Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended 1995 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from__________to___________
Commission file number 1-10254
TOTAL SYSTEM SERVICES, INC.
(Exact Name of Registrant as specified in its charter)
Georgia 58-1493818
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1200 Sixth Avenue,
Columbus, Georgia 31901
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (706) 649-2204
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, $.10 Par Value New York Stock Exchange
Securities registered pursuant to Section l2(g) of the Act:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section l3 or l5(d) of the Securities Exchange Act of
l934 during the preceding l2 months, and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
-------- -------------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of February 22, 1996, 64,644,361 shares of the $.10 par value common
stock of Total System Services, Inc. were outstanding, and the aggregate market
value of the shares of $.10 par value common stock of Total System Services,
Inc. held by non-affiliates was approximately $282,551,650 (based upon the
closing per share price of such stock on said date.)
Portions of the 1995 Annual Report to Shareholders of Registrant are
incorporated in Parts I, II, III and IV of this report. Portions of the Proxy
Statement of Registrant dated March 15, 1996 are incorporated in Part III of
this report.
<PAGE>
Registrant's Documents Incorporated by Reference
Part Number and Item
Document Incorporated Number of Form 10-K
by Reference Into Which Incorporated
- ----------------------------------- --------------------------------
Pages 18 through 25, 30 through Part I, Item 1, Business
34, and 37 of
Registrant's 1995
Annual Report to Shareholders
Pages 30 through 34, and 37 of Part I, Item 2, Properties
Registrant's 1995 Annual
Report to Shareholders
Page 37 of Registrant's Part I, Item 3, Legal
1995 Annual Report to Proceedings
Shareholders
Page 39 of Registrant's 1995 Part II, Item 5, Market
Annual Report to Shareholders for Registrant's Common
Equity and Related Stock-
holder Matters
Page 17 of Registrant's 1995 Part II, Item 6, Selected
Annual Report to Shareholders Financial Data
Pages 18 through 25 of Registrant's Part II, Item 7, Management's
1995 Annual Report to Shareholders Discussion and Analysis of
Financial Condition and
Results of Operations
Pages 26 through 39 Part II, Item 8, Financial
of Registrant's 1995 Annual Statements and Supplementary
Report to Shareholders Data
Pages 2 through 4, 6 and 7, and 19 and Part III, Item 10,
20 of Registrant's Proxy Statement in Directors and Executive
connection with the Annual Meeting Officers of the Registrant
of Shareholders to be held on
April 15, 1996
Pages 9 through 12, and 15 Part III, Item 11,
of Registrant's Proxy Statement Executive Compensation
in connection with the Annual Meeting
of Shareholders to be held on
April 15, 1996
Page 5, and 16 and 17 of Part III, Item 12, Security
Registrant's Proxy Statement in connection Ownership of Certain
with the Annual Meeting of Shareholders Beneficial Owners and
to be held on April 15, 1996 Management
Pages 15 and 16, and 18 and 19 Part III, Item 13,
of Registrant's Proxy Statement in Certain Relationships
connection with the Annual Meeting and Related Transactions
of Shareholders to be held on April 15, 1996
and pages 32 through 34 of Registrant's 1995
Annual Report to Shareholders
Pages 26 through 38 of Registrant's Part IV, Item 14, Exhibits,
1995 Annual Report to Shareholders Financial Statement
Schedules and Reports
on Form 8-K
Table of Contents
Item No. Caption Page No.
Part I
1. Business
2. Properties
3. Legal Proceedings
4. Submission of Matters to a Vote of
Security Holders
Part II
5. Market for Registrant's Common Equity
and Related Stockholder Matters
6. Selected Financial Data
7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations
8. Financial Statements and Supplementary
Data
9. Changes In And Disagreements With Accountants
on Accounting and Financial Disclosure
Part III
10. Directors and Executive Officers of
the Registrant
11. Executive Compensation
12. Security Ownership of Certain
Beneficial Owners and Management
13. Certain Relationships and Related
Transactions
Part IV
14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K
<PAGE>
Item 1. Business.
Business. Established in 1983 as an outgrowth of an on-line accounting
and bankcard data processing system developed for Columbus Bank and Trust
Company(R), Total System Services, Inc.(sm) ("TSYS(R)") is now one of the
world's largest credit, debit and private-label card processing companies. Based
in Columbus, Georgia, and traded on the New York Stock Exchange under the symbol
"TSS," TSYS provides a comprehensive on-line system of data processing services
marketed as THE TOTAL SYSTEM(sm), servicing issuing and acquiring institutions
throughout the United States, Puerto Rico, Canada and Mexico, representing more
than 63 million cardholder and over 600,000 merchant accounts. TSYS provides
card production, domestic and international clearing, statement preparation,
customer service support, merchant accounting, merchant services and management
support. Synovus Financial Corp.(R), a $7.9 billion asset, multi-financial
services company, owns 80.8 percent of TSYS.
TSYS has four wholly-owned subsidiaries: (1) Columbus Depot Equipment
Company(sm) ("CDEC(sm)"), which sells and leases computer related equipment
associated with TSYS' bankcard data processing services and bank data processing
services provided by an affiliate; (2) Mailtek, Inc.(sm) ("Mailtek"), which
provides full-service direct mail production services and offers data
processing, list management, laser printing, computer output microfiche, card
embossing, encoding and mailing services; (3) Lincoln Marketing, Inc.(sm)
("LMI"), which provides correspondence, fulfillment, telemarketing, data
processing and mailing services; and (4) Columbus Productions, Inc.(sm) ("CPI"),
which provides full-service commercial printing and related services. TSYS also
holds a 49% equity interest in a Mexican company named Total System Services de
Mexico, S.A. de C.V.("TSM"), which provides credit card related processing
services to Mexican banks.
Service Marks. TSYS owns a family of service marks containing the name
Total System, and the federally registered service marks TSYS and TS2, to which
TSYS believes strong customer identification attaches. TSYS also owns service
marks associated with its subsidiaries. Management does not believe the loss of
such marks would have a material impact on the business of TSYS.
Major Customers. A significant amount of TSYS' revenues are derived
from certain major customers who are processed under long-term contracts. For
the year ended December 31, 1995, AT&T Universal Card Services Corp. and
NationsBank accounted for 21.4% and 12.4%, respectively, of TSYS' total
revenues. As a result, the loss of one of TSYS' major customers could have a
material adverse effect on TSYS' results of operations.
- ------------------------------------
Synovus Financial Corp., Synovus, Columbus Bank and Trust Company and CB&T are
federally registered service marks of Synovus Financial Corp. Total System
Services, Inc., "THE TOTAL SYSTEM," Columbus Depot Equipment Company, CDEC,
Lincoln Marketing, Inc., Mailtek, Inc. and Columbus Productions, Inc. are
service marks of Total System Services, Inc. TSYS and TS2 are federally
registered service marks of Total System Services, Inc.
1
Competition. TSYS encounters vigorous competition in providing bankcard
data processing services from several different sources. The national market in
third party bankcard data processors is presently being provided by
approximately five vendors. TSYS believes that it is the second largest third
party bankcard processor in the United States. In addition, TSYS competes
against software vendors which provide their products to institutions which
process in-house. TSYS is presently encountering, and in the future anticipates
continuing to encounter, substantial competition from bankcard associations,
data processing and bankcard computer service firms and other such third party
vendors located throughout the United States.
TSYS' major competitor in the bankcard data processing industry is
First Data Resources, Inc., a wholly-owned subsidiary of First Data Corporation,
which is headquartered in Omaha, Nebraska, and provides bankcard data processing
services, including authorization and data entry services. The principal methods
of competition between TSYS and First Data Resources are price and the type and
quality of services provided. In addition, there are a number of other companies
which have the necessary financial resources and the technological ability to
develop or acquire products and, in the future, to provide services similar to
those being offered by TSYS.
Regulation and Examination. TSYS is subject to being examined, and is
indirectly regulated, by the Office of the Comptroller of the Currency, the
Federal Reserve Board ("Board"), the Federal Deposit Insurance Corporation, the
Office of Thrift Supervision, the National Credit Union Administration, and the
various state financial regulatory agencies which supervise and regulate the
banks, savings institutions and credit unions for which TSYS provides bankcard
data processing services. Matters reviewed and examined by these federal and
state financial institution regulatory agencies have included TSYS' internal
controls in connection with its present performance of bankcard data processing
services, and the agreements pursuant to which TSYS provides such services.
On January 4, 1990, the Federal Reserve Bank of Atlanta approved
Synovus' indirect retention of its ownership of TSYS through Columbus Bank and
Trust Company ("CB&T") and TSYS is now subject to direct regulation by the
Board. TSYS was formed with the prior written approval of, and is subject to
regulation and examination by, the Department of Banking and Finance of the
State of Georgia as a subsidiary of CB&T and is authorized to engage in only
those activities which CB&T itself is authorized to engage in directly, which
includes the bankcard and other data processing services presently being
provided by TSYS. As TSYS and its subsidiaries operate as subsidiaries of CB&T,
they are subject to regulation by the Federal Deposit Insurance Corporation.
Employees. On December 31, 1995, TSYS had 2,269 full-time employees.
See the "Financial Review" Section on pages 18 through 25 and Note 1,
Note 4 and Note 9 of Notes to Consolidated Financial Statements on pages 30
through 32, 33 and 34, and 37 of TSYS' 1995 Annual Report to Shareholders which
are specifically incorporated herein by reference.
2
Item 2. Properties.
TSYS owns its 73,000 square foot South Center located at 1000 Fifth
Avenue, Columbus, Georgia 31901, and owns its 60,000 square foot Annex Building
located at 420 10th Street, Columbus, Georgia 31901. TSYS also owns a warehouse
facility, various other tracts of real estate located near or adjacent to its
South Center and Annex Building which are used for parking and/or future
expansion needs, and leases additional office space in Columbus, Georgia,
Atlanta, Georgia, and Jacksonville, Florida.
The approximately 32,000 square foot Columbus Depot, located at 1200
Sixth Avenue, Columbus, Georgia 31901, which is owned by TSYS and is on the
National Register of Historic Places, houses TSYS' executive offices and several
corporate divisions.
TSYS also owns a 210,000 square foot production center which is located
on a 40.4 acre tract of land in north Columbus, Georgia. Primarily a production
center, this facility houses TSYS' primary data processing computer operations,
statement preparation, mail handling, microfiche production and purchasing, as
well as other related operations.
TSM owns a 52,000 square foot structure in Toluca, Mexico which has
offices, a communication node and facilities for statement production, report
printing and card embossing.
During 1995, TSYS purchased a 110,000 square foot building on a 23-acre
site in Columbus, Georgia, to accommodate current and future office space needs.
On March 7, 1996, TSYS announced its plans to purchase approximately 50
acres in downtown Columbus, Georgia, on which it will begin building a
campus-like complex for its corporate headquarters in early 1997.
All properties owned and leased by TSYS are in good repair and suitable
condition for the purposes for which they are used.
In addition to its real property, TSYS owns and/or leases a substantial
amount of computer equipment.
See Note 1, Note 2, Note 3, Note 5 and Note 9 of Notes to Consolidated
Financial Statements on pages 30 through 32, pages 33 and 34, and page 37 of
TSYS' 1995 Annual Report to Shareholders which are specifically incorporated
herein by reference.
Item 3. Legal Proceedings.
See Note 9 of Notes to Consolidated Financial Statements on page 37 of
TSYS' Annual Report to Shareholders which is specifically incorporated herein by
reference.
3
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The "Quarterly Financial Data, Stock Price, Dividend Information"
Section which is set forth on page 39 of TSYS' 1995 Annual Report to
Shareholders is specifically incorporated herein by reference.
Item 6. Selected Financial Data.
