director of Concord since August 1992.
Since August 1997, he had been President and COO of
ServiceMaster Employer Services, Inc. He retired from this
position in 1998. Prior to then he was President of Healthcare
New Business Initiatives and formerly served as Chairman,
President and CEO of ServiceMaster Diversified Health Services,
Inc. (formerly VHA Long Term Care) since 1981.
Paul L. Whittington (65)*+ Mr. Whittington has been a director of Concord since May 1993.
Mr. Whittington had been the Managing Partner of the Memphis,
Tennessee and Jackson, Mississippi offices of Ernst & Young from
1988 until his retirement in 1991. Since 1979, he had been the
partner in charge of consulting at various Ernst & Young offices.
Richard P. Kiphart (56)* Mr. Kiphart has been a Director of the Company since
March 1997. In 1972 he became a General Partner of
William Blair & Company, LLC. He served as head of
Equity Trading from 1972 to 1980. He joined the
Corporate Finance Department in 1980, and was made
head of that department in January 1995.
Douglas C. Altenbern (61)* Mr. Altenbern has been a Director of the Company
since February 1998. Mr. Altenbern served as Vice
Chairman of First Financial Management Corporation
until 1989, at which time he resigned to found
Argosy Network Corporation, of which he served as
Chairman and CEO. In 1992 he sold his interest in
Argosy and in 1993 founded Pay Systems of America,
of which he served as Chairman and CEO through
December 1996. He currently is a private investor
and serves as a Director on the Boards of The
Bradford Funds, Inc., OPTS, Inc., Interlogics, Inc.,
CSM, Inc. and Equitas.
* Member of the Board's Audit Committee.
+ Member of the Board's Compensation Committee.
Compensation of Directors
Compensation of Directors
The CompanyCOMPENSATION OF DIRECTORS
Concord currently pays to each non-employee director of the CompanyConcord an
annual$8,000 cash director fee of $8,000 plus $2,000each year for each meeting attended plusattending scheduled board meetings. Each
non-employee director receives $1,000 for each
telephone meetingany special meetings of the full Board
or any committee attended. There are normally four meetings perConcord pays the chairman of its Audit Committee an
additional $4,000 cash fee each year. In addition, non-employee directors are
granted options to purchase 4,50010,875 shares of the Company'sConcord's common stock at market
value on the date of the annual meeting of stockholders. One director receives
an annual fee of $8,000 plus $2,000 for each meeting attended. This director is
granted options to purchase only 9,000 shares of Concord's stock in the same
manner as the other non-employee directors. Directors are reimbursed for
expenses incurred in attending meetings of the Board of Directors. TwoDirectors and committees
of the tenBoard. Three of the nine nominees are employees of the
CompanyConcord or its
subsidiaries and are not separately compensated for serving as directors.
Executive CompensationEXECUTIVE COMPENSATION
The following summary compensation table is intended to provide a
comprehensive overview of the Company'sConcord's executive pay practices. It includes the
cash compensation paid or accrued by the CompanyConcord and its subsidiaries for services
in all capacities during the fiscal year ended December 31, 1998,2000 to, or on
behalf of, each of the Company'sConcord's named executives. Named executives include the
Chief Executive Officer and the President ofand the Company.
Summary Compensation Table
Annual Compensation Long-Term Compensation
Name and Salary Bonus
Principal Position Year ($) ($) Options Awarded*
- ------------------------ ---- -------- ------- ----------------------
Dan M. Palmer 1998 466,538 331,250 1,125,000
Chairman of the Board 1997 427,392 262,000 1,200,000
Chief Executive Officer 1996 425,000 125,000 356,250
of the Company and
EFS National Bank
Edward A. Labry III 1998 466,538 331,250 1,125,000
President of the Company 1997 417,777 262,000 1,200,000
and EFS National Bank 1996 392,308 125,000 356,250three highest paid executive
officers.
Summary Compensation Table
Long-Term
Name and Principal Position Year Annual Compensation Compensation
------------------------------ ----------------------
Salary Bonus Securities
($) ($) Underlying Options*
- ------------------------------------ --------- ------------- ------------ ----------------------
Dan M. Palmer 2000 683,654 175,000 1,843,750
Chairman of the Board 1999 538,750 393,750 1,687,500
Chief Executive Officer, Concord 1998 466,538 331,250 1,687,500
Edward A. Labry III 2000 683,654 175,000 1,843,750
President, Concord 1999 538,750 393,750 1,687,500
1998 466,538 331,250 1,687,500
Edward T. Haslam 2000 233,654 195,000 30,000
Chief Financial Officer, 1999 186,200 237,500 185,000
Concord 1998 178,150 85,000 55,363
Vickie Brown 2000 212,308 40,000 25,000
Chief Operations Officer, 1999 203,462 40,000 77,500
EFS National Bank 1998 184,519 20,000 56,250
William E. Lucado 2000 200,577 30,000 20,000
Senior Vice President, 1999 191,827 40,000 45,000
Concord 1998 164,000 15,000 33,750
* Options awarded have been restated to reflect all stock splits.
Stock Options
The following tables present the following types of information for
options granted to the Company'sConcord's named executives under the Company'sConcord's 1993 Incentive
Stock Option Plan. Table I -presents information regarding options granted and
the potential realizable value of such options, and Table II -presents
information regarding options exercised in the latest fiscal year and the number
of unexercised options held. Except as otherwise indicated in the table,
provided that the person remains employed by Concord or its subsidiaries, each
of the options listed in the table remains outstanding for a period of 10 years
and vests in four equal installments commencing on the first anniversary of the
applicable grant date.
Table I
OptionsOptions/SARs Granted in 1998
2000
Individual Grants
------------------------------------------------------------------------------------------------------------------
Name Number of
Securities % of Total
Underlying Options/ Exercise Potential Realizable % 0f Total Value
Options/ SARs Granted or Base at Assumed
Options Annual Rates of
StockSARs Granted to ExerciseEmployees Price Expiration Stock Price Appreciation
Options Employees(#) in price Expiration2000 ($/Share) Date for Option Term
Name Granted 1998 ($/Share) Date-----------------------------
5% ($) 10%($)
- ------------------- ---------- ------------ ---------------------------------- ----------- ---- ---------------- ---------- ----------- -----------
------------ ------------
Dan M. Palmer 1,125,000 37.5% $20.251,562,500 (1) 27.1% $18.13 2/26/2008 14,327,006 36,307,44517/2010 17,810,492 45,135,285
281,250 (2) 4.9% $28.44 9/09/2010 5,031,149 12,749,920
Edward A. Labry III 1,125,000 37.5% $20.251,562,500 (1) 27.1% $18.13 2/26/2008 14,327,006 36,307,44517/2010 17,810,492 45,135,285
281,250 (2) 4.9% $28.44 9/09/2010 5,031,149 12,749,920
Edward T.Haslam 30,000 0.5% $18.13 2/17/2010 341,961 866,597
Vickie Brown 25,000 0.4% $18.13 2/17/2010 284,968 722,165
William E. Lucado 20,000 0.3% $18.13 2/17/2010 227,974 577,732
(1) Includes options for 562,500 shares which vest over a period of four years
and options for 1,000,000 shares which vest on the earlier of February 17,
2005 or a change in control of Concord. (See "Change in Control
Arrangements" below for further details.)
