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EX-20
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
CONCORD EFS, INC.
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
To the Stockholders of
Concord EFS, Inc.
Notice is hereby given that the Annual Meeting of Stockholders of
Concord EFS, Inc. will be held at Colonial Country Club, 2736 Countrywood
Parkway, Memphis, Tennessee on May 24, 2001 beginning at 9:30 a.m. 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 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 16,
2001 as the record date for determination of the stockholders entitled to notice
of and to vote at the Annual Meeting. Concord's By-Laws 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 transact business.
By Order of the Board of Directors
Richard M. Harter
Secretary
April 6, 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.
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CONCORD EFS, INC.
PROXY STATEMENT
April 6, 2001
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Concord EFS, Inc. of proxies for use at its Annual
Meeting of Stockholders to be held on May 24, 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 Concord 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 whether 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. At the Annual Meeting, the voting will
be by voice vote unless any stockholder entitled to vote requests that voting be
by ballot.
BENEFICIAL OWNERSHIP OF COMMON STOCK
Concord'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 is
entitled to one vote for each share registered in that stockholder's name on
March 16, 2001. As of that date, our Common Stock was held by approximately
54,000 stockholders.
The following table sets forth, as of March 16, 2001, the ownership of
our Common Stock by each person who is known to us to own beneficially more than
5% of our outstanding Common Stock, by each director who owns shares and by all
of our directors and officers as a group.
Amount and Nature
of Beneficial Percent of
Ownership Outstanding
Beneficial Owner (1) Owned Shares (2)
-------------------------------------------- -------------------- --------
Dan M. Palmer, Chairman of the Board & CEO 5,105,775 (3) 2.1%
Edward A. Labry III, Director and President 4,422,192 (4) 1.8%
Edward T. Haslam, Chief Financial Officer 95,250 (5) *
Vickie Brown, Chief Operations Officer 56,561 (6) *
William E. Lucado, Sr. Vice-President 89,737 (7) *
Douglas C. Altenbern, Director 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 and directors as a group 15,522,282 (12) 6.4%
(12 persons)
William Blair & Company, L.L.C.
222 West Adams Street
Chicago, IL 60606 19,496,453 (13) 8.1%
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(1) The address of each beneficial owner who is also a director or officer is
the same as Concord's.
(2) Percentage ownership is based on 242,043,621 shares issued and outstanding
as of March 16, 2001, plus the number of shares subject to options exercisable
within 60 days after the record date by the person or the aggregation of persons
for which such percentage ownership is being determined.
(3) Shares owned include 5,085,775 shares covered by stock options exercisable
within 60 days after the record date.
(4) Shares owned include 4,387,575 shares covered by stock options exercisable
within 60 days after the record date.
(5) Shares owned include 91,250 shares covered by stock options exercisable
within 60 days after the record date.
(6) Shares owned include 56,560 shares covered by stock options exercisable
within 60 days after the record date.
(7) Shares owned include 89,062 shares covered by stock options exercisable
within 60 days after the record date.
(8) Shares 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 an amended Schedule 13G filed on
February 14, 2001 by William Blair and Company, L.L.C. ("Blair") reflecting
ownership as of December 31, 2000. The amended Schedule 13G provides that such
number of shares includes 5,858,185 shares beneficially owned by principals of
Blair with respect to which Blair disclaims beneficial ownership and 13,638,268
shares held in client accounts at Blair with respect to which Blair disclaims
beneficial ownership.
ELECTION OF DIRECTORS
Nine 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 nine 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 nine 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. The nine nominees
receiving the highest number of affirmative votes will be elected as directors.
Shares not voted, whether due to abstention, broker non-vote or otherwise, will
have no impact on the election of directors.
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Recommended Vote
The Board of Directors recommends that you vote "FOR" the election of
these nine individuals as directors.
The following table lists the name of each proposed nominee; his or her
age; his or her business experience during at least the past five years,
including all positions and offices held with Concord or any of its
subsidiaries; his or her experience as a director of Concord; and any other
directorships held by him or her. There are no family relationships among the
nominees. Also, there is no arrangement or understanding between any nominee and
any other person pursuant to which he or she is to be selected as a director or
nominee, except that, in connection with the acquisition of Star Systems, Inc.,
Concord agreed that its Board of Directors would elect Mr. Congemi to become a
director of Concord.
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.
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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.
* Member of the Board's Audit Committee.
+ Member of the Board's Compensation Committee.
COMPENSATION OF DIRECTORS
Concord currently pays to each non-employee director of Concord an
$8,000 cash director fee each year for attending scheduled board meetings. Each
non-employee director receives $1,000 for any special meetings of the full Board
or any committee attended. Concord 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 10,875 shares of Concord'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 $2,000 for each meeting attended. This director is
granted options to purchase only 9,000 shares of Concord's stock in the same
manner as the other non-employee directors. Directors are reimbursed for
expenses incurred in attending meetings of the Board of Directors and committees
of the Board. Three of the nine nominees are employees of Concord or its
subsidiaries and are not separately compensated for serving as directors.