The "Selected Financial Data" Section which is set forth on page 17 of
TSYS' 1995 Annual Report to Shareholders is specifically incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The "Financial Review" Section which is set forth on pages 18 through
25 of TSYS' 1995 Annual Report to Shareholders, which includes the information
encompassed within "Management's Discussion and Analysis of Financial Condition
and Results of Operations," is specifically incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
The "Quarterly Financial Data, Stock Price, Dividend Information"
Section, which is set forth on page 39, and the "Consolidated Balance Sheets,
Consolidated Statements of Income, Consolidated Statements of Shareholders'
Equity, Consolidated Statements of Cash Flows, Notes to Consolidated Financial
Statements and Report of Independent Auditors" Sections, which are set forth on
pages 26 through 38 of TSYS' 1995 Annual Report to Shareholders are specifically
incorporated herein by reference.
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
Item 10. Directors and Executive Officers of the Registrant.
The "ELECTION OF DIRECTORS - Information Concerning Number and
Classification of Directors and Nominees" Section which is set forth on pages 2
and 3, the "ELECTION OF DIRECTORS - Information Concerning Directors and
Nominees for Class I Directors - General Information" Section which is set forth
on pages 3 and 4, the "ELECTION OF DIRECTORS - Executive Officers" Section which
is set forth on pages 6 and 7, and the "COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT" Section which is set forth on pages 19 and 20 of TSYS'
Proxy Statement in connection with the Annual Meeting of Shareholders of TSYS to
be held
4
on April 15, 1996 are specifically incorporated herein by reference.
Item 11. Executive Compensation.
The "EXECUTIVE COMPENSATION - Summary Compensation Table; Stock Option
Exercises and Grants; Compensation of Directors; Change in Control Arrangements;
and Compensation Committee Interlocks and Insider Participation" Sections which
are set forth on pages 9 through 12, and page 15 of TSYS' Proxy Statement in
connection with the Annual Meeting of Shareholders of TSYS to be held on April
15, 1996 are specifically incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The "ELECTION OF DIRECTORS - Information Concerning Directors and
Nominees for Class I Directors - TSYS Common Stock Ownership of Directors and
Management" Section which is set forth on page 5, the "RELATIONSHIPS BETWEEN
TSYS, SYNOVUS, CB&T AND CERTAIN OF SYNOVUS' SUBSIDIARIES - Beneficial Ownership
of TSYS Common Stock by CB&T" Section which is set forth on page 16, and the
"RELATIONSHIPS BETWEEN TSYS, SYNOVUS, CB&T AND CERTAIN OF SYNOVUS' SUBSIDIARIES
- - Synovus Common Stock Ownership of Directors and Management" Section which is
set forth on pages 16 and 17 of TSYS' Proxy Statement in connection with the
Annual Meeting of Shareholders of TSYS to be held on April 15, 1996 are
specifically incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The "EXECUTIVE COMPENSATION - Compensation Committee Interlocks and
Insider Participation" Section which is set forth on page 15, "EXECUTIVE
COMPENSATION - Transactions with Management" Section which is set forth on pages
15 and 16, the "RELATIONSHIPS BETWEEN TSYS, SYNOVUS, CB&T AND CERTAIN OF
SYNOVUS' SUBSIDIARIES - Beneficial Ownership of TSYS Common Stock by CB&T"
Section which is set forth on page 16, the "RELATIONSHIPS BETWEEN TSYS, SYNOVUS,
CB&T AND CERTAIN OF SYNOVUS' SUBSIDIARIES Interlocking Directorates of TSYS,
Synovus and CB&T" Section which is set forth on page 16, and the "RELATIONSHIPS
BETWEEN TSYS, SYNOVUS, CB&T, AND CERTAIN OF SYNOVUS' SUBSIDIARIES - Bankcard
Data Processing Services Provided to CB&T and Certain of Synovus' Subsidiaries;
Other Agreements Between TSYS, Synovus, CB&T and Certain of Synovus'
Subsidiaries" Section which is set forth on pages 18 and 19 of TSYS' Proxy
Statement in connection with the Annual Meeting of Shareholders of TSYS to be
held on April 15, 1996 are specifically incorporated herein by reference.
See also Note 2 and Note 5 of Notes to Consolidated Financial
Statements on pages 32, and 33 and 34 of TSYS' 1995 Annual Report to
Shareholders which are specifically incorporated herein by reference.
5
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1. Financial Statements
The following Consolidated Financial Statements of
TSYS are specifically incorporated by reference from pages 26 through 38 of
TSYS' 1995 Annual Report to Shareholders to Item 8, Part II, Financial
Statements and Supplementary Data.
Consolidated Balance Sheets - December 31, 1995 and 1994.
Consolidated Statements of Income - Years Ended December 31,
1995, 1994 and 1993.
Consolidated Statements of Shareholders' Equity - Years Ended
December 31, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows - Years Ended December
31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements.
Report of Independent Auditors.
2. Index to Financial Statement Schedules
The following report of independent auditors and
consolidated financial statement schedule of Total System Services, Inc. are
included:
Report of Independent Auditors.
Schedule II - Valuation and Qualifying Accounts - Years Ended
December 31, 1995, 1994 and 1993.
All other schedules are omitted because they are
inapplicable or the required information is included in the Notes to
Consolidated Financial Statements.
3. Exhibits
Exhibit
Number Description
3.1 Articles of Incorporation of Total System
Services, Inc. ("TSYS"), as amended,
incorporated by reference to Exhibit 3.1 of
TSYS' Annual Report on Form 10-K for the
fiscal year ended December 31, 1990, as
filed with the Commission on March 19, 1991.
6
3.2 Bylaws of TSYS.
10. EXECUTIVE COMPENSATION PLANS AND
ARRANGEMENTS
10.1 Director Stock Purchase Plan of TSYS,
incorporated by reference to Exhibit 10.1 of
TSYS' Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, as
filed with the Commission on March 18, 1993.
10.2 Group "Y" Key Executive Restricted Stock
Bonus Plan of TSYS, incorporated by
reference to Exhibit 10.2 of TSYS' Annual
Report on Form 10-K for the fiscal year
ended December 31, 1992, as filed with the
Commission on March 18, 1993.
10.3 1985 Key Employee Restricted Stock Bonus
Plan of TSYS, incorporated by reference to
Exhibit 10.3 of TSYS' Annual Report on Form
10-K for the fiscal year ended December 31,
1992, as filed with the Commission on March
18, 1993.
10.4 1990 Key Employee Restricted Stock Bonus
Plan of TSYS, incorporated by reference to
Exhibit 10.4 of TSYS' Annual Report on Form
10-K for the fiscal year ended December 31,
1992, as filed with the Commission on March
18, 1993.
10.5 Total System Services, Inc. 1992 Long-Term
Incentive Plan, incorporated by reference to
Exhibit 10.5 of TSYS' Annual Report on Form
10-K for the fiscal year ended December 31,
1992, as filed with the Commission on March
18, 1993.
10.6 Excess Benefit Agreement of TSYS,
incorporated by reference to Exhibit 10.6 of
TSYS' Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, as
filed with the Commission on March 18, 1993.
10.7 Wage Continuation Agreement of TSYS,
incorporated by reference to Exhibit 10.7 of
TSYS' Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, as
filed with the Commission on March 18, 1993.
10.8 Incentive Bonus Plan of Synovus Financial
Corp. in which executive officers of TSYS
participate, incorporated by reference to
Exhibit 10.8 of TSYS' Annual Report on Form
10-K for the fiscal year ended December 31,
1992, as filed with the Commission on March
18, 1993.
10.9 Agreement in connection with use of
aircraft, incorporated
7
by reference to Exhibit 10.9 of TSYS' Annual
Report on Form 10-K for the fiscal year
ended December 31, 1992, as filed with the
Commission on March 18, 1993.
10.10 Split Dollar Insurance Agreement of TSYS,
incorporated by reference to Exhibit 10.10
of TSYS' Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, as
filed with the Commission on March 22, 1994.
10.11 Synovus Financial Corp. 1994 Long-Term
Incentive Plan in which executive officers
of TSYS participate, incorporated by
reference to Exhibit 10.11 of TSYS' Annual
Report on Form 10-K for the fiscal year
ended December 31, 1994, as filed with the
Commission on March 9, 1995.
10.12 Synovus Financial Corp. Executive Bonus Plan
in which executive officers of TSYS
participate.
10.13 Change of Control Agreements for executive
officers of TSYS.
11.1 Statement re Computation of Per Share
Earnings.
13.1 Certain specified pages of TSYS' 1995
Annual Report to Shareholders, which are
specifically incorporated herein by
reference.
20.1 Proxy Statement for the Annual Meeting of
Shareholders of TSYS to be held on April 15,
1996, certain pages of which are
specifically incorporated herein by
reference.
21.1 Subsidiaries of Total System Services, Inc.
23.1 Independent Auditors' Consent.
24.1 Powers of Attorney contained on the
signature pages of the 1995 Annual Report on
Form 10-K.
27.1 Financial Data Schedule (for SEC use only).
99.1 Annual Report on Form 11-K for the Total
System Services, Inc. Employee Stock
Purchase Plan for the year ended December
31, 1995 (to be filed as an amendment hereto
within 120 days of the end of the period
covered by this report.)
99.2 Annual Report on Form 11-K for the Total
System Services,
8
Inc. Director Stock Purchase Plan for the
year ended December 31, 1995 (to be filed as
an amendment hereto within 120 days of the
end of the period covered by this report.)
(b) Reports on Form 8-K
On October 20, 1995, TSYS filed a Form 8-K with the Commission
in connection with the renewal of a long-term credit card processing contract
with NationsBank.
filings\TSYS\TSYS96.10K
9
Report of Independent Auditors
The Board of Directors
Total System Services, Inc.
Under date of January 26, 1996, we reported on the consolidated balance sheets
of Total System Services, Inc. and subsidiaries as of December 31, 1995 and
1994, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the years in the three-year period ended December 31,
1995, as contained in the Total System Services, Inc. 1995 Annual Report to
Shareholders. These consolidated financial statements and our report thereon are
incorporated by reference in the Total System Services, Inc. Annual Report on
Form 10-K for the year 1995. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related financial
statement schedule in Item 14(a)2. The financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Atlanta, Georgia
January 26, 1996
Total System Services, Inc.
Schedule II
Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
__________________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________________
Additions
________________________
Charged to
Balance at Charged to other Balance at
beginning costs and accounts-- Deductions-- end of
Description of period expenses describe describe period
__________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Allowance for doubtful accounts $ 707,428 137,848 - (30,203)<F1> $ 815,073
========= ========= ======== ========= =========
Year ended December 31, 1994: (16,347)<F1>
Allowance for doubtful accounts $ 815,073 - - (542,958)<F2> 255,768
========= ========= ======== ========= =========
Year ended December 31, 1995:
Allowance for doubtful accounts $ 255,768 509,500 - (50,894)<F1> $ 714,374
========= ========= ========= ========= =========
- ------------
<FN>
<F1> Accounts deemed to be uncollectible and written off during the year.
<F2> Reversal of provision for bad debt expense to adjust allowance for doubtful accounts to appropriate amounts.
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, Total System Services, Inc. has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TOTAL SYSTEM SERVICES, INC.
(Registrant)
March 19, 1996 By:/s/ Richard W. Ussery
---------------------
Richard W. Ussery,
Chairman and
Principal Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James H. Blanchard, Richard W. Ussery and
Philip W. Tomlinson each of them, his true and lawful attorney(s)-in-fact and
agent(s), with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any or all amendments
to this report and to file the same, with all exhibits and schedules thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney(s)-in-fact and agent(s) full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney(s)-in-fact and agent(s), or their substitute(s), may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, this report has been signed by the following
persons in the capacities and on the dates indicated.