(2) These options vest on February 26, 2003. Table II Options ExercisedAggregated Option/SAR
Exercises in 19982000 and 1998 Year End2000 Year-End Option Values
Value of
Number of Unexercised
Shares Acquired Value ($) Unexercised In-the-Money
Name on Exercise (#) Realized(1) Options(#) Options($)(2)
- ------------------- --------------- ----------- ----------- -------------
Dan M. Palmer -0- -0- 1,385,623(E) 48,153,680(E)
2,286,563(U) 57,246,231(U)
Edward A. Labry III -0- -0- 932,813(E) 30,489,419(E)
2,273,906(U) 56,784,892(U) Number of Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Fiscal Year End (#) Fiscal Year End ($)
Shares Acquired on Value ($) Exercisable/ Exercisable/
Name Exercise (#) Realized(1) Unexercisable Unexercisable (2)
- -------------------------- --------------------- ---------------- ----------------------- ---------------------
Dan M. Palmer 400,000 16,216,426 4,523,277(E) 155,076,578(E)
4,116,249(U) 103,105,404(U)
Edward A. Labry III 400,000 16,084,756 3,825,077(E) 126,129,981(E)
4,116,249(U) 103,105,404(U)
Edward T. Haslam -0- -0- 46,250(E) 1,037,733(E)
168,750(U) 3,887,574(U)
Vickie Brown 159,324 4,793,381 19,373(E) 613,408(E)
111,250(U) 2,791,954(U)
William E. Lucado 42,981 1,037,684 55,937(E) 1,669,768(E)
86,562(U) 2,218,792(U)
(1) Values are calculated by subtracting the exercise price from the fair
market value of the stock as of the exercise date.
(2) Values are calculated by subtracting the exercise price from the fair
market value of the stock on December 31, 1998.2000.
(E) Exercisable at December 31, 1998.2000.
(U) Unexercisable at December 31, 1998.
Committees; Attendance2000.
Change in Control Arrangements
The Incentive Agreements between Concord and each of Mr. Palmer and Mr.
Labry contain a change in control provision. Under the agreements, a change in
control occurs if any person becomes the beneficial owner of 50% or more of the
combined voting power of Concord's then outstanding voting securities, if
Concord's stockholders approve a plan to liquidate Concord, or if Concord sells
or disposes of all or substantially all of its assets. Upon a change in control,
the agreements provide that the full bonus potential under the agreements will
be paid for the year in which the change in control occurs, and all stock
options granted before the change in control become fully and immediately
exercisable. In addition, Mr. Palmer's and Mr. Labry's obligations under the
non-compete, non-solicitation and confidentiality provisions of the agreements
are shortened to a period of six months following a change in control.
Concord's 1993 Incentive Stock Option Plan also contains a change in
control provision. Each option granted under the plan vests on the date on which
any person or entity becomes the beneficial owner of 20% or more of Concord's
outstanding shares entitled to vote in the election of directors.
COMMITTEES; ATTENDANCE
The Board of Directors held four regular meetings during the fiscal
year ended December 31, 1998.2000. Each of the directors attended at least 75% of the
total number of meetings of the Board.
The Audit Committee, consistingBoard and the total number of Messrs. Anderson, Buchignani, Harter,
Mooney, Whittington and Kiphart met twice duringmeetings held by
all board committees on which he or she served. During the fiscal year ended
December 31, 1997. The2000, the Audit Committee reviewedheld three meetings, and the results of the audit conducted by
outside auditors and management's response to the management letter prepared by
outside auditors. The AuditCompensation
Committee also monitored the Company's compliance
with the Year 2000 computer issues.held two meetings. The Board of Directors has no Nominating Committee.
Compensation Committee Interlocks and Insider Participation
Mr. Altenbern, Mr. Mooney and Mr. Whittington are members of the
Compensation Committee, none of whom is or was an executive officer or employee
of Concord or had any relationship with Concord requiring disclosure under
securities regulations. No Concord officer served on the compensation committee
of the board of any entity with an executive officer serving on Concord's Board
of Directors.
Compensation Committee Report on Executive Compensation
Committee Composition
The Board of Directors has a Compensation Committee of Messrs. Anderson,
Mooney and Whittington (the "Committee"), who are not employees of the Company
or any of its affiliates and have never been employees of the Company or any of
its affiliates.
General Policy
It is the policy of the Compensation Committee to establish base
salaries, award bonuses and grant stock options to executive officers in such
amounts as will assure the continued availability to the CompanyConcord of the services of
the executives and will recognize the contributions made by the executives to
the success of the
Company'sConcord's business and the growth over time in the market
capitalization of the
Company.Concord. To achieve these goals, the Committee establishes
base salaries at levels which it believes to be below the mid-point for
comparable executives in companies of comparable size and scope. The Committee
then awards cash bonuses reflecting individual performance during the year for
which the awards are made. For executives other than the Chief Executive Officer
and President, the Committee receives bonus award recommendations from the Chief
Executive Officer. The Committee grants stock options to senior and middle
management executives of the CompanyConcord and its affiliatessubsidiaries at levels whichthat it believes
to be higher than average for comparable companies in order to give the
executives significant incentive to improve theConcord's revenue of the Company and its market
capitalization.
Section 162(m) of the Internal Revenue Code limits the tax deduction to
$1 million for compensation paid to certain executives of public companies. The
Committee has considered these requirements and believes that the Company'sConcord's 1993
Incentive Stock Option Plan, meetsas amended, and bonus arrangements for senior
officers meet the requirement that itthey be "performance based" and, therefore,
exempt from the limitations on deductibility. Historically, the
combined salaries and bonuses of the Company's executive officers have been well
under the $1 million limit. The Committee's present intention
is to comply with Section 162(m) unless the Committee feels that required changescompliance in a
particular instance would not be in the best interest of the CompanyConcord or its
stockholders.
Specific Arrangements for CEO and President
During 1998, Concord entered into five-year incentive agreements with
its Chief Executive Officer and with its President. Each incentive agreement
provides for base salary of $550,000 with annual reviews, for a bonus
opportunity equal to 50% of base salary with growth in earnings per share being
a significant factor in awarding the bonuses and for option grants of 375,000562,500
shares per year. In addition, each incentive agreement providedprovides for a one-time
option grant for 750,000of 1,125,000 shares with a "reload" feature:feature. Under this reload
feature, after the stock market price reaches $32reached $21.33 per share for a stated
period, a new option for 375,000562,500 shares will bewas granted at $32;$21.33, and after the
stock market price reaches $42.67,reached $28.44, a new option for 187,500281,250 shares will bewas granted
at $42.67. The first of these
milestones has already been reached.$28.44.