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EXECUTIVE COMPENSATION
The following summary compensation table is intended to provide a
comprehensive overview of Concord's executive pay practices. It includes the
cash compensation paid or accrued by Concord and its subsidiaries for services
in all capacities during the fiscal year ended December 31, 2000 to, or on
behalf of, each of Concord's named executives. Named executives include the
Chief Executive Officer and the President and the three highest paid executive
officers.
Summary Compensation Table
Long-Term
Name and Principal Position Year Annual Compensation Compensation
------------------------------ ----------------------
Salary Bonus Securities
($) ($) 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 Concord's named executives under Concord'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.
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Options/SARs Granted in 2000
Individual Grants
--------------------------------------------------------------------
Name Number of
Securities % of Total
Underlying Options/ Exercise Potential Realizable Value
Options/ SARs Granted or Base at Assumed Annual Rates of
SARs Granted to Employees Price Expiration Stock Price Appreciation
(#) in 2000 ($/Share) Date for Option Term
-----------------------------
5% ($) 10%($)
------------------------ ----------- ---- ---------------- ---------- ----------- ------------ ------------
Dan M. Palmer 1,562,500 (1) 27.1% $18.13 2/17/2010 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 1,562,500 (1) 27.1% $18.13 2/17/2010 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% $18.13 2/17/2010 227,974 577,732
(1) Includes options for 562,500 shares which vest over a period of four years
and options for 1,000,000 shares which vest on the earlier of February 17,
2005 or a change in control of Concord. (See "Change in Control
Arrangements" below for further details.)
(2) These options vest on February 26, 2003. Table II Aggregated Option/SAR
Exercises in 2000 and 2000 Year-End Option Values
Underlying Value of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Fiscal Year End (#) Fiscal Year End ($)
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, 2000.
(E) Exercisable at December 31, 2000.
(U) Unexercisable at December 31, 2000.
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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, 2000. Each of the directors attended at least 75% of the
total number of meetings of the Board and the total number of meetings held by
all board committees on which he or she served. During the fiscal year ended
December 31, 2000, the Audit Committee held three meetings, and the Compensation
Committee 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
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 Concord of the services of
the executives and will recognize the contributions made by the executives to
the success of Concord's business and the growth over time in the market
capitalization of 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 Concord and its subsidiaries at levels that it believes
to be higher than average for comparable companies in order to give the
executives significant incentive to improve Concord's revenue 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 Concord's 1993
Incentive Stock Option Plan, as amended, and bonus arrangements for senior
officers meet the requirement that they be "performance based" and, therefore,
exempt from the limitations on deductibility. The Committee's present intention
is to comply with Section 162(m) unless the Committee feels that compliance in a
particular instance would not be in the best interest of Concord or its
stockholders.
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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 562,500
shares per year. In addition, each incentive agreement provides for a one-time
option grant of 1,125,000 shares with a "reload" feature. Under this reload
feature, after the stock market price reached $21.33 per share for a stated
period, a new option for 562,500 shares was granted at $21.33, and after the
stock market price reached $28.44, a new option for 281,250 shares was granted
at $28.44.
The Chief Executive Officer'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 and bonus for the Chief Executive
Officer and President, the Committee considered Concord's historic rate of
increase in revenues and the rate of increase in diluted earnings per share.
Additionally, the Committee noted that for the preceding three years Concord's
market capitalization growth averaged approximately 77% per year and that these
individuals were responsible for past growth and uniquely situated to contribute
to Concord's future growth.
Douglas C. Altenbern
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.
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Audit 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
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FIVE YEAR CUMULATIVE STOCKHOLDER RETURN
Below is a performance graph, which compares Concord's cumulative total
stockholder return during the previous five years with the NASDAQ stock market
and the NASDAQ financial stocks (Concord's peer group).
NASDAQ NASDAQ
Date Concord EFS, Inc. Stock Market Financial Stocks
--------- ----------------- ---------------- ----------------
12/31/95 100.00 100.00 100.00
12/31/96 150.44 123.04 128.36
12/31/97 132.47 150.69 196.31
12/31/98 338.49 212.51 190.73
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
Concord's authorized capital stock currently consists of 500,000,000
shares of Common Stock, $0.33 1/3 par value. The Board of Directors finds it
advisable that Concord's Certificate of Incorporation be amended to increase the
number of authorized shares of Common Stock to 750,000,000 shares, $0.33 1/3 par
value.
The holders of Common Stock are not entitled to preemptive rights to
purchase Concord's Common Stock.