/s/James H. Blanchard Date: March 19, 1996
- -----------------------------------------------
James H. Blanchard,
Director and Chairman of the
Executive Committee
/s/Richard W. Ussery Date: March 19, 1996
- -----------------------------------------------
Richard W. Ussery,
Chairman of the Board
and Principal Executive Officer
/s/Philip W. Tomlinson Date: March 19, 1996
- -----------------------------------------------
Philip W. Tomlinson,
President
and Director
/s/James B. Lipham Date: March 19, 1996
- -----------------------------------------------
James B. Lipham,
Executive Vice President, Treasurer, Principal
Accounting and Financial Officer
/s/William A. Pruett Date: March 19, 1996
- -----------------------------------------------
William A. Pruett,
Exective Vice President
/s/M. Troy Woods Date: March 19, 1996
- -----------------------------------------------
M. Troy Woods,
Executive Vice President
/s/G. Sanders Griffith, III Date: March 19, 1996
- -----------------------------------------------
G. Sanders Griffith, III,
General Counsel and Secretary
/s/Griffin B. Bell Date: March 19, 1996
- -----------------------------------------------
Griffin B. Bell,
Director
/s/ Richard Y. Bradley Date: March 19, 1996
- -----------------------------------------------
Richard Y. Bradley,
Director
/s/Salvador Diaz-Verson, Jr. Date: March 19, 1996
- -----------------------------------------------
Salvador Diaz-Verson, Jr.,
Director
/s/Kenneth E. Evans Date: March 19, 1996
- -----------------------------------------------
Kenneth E. Evans,
Director
/s/Gardiner W. Garrard, Jr. Date: March 19, 1996
- -----------------------------------------------
Gardiner W. Garrard, Jr.,
Director
/s/ John P. Illges Date: March 19, 1996
- -----------------------------------------------
John P. Illges, III,
Director
/s/Mason H. Lampton Date: March 19, 1996
- -----------------------------------------------
Mason H. Lampton,
Director
/s/W. Walter Miller, Jr. Date: March 19, 1996
- -----------------------------------------------
W. Walter Miller, Jr.,
Director
/s/H. Lynn Page Date: March 19, 1996
- -----------------------------------------------
H. Lynn Page,
Director
/s/William B. Turner Date: March 19, 1996
- -----------------------------------------------
William B. Turner,
Director
/s/George C. Woodruff, Jr. Date: March 19, 1996
- -----------------------------------------------
George C. Woodruff, Jr.,
Director
/s/James D. Yancey Date: March 19, 1996
- -----------------------------------------------
James D. Yancey,
Director
<PAGE>
As Amended and Restated
Effective September 4, 1995
BYLAWS
OF
TOTAL SYSTEM SERVICES, INC.
ARTICLE I. OFFICES
Section 1. Principal Office. The principal office for the transaction of
the business of the corporation shall be located in Muscogee County, Georgia, at
such place within said County as may be fixed from time to time by the Board of
Directors.
Section 2. Other Offices. Branch offices and places of business may be
established at any time by the Board of Directors at any place or places where
the corporation is qualified to do business, whether within or without the State
of Georgia.
ARTICLE II. SHAREHOLDERS' MEETINGS
Section 1. Meetings, Where Held. Any meeting of the shareholders of the
corporation, whether an annual meeting or a special meeting, may be held either
at the principal office of the corporation or at any place in the United States
within or without the State of Georgia.
Section 2. Annual Meeting. The annual meeting of the shareholders of the
corporation shall be held on such date as is determined by the Board of
Directors of the corporation each year. Provided, however, that if the Board of
Directors shall fail to set a date for the annual meeting of shareholders in any
year, that the annual meeting of the shareholders of the corporation shall be
held on the second Monday of April of each year; provided, that if said day
shall fall upon a legal holiday, then such annual meeting shall be held on the
next day thereafter ensuing which is not a legal holiday.
Section 3. Special Meetings. A special meeting of the shareholders of the
corporation, for any purpose or purposes whatsoever, may be called at any time
by the Chairman of the Board, any Vice Chairman of the Board, if elected, the
President, any Vice President, a majority of the Board of Directors, or one or
more shareholders of the corporation holding at least 80% of the issued and
outstanding shares of common stock of the corporation. Such a call for a special
meeting must state the purpose of the
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meeting. This section, as it relates to the call of a special meeting of the
shareholders of the corporation by one or more shareholders holding at least 80%
of the issued and outstanding shares of common stock of the corporation shall
not be altered, deleted or rescinded except upon the affirmative vote of the
shareholders of the corporation holding at least 80% of the issued and
outstanding shares of common stock of the corporation.
Section 4. Notice of Meetings. Unless waived, written notice of each annual
meeting and of each special meeting of the shareholders of the corporation shall
be given to each shareholder of record entitled to vote, either personally or by
first class mail (postage prepaid) addressed to such shareholder at his last
known address, not less than ten (10) days nor more than seventy (70) days prior
to said meeting. Such written notice shall specify the place, day and hour of
the meeting; and in the case of a special meeting, it shall also specify the
purpose or purposes for which the meeting is called.
Section 5. Waiver of Notice. Notice of any annual or special meeting of the
shareholders of the corporation may be waived by any shareholder, either before
or after the meeting; and the attendance of a shareholder at a meeting, either
in person or by proxy, shall of itself constitute waiver of notice and waiver of
any and all objections to the place or time of the meeting, or to the manner in
which it has been called or convened, except when a shareholder attends solely
for the purpose of stating, at the beginning of the meeting, an objection or
objections to the transaction of business at such meeting.
Section 6. Quorum, Voting and Proxy. Shareholders representing a majority
of the issued and outstanding shares of common stock of the corporation shall
constitute a quorum at a shareholders' meeting. Each shareholder shall be
entitled to one vote for each share of common stock owned. Any shareholder may
be represented and vote at any shareholders' meeting by written proxy filed with
the Secretary of the corporation on or before the date of such meeting;
provided, however, that no proxy shall be valid for more than 11 months after
the date thereof unless otherwise specified in such proxy.
Section 7. No Meeting Necessary When. Any action required by law or
permitted to be taken at any shareholders' meeting may be taken without a
meeting if, and only if, written consent, setting forth the action so taken,
shall be signed by all of the shareholders entitled to vote with respect to the
subject matter thereof. Such consent shall have the same force and effect as a
unanimous vote of the shareholders and shall be filed with the Secretary and
recorded in the Minute Book of the corporation.
ARTICLE III. DIRECTORS
Section 1. Number. The Board of Directors of the corporation shall consist
of not less
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than 8 nor more than 60 Directors. The number of Directors may vary between said
minimum and maximum, and within said limits, the shareholders holding at least
80% of the issued and outstanding shares of common stock of the corporation may,
from time to time, by resolution fix the number of Directors to comprise said
Board. This section, as it relates to from time to time, fixing the number of
Directors of the corporation by the shareholders of the corporation holding at
least 80% of the issued and outstanding shares of common stock of the
corporation, shall not be altered, deleted or rescinded except upon the
affirmative vote of the shareholders of the corporation holding at least 80% of
the issued and outstanding shares of common stock of the corporation.
Section 2. Election and Tenure. The Board of Directors of the corporation
shall be divided into three classes serving staggered 3-year terms, with each
class to be as nearly equal in number as possible. At the first annual meeting
of the shareholders of the corporation, all members of the Board of Directors
shall be elected with the terms of office of Directors comprising the first
class to expire at the first annual meeting of the shareholders of the
corporation after their election, the terms of office of Directors comprising
the second class to expire at the second annual meeting of the shareholders of
the corporation after their election and the terms of office of Directors
comprising the third class to expire at the third annual meeting of the
shareholders of the corporation after their election, and as their terms of
office expires, the Directors of each class will be elected to hold office until
the third succeeding annual meeting of the shareholders of the corporation after
their election. In such elections, the nominees receiving a plurality of votes
shall be elected. This section, as it relates to the division of the Board of
Directors into three classes serving staggered 3-year terms, shall not be
altered, deleted or rescinded except upon the affirmative vote of the
shareholders of the corporation holding at least 80% of the issued and
outstanding shares of common stock of the corporation.
Section 3. Powers. The Board of Directors shall have authority to manage
the affairs and exercise the powers, privileges and franchises of the
corporation as they may deem expedient for the interests of the corporation,
subject to the terms of the Articles of Incorporation, bylaws, and such policies
and directions as may be prescribed from time to time by the shareholders of the
corporation.
Section 4. Meetings. The annual meeting of the Board of Directors shall be
held without notice immediately following the annual meeting of the shareholders
of the corporation, on the same date and at the same place as said annual
meeting of the shareholders. The Board by resolution may provide for regular
meetings, which may be held without notice as and when scheduled in such
resolution. Special meetings of the Board may be called at any time by the
Chairman of the Board, any Vice Chairman of the Board, if elected, the President
or by any two or more Directors.
Section 5. Notice and Waiver; Quorum. Notice of any special meeting of the
Board
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of Directors shall be given to each Director personally or by mail, telegram or
cablegram addressed to him at his last known address, at least one day prior to
the meeting. Such notice may be waived, either before or after the meeting; and
the attendance of a Director at any special meeting shall of itself constitute a
waiver of notice of such meeting and of any and all objections to the place or
time of the meeting, or to the manner in which it has been called or convened,
except where a Director states, at the beginning of the meeting, any such
objection or objections to the transaction of business. A majority of the Board
of Directors shall constitute a quorum at any Directors' meeting.
Section 6. No Meeting Necessary, When. Any action required by law or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if written consent, setting forth the action so taken, shall
be signed by all the Directors. Such consent shall have the same force and
affect as a unanimous vote of the Board of Directors and shall be filed with the
Secretary and recorded in the Minute Book of the corporation.
Section 7. Voting. At all meetings of the Board of Directors each Director
shall have one vote and, except as otherwise provided herein or provided by law,
all questions shall be determined by a majority vote of the Directors present.
Section 8. Removal. Any one or more Directors or the entire Board of
Directors may be removed from office, with or without cause, by the affirmative
vote of the shareholders of the corporation holding at least 80% of the issued
and outstanding shares of common stock of the corporation at any shareholders'
meeting with respect to which notice of such purpose has been given. This
section, as it relates to the removal of Directors of the corporation by the
shareholders of the corporation holding at least 80% of the issued and
outstanding shares of common stock of the corporation, shall not be altered,
deleted or rescinded except upon the affirmative vote of the shareholders of the
corporation holding at least 80% of the issued and outstanding shares of common
stock of the corporation.
Section 9. Vacancies. Any vacancy occurring in the Board of Directors
caused by an increase in the number of Directors may be filled by the
shareholders of the corporation for a full classified 3-year term, or such
vacancy may be filled by the Board of Directors until the next annual meeting of
the shareholders. Any vacancy occurring in the Board of Directors caused by the
removal of a Director shall be filled by the shareholders, or if authorized by
the shareholders, by the Board of Directors, for the unexpired term of the
Director so removed. Any vacancy occurring in the Board of Directors caused by a
reason other than an increase in the number of Directors or removal of a
Director may be filled by the Board of Directors, or the shareholders, for the
unexpired term of the Director whose position is vacated. Vacancies in the Board
of Directors filled by the Board of Directors may be filled by the affirmative
vote of a majority of the remaining Directors, though less than a quorum, or the
sole remaining
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Director, as the case may be.
Section 10. Dividends. The Board of Directors may declare dividends payable
in cash or other property out of the unreserved and unrestricted net earnings of
the current fiscal year, computed to the date of declaration of the dividend, or
the preceding fiscal year, or out of the unreserved and unrestricted earned
surplus of the corporation, as they may deem expedient.