The Chief Executive OfficerOfficer's and the President's base salary, cash
bonus and option grants were established by the Committee based upon its
members' own experience in their companies and in other companies which they
serve as directors or advisors. In addition, the Committee received advice from
a compensation consulting firm in setting compensation levels for executive
officers. In setting the 2001 base salary bonus and option grants for 1998bonus for the Chief Executive
Officer and President, the Committee considered the 39%Concord's historic rate of
increase in revenues and the 50%rate of increase in diluted earnings per share in 1998 over
1997.share.
Additionally, the Committee noted that for the preceding three years the
Company's revenue growth averaged approximately 44% per year, that itsConcord's
market capitalization growth averaged approximately 71%77% per year and that these
individuals were responsible for past growth and uniquely situated to contribute
to theConcord's future growth of the Company.
Davidgrowth.
Douglas C. AndersonAltenbern
Jerry D. Mooney
Paul L. Whittington
Description of Audit Committee
The Audit Committee, consisting of Messrs. Mooney (Chairman),
Altenbern, Buchignani, Harter, Kiphart and Whittington, oversees Concord's
financial statements provided to its stockholders and Concord's systems of
internal control. The Committee recommends to the Board of Directors both the
selection of Concord's independent accountants and the fees and other
compensation to be paid to them. In consultation with the selected independent
accountants and Concord's internal auditors, the Audit Committee reviews the
adequacy of Concord's financial reporting processes.
Five Year Cumulative Stockholder ReturnAudit Committee Report
During the year ended December 31, 2000, the Audit Committee reviewed
and discussed the audited financial statements with management and the
independent auditors, Ernst & Young, LLP. The Committee discussed with the
independent auditors the matters required to be discussed by the Statement of
Auditing Standards No. 61, Communications with Audit Committees, as amended, by
the Auditing Standards Board of the American Institute of Certified Public
Accountants and reviewed the results of the independent auditors' examination of
the financial statements.
The Committee also reviewed the written disclosures and the letter from
the independent auditors required by Standard No. 1, Independence Discussions
with Audit Committees, as amended, discussed with the auditors the auditors'
independence, and satisfied itself that the non-audit services provided by
Concord's auditors are compatible with maintaining the auditors' independence.
Based on its reviews and discussions, the Audit Committee recommends to
the Board of Directors that the financial statements be included or incorporated
by reference in the Annual Report on Form 10-K for the year ended December 31,
2000 for filing with the Securities and Exchange Commission.
The Committee is governed by a charter which has been adopted by the
Board of Directors and is included as Appendix A. The Board of Directors has
determined that the members of the Audit Committee are independent as defined in
the National Association of Securities Dealers' listing standards.
This report shall not be deemed to be incorporated by reference into
any filings with the Securities and Exchange Commission under the Securities Act
of 1933 or the Securities Exchange Act of 1934, except to the extent that
Concord specifically incorporates it by reference.
Jerry D. Mooney
Douglas Altenbern
J. Richard Buchignani
Richard M. Harter
Richard P. Kiphart
Paul L. Whittington
FIVE YEAR CUMULATIVE STOCKHOLDER RETURN
Below is a performance tablegraph, which compares the Company'sConcord's cumulative total
stockholder return during the previous five years with the NASDAQ stock market
and the NASDAQ financial stocks (the Company's(Concord's peer group).
NASDAQ NASDAQ
Date Concord EFS, Inc. Stock Market Financial Stocks
- ----------------- ----------------- ---------------------------- ----------------
12/31/9395 100.00 100.00 100.00
12/31/94 169.49 97.75 100.24
12/31/95 429.66 138.26 145.98
12/31/96 646.40 170.01 187.13150.44 123.04 128.36
12/31/97 569.17 208.58 285.87132.47 150.69 196.31
12/31/98 1,454.57 293.21 276.58
AMEND338.49 212.51 190.73
12/31/99 308.53 394.92 189.46
12/31/00 514.47 237.62 207.03
AMENDMENT TO CONCORD'S CERTIFICATE OF INCORPORATION TO INCREASE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Company'sConcord's authorized capital stock currently consists of 200,000,000500,000,000
shares of Common Stock, $0.33 1/3 par value. The Board of Directors finds it
advisable that the Company'sConcord's Certificate of Incorporation be amended to increase the
number of authorized shares of Common Stock to 500,000,000750,000,000 shares, $0.33 1/3 par
value.
The holders of Common Stock are not entitled to preemptive rights to
purchase Concord's Common Stock of the Company.Stock.
The authorized shares of Common Stock can be issued without stockholder
approval upon such terms and in consideration of such amounts as the Board of
Directors determines is in theConcord's best interest of the Company.interest. The Board in the past has
issued stock to effect stock splits, to fulfill the exercise of stock options
and to make acquisitions. It has no current plans to issue any of the
authorizedadditional shares
of its Common Stock.Stock, although Concord currently expects that it will engage in a
disciplined process in 2001 to eliminate the stock overhang resulting from its
acquisition of Star Systems, Inc. (in which Concord issued 24.75 million shares
of unregistered Common Stock).
Dilutive Effect of Issuance of Additional Shares
The authorization of additional shares of Common Stock pursuant to this
proposal will have no dilutive effect upon the proportionate voting power of
theConcord's present stockholders of the Company.stockholders. However, issuance of additional shares could
have a substantial dilutive effect on present stockholders.
Anti-takeover Effect
The issuance of additional shares of Common Stock by the CompanyConcord may also
make it more difficult to obtain stockholder approval of various actions, such
as a merger or other corporate combination. The proposed increase in the number
of authorized shares of Common Stock could enable the Board of Directors to
render more difficult an attempt by another person or entity to obtain control
of the Company, thoughConcord, although the Board of Directors has no present intention of issuing
additional shares for such purpose and has no present knowledge of any takeover
efforts by any person or entity.
Recommended Vote
An affirmative vote of a majority of the Company'sConcord's outstanding Common Stock
entitled to vote is necessary to adopt the amendment to the Company'sConcord's Certificate of
Incorporation to increase the number of authorized shares of Common Stock to
500,000,000750,000,000 shares. Abstentions and broker non-votes will not be counted toward
the vote and, thus, will have the effect of a vote against the proposed
amendment. The Board of Directors recommends that you vote "FOR" the proposal.
AMENDMENT TO THE 1993 INCENTIVE STOCK OPTION PLAN
Concord's Board has adopted, subject to stockholder approval, an amendment
to Concord's 1993 Incentive Stock Option Plan (the "Plan") to permit optionees
to transfer options to specified family members or trusts or other entities
exclusively for the benefit of family members and to increase the options to be
granted annually to non-employee directors from 4,500 shares to 6,000 shares or,
if the director shall have waived his/her basic cash director fee for the
ensuing year, 7,250 shares. The restated Plan is attached as Exhibit I.