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 Concord's best 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 additional shares
of its Common 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
Concord's present 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 Concord 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 Concord, 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.
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Recommended Vote
An affirmative vote of a majority of Concord's outstanding Common Stock
entitled to vote is necessary to adopt the amendment to Concord's Certificate of
Incorporation to increase the number of authorized shares of Common Stock to
750,000,000 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.
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 hereunder 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 Concord. Richard M. Harter,
Secretary and Director of Concord, is a partner of that firm. Wyatt, Tarrant and
Combs, LLP also serves as legal counsel to Concord. J. Richard Buchignani,
Director of 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.
13
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 2002 Annual
Meeting must be delivered to Concord on or before December 7, 2001.
EXPENSES OF SOLICITATION
Solicitations of proxies by mail is expected to commence on April 6,
2001, and the cost thereof will be borne by Concord. Copies of solicitation
materials will also be furnished to brokerage firms, fiduciaries and custodians
to forward to their principals, and Concord will reimburse them for their
reasonable expenses.
By Order of the Board of Directors
Richard M. Harter
Secretary
ANNUAL REPORT ON FORM 10-K
Concord will deliver without charge to each of its stockholders, upon
their written request, a copy of its most recent annual report on Form 10-K and
any information contained in any subsequent reports filed with the Securities
and Exchange Commission. Requests for such information should be directed to
Investor Relations, Concord EFS, Inc., 2525 Horizon Lake Drive, Suite 120,
Memphis, Tennessee 38133.
14
Appendix A
CONCORD EFS, Inc.
AUDIT COMMITTEE CHARTER
Organization
This charter governs the operations of the audit 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 board of directors in
fulfilling their oversight responsibility to the shareholders, potential
shareholders, the investment community, and others relating to the Company's
financial statements and the financial reporting process, the systems of
internal accounting and financial controls, the internal audit function, the
annual independent audit of the Company'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 committee to maintain free and open
communication between the committee, independent auditors, the internal auditors
and management of the Company. In discharging its oversight role, the committee
is empowered to investigate any matter brought to its attention with full access
to all books, records, facilities, and personnel 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
responsibilities believes its policies and procedures should remain flexible, in
order to best 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 the board and the audit committee, as representatives of the
Company's shareholders. The committee 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.
15
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 communicated to the committee by the
independent auditors under generally accepted auditing standards. The chair of
the committee may represent the entire committee for the purposes of this
review.
The committee shall review with management and the independent auditors the
financial statements to be included in the Company's Annual Report on Form 10-K
(or the annual report to shareholders if distributed prior to the filing 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 disclosures in the financial statements. Also, the committee
shall discuss the results of the annual audit and any other matters required to
be communicated to the committee by the independent auditors under generally
accepted auditing standards.
March 2001
16
EXHIBIT 1 - PROXY CARD
CONCORD EFS, INC.
2525 Horizon Lake Drive, Suite 120
Memphis, Tennessee 38133
THIS PROXY IS SOLICITED 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. held by the undersigned on March 16, 2001, at
the Annual Meeting of Stockholders to be held on Thursday, May 24, 2001 at
Colonial Country Club, 2736 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 ENVELOPE.
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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 Items 1 and 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 thereof.
1. To elect directors to serve for the ensuing year;
For all For All
Nominees Withhold Except
Douglas C. Altenbern Edward A. Labry [ ] [ ] [ ]
J. Richard Buchignani Jerry D. Mooney
Ronald V. Congemi Dan M. Palmer
Richard M. Harter 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).
Your shares will be voted "For" the remaining nominee(s).
2. To approve the Amendment to the Certificate of Incorporation to increase
the number of authorized shares of Common Stock;
Approve Disapprove Abstain
[ ] [ ] [ ]
3. To transact such other business as may properly come before the annual
meeting and any adjournments thereof.
17
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:
-----------------------
------------------------- -----------------------------
Stockholder sign here Co-Owner sign here
DETACH CARD DETACH CARD
Vote by Telephone Vote by Internet
It's fast, convenient, and immediate! It's fast, convenient, and your vote
Call Toll-Free on a Touch-Tone Phone is immediately confirmed and posted.
Follow these four easy steps: Follow these four easy steps:
1. Read the accompanying Proxy 1. Read the accompanying Proxy
Statement and Proxy Card. Statement and Proxy Card.
2. Call the toll-free number 2. Go to the Website
1-877-PRX-VOTE (1-877-779-8683) http://www.eproxyvote.com/ceft
3. Enter your Control Number located on your Proxy 3. Enter your Control Number located on your
Card. Proxy Card.
4. Follow the recorded instructions. 4. Follow the instructions provided.
Your vote is important! Your vote is important!
Call 1-877-PRX-VOTE anytime! Go to http://www.proxyvote.com/ceft anytime!
Do not return your Proxy Card if you are voting by Telephone or Internet