Section 11. Committees. In the discretion of the Board of Directors, said
Board from time to time may elect or appoint, from its own members, one or more
committees as said Board may see fit to establish. Each such committee shall
consist of three or more Directors, and each shall possess such powers and be
charged with such responsibilities, subject to the limitations imposed by
applicable law, as the Board by resolution may from time to time prescribe.
Section 12. Officers, Salaries and Bonds. The Board of Directors shall
elect all officers of the corporation and fix their compensation. The fact that
any officer is a Director shall not preclude him from receiving a salary or from
voting upon the resolution providing the same. The Board of Directors may or may
not, in their discretion, require bonds from either or all of the officers and
employees of the corporation for the faithful performance of their duties and
good conduct while in office.
Section 13. Compensation of Directors. Directors, as such shall be entitled
to receive compensation for their service as Directors and such fees and
expenses, if any, for attendance at each regular or special meeting of the Board
and any adjournments thereof, as may be fixed from time to time by resolution of
the Board, and such fees and expenses shall be payable even though an
adjournment be had because of the absence of a quorum; provided, however, that
nothing herein contained shall be construed to preclude any director from
serving the corporation in any other capacity and receiving compensation
therefore. Members of either standing or special committees may be allowed such
compensation as may be provided from time to time by resolution of the Board for
serving upon and attending meetings of such committees.
Section 14. Emeritus Directors. When a member of the Board of Directors of
the corporation, as the case may be: (a) attains seventy (70) years of age or,
(b) prior to his attainment of seventy (70) years of age, retires from his
principal occupation, under the retirement policy and criteria established from
time to time by the Board of Directors of the corporation (except for a member
of the Board of Directors of the corporation: (1) who is, upon the attainment of
age seventy (70), then serving as an executive officer, including Chairman of
the Board or Chairman of the Executive Committee of the corporation or its
parent or grandparent corporation; or (2) who was sixty (60) years of age on
June 14, 1973), such director shall automatically, at his option, either (i)
retire from the Board of Directors of the corporation, as the case may be; or
(ii) be appointed as a member of the Emeritus Board of Directors of the
corporation. A
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member of the Board of Directors of the corporation: (1) who is, upon the
attainment of age seventy (70), then serving as an executive officer, including
Chairman of the Board or Chairman of the Executive Committee, of the corporation
or its parent or grandparent corporation; or (2) who was sixty (60) years of age
on June 14, 1973, may, at his option, either: (a) continue his service as a
member of the Board of Directors of the corporation, as the case may be; or (b)
be appointed as a member of the Emeritus Board of Directors of the corporation.
Members of the Emeritus Board of Directors of the corporation shall be appointed
annually by the Chairman of the Board of Directors of the corporation at the
Annual Meeting of the Board of Directors of the corporation, or from time to
time thereafter. Each member of the Emeritus Board of Directors of the
corporation, except in the case of his earlier death, resignation, retirement,
disqualification or removal, shall serve until the next succeeding Annual
Meeting of the Board of Directors of the corporation. Any individual appointed
as a member of the Emeritus Board of Directors of the corporation may, but shall
not be required to, attend meetings of the Board of Directors of the corporation
and may participate in any discussions thereat, but such individual may not vote
at any meeting of the Board of Directors of the corporation or be counted in
determining a quorum at any meeting of the Board of Directors of the
corporation, as provided in Section 5 of Article III of the bylaws of the
corporation. It shall be the duty of the members of the Emeritus Board of
Directors of the corporation to serve as goodwill ambassadors of the
corporation, but such individuals shall not have any responsibility or be
subject to any liability imposed upon a member of the Board of Directors of the
corporation or in any manner otherwise be deemed to be a member of the Board of
Directors of the corporation. Each member of the Emeritus Board of Directors of
the corporation shall be paid such compensation as may be set from time to time
by the Chairman of the Board of Directors of the corporation and shall remain
eligible to participate in any Director Stock Purchase Plan maintained by, or
participated in, from time to time by the corporation according to the terms and
conditions thereof. Notwithstanding the foregoing, if a member of the Board of
Directors of the corporation is initially elected to the Board of Directors
within six years of his attainment of seventy (70) years of age, such member
may, subject to his continuing election to the Board of Directors of the
corporation, serve as a director of the corporation for a period ending the
later of (i) six years from the date of his initial election to the Board of
Directors of the corporation; or (ii) the expiration of the term of office of
such director to which he was last elected during such six year period, at which
time such director shall automatically, at his option, either (i) retire from
the Board of Directors of the corporation; or (ii) be appointed as a member of
the Emeritus Board of Directors of the corporation."
Section 15. Advisory Directors. The Board of Directors of the corporation
may at its annual meeting, or from time to time thereafter, appoint any
individual to serve as a member of an Advisory Board of Directors of the
corporation. Any individual appointed to serve as a member of an Advisory Board
of Directors of the corporation shall be entitled to attend all meetings of the
Board of Directors and may participate in any discussion thereat, but such
individual may not vote at any meeting of the Board of Directors or be counted
in determining a quorum for such meeting. It shall be the duty
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of members of the Advisory Board of Directors of the corporation to advise and
provide general policy advice to the Board of Directors of the corporation at
such times and places and in such groups and committees as may be determined
from time to time by the Board of Directors, but such individuals shall not have
any responsibility or be subject to any liability imposed upon a director or in
any manner otherwise deemed a director. The same compensation paid to directors
for their services as directors shall be paid to members of an Advisory Board of
Directors of the corporation for their services as advisory directors. Each
member of the Advisory Board of Directors except in the case of his earlier
death, resignation, retirement, disqualification or removal, shall serve until
the next succeeding annual meeting of the Board of Directors and thereafter
until his successor shall have been appointed.
ARTICLE IV. OFFICERS
Section 1. Selection. The Board of Directors at each annual meeting shall
elect or appoint a Chairman of the Board, a President, a Secretary and a
Treasurer, each to serve for the ensuing year and until his successor is elected
and qualified, or until his earlier resignation, removal from office, or death.
The Board of Directors, at such meeting, may or may not, in the discretion of
the Board, elect one or more Vice Chairmen of the Board, one or more Chairmen of
the Board-Emeritus, one or more Vice Presidents, one or more Assistant Vice
Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers,
and such other officers as the Board of Directors, in its discretion, shall
determine are desirable for the management of the business and affairs of the
corporation. When more than one Vice President is elected, they may, in the
discretion of the Board, be designated Executive Vice President, First Vice
President, Second Vice President, etc., according to seniority or rank, and any
person may hold two or more offices, except that the President shall not also
serve as the Secretary.
Section 2. Removal, Vacancies. Any officers of the corporation may be
removed from office at any time by the Board of Directors, with or without
cause. Any vacancy occurring in any office of the corporation may be filled by
the Board of Directors.
Section 3. Chairman of the Board. The Chairman of the Board of Directors,
shall, whenever present, preside at all meetings of the Board of Directors and
at all meetings of the shareholders. The Chairman of the Board of Directors
shall confer with the President on matters of general policy affecting the
business of the corporation and shall have, in his discretion, power and
authority to generally supervise all the affairs of the corporation and the acts
and conduct of all the officers of the corporation, and shall have such other
duties as may be conferred upon him. Any Vice Chairman of the Board, if elected,
shall perform the duties of the Chairman of the Board during the absence or
disability of the Chairman of the Board and shall have such other duties as may
be conferred upon him by the Board of Directors or the Chairman of the Board.
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Section 4. President. In the absence of the Chairman of the Board and if
there be no Vice Chairman of the Board elected, or in his absence, the President
shall preside at all meetings of the Board of Directors and at all meetings of
the shareholders. The immediate supervision of the affairs of the corporation
shall be vested in the President. It shall be his duty to attend constantly to
the business of the corporation and maintain strict supervision over all of its
affairs and interests. He shall keep the Board of Directors fully advised of the
affairs and condition of the corporation, and shall manage and operate the
business of the corporation pursuant to such policies as may be prescribed from
time to time by the Board of Directors. The President shall, subject to approval
of the Board, hire and fix the compensation of all employees and agents of the
corporation, other than officers, and any person thus hired shall be removable
at his pleasure.
Section 5. Vice President. Any Vice President of the corporation may be
designated by the Board of Directors to act for and in the place of the
President in the event of sickness, disability or absence of the President or
the failure of the President to act for any reason, and when so designated, such
Vice President shall exercise all the powers of the President in accordance with
such designation. The Vice Presidents shall have such duties as may be required
of, or assigned to, them by the Board of Directors, the Chairman of the Board,
the Vice Chairman of the Board, if elected, or the President.
Section 6. Secretary. It shall be the duty of the Secretary to keep a
record of the proceedings of all meetings of the shareholders and Board of
Directors; to keep the stock records of the corporation; to notify the
shareholders and Directors of meetings as provided by these bylaws; and to
perform such other duties as may be prescribed by the Board of Directors, the
Chairman of the Board, any Vice Chairman of the Board, if elected, or the
President. Any Assistant Secretary, if elected, shall perform the duties of the
Secretary during the absence or disability of the Secretary and shall perform
such other duties as may be prescribed by the Board of Directors, the Chairman
of the Board, any Vice Chairman of the Board, if elected, the President or the
Secretary.
Section 7. Treasurer. The Treasurer shall keep, or cause to be kept, the
financial books and records of the corporation, and shall faithfully account for
its funds. He shall make such reports as may be necessary to keep the Board of
Directors, the Chairman of the Board, any Vice Chairman of the Board, if
elected, and the President fully informed at all times as to the financial
condition of the corporation, and shall perform such other duties as may be
prescribed by the Board of Directors, the Chairman of the Board, any Vice
Chairman of the Board, if elected, or the President. Any Assistant Treasurer, if
elected, shall perform the duties of the Treasurer during the absence or
disability of the Treasurer, and shall perform such other duties as may be
prescribed by the Board of Directors, the Chairman of the Board, any Vice
Chairman of the Board, if elected, the President or the Treasurer.
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ARTICLE V. CONTRACTS, ETC.
Section 1. Contracts, Deeds and Loans. All contracts, deeds, mortgages,
pledges, promissory notes, transfers and other written instruments binding upon
the corporation shall be executed on behalf of the corporation by the Chairman
of the Board, any Vice Chairman of the Board, if elected, the President, any
Executive Vice President, any Vice Presidents who report directly to such
Executive Vice Presidents, or by such other officers or agents as the Board of
Directors may designate from time to time. Any such instrument required to be
given under the seal of the corporation may be attested by the Secretary or
Assistant Secretary of the corporation.
Section 2. Proxies. The Chairman of the Board, any Vice Chairman of the
Board, if elected, the President, any Vice President, the Secretary or the
Treasurer of the corporation shall have full power and authority, on behalf of
the corporation, to attend and to act and to vote at any meetings of the
shareholders, bond holders or other security holders of any corporation, trust
or association in which the corporation may hold securities, and at and in
connection with any such meeting shall possess and may exercise any and all of
the rights and powers incident to the ownership of such securities and which as
owner thereof the corporation might have possessed and exercised if present,
including the power to execute proxies and written waivers and consents in
relation thereto. In the case of conflicting representation at any such meeting,
the corporation shall be represented by its highest ranking officer, in the
order first above stated. Notwithstanding the foregoing, the Board of Directors
may, by resolution, from time to time, confer like powers upon any other person
or persons.
ARTICLE VI. CHECKS AND DRAFTS
Checks and drafts of the corporation shall be signed by such officer or officers
or such other employees or persons as the Board of Directors may from time to
time designate.