Purpose of the Plan
The purpose of the Plan is to encourage ownership of Concord Common Stock
by employees and directors and to provide additional incentive for them to
promote the success of the Concord's business.
Administration of the Plan
The Plan is administered by the Committee. The Committee consists
exclusively of non-employee directors. Subject to the provisions of the Plan,
the Committee has discretion to determine which employees shall be granted
options, the time of grant, the number of shares subject to each option, the
exercise price of each option and all other relevant terms of the grants. The
Committee also has broad discretion to construe and interpret the Plan and to
adopt rules and regulations thereunder.
Eligibility to Participate in Plan; Annual Grant
Awards may be granted under the Plan to employees of Concord and its
subsidiaries. Non-employee directors now automatically receive each year options
to purchase 4,500 shares of Concord Common Stock. As amended, the annual grant
for each director will be 6,000 shares of Concord Common Stock or, if a director
shall have waived his/her right to receive the $8,000 cash director fee for the
ensuing year, 7,250 shares of Concord Common Stock.
Shares Subject to the Plan
The shares issued under the Plan are shares of Concord Common Stock, which
may be authorized but unissued shares or shares held by Concord in its treasury.
Up to 25,000,000 shares may be issued under the Plan, subject to adjustment for
stock dividends, stock splits or other changes in Concord's capitalization. In
the event that any option expires or terminates for any reason without being
exercised in full, the shares not purchased will be available for subsequent
grants under the Plan.
Stock Options Granted Under the Plan
Options will normally be incentive options within the meaning of Section
422 of the Internal Revenue Code. During any calendar year, the aggregate fair
market value of incentive stock options (determined as of the dates of grant)
held by an employee which first become exercisable in that year may not exceed
$100,000. To the extent that any option exceeds this limit, it will be a
nonstatutory option. No person may be granted in any year options to purchase
more than 1,500,000 shares. No stock option may be exercised more than 10 years
after it is granted or, for any option granted to a "Major Shareholder" (as
defined below), more than five years after the date of grant. The exercise price
under each option shall be not less than 100% of the fair market value of
Concord Common Stock on the date of grant, except for options granted to a Major
Shareholder, the exercise price for which shall be not less than 110% of fair
market value. "Major Shareholder" means a person beneficially owning stock with
voting power over 10% of the combined voting power of all classes of stock of
the Company.
Payment for shares of Concord Common Stock purchased upon exercise of any
option must be made in full by (a) cash or check, (b) by delivery of shares of
Concord Common Stock with a current fair market value equal to the option
purchase price, or (c) by irrevocable instructions to a brokerage firm to sell a
sufficient number of shares to generate the option price and minimum applicable
withholding taxes. Options have historically not been transferable except by
will or the laws of descent and distribution. The Plan as amended permits
optionees to transfer options to family members and trusts and other entities
exclusively for family members. Family members include children, grandchildren,
parents, grandparents spouses and siblings, including in each instance adoptive
relationships, step relationships and in-law relationships. If a "change in
control" (as defined in the Plan) occurs, all options will become fully
exercisable. If an optionee ceases to be an employee of Concord or any
subsidiary other than by reason of death, options other than director options
may, to the extent exercisable at the time of termination of employment, be
exercised any time within three months after the date of termination, unless
terminated earlier by their terms. If a director ceases to be associated with
Concord, director options may, to the extent exercisable at the time of
termination, be exercised any time within five years after the date of
termination, unless terminated earlier by their terms. In the case of death of
the employee, options may, to the extent exercisable at the date of death, be
exercised any time within one year after the date of death, unless terminated
earlier by their terms.
Amendments to the Plan
The Committee may terminate or amend the Plan at any time, provided that no
such action shall adversely affect or impair the rights of any optionee under
any outstanding option without such optionee's consent. The Committee may not,
without the approval of the holders of Concord Common Stock, amend the Plan in
any manner that: (i) increases the maximum number of shares that may be issued
under the Plan (except for adjustments by reason of stock splits and like
changes), (ii) changes the class of persons eligible to participate in the Plan
or (iii) extends the period during which options may be granted or exercised.
Federal Income Tax Consequences of Grants and Exercises Under the Plan
Neither the granting nor the exercise of an incentive stock option will be
a taxable event for the optionee or for Concord. If an optionee holds shares of
stock purchased pursuant to the exercise of an incentive option for at least two
years after the date the option was granted and at least one year after the
exercise of the option, the subsequent sale of the shares will give rise to a
long-term capital gain or loss to the optionee, and no deduction will be
available to Concord. If the optionee sells the shares within two years after
the date an incentive option is granted or within one year after the exercise of
an option, the optionee will recognize ordinary income in an amount equal to the
difference between the fair market value at the exercise date and the option
exercise price, and Concord will be entitled to an equivalent deduction. The
granting of a nonstatutory option is not a taxable event. If an optionee
exercises a nonstatutory option, the optionee will, on exercise, recognize
ordinary income equal to the amount by which the fair market value of the shares
purchased on the exercise date exceeds the exercise price, and a sale of the
shares so acquired will give rise to a capital gain equal to the difference
between the fair market value of the shares on the sale and exercise dates. Some
optionees who exercise incentive options may also be subject to a minimum tax in
the year of exercise on the difference between the fair market value at the
exercise date and the exercise price. Where already-owned shares are used to
exercise a stock option, special rules will apply in determining the tax basis
of the shares received upon exercise.
Payments of Withholding Taxes
Concord may require persons exercising an option to report to Concord any
disposition of shares so purchased prior to the expiration of certain holding
periods. To the extent that such disposition imposes upon Concord any
withholding tax requirements, or any withholding is required to secure for
Concord an otherwise available tax deduction, Concord may require that such
optionee pay such amounts to Concord.
Federal Gift and Estate Tax Consequences of Option Transfers
The transfer of an option to a family member is a gift and will generate a
federal gift tax except to the extent excluded by the annual exclusion of
$10,000 per donor to any donee or the lifetime exclusion per donor of $650,000
in 1999, increasing gradually to $1 million in 2006. The value of the option
would be calculated at the time of gift using an analysis such as the
Black-Scholes analysis. The transferred option will lapse or terminate at the
same time in the hands of the donee as it would have lapsed or terminated if it
had not been transferred.
Expiration of the Plan
No awards may be granted under the Plan after February 16, 2003.
Recommendation of the Board
An affirmative vote of a majority of the shares voting on the matter is
necessary to approve the amendment. Concord's Board of Directors has unanimously
approved the proposed amendments to the Plan to permit transferability of
options to specified family members and trusts and other entities for the
exclusive benefit of family members and to increase the number of options
granted annually to directors and recommends that Concord's stockholders vote
"FOR" the proposed amendment.
OTHER MATTERS
The Board of Directors knows of no matters which are likely to be
presented for action at the Annual Meeting other than the proposals specifically
set forth in the Notice and referred to herein. If any other matter properly
comes before the Annual Meeting for action, it is intended that the persons
named in the accompanying proxy and acting thereunderhereunder will vote or refrain from
voting in accordance with their best judgment pursuant to the discretionary
authority conferred by the proxy.
CERTAIN TRANSACTIONS
In connection with the acquisition of Star Systems, Inc., Concord
entered into two agreements with Mr. Congemi, who currently serves as a director
of Concord and President of Star Systems, Inc. Under one of these agreements,
Mr. Congemi agreed to remain at Star Systems, Inc. through the closing of the
transaction with Concord and agreed to various other provisions, including
confidentiality and non-competition provisions, and Concord agreed to grant Mr.
Congemi an option to purchase 200,000 shares of Concord Common Stock. The
options granted were pursuant to the terms of Concord's 1993 Incentive Stock
Option Plan, as amended, have a 10-year term, have an exercise price equal to
the fair market value of Concord's stock on February 1, 2001 and vest with
respect to 25% of the shares subject to the option each year as long as Mr.
Congemi remains employed by Concord or any of its subsidiaries.
Under the second agreement with Mr. Congemi, his Salary Continuation
Agreement with Star Systems, Inc. was terminated and certain benefits under that
agreement were credited to Mr. Congemi and will become payable pursuant to the
terms of the Star Non-Qualified Deferred Compensation Plan.
Bingham Dana LLP serves as legal counsel to the Company.Concord. Richard M. Harter,
Secretary and Director of the Company,Concord, is a partner of that firm. Wyatt, Tarrant and
Combs, LLP also serves as legal counsel to the Company.Concord. J. Richard Buchignani,
Director of the Company,Concord, is a partner of that firm.
In connection with Concord's acquisition of Star Systems, Inc., William
Blair & Company, L.L.C. served as financial advisors to Concord and issued a
fairness opinion to Concord's Board of Directors. As of December 31, 2000,
certain principals (including Richard P. Kiphart, a director of Concord) of
William Blair & Company, L.L.C. beneficially owned an aggregate of 5,858,185
shares of Concord's Common Stock.
INFORMATION CONCERNING AUDITORS
Concord has engaged Ernst & Young LLP as independent auditors to audit
its financial statements for the year ended December 31, 2000. Information
regarding fees for services rendered by Ernst & Young LLP is provided below.
Representatives of Ernst & Young LLP are expected to be at the Annual
Meeting and will have an opportunity to make a statement if they desire to do
so. Such representatives are also expected to be available to respond to
appropriate questions.
STOCKHOLDERS
Audit Fees
The aggregate fees billed for professional services rendered for the
audit of Concord's financial statements for the year ended December 31, 2000 and
the review of the financial statements included in Concord's Forms 10-Q for the
year then ended were $343,000.
All Other Fees
All other fees billed for services rendered by Ernst & Young LLP were
$1,292,000, including audit related services of $243,000 and non-audit services
of $1,049,000. Audit related services generally include fees for business
combinations, accounting consultations, Securities and Exchange Commission
registration statements and internal control reviews.
STOCKHOLDERS' PROPOSALS
Stockholder proposals to be submitted for vote at the 20002002 Annual
Meeting must be delivered to the CompanyConcord on or before December 10, 1999.7, 2001.
EXPENSES OF SOLICITATION
Solicitations of proxies by mail is expected to commence on April 9, 1999,6,
2001, and the cost thereof will be borne by the Company.Concord. Copies of solicitation
materials will also be furnished to brokerage firms, fiduciaries and custodians
to forward to their principals, and the CompanyConcord will reimburse them for their
reasonable expenses.
By Order of the Board of Directors
Richard M. Harter
Secretary
ANNUAL REPORT ON FORM 10-K
The CompanyConcord will deliver without charge to each of its stockholders, upon
their written request, a copy of the Company'sits most recent annual report on Form 10-K and
any information contained in any subsequent reports filed with Thethe Securities
and Exchange Commission. RequestRequests for such information should be directed to
Investor Relations, Concord EFS, Inc., 2525 Horizon Lake Drive, Suite 120,
Memphis, Tennessee 38133.
Exhibit IAppendix A
CONCORD EFS, INC.
1993 INCENTIVE STOCK OPTION PLAN
(Second 1999 Restatement)
1. Definitions. As used in this 1993 Incentive Stock Option PlanInc.
AUDIT COMMITTEE CHARTER
Organization
This charter governs the operations of Concord EFS,
Inc., the following termsaudit committee. The committee shall
review and reassess the charter at least annually and obtain the approval of the
board of directors. The committee shall be appointed by the board of directors
and shall comprise at least three directors, each of whom are independent of
management and the Company. Members of the committee shall be considered
independent if they have no relationship that may interfere with the exercise of
their independence from management and the Company. All committee members shall
be financially literate, and at least one member shall have accounting or
related financial management expertise.
Statement of Policy
The audit committee shall provide assistance to the following meanings:
1.1 Awarded Options means all options other than Formula Options.
1.2 Changeboard of directors in
Corporate Control meansfulfilling their oversight responsibility to the date on which any individual,
corporation, partnership or other person or entity (together with its
"Affiliates"shareholders, potential
shareholders, the investment community, and "Associates," as defined in Rule 12b-2 underothers relating to the Securities
Exchange ActCompany's
financial statements and the financial reporting process, the systems of
1934) "beneficially owns" (as defined in Rule 13d- 3 underinternal accounting and financial controls, the Securities Exchange Act of 1934) ininternal audit function, the
aggregate 20% or moreannual independent audit of the outstanding
shares of capital stockCompany's financial statements, and the legal
compliance and ethics programs as established by management and the board. In so
doing, it is the responsibility of the Company entitledcommittee to vote generally inmaintain free and open
communication between the election of directorscommittee, independent auditors, the internal auditors
and management of the Company. 1.3 Code meansIn discharging its oversight role, the Internal Revenue Code of 1986, as amended.
1.4 Committee means the Compensation Committee of the Company's Board of
Directors, consisting exclusively of directors who at the relevant time are
"outside directors" within the meaning of ss.162(m) of the Code.
1.5 Company means Concord EFS, Inc., a Delaware corporation.
1.6 Fair Market Value means the value of a share of Stock of the Company oncommittee
is empowered to investigate any date as determined by the Board.
1.7 Family Member means a child, stepchild, grandchild, parent, grandparent,
spouse, sibling, child-in-law, parent-in-law, or sibling-in-law, including
adoptive relationships.