ARTICLE VII. STOCK
Section 1. Certificates of Stock. The certificates for shares of capital
stock of the corporation shall be in such form as shall be determined by the
Board of Directors. They shall be numbered consecutively and entered into the
stock book of the corporation as they are issued. Each certificate shall state
on its face the fact that the corporation is a Georgia corporation, the name of
the person to whom the shares are issued, the number and class of shares (and
series, if any) represented by the certificate and their par value, or a
statement that they are without par value. In addition, when and if more than
one class of shares shall be outstanding, all share certificates of whatever
class shall state that the corporation will furnish to any shareholder upon
request and
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without charge a full statement of the designations, relative rights,
preferences and limitations of the shares of each class authorized to be issued
by the corporation.
Section 2. Signature; Transfer Agent; Registrar. Share certificates shall
be signed by the President or any Vice President and by the Secretary or an
Assistant Secretary of the corporation, and shall bear the seal of the
corporation or a facsimile thereof. The Board of Directors may from time to time
appoint transfer agents and registrars for the shares of capital stock of the
corporation or any class thereof, and when any share certificate is
countersigned by a transfer agent or registered by a registrar, the signature of
any officer of the corporation appearing thereon may be a facsimile signature.
In case any officer who signed, or whose facsimile signature was placed upon,
any such certificate shall have died or ceased to be such officer before such
certificate is issued, it may nevertheless be issued with the same effect as if
he continued to be such officer on the date of issue.
Section 3. Stock Book. The corporation shall keep at its principal office,
or at the office of its transfer agent, wherever located, with a copy at the
principal office of the corporation, a book, to be known as the stock book of
the corporation, containing in alphabetical order name of each shareholder of
record, together with his address, the number of shares of each kind, class or
series of stock held by him and his social security number. The stock book shall
be maintained in current condition. The stock book, including the share
register, or the duplicate copy thereof maintained at the principal office of
the corporation, shall be available for inspection and copying by any
shareholder at any meeting of the shareholders upon request, or, for a bona fide
purpose which is in the best interest of the business of the corporation, at
other times upon the written request of any shareholder or holder of a voting
trust certificate. The stock book may be inspected and copied either by a
shareholder or a holder of a voting trust certificate in person, or by their
duly authorized attorney or agent. The information contained in the stock book
and share register may be stored on punch cards, magnetic tape, or any other
approved information storage devices related to electronic data processing
equipment, provided that any such method, device, or system employed shall first
be approved by the Board of Directors, and provided further that the same is
capable of reproducing all informations contained therein, in legible and
understandable form, for inspection by shareholders or for any other proper
corporate purpose.
Section 4. Transfer of Stock; Registration of Transfer. The stock of the
corporation shall be transferred only by surrender of the certificate and
transfer upon the stock book of the corporation. Upon surrender to the
corporation, or to any transfer agent or registrar for the class of shares
represented by the certificate surrendered, of a certificate properly endorsed
for transfer, accompanied by such assurances as the corporation, or such
transfer agent or registrar, may require as to the genuineness and effectiveness
of each necessary endorsement and satisfactory evidence of compliance with all
applicable laws relating to securities transfers and the collection of taxes, it
shall be the duty of the corporation, or such transfer agent or registrar, to
issue a new
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certificate, cancel the old certificate and record the transactions upon the
stock book of the corporation.
Section 5. Registered Shareholders. Except as otherwise required by law,
the corporation shall be entitled to treat the person registered on its stock
book as the owner of the shares of the capital stock of the corporation as the
person exclusively entitled to receive notification, dividends or other
distributions, to vote and to otherwise exercise all the rights and powers of
ownership and shall not be bound to recognize any adverse claim.
Section 6. Record Date. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action affecting the interests of shareholders, the Board
of Directors may fix, in advance, a record date. Such date shall not be more
than fifty (50) nor less than ten (10) days before the date of any such meeting
nor more than fifty (50) days prior to any other action. In each case, except as
otherwise provided by law, only such persons as shall be shareholders of record
on the date so fixed shall be entitled to notice of and to vote at such meeting
and any adjournment thereof, to express such consent or dissent, or to receive
payment of such dividend or such allotment of rights, or otherwise be recognized
as shareholders for any other related propose, notwithstanding any registration
of a transfer of shares on the stock book of the corporation after any such
record date so fixed.
Section 7. Lost Certificates. When a person to whom a certificate of stock
has been issued alleges it to have been lost, destroyed or wrongfully taken, and
if the corporation, transfer agent or registrar is not on notice that such
certificate has been acquired by a bona fide purchaser, a new certificate may be
issued upon such owner's compliance with all of the following conditions,
to-wit: (a) He shall file with the Secretary of the corporation, and the
transfer agent or the registrar, his request for the issuance of a new
certificate, with an affidavit setting for the time, place and circumstances of
the loss; (b) He shall also file with the Secretary, and the transfer agent or
the registrar, a bond with good and sufficient security acceptable to the
corporation and the transfer agent or the registrar, or other agreement of
indemnity acceptable to the corporation and the transfer agent or the registrar,
conditioned to indemnify and save harmless the corporation and the transfer
agent or the registrar from any and all damage, liability and expense of every
nature whatsoever resulting from the corporation's or the transfer agent's or
the registrar's issuing a new certificate in place of the one alleged to have
been lost; and (c) He shall comply with such other reasonable requirements as
the Board of Directors, the Chairman of the Board, any Vice Chairman of the
Board, if elected, or the President of the corporation, and the transfer agent
or the registrar shall deem appropriate under the circumstances.
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Section 8. Replacement of Mutilated Certificates. A new certificate may be
issued in lieu of any certificate previously issued that may be defaced or
mutilated upon surrender for cancellation of a part of the old certificate
sufficient in the opinion of the Secretary and the transfer agent or the
registrar to duly identify the defaced or mutilated certificate and to protect
the corporation and the transfer agent or the registrar against loss or
liability. Where sufficient identification is lacking, a new certificate may be
issued upon compliance with the conditions set forth in Section 7 of this
Article VII.
ARTICLE VIII. INDEMNIFICATION AND REIMBURSEMENT
Subject to any express limitations imposed by applicable law, every
person now or hereafter serving as a director, officer, employee or agent of the
corporation and all former directors and officers, employees or agents shall be
indemnified and held harmless by the corporation from and against the obligation
to pay a judgement, settlement, penalty, fine (including an excise tax assessed
with respect to an employee benefit plan), and reasonable expenses (including
attorneys' fees and disbursements) that may be imposed upon or incurred by him
or her in connection with or resulting from any threatened, pending, or
completed, action, suit, or proceeding, whether civil, criminal, administrative,
investigative, formal or informal, in which he or she is, or is threatened to be
made, a named defendant or respondent: (a) because he or she is or was a
director, officer, employee, or agent of the corporation; (b) because he or she
is or was serving at the request of the corporation as a director, officer,
partner, trustee, employee, or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise; or (c) because he or
she is or was serving as an employee of the corporation who was employed to
render professional services as a lawyer or an accountant to the corporation;
regardless of whether such person is acting in such a capacity at the time such
obligation shall have been imposed or incurred, if (i) such person acted in a
manner he or she believed in good faith to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal proceeding, if
such person had no reasonable cause to believe his or her conduct was unlawful
or (ii), with respect to an employee benefit plan, such person believed in good
faith that his or her conduct was in the interests of the participants in and
beneficiaries of the plan.
Reasonable expenses incurred in any proceeding shall be paid by the
corporation in advance of the final disposition of such proceeding if authorized
by the Board of Directors in the specific case, or if authorized in accordance
with procedures adopted by the Board of Directors, upon receipt of a written
undertaking executed personally by or on behalf of the director, officer,
employee, or agent to repay such amount if it shall ultimately be determined
that he or she is not entitled to be indemnified by the corporation, and a
written affirmation of his or her good faith belief that he or she has met the
standard of conduct required for indemnification.
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The foregoing rights of indemnification and advancement of expenses
shall not be deemed exclusive of any other right to which those indemnified may
be entitled, and the corporation may provide additional indemnity and rights to
its directors, officers, employees or agents to the extent they are consistent
with law.
The provisions of this Article VIII shall cover proceedings whether now
pending or hereafter commenced and shall be retroactive to cover acts or
omissions or alleged acts or omissions which heretofore have taken place. In the
event of death of any person having a right of indemnification or advancement of
expenses under the provisions of this Article VIII, such right shall inure to
the benefit of his or her heirs, executors, administrators and personal
representatives. If any part of this Article VIII should be found to be invalid
or ineffective in any proceeding, the validity and effect of the remaining
provisions shall not be affected.
ARTICLE IX.
MERGERS, CONSOLIDATIONS AND OTHER DISPOSITIONS OF ASSETS
The affirmative vote of the shareholders of the corporation holding at least 80%
of the issued and outstanding shares of common stock of the corporation shall be
required to approve any merger or consolidation of the corporation with or into
any corporation, and the sale, lease, exchange or other disposition of all, or
substantially all, of the assets of the corporation to or with any other
corporation, person or entity, with respect to which the approval of the
corporation's shareholders is required by the provisions of the corporate laws
of the State of Georgia. This Article shall not be altered, deleted or rescinded
except upon the affirmative vote of the shareholders holding at least 80% of the
issued and outstanding shares of common stock of the corporation.
ARTICLE X.
CRITERIA FOR CONSIDERATION OF TENDER OR OTHER OFFERS
Section 1. Factors to Consider. The Board of Directors of the corporation
may, if it deems it advisable, oppose a tender or other offer for the
corporation's securities, whether the offer is in cash or in the securities of a
corporation or otherwise. When considering whether to oppose an offer, the Board
of Directors may, but is not legally obligated to, consider any pertinent
issues; by way of illustration, but not of limitation, the Board of Directors
may, but shall not be legally obligated to, consider all or any of the
following:
(i) whether the offer price is acceptable based on the
historical and present operating results or financial condition of the
corporation;
(ii) whether a more favorable price could be obtained for
the corporation's securities in the future;
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<PAGE>
(iii) the impact which an acquisition of the corporation
would have on the employees and customers of the corporation and its
subsidiaries and the communities which they serve;
(iv) the reputation and business practices of the offeror and
its management and affiliates as they would affect the employees and
customers of the corporation and its subsidiaries and the future value
of the corporation's stock;
(v) the value of the securities, if any, that the offeror is
offering in exchange for the corporation's securities, based on an
analysis of the worth of the corporation as compared to the offeror or
any other entity whose securities are being offered; and
(vi)any antitrust or other legal or regulatory issues that are
raised by the offer.
Section 2. Appropriate Actions. If the Board of Directors determines that
an offer should be rejected, it may take any lawful action to accomplish its
purpose including, but not limited to, any or all of the following: (i) advising
shareholders not to accept the offer; (ii) litigation against the offeror; (iii)
filing complaints with governmental and regulatory authorities; (iv) acquiring
the corporation's securities; (v) selling or otherwise issuing authorized but
unissued securities of the corporation or treasury stock or granting options or
rights with respect thereto; (vi) acquiring a company to create an antitrust or
other regulatory problem for the offeror; and (vii) soliciting a more favorable
offer from another individual or entity.
ARTICLE XI. AMENDMENT
Except as otherwise specifically provided herein, the bylaws of the corporation
may be altered, amended or added to by a majority of the issued and outstanding
shares of common stock of the corporation present and voting therefor at a
shareholders' meeting or, subject to such limitations as the shareholders may
from time to time prescribe, by a majority vote of all the Directors then
holding office at any meeting of the Board of Directors.
files\bylaws.tss
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<PAGE>
SYNOVUS FINANCIAL CORP.
EXECUTIVE BONUS PLAN
ARTICLE I
OBJECTIVE OF THE PLAN
The purposes of this Synovus Financial Corp. Executive Bonus Plan
("Plan") to reward selected officers of Synovus Financial Corp. (the "Company")
and certain of its subsidiaries ("Subsidiaries") for superior corporate
performance measured by achievement of financial performance and strategic
corporate objectives and to attract and retain top quality officers.