1.8 Formula Grant means a grant of options pursuantmatter brought to Section 11.
1.9 Formula Grant Date shall have the meaning specified in Section 11.
1.10 Formula Options means options granted pursuantits attention with full access
to Section 11.
1.11 Grant Date means the date on which an Option is granted, as specified in
Section 7.
1.12 Major Shareholder means a person who, within the meaning of Section
422(b)(6) of the Code, is deemed to own stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company (or of its
parent or subsidiary corporations).
1.13 Option means an option to purchase shares of the Stock granted under the
Plan.
1.14 Option Agreement means an agreement between the Companybooks, records, facilities, and an Optionee,
setting forth the terms and conditions of an Option.
1.15 Option Period means the period from the date of the grant of an Option to
the date when the Option expires as stated in the terms of the Option Agreement.
1.16 Option Price means the price paid by an Optionee for an Option under this
Plan.
1.17 Option Share means any share of Stock of the Company transferred to an
Optionee upon exercise of an Option pursuant to this Plan.
1.18 Optionee means a person eligible to receive an Option, as provided in
Section 6, to whom an Option shall have been granted under the Plan.
1.19 Plan means this 1993 Incentive Stock Option Plan of the Company.
1.20 Related Corporation means a Parent Corporation or a Subsidiary Corporation,
each as defined in Section 424 of the Code.
1.21 Stock means common stock, $0.33 1/3 par value, of the Company.
1.22 Vested Shares, as of any date, means those shares of stock available at
that date for purchase by exercise of a Formula Option pursuant to Section 11.
2. Purpose. This 1993 Incentive Stock Option Plan is intended to encourage
ownership of the Stock by key employees and directorspersonnel of the Company and the power to
retain outside counsel, or other experts for this purpose.
Responsibilities and Processes
The primary responsibility of the audit committee is to oversee the Company's
financial reporting process on behalf of the board and report the results of
their activities to the board. Management is responsible for preparing the
Company's financial statements, and the independent auditors are responsible for
auditing those financial statements. The committee in carrying out its
Related Corporationsresponsibilities believes its policies and procedures should remain flexible, in
order to provide additional incentivebest react to changing conditions and circumstances. The committee
should take the appropriate actions to set the overall corporate "tone" for
quality financial reporting, sound business risk practices, and ethical
behavior.
The following shall be the principal recurring processes of the audit committee
in carrying out its oversight responsibilities. The processes are set forth as a
guide with the understanding that the committee may supplement them as
appropriate. The committee shall have a clear understanding with management and
the independent auditors that the independent auditors are ultimately
accountable to promote the successboard and the audit committee, as representatives of the
Company's business.shareholders. The Plan is intendedcommittee shall have the ultimate authority and
responsibility to evaluate and, where appropriate, recommend the replacement of
the independent auditors. The committee shall discuss with the auditors their
independence from management and the Company including the matters in the
written disclosures required by the Independence Standards Board and shall
consider the compatibility of nonaudit services with the auditors' independence.
Annually, the committee shall review and recommend to the board the selection of
the Company's independent auditors, subject to shareholders' approval.
The committee shall discuss with the internal auditors and the independent
auditors the overall scope and plans for their respective audits including the
adequacy of staffing and compensation. Also, the committee shall discuss with
management, the internal auditors, and the independent auditors the adequacy and
effectiveness of the accounting and financial controls, including the Company's
system to monitor and manage business risk, and legal and ethical compliance
programs. Further, the committee shall meet separately with the internal
auditors and the independent auditors, with and without management present, to
discuss the results of their examinations.
The committee shall review the interim financial statements with management and
the independent auditors prior to the filing of the Company's Quarterly Report
on Form 10-Q. Also, the committee shall discuss the results of the quarterly
review and any other matters required to be an incentive stock
option plan withincommunicated to the meaning of Section 422committee by the
independent auditors under generally accepted auditing standards. The chair of
the Code.
3. Term ofcommittee may represent the Plan. Options under the Plan may be granted not later than
February 16, 2003.
4. Stock Subject to the Plan. At no time shall the number of shares of the Stock
then outstanding which are attributable to the exercise of Options granted under
the Plan, plus the number of shares then issuable upon exercise of outstanding
options granted under the Plan exceed 25,000,000 shares, subject, however, to
the provisions of Section 16 of the Plan. No Optionee may be granted in any year
Options to purchase more than 1,500,000 shares of Stock, subject to adjustment
pursuant to Section 16. Shares to be issued upon the exercise of Options granted
under the Plan may be either authorized but unissued shares or shares held by
the Company in its treasury. If any Option expires or terminates for any reason
without having been exercised in full, the shares not purchased thereunder shall
again be available for Options thereafter to be granted.
5. Administration. The Plan shall be administered by the Committee. Subject to
the provisions of the Plan (including, without limitation, the provisions of
Sections 11 and 20), the Committee shall have complete authority, in its
discretion, to make the following determinations with respect to each Awarded
Option to be granted by the Company: (a) the key employee to receive the Awarded
Option; (b) the time of granting the Awarded Option; (c) the number of shares
subject thereto; (d) the Option Price; (e) the Option period; and (f) the
transferability of Options other than Incentive Options under Code Section 422.
. In making such determinations, the Committee may take into account the nature
of the services rendered by the respective employees, their present and
potential contributions to the success of the Company and its subsidiaries, and
such other factors as the Committee in its discretion shall deem relevant.
Subject to the provisions of the Plan, the Committee shall also have complete
authority to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it, to determine the terms and provisions of the
respective Option Agreements (which need not be identical) other than Option
Agreements for Formula Options, and to make all other determinations necessary
or advisableentire committee for the administration of the Plan. The Committee's determinations
on the matters referred to in this Section 5 shall be conclusive.
6. Eligibility. An Awarded Option may be granted only to a key employee of one
or more of the Company and its subsidiaries. A director of one or more of the
Company and its subsidiaries who is not also an employee of one or more of the
Company and its subsidiaries shall not be eligible to receive Awarded Options
but shall receive Formula Options pursuant to Section 11. A Major Shareholder
shall be eligible to receive an Awarded Option only if the Option Price is at
least 110% of the Fair Market Value on the Grant Date and only if the Awarded
Option expires, to the extent not theretofore exercised, on the fifth
anniversary of the Grant Date.
7. Time of Granting Awarded Options. The granting of an Awarded Option shall
take place at the time specified by the Committee. Only if expressly so provided
by the Committee, shall the Grant Date be the date on which an Option Agreement
shall have been duly executed and delivered by the Company and the Optionee.
8. Awarded Option Price. The Option Price under each Awarded Option shall be not
less than 100% of the Fair Market Value of the Stock on the Grant Date except
that the Option Price under an Awarded Option granted to a Major Shareholder
must be not less than 110% of the Fair Market Value.
9. Awarded Option Period. No Awarded Option may be exercised later than the
tenth anniversary of the Grant Date, or for an Awarded Option granted to a Major
Shareholder, the fifth anniversary of the Grant Date. An Awarded Option may
become exercisable in such installments, cumulative or non-cumulative, as the
Committee may determine.
10. Maximum Size of Awarded Option as Incentive Option. To the extent that the
aggregate Fair Market Value of Stock for which an Awarded Option becomes
exercisable by an Optionee for the first time in any calendar year exceeds
$100,000, the Awarded Option shall be treated as a nonstatutory option, and not
an incentive option under Section 422 of the Code. For purposes of this
Section
10, all Awarded Options grantedreview.
The committee shall review with management and the independent auditors the
financial statements to an Optionee by the Company shall be consideredincluded in the order in which they were granted, andCompany's Annual Report on Form 10-K
(or the Fair Market Value
shall be determined as of the Grant Dates.
1. Formula Grants of Options to Certain Directors.
(a) Directors Elected or Re-Elected at Annual Stockholders Meeting, Special
Meeting in Lieu of Annual Meeting or at Other Times. Each individual who is not
an employee of the Company or any subsidiary of the Company, and who is elected
or re-elected to the Board of Directors during the term of the Plan (whether
elected at an annual or special stockholders' meeting or by action of the Board
of Directors) shall be granted, on the date of such meeting or other appointment
(as used in or with reference to this Section 11(a), a "Formula Grant Date"), a
nonstatutory Stock Option to purchase 6,000 shares of Stock, or, if a Director
shall have waived his/her basic cash director fee for the year then beginning,
7,250 shares of stock, each subject to adjustment pursuant to Section 16.
(b) Terms of Formula Options. Each Formula Option granted to an Optionee under
this Section 18 shall (i) have an exercise price equal to 100% of the Fair
Market Value of the Stock on the applicable Formula Grant Date, and (ii) become
exercisable for Vested Shares on the second anniversary of the Formula Grant
Date if the Optionee remains a director of the Company on that date. No Formula
Option granted pursuant to this Section 11 is intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code. The
Formula Grants shall be evidenced by Option Agreements. The Option Agreements
shall contain provisions consistent with this Section 11 and shall contain
identical terms and conditions, except as otherwise required by this Section 11.
(c) Option Period. The Option Period for any Formula Option granted pursuant to
this Section 11 shall be ten years from the date of grant.
12. Exercise of Option. An Option may be exercised only by giving written
notice, in the manner provided in Section 21 hereof, specifying the number of
shares as to which the Option is being exercised, accompanied by (a) full
payment for such shares in the form of (X) a check or bank draft payable to the
order of the Company, (Y) certificates representing shares of the Stock with a
current Fair Market Value equal to the Option Price of the shares to be
purchased, or (Z) irrevocable instructions to a brokerage firm to sell a
sufficient number of the Option Shares to generate the full exercise price plus
all applicable withholding taxes and to pay over to the Company such proceeds of
sale, and (b) such additional amount in one or more of the foregoing forms as
the Company may reasonably require to permit the Company to comply with
applicable withholding tax requirements. Receipt by the Company of such notice
and payment shall constitute the exercise of the Option or a part thereof.
Within 20 days thereafter, the Company shall deliver or cause to be delivered to
the Optionee a certificate or certificates for the number of shares then being
purchased by him. Such shares shall be fully paid and nonassessable. If any law
or applicable regulation of the Securities and Exchange Commission or other
public regulatory authority shall require the Company or the Optionee to
register or qualify under the Securities Act of 1933, as amended, any similar
federal statute then in force or any state law regulating the sale of
securities, any Option Shares with respect to which notice of intent to exercise
shall have been delivered to the Company or to take any other action in
connection with such shares, the delivery of the certificate or certificates for
such shares shall be postponed until completion of the necessary action, which
the Company shall take in good faith and without delay. All such action shall be
taken by the Company at its own expense. Upon each exercise of the Option, the
Optionee may be required to give a representation in form satisfactory to
counsel for the Company that he or she is acquiring shares purchased pursuant to
such exercise for investment and not with a view to distribution and that he or
she will make no transfers of the shares in violation of the Securities Act of
1933, as amended, and the regulations of the Securities and Exchange Commission
thereunder. The Company may, at its discretion, make a notation on any
certificate delivered upon exercise of the Option to the effect that the shares
represented by the certificate may not be transferred except after receipt by
the Company of an opinion of counsel satisfactory to it to the effect that such
transfer will not violate such Act and such regulations, and may issue "stop
transfer" instructions to its transfer agent, if any, and make a "stop transfer"
notation on its books, as appropriate. Notwithstanding the foregoing, the
Company may release the Optionee from the investment representation if the
shares of the Stock subject to the Option have been registered with the
Securities and Exchange Commission under such Act.
13. Notice of Disposition of Stock Prior to Expiration of Specified Holding
Period. The Company may require that the person exercising an Option give a
written representation to the Company, satisfactory in form and substance to its
counsel and upon which the Company may reasonably rely, that he or she will report to the Company any disposition of shares purchased upon exerciseshareholders if distributed prior to the expirationfiling of Form
10-K), including their judgment about the quality, not just acceptability, of
accounting principles, the reasonableness of significant judgments, and the
clarity of the holding periods specified by Section 422(a)(1)disclosures in the financial statements. Also, the committee
shall discuss the results of the Code. Ifannual audit and any other matters required to
be communicated to the extent that the disposition imposes upon the Company
federal, state, local or other withholding tax requirements, or any such
withholding is required to secure for the Company an otherwise available tax
deduction, the Company shall have the right to require that the person making
the disposition remit to the Company an amount sufficient to satisfy those
requirements.
14. Transferability of Options. Incentive Options under Code Section 422 shall
not be transferable, otherwise than by will or the laws of descent and
distribution, and may be exercised during the life of the Optionee onlycommittee by the Optionee. Any Other Option, including a Formula Option, may be transferred by
the Optionee to a Family Member or a trust for one or more Family Members or an
entity exclusively owned by Family Members unless the Option Agreement specified
that the Option covered thereby may not be transferred.
15. Termination of Employment or Service. With respect to Awarded Options, in
the event that the Optionee's employment is terminated for any reason other than
death or the Optionee's employer is no longer the Company or a Related
Corporation, the Awarded Option, to the extent exercisable at termination, may
be exercised by the Optionee at any time within three months after termination
unless terminated earlier by its terms. If termination results from the death of
the Optionee, the Awarded Option, to the extent exercisable at the date of
death, may be exercised by the person to whom the Awarded Option is transferred
by will or the applicable laws of descent and distribution, at any time within
one year after the date of death, unless terminated earlier by its terms.
Military or sick leave shall not be deemed a termination of employment provided
that it does not exceed the longer of 90 days or the period during which the
absent employee's re-employment rights are guaranteed by statute or by contract.