ARTICLE II
PLAN ADMINISTRATION
This Plan is administered by the Compensation Committee (the
"Committee") of the Company's Board of Directors (the "Board"), with the
approval, as to matters involving employees of any publicly-traded Subsidiary of
the Company, of the compensation committee of such publicly-traded Subsidiary.
The Committee (and the compensation committee of any publicly-traded Subsidiary
of the Company) shall be composed of two or more outside directors as defined in
Section 162(m) of the Internal Revenue Code of 1986, as amended ("Code").
ARTICLE III
PARTICIPANTS
Participation is limited to the Chief Executive Officer and the four
highest compensated officers of the Company and any publicly-traded Subsidiary
of the Company as selected from year-to-year by the members of the Committee
("Participants").
ARTICLE IV
PERFORMANCE OBJECTIVES
Each fiscal year, the Committee shall establish
(i) performance objectives for such and/or the succeeding
fiscal year for the Company, any Subsidiary, or any
business segment or business unit of the Company or
any Subsidiary, based upon such criteria as may be
from time to time considered by the Committee, which
criteria may include, not to the exclusion of other
criteria, criteria that has been approved by the
shareholders of the Company or the shareholders of
any publicly-traded Subsidiary of the Company; and
(ii) a system which equates the attainment of various
performance objectives by the Company and
Subsidiaries for such and/or the succeeding fiscal
year into various percentages of the base salaries of
eligible officers of the Company and Subsidiaries for
such and/or the succeeding fiscal year which may be
awarded to such Employees who are selected to be
Participants in the Plan as bonuses.
The maximum award under this Plan to any participant shall be 150% of
base salary, provided, however, that no participant may receive an award for any
performance period in excess of $1,500,000.
ARTICLE V
AWARD OF BONUSES
As soon as practicable after each fiscal year for which performance
objectives have, pursuant to Article IV, been established, the Committee shall
determine whether the Company and each Subsidiary attained the
previously-established performance objectives. Assuming such performance
objectives shall be attained, the Committee shall determine, in its sole and
exclusive discretion, whether any bonuses shall be awarded for such fiscal year.
Such bonuses shall be awarded as soon as practicable thereafter and the officers
who are determined to be entitled to receive such bonuses shall be promptly
notified of the award thereof.
ARTICLE VI
PAYMENT OF BONUSES
Any bonus or any portion of any bonus awarded to a Participant shall,
at the election of such Participant, be deferred and made subsequently payable
to such Participant and/or his beneficiary, as provided in Article VIII hereof.
In order to properly provide for timely elections as to the deferral of
receipt of bonuses, each eligible officer of the Company or Subsidiary eligible
to become a Participant in the Plan may elect by an instrument in writing, the
form for said written election being attached hereto and marked Exhibit "A" and
entitled "Election Regarding Deferral of Executive Bonus Awarded Pursuant to
Synovus Financial Corp. Executive Bonus Plan" on or before the 31st day of
December of the year preceding the fiscal year for which such bonus is to be
awarded, to have any percentage of any bonus which may be awarded to him for
such fiscal year paid to him in cash on the distribution date for such fiscal
year, with the balance being deferred and payable to him as provided in Article
VIII hereof. Said written forms of election shall be filed with the Committee.
ARTICLE VII
DEFERRED EXECUTIVE BONUS ACCOUNTS
There shall be established for each Participant who elects to defer
receipt of any portion of any bonus awarded to him an account to be designated
as such Participant's Deferred Executive Bonus Account to which amounts so
elected to be deferred shall be allocated. Interest, at a rate equal to the
average annual short-term prime rate as established by Columbus Bank and Trust
Company for each fiscal year and applied to the average balance in said Account
for said fiscal year, shall be credited to such Participants' Deferred Executive
Bonus Accounts on December 31st of each fiscal year until all amounts allocated
thereto have been distributed to such Participants or their beneficiaries as
provided in Article VIII hereof.
ARTICLE VIII
DISTRIBUTION AFTER PARTICIPANT'S DEFERRAL TERMINATION DATE
When a Participant's employment termination date shall occur, the
balance in such Participant's Deferred Executive Bonus Account shall be
distributed to such Participant or his beneficiary as provided hereinbelow:
(A) Distribution shall be made in one lump sum or in up
to 120 approximately equal and consecutive monthly
installments. The method of payment, lump sum or
installment, and, in the event the distribution is
determined to be made by installments, the number of
installments in which such distribution is to be
made, for each Participant shall be determined solely
and exclusively by the Committee.
(B) If a Participant's termination of employment occurs
by reason of his death (except by suicide) or total
disability, the lump sum payment or the first monthly
installment, provided for in paragraph (A)
hereinabove, shall be paid within 30 days after the
last day of the month in which the Participant's
termination of employment occurs.
(C) If a Participant's termination of employment with the
Company and/or Subsidiary is for a reason other than
death (except by suicide) or disability, the
distributions made pursuant to paragraph (A)
hereinabove shall commence at such time as shall be
determined by the Committee; PROVIDED, HOWEVER, that
in no event shall such distributions begin later than
the date upon which such Participant attains age
70 1/2, and PROVIDED FURTHER, HOWEVER, that if such
Participant dies or becomes totally disabled prior to
his attaining age 70 1/2, the distributions
to which such Participant would have been entitled to
receive under this paragraph shall commence to be
made within thirty (30) days after the last day of
the month in which such Participant's death or total
disability occurred.
(D) If a Participant shall cease to be an Employee of the
Company by reason of his death or if he shall die
after his employment termination date but prior to
his receipt of all distributions provided for herein,
all cash distributable hereunder, or the
undistributed balance thereof, shall be distributed
to such beneficiary or beneficiaries as he shall have
designated by an instrument in writing, the form for
said written designation being attached hereto and
marked Exhibit "B" and entitled "Beneficiary
Designation," filed with the Committee in the same
manner and at the same intervals as they would have
been made to the Participant had he continued to
live, or, in the absence of an effective Beneficiary
Designation, in a lump sum to the Participant's
estate.
ARTICLE IX
DISTRIBUTION IN THE EVENT OF SEVERE FINANCIAL HARDSHIP
In the event a Participant or any beneficiary of a Participant incurs
"severe financial hardship," the Committee may authorize the acceleration of the
payment of benefits hereunder to, and only to, the extent reasonably necessary
to eliminate such "severe financial hardship." The Committee possesses the sole
discretion as to the determination of the existence, in a particular factual
setting, of "severe financial hardship;" PROVIDED, HOWEVER, in the exercise of
such discretion, the Committee is charged with the responsibility of exercising
its discretion in a fair, reasonable and nondiscriminatory manner and
determinations of "severe financial hardship" shall be limited solely to factual
situations caused by accident, illness or other event beyond the control of the
Participant or his beneficiary, which shall not have been an event that such
Participant or his beneficiary would voluntarily incur.
ARTICLE X
NO ENTITLEMENT TO BONUS
Participants are entitled to a distribution under this Plan only upon
the approval of the award by the Committee and no Participant shall be entitled
to a bonus under the Plan due to the attainment of performance objectives. In
addition, any Participant not employed by the Company or a Subsidiary on
December 31 of any fiscal year will not be entitled to a bonus unless otherwise
---
determined by the Committee.
ARTICLE XI
TERMINATION OF PLAN
The Company Board of Directors may amend or terminate the Plan at any
time. Upon termination of the Plan, distributions in respect of credits to
Participants' Deferred Executive Bonus Accounts as of the date of termination
shall be made in the manner and at the time prescribed in Article VIII hereof.
ARTICLE XII
PARTICIPANT'S RIGHT OF ASSIGNABILITY
Except as provided in subsection (D) of Article VIII hereof, regarding
beneficiary designation, amounts credited to Deferred Executive Bonus Accounts
of Participants shall not be subject to assignment, pledge or other disposition,
nor shall such amounts be subject to garnishment, attachment, transfer by
operation of law, or any legal process.
ARTICLE XIII
GOVERNING LAW
The validity, construction, performance and effect of the Plan shall be
governed by Georgia law.
EXHIBIT "A"
ELECTION REGARDING DEFERRAL OF
BONUS AWARDED PURSUANT TO THE
SYNOVUS FINANCIAL CORP. EXECUTIVE BONUS PLAN
__________________("Employee"), in the event Employee is awarded a bonus
under the Synovus Financial Corp. Executive Bonus Plan (the "Plan") for the
period commencing January 1, 199_____, and ending December 31, 199_____, hereby
makes the following elections.
I. Employee elects to have____________percent of the bonus awarded to
him for the above elected period of participation in the Plan paid
in cash to him on the distribution date provided for under the
Plan.
II. Employee further elects to defer receipt of the balance of the
bonus awarded to him for the above elected period of
participation in the Plan, said balance to be payable to
Employee or his Beneficiary pursuant to the terms of Article
VIII of this Plan.
IN WITNESS WHEREOF, Employee has affixed his hand and seal, all as of
the_______day of ______________ , 199____ .
_________________________________(L.S.)
"EMPLOYEE"
Received and accepted as of the ________day of________ , 199_____ .
COMPENSATION COMMITTEE
By:________________________________
Secretary
EXHIBIT "B"
BENEFICIARY DESIGNATION
________________________("Participant") hereby designates the following
persons as beneficiaries entitled, upon the death of Participant, to any
payments in accordance with the terms and provisions of the Synovus Financial
Corp. Executive Bonus Plan ("Plan"), this beneficiary designation being made by
Participant pursuant to Article VIII of the Plan:
Primary Beneficiary:
Name:__________________________________________________________________
Address:_______________________________________________________________
It is understood and agreed that in the event of the death of the
above-named Primary Beneficiary, the Contingent Beneficiary (or Beneficiaries)
shall be entitled to receive the payments under the Plan the Primary Beneficiary
was receiving or would have received. In the event more than one Contingent
Beneficiary is designated, said Contingent Beneficiaries shall be entitled to
receive payments made pursuant to the Plan per capita:
Names: ____________________________________________________________
____________________________________________________________
Addresses: ____________________________________________________________
____________________________________________________________
This beneficiary designation supersedes all beneficiary designations,
if any, previously made by Participant and may be amended at any time by filing
another such beneficiary designation with the Compensation Committee.
IN WITNESS WHEREOF, Participant has affixed his hand and seal,
this _______ day of_________, 199______ .
____________________________(L.S.)
"PARTICIPANT"
Received this day of ___________day of__________ , 199________.
COMPENSATION COMMITTEE
By:_______________________________
Secretary
CHANGE OF CONTROL AGREEMENT
THIS AGREEMENT ("Agreement"), by and between TOTAL SYSTEM SERVICES,
INC., a Georgia corporation (the "Company") and __________________________ (the
"Employee") is entered into as of the 1st day of January, 1996 (the "Effective
Date");
WHEREAS, the Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its shareholders
to assure that the Company will have the continued dedication of the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company;
WHEREAS, the Board believes it is imperative to diminish the inevitable
distraction of the Employee by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Employee's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Employee with appropriate compensation and benefits arrangements upon a Change
of Control which are competitive with those of other corporations; and
WHEREAS, in order to accomplish these objectives, the Board has caused
the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Change of Control Date" shall mean the
first date during the Change of Control Period (as defined in Section 1(b)) on
which a Change of Control (as defined in Section 2) occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of Control occurs and if
the Employee's employment with the Company is terminated prior to the date on
which the Change of Control occurs, and if it is reasonably demonstrated by
Employee that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or in anticipation of a Change of
Control, then for all purposes of this Agreement the "Change of Control Date"
shall mean the date immediately prior to the date of such termination of
employment.