With respect to Formula Options, in the event that the Optionee's service is
terminated for any reason, the Formula Option, to the extent exercisable at
termination, may be exercised at any time within five years after the
termination of service, unless terminated earlier by its terms.
16. Adjustment of Number of Shares. Each Option Agreement shall provide that in
the event of any stock dividend payable in the Stock or any split-up or
contraction in the number of shares of the Stock occurring after the date of the
Agreement and prior to the exercise in full of the Option, the number of shares
subject to such Agreement shall be proportionately adjusted and the price to be
paid for each share subject to the Option shall be proportionately adjusted.
Each such Agreement shall also provide that in case of any reclassification or
change of outstanding shares of the Stock or in case of any consolidation or
merger of the Company with or into another company or in the case of any sale or
conveyance to another company or entity of the property of the Company as a
whole or substantially as a whole, shares of Stock or other securities shall be
delivered equivalent in kind and value to those shares or other securities an
Optionee would have received if the Option had been exercised in full prior to
such reclassification, change, consolidation, merger, sale or conveyance and no
disposition had subsequently been made. Each Agreement shall further provide
that upon dissolution or liquidation of the Company, the Option shall terminate,
but the Optionee (if at the time in the employ of the Company or any of its
subsidiaries) shall have the right, immediately prior to such dissolution or
liquidation, to exercise the Option to the extent not theretofore exercised. No
fraction of a share shall be purchasable or deliverable upon exercise, but in
the event any adjustment hereunder of the number of shares covered by the Option
shall cause such number to include a fraction of a share, such fraction shall be
adjusted to the nearest smaller whole number of shares. In the event of changes
in the outstanding Stock by reason of any stock dividend, split-up, contraction,
reclassification, or change of outstanding shares of the Stock of the nature
contemplated by this Section 15, the number of shares of the Stock available for
the purpose of the Plan as stated in Section 4 shall be correspondingly adjusted
and the maximum number of shares available for any one Option as stated in
Section 4 and the number of shares to be granted to each director as stated in
Section 11 shall be correspondingly adjusted.
17. Change in Corporate Control. Upon a Change in Corporate Control, each
outstanding Option shall immediately become fully exercisable, and a
registration statementindependent auditors under the Securities Act of 1933, as amended, with
respect to shares covered by all outstanding Options, whether to be issued by
the Company or by any successor corporation, shall be effective at all times
during which the Options may be exercised and, to facilitate resale of the
shares, during the twelve months after the last exercise of the Options.
18. Reservation of Stock. The Company shall at all times during the term of the
Option reserve and keep available such number of shares of the Stock as will be
sufficient to satisfy the requirements of this Plan and shall pay all fees and
expenses necessarily incurred by the Company in connection therewith.
19. Limitation of Rights in the Option Shares. The Optionee shall not be deemed
for any purpose to be a stockholder of the Company with respect to any of the
Option Shares except to the extent that the Option shall have been exercised
with respect thereto and, in addition, a certificate shall have been issued
therefor and delivered to the Optionee.
20. Termination and Amendment of the Plan. The Committee may at any time
terminate the Plan or make such amendment to the Plan as it shall deem
advisable, provided that, except as provided in Section 15, the Committee may
not, without the approval by the holders of a majority of the Stock, change the
classes of persons eligible to receive Options, increase the maximum number of
shares available for option under the Plan or extend the period during which
Options may be granted or exercised. Notwithstanding the preceding sentence, the
provision of Sections 1, 5 and 6, insofar as they relate to Formula Options, and
Section 11 shall not be amended more often than once every six months, other
than to comport with changes in the Code and regulations thereunder. No
termination or amendment of the Plan may, without the consent of the Optionee to
whom any Option shall theretofore have been granted, adversely affect the rights
of such Optionee under such Option.
21. Notices. Any communication or notice required or permitted to be given under
the Plan shall be in writing, and mailed by registered or certified mail or
delivered in hand, if to the Company, to its Treasurer at Concord EFS, Inc.,
2525 Horizon Lake Drive, Suite 120, Memphis, Tennessee 38133 and, if to the
Optionee, to the address as the Optionee shall last have furnished to the
communicating party.generally
accepted auditing standards.
March 2001
EXHIBIT 21 - PROXY CARD
CONCORD EFS, INC.
2525 Horizon Lake Drive, Suite 120
Memphis, Tennessee 38133
THIS PROXY IS SOLICITEEDSOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Dan M. Palmer and Thomas J. Dowling or either of
them as Proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote as designated below, all the shares of
Common Stock of Concord EFS, Inc. (Concord) held by the undersigned on March 18,
1999,16, 2001, at
the Annual Meeting of Stockholders to be held on Thursday, May 2, 199924, 2001 at
Colonial Country Club, 27352736 Countrywood Parkway, Memphis, Tennessee beginning at
9:30 a.m. local time, or any adjournment thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING,
PLEASE SIGN AND RETURN THIS PROXY.
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PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN
PROMPTLY IN THE ENCLOSED ENVLELOPE.ENVELOPE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please sign exactly as your name(s) appear(s) hereon. 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
and state title.
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[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
This proxy, when properly executed, will be voted in the manner directed by the
undersigned stockholder. If no direction is made, this proxy will be voted FOR
the actions described in Item Nos.Items 1 2, and 3.2. In their direction, the Proxies are
authorized to vote upon such other business as may properly come before the
Annual Meeting or any adjournment thereofthereof.
1. To elect directors to serve for the ensuing year.year;
For all With- For All
Nominees holdWithhold Except
Douglas C. Altenbern Richard P. KiphartEdward A. Labry [ ] [ ] [ ]
David C. Anderson Edward A. Labry
J. Richard Buchignani Jerry D. Mooney
Ronald V. Congemi Dan M. Palmer
Richard M. Harter Dan M. Palmer
Joyce Kelso Paul L. Whittington
Richard P. Kiphart
NOTE: If you do not wish your shares voted "For" a particular nominee mark the
"For All Except" box and strike a line through the name(s) of the nominee(s) name(s).
Your shares will be voted "For" the remaining nominee(s).
For Against Abstain
2. To approve the Amendment to the Certificate [ ] [ ] [ ] of Incorporation to increase
the number of authorized shares of Common Stock.
For AgainstStock;
Approve Disapprove Abstain
3. To approve the Amendment to Concord's 1993
[ ] [ ] [ ]
Incentive Stock Option Plan to permit
optionees to transfer options to family
members and increase options granted annually
to non-employee directors.
4.3. To transact such other business as may properly come before the annual
meeting and any adjournments thereof.
CONCORD EFS, INC.
Mark box at right if an address change or comment has been noted on the reverse
side of this card. [ ]
CONTROL NUMBER:
RECORD DATE SHARES:
Please be sure to sign and date this Proxy. Date:
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Stockholder sign here Co-Owner sign here
DETACH CARD DETACH CARD
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