(b) The "Change of Control Period" shall mean the period
commencing on the Effective Date and ending on the day after the date of
Employee's termination of employment from the Company or, if earlier, the date
which is 396 days after the Change of Control Date.
(c) "Cause" shall mean:
(1) the willful and continued failure of the
Employee to perform substantially the Employee's duties with the Company or one
of its affiliates after a written demand for substantial performance is
delivered to the Employee by the Executive Committee of the Board or the Chief
Executive Officer of the Company which specifically identifies the manner in
which the Executive Committee of the Board or Chief Executive Officer believes
that the Employee has
1
not substantially performed the Employee's duties, after which Employee shall
have a reasonable amount of time to remedy such failure to substantially perform
his or her duties; or
(2) the willful engaging by the Employee in
illegal conduct or gross misconduct which is materially and demonstrably
injurious to the Company.
For purposes of this provision, no act, or failure to act, on
the part of the Employee shall be considered "willful" unless it is done, or
omitted to be done, by the Employee in bad faith or without reasonable belief
that the Employee's action or omission was in the best interests of the Company.
Any act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board, or the Executive Committee of the Board, or upon the
instructions of the Chief Executive Officer, or an Executive Vice President (or
higher ranking officer), of the Company, or based upon the advice of counsel for
the Company, shall be conclusively presumed to be done, or omitted to be done,
by the Employee in good faith and in the best interests of the Company. The
cessation of employment of the Employee shall not be deemed to be for Cause
unless and until there shall have been delivered to the Employee a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of the Executive Committee of the Board at a
meeting of the Executive Committee of the Board called and held for such purpose
(after reasonable notice is provided to the Employee and the Employee is given
an opportunity, together with counsel, to be heard before the Executive
Committee of the Board), finding that, in the good faith opinion of the
Executive Committee of the Board, the Employee is guilty of the conduct
described in subparagraph (1) or (2) above, and specifying the particulars
thereof in detail.
(d) "Good Reason" shall mean:
(1) the assignment to the Employee of any duties
inconsistent in any respect with the Employee's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as in effect on either the Change of Control Date or the date
which is 120 days prior to the Change of Control Date (if such earlier date is
selected by Employee) or any other action by the Company which results in a
diminution in such position, authority, duties or responsibilities, excluding
----------
for this purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Employee;
(2) the Company's requiring the Employee to be
based at any office or location more than 35 miles from the location where
Employee was employed on the Change of Control Date or the date which is 120
days prior to the Change of Control Date (if such earlier date is selected by
Employee);
(3) a reduction in Employee's annual base
salary, maximum annual bonus opportunity (including, without limitation, the use
of bonus goals that are not reasonable and consistent with the bonus goals
established for the preceding year), or participation in employee benefit plans,
as such salary, bonus and plans were in effect on either the Change of Control
Date or the date which is 120 days prior to the Change of Control Date (if such
earlier date is selected by Employee) provided, however, that a reduction in the
level of retirement or welfare benefits shall not be considered "Good Reason" so
long as Employee is participating in retirement and welfare
2
plans that are substantially equivalent to those provided to peer employees of
Company and its affiliated companies; or
(4) any failure by the Company to comply with
and satisfy Section 8(c) of this Agreement.
For purposes of this Section 1(d), any good faith
determination of "Good Reason" made by the Employee shall be conclusive.
(e) "Disability" shall be defined the same as such term is
defined in either, at the selection of the Employee, (a) the group long-term
disability insurance plan sponsored or maintained by Company on the Change of
Control Date in which Employee participates or (b) any individual long-term
disability insurance arrangement in effect on the Change of Control Date, the
premiums of which are paid by Company for the benefit of Employee.
2. Change of Control. For the purposes of this Agreement, a
"Change of Control" shall mean:
(a) the acquisition by any "person" ("Person"), as such term
is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than the Company or a subsidiary or any
Company employee benefit plan (including its trustee) or an "Exempt Person" as
defined below), of "beneficial ownership" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
20% or more of the total number of shares of the Company's then outstanding
securities;
(b) individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least
two-thirds (2/3) of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least
two-thirds (2/3) of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board;
(c) consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets or stock
of the Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the total number of
shares of the Company's outstanding securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than
two-thirds (2/3) of, respectively, the total number of shares of the then
outstanding securities of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination, of the total number of shares of the Company's outstanding
securities, (ii) no Person (excluding any corporation resulting from such
Business Combination, or any
3
employee benefit plan (including its trustee) of the Company or such corporation
resulting from such Business Combination, or an "Exempt Person" as defined
below) beneficially owns, directly or indirectly, 20% or more of, respectively,
the total number of shares of the then outstanding securities of the corporation
resulting from such Business Combination except to the extent that such
ownership existed prior to the Business Combination and (iii) at least
two-thirds (2/3) of the members of the board of directors of the Corporation
resulting from such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(d) the occurrence of a "Triggering Event" as such term is
defined in the Rights Agreement dated April 20, 1989, by and between the Company
and Trust Company Bank ("Rights Agreement"), the provisions of which, as such
provisions and Rights Agreement may be amended from time to time, are
incorporated herein by this reference, but only so long as the Rights Agreement
is in effect.
For purposes of this Section 2, an "Exempt Person" shall mean (1) any
shareholder who (i) is a descendent of D. Abbott Turner (the "Turner Family"),
(ii) any shareholder who is affiliated or associated, as defined in the Rights
Agreement, with the Turner Family, or (iii) any person who would otherwise
become a "beneficial owner" of 20% of the total number of shares of the
Company's then outstanding securities as a result of the receipt of the
Company's securities or a beneficial interest in the Company's securities from
one or more members of the Turner Family by way of gift, devise, descent or
distribution (but not by way of sale) unless any such person, together with his
or her affiliates and associates, becomes the "beneficial owner" of more than
30% of the total number of shares of the Company's then outstanding securities;
and (2) any person who is not otherwise an Exempt Person and who as of April 20,
1989 was the beneficial owner of 10% or more of the total number of shares of
the Company's then outstanding securities unless and until such person shall
become the beneficial owner of any additional outstanding Company securities.
For purposes of this Section 2, a "Change of Control" shall not result from any
transaction precipitated by the Company's insolvency, appointment of a
conservator, or determination by a regulatory agency that the Company is
insolvent, nor from any transaction initiated by the Company in regard to
converting from a publicly traded company to a privately held company.
For purposes of Sections 2(a), 2(b) and 2(c) of this Agreement only, "Company"
shall be defined as Synovus Financial Corp. or Total System Services, Inc. For
purposes of Section 2(d) of this Agreement only, "Company" shall be defined as
Synovus Financial Corp. Notwithstanding anything in this Agreement to the
contrary, a "Change of Control" of Total System Services, Inc. shall not result
from (1) a spin-off of Total System Services, Inc. stock to Synovus Financial
Corp. shareholders or (2) any transaction (including, without limitation, any
transaction described in Sections 2(a), 2(b) and 2(c) of this Agreement) if
Synovus Financial Corp. continues to own more than 50% of the total number of
shares of Total System Services, Inc.'s outstanding securities.
3. Obligations of Company Upon Termination. In the event
Employee's employment by Company (a) is terminated before the one-year
anniversary date of the Change of Control Date either (i) by the Company for any
reason other than Cause or Employee's death or Disability or (ii) by Employee
for Good Reason; or (b) is terminated on, or within the 30-day period following,
the
4
one-year anniversary date of the Change of Control Date by Employee for any
reason or no reason, or by the Company for any reason other than Cause or
Employee's death or Disability, then
(a) The Company shall pay to Employee in a lump sum in cash
within 30 days after the date of termination the aggregate of the following
amounts:
(1) three times the sum of: (a) Employee's
annual base salary as in effect immediately prior to Employee's termination;
plus (b) the product of (i) Employee's annual base salary as in effect
immediately prior to Employee's termination of employment multiplied by (ii) a
percentage equal to the average percentage of Employee's annual bonus earned
with respect to the three calendar years ended prior to Employee's termination,
measured as a percentage of Employee's annual base salary for the year the bonus
was earned;
(2) the product of (a) a fraction, the numerator
of which is the greater of (i) six, or (ii) number of full months Employee
worked in the calendar year of Employee's termination (e.g., an October 1
----
termination date results in a numerator of 9) and the denominator of which is
12; multiplied by (b) the maximum annual bonus for which Employee was eligible
immediately prior to Employee's termination; and
(3) the product of (a) Employee's long-term
market grant (equal to Employee's annual base salary as in effect immediately
prior to Employee's termination multiplied by the market multiple for long-term
incentive grants for Employee's position on the Change of Control Date as set
forth in the market survey being used by Company in making long-term incentive
grants); multiplied by (b) either (i) 150%, if Employee has received a long-term
incentive award in the calendar year of Employee's termination of employment, or
(ii) 250%, if Employee has not received a long-term incentive award in the
calendar year of Employee's termination.
For purposes of this Agreement, "annual base salary" means Employee's annual
rate of pay excluding all other elements of compensation such as, without
limitation, bonuses, perquisites, restricted stock awards, stock options, and
retirement and welfare benefits.
(b) For three years after Employee's termination of
employment, the Company shall continue to provide medical and welfare benefits
(including, without limitation, medical, prescription, dental, disability (both
individual and group arrangements), life (both individual and group
arrangements), and accidental death and dismemberment plans and programs) to
Employee and Employee's dependents at the level of coverage elected by Employee
during the open enrollment period immediately preceding Employee's termination
of employment date under benefit plans that are generally equivalent to those
provided generally at any time after the Effective Date to other peer employees
of the Company and its affiliated companies (excluding individual disability and
individual life insurance arrangements, which must continue to be provided
regardless of whether provided to peer employees); provided, however, that if
Employee becomes reemployed with another employer (specifically excluding
self-employment) and is eligible to receive medical or other welfare benefits
under another employer provided plan, Company shall terminate all medical and
other welfare benefits being provided hereunder; and provided further, however,
that, at the election of Employee, or at the election of Company if Employee is
not eligible to participate under the terms of such medical and welfare benefit
plans (including COBRA continuation coverage for which Executive is eligible),
Company shall pay Employee an agreed upon lump sum amount
5
in cash in lieu of the benefits described in this Section 3(b), not to exceed
25% of the lump sum amount payable to Employee pursuant to Section 3(a) of this
Agreement.
(c) The Company shall not be obligated under this Agreement to
provide outplacement assistance or any other benefits and perquisites not
covered above, such as a Company-provided automobile, country club and dining
club dues, health club dues, retirement benefits, etc.
4. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Employee's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Employee may qualify, nor, subject to Section 9(f), shall
anything herein limit or otherwise affect such rights as the Employee may have
under any contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Employee is otherwise
entitled to receive under any plan, policy, practice or program of or any
contract or agreement with the Company or any of its affiliated companies at or
subsequent to the date of termination shall be payable in accordance with such
plan, policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
5. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Employee or others. In no event shall the Employee be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Employee under any of the provisions of this Agreement and, except as
otherwise provided in this Agreement, such amounts shall not be reduced whether
or not the Employee obtains other employment. The Company agrees to pay as
incurred, to the full extent permitted by law, all legal fees and expenses which
the Employee may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, the Employee or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Employee about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
6. Certain Additional Payments by the Company. (a) Anything in this
Agreement to the contrary notwithstanding and except as set forth below, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Employee (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
(6) (a "Payment")) would be subject to the excise tax imposed by Section 4999 of
the Code or any interest or penalties are incurred by the Employee with respect
to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Employee shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Employee of all taxes on
the Gross-Up Payment including, without limitation, any income taxes, employment
taxes, excise taxes, and interest and penalties imposed upon the Gross-Up
Payment, the Employee retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.
6
(b) Subject to the provisions of Section 6(c), all
determinations required to be made under this Section 6, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by KPMG Peat Marwick or such other nationally recognized certified public
accounting firm as may be designated by the Employee (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and the
Employee within 15 business days of the receipt of notice from the Employee that
there has been a Payment, or such earlier time as is requested by the Company.
In the event that the Accounting Firm is serving as accountant or auditor for
the individual, entity or group effecting the Change of Control, the Employee
may appoint another nationally recognized certified public accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 6, shall be paid by the Company to the
Employee within five days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding upon the Company and
the Employee. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 6(c) and the Employee thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Employee.
(c) The Employee shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after the Employee is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Employee shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Employee in writing prior to the expiration
of such period that it desires to contest such claim, the Employee shall:
(1) give the Company any information reasonably
requested by the Company relating to such claim,
(2) take such action in connection with
contesting such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Company,
(3) cooperate with the Company in good faith in
order effectively to contest such claim, and
7
(4) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 6(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Employee to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and the Employee agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Employee to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Employee, on an interest-free basis and shall indemnify and hold
the Employee harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Employee with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Employee shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Employee of an amount
advanced by the Company pursuant to Section 6(c), the Employee becomes entitled
to receive any refund with respect to such claim, the Employee shall (subject to
the Company's complying with the requirements of Section 6(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Employee of an amount advanced by the Company pursuant to Section 6(c), a
determination is made that the Employee shall not be entitled to any refund with
respect to such claim and the Company does not notify the Employee in writing of
its intent to contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
7. Confidential Information. The Employee shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Employee
during the Employee's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Employee or representatives of the Employee in violation of this
Agreement). After termination of the Employee's employment with the Company, the
Employee shall not, without the prior written consent of the Company or as may
otherwise be required by law or legal process, communicate or
8
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it.
8. Successors. (a) This Agreement is personal to the Employee
and without the prior written consent of the Company shall not be assignable by
the Employee otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Employee's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
9. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia, without reference
to principles of conflict of laws. The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid
If to the Employee:
To the Employee's most recent home address as filed with
the Company
If to the Company:
Synovus Financial Corp.
P. O. Box 120
Columbus, GA 31902
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
9
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(e) The Employee's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Employee or the Company may have hereunder, including, without
limitation, the right of the Employee to terminate employment for Good Reason
pursuant to Section 3 of this Agreement, shall not be deemed to be a waiver of
such provision or right or any other provision or right of this Agreement.
(f) The Employee and the Company acknowledge that, except as
may otherwise be provided under any other written agreement between the Employee
and the Company, the employment of the Employee by the Company is "at will" and,
subject to Section 1(a) hereof, prior to the Change of Control Date, the
Employee's employment may be terminated by either the Employee or the Company at
any time prior to the Change of Control Date, in which case the Employee shall
have no further rights under this Agreement. In addition, in the event
Employee's employment is terminated as a result of Employee's death or
Disability, Employee shall have no further rights under this Agreement. From and
after the Effective Date this Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof.
(g) This Agreement is executed in two counterparts, each of
which shall be deemed an original and together shall constitute one and the same
agreement, with one counterpart being delivered to each party hereto.
IN WITNESS WHEREOF, the Employee has hereunto set the Employee's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all being done
in duplicate originals, with one original being delivered to each party hereto,
all as of the day and year first above written.
---------------------------------
[Employee]
TOTAL SYSTEM SERVICES, INC.
By: _________________________________
Title: _________________________________
10
<PAGE>
TOTAL SYSTEM SERVICES, INC
Statement re Computation of Per Share Earnings
<TABLE>
<CAPTION>
The following computations set forth the calculations of primary and fully
diluted earnings per share for the twelve months ended December 31, 1995, 1994
and 1993.
Twelve Months Ended Twelve Months Ended Twelve Months Ended
December 31, 1995 December 31, 1994 December 31, 1993
- ------------------------------------------------------------------------------------------------------------------------------------
Fully Fully Fully
Primary Diluted Primary Diluted Primary Diluted
Earnings Earnings Earnings Earnings Earnings Earnings
Per Share Per Share Per Share Per Share Per Share Per Share
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income $27,730,102 $27,730,102 $22,490,144 $22,490,144 $20,223,061 $20,223,061
====================================================================================================================================
Weighted average number of common shares
outstanding 64,631,613 64,631,613 64,629,562 64,629,562 64,405,640 64,405,640
Increase due to assumed issuance of shares
related to stock options outstanding 65,043 76,794 55,274 63,859 - -
Increase due to contingently issuable
shares associated with an acquisition 10,989 10,989 - 37,651 23,408 70,224
- -----------------------------------------------------------------------------------------------------------------------------------
Adjusted weighted average number of common
and common equivalent shares outstanding 64,707,645 64,719,396 64,684,836 64,731,072 64,429,048 64,475,864
====================================================================================================================================
Net income per common and common equivalent
share $ .43 $ .43 $ .35 $ .35 $ .31 $ .31
====================================================================================================================================
</TABLE>
<PAGE>
Selected Financial Data
The following comparisons highlight significant historical trends in TSYS
results of operations and financial condition. Total revenues and net income
have grown over the last five years at compounded annual growth rates of 24.4%
and 17.0%, respectively. The balance sheet data also reflects the continued
strong financial position of TSYS, as evidenced by the current ratio of 2.1:1 at
December 31, 1995, and increased shareholders equity. The following data should
be read in conjunction with the Consolidated Financial Statements and related
Notes thereto and Financial Review, included elsewhere in the Annual Report.
<TABLE>
<CAPTION>
Years Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands except share and per share data) 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Bankcard data processing services ............................$ 218,953 166,194 136,650 123,356 108,225
Other services ............................................... 30,755 21,377 15,424 6,307 4,136
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues ....................................... 249,708 187,571 152,074 129,663 112,361
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Salaries and other personnel expense ......................... 94,946 73,051 54,517 43,136 38,637
Net occupancy and equipment expense .......................... 64,549 51,283 43,421 39,793 32,151
Other operating expenses ..................................... 47,291 28,139 21,521 17,712 16,149
- ------------------------------------------------------------------------------------------------------------------------------------
Total operating expenses ............................. 206,786 152,473 119,459 100,641 86,937
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income ..................................... 42,922 35,098 32,615 29,022 25,424
- ------------------------------------------------------------------------------------------------------------------------------------
Other nonoperating income (expense):
Gain (loss) on disposal of equipment, net .................... (123) 65 335 157 52
Interest income (expense), net ............................... 839 264 (80) (1,121) (1,203)
- ------------------------------------------------------------------------------------------------------------------------------------
Total other nonoperating income (expense) ............ 716 329 255 (964) (1,151)
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes and equity in
income (loss) of joint venture ............... 43,638 35,427 32,870 28,058 24,273
Income taxes ......................................................... 15,977 12,924 12,647 10,489 9,061
- ------------------------------------------------------------------------------------------------------------------------------------
Income before equity in income (loss) of joint venture 27,661 22,503 20,223 17,569 15,212
Equity in income (loss) of joint venture ............................. 69 (13) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income ...........................................$ 27,730 22,490 20,223 17,569 15,212
====================================================================================================================================
Net income per share .................................$ .43 .35 .31 .27 .24
====================================================================================================================================
Cash dividends declared per share ....................................$ .09 .08 .07 .07 .07
====================================================================================================================================
Weighted average outstanding shares .................................. 64,631,613 64,629,562 64,405,640 64,053,336 63,564,908
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands) 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets ............................. $ 199,000 165,042 133,339 122,048 107,004
Working capital .......................... 40,246 33,421 30,594 31,850 30,003
Total long-term debt ..................... 931 1,162 1,707 12,282 21,167
Shareholders' equity ...................... 144,472 123,004 102,278 85,945 70,111
</TABLE>
Total System Services, Inc.(SM)
17
Financial Review
This Financial Review provides a discussion of the results of operations,
financial condition, liquidity and capital resources of TSYS(R) and creates
awareness of the factors that have affected its recent earnings, as well as
those factors that may affect its future earnings. The accompanying Consolidated
Financial Statements and related Notes, and Selected Financial Data are an
integral part of this Financial Review and should be read in conjunction with
it.
[Omitted Bankcard Revenues Graph is represented by the following table.]
Bankcard Revenues
(Millions of Dollars)
91 $108.2
92 $123.4
93 $136.6
94 $166.2
95 $219.0
Results of Operations
Revenues
TSYS' revenues are derived principally from providing bankcard data processing
and related services to banks and other institutions under long-term processing
contracts. TSYS' services are provided as THE TOTAL SYSTEM(SM) to financial
institutions and other organizations across the United States and in Mexico,
Puerto Rico and Canada.
[Omitted Operating Income Graph is represented by the following table.]
Operating Income
(Millions of Dollars)
91 $25.4
92 $29.0
93 $32.6
94 $35.1
95 $42.9
Bankcard data processing revenues are generated primarily from charges
based on the number of accounts billed, transactions and authorizations
processed, credit bureau requests, credit cards embossed and mailed, and other
processing services for cardholder accounts on file. Due to the expanding use of
bankcards and the increase in the number of cardholder accounts processed by
TSYS, revenues relating to bankcard data processing services have continued to
grow. Processing contracts with certain large customers generally provide for
discounts on certain services based on increases in the number of cardholder
accounts processed. As a result, bankcard data processing revenues are
influenced by the customer mix relative to the size of customer bankcard
portfolios, as well as the number of individual cardholder accounts processed
for each customer.
Due to the somewhat seasonal nature of the credit card industry, TSYS'
revenues and results of operations have generally increased in the fourth
quarter of each year because of increased transaction and authorization volumes
during the traditional holiday season. Furthermore, the conversion of new
customers to THE TOTAL SYSTEM, as well as the deconversion of customers, also
impacts the results of operations from period to period.
The average number of cardholder accounts on file increased 35.2% to 53.1
million in 1995, compared to 39.3 million in 1994, which represented a 20.9%
increase over 32.5 million in 1993. At December 31, 1995, TSYS' total cardholder
accounts on file were approximately 63.3 million, up from 44.1 million and 35.6
million at December 31, 1994 and 1993, respectively. The cardholder accounts on
file at December 31, 1995, included 3.8 million accounts of banks being
processed for Total System Services de Mexico, S.A. de C.V. ("TSYS de Mexico"),
TSYS' Mexican joint venture; the conversion of these accounts to THE TOTAL
SYSTEM was completed in July 1995. In June 1995, approximately 590,000
cardholder
18 Total System Services, Inc.(SM)
[Omitted 1995 Revenues Graph is represented by the following table.]
1995 Revenues
Bankcard Data Processing Services 87.7%
Other Services 12.3%
[Omitted 1995 Revenue Distribution Graph is represented by the following table.]
1995 Revenue Distribution
Salaries and Other Personnel Expenses 38.0%
Net Occupancy and Equipment Expense 25.8%
Other Operating Expenses and
Other Nonoperating Income (Expense) 18.7%
Income Taxes 6.4%
Net Income 11.1%
accounts of an existing customer being serviced by another processor were added
to THE TOTAL SYSTEM. The remaining growth in cardholder accounts is primarily a
result of portfolio growth of existing customers.
Revenues derived from the processing of TSYS' merchant account customers
who accept certain private-label cards, as well as bankcards, are included in
bankcard data processing revenues. Due to a significantly higher volume of
transactions and item charges per individual account than consumer cardholder
accounts, merchant accounts generally provide more revenue per account
processed. At year-end 1995, TSYS was processing over 600,000 merchant accounts,
a 57.9% increase over the 380,000 accounts being processed at year-end 1994;
269,000 merchant accounts were being processed at year-end 1993. The majority of
the increase in merchant accounts being processed is attributable to the over
100,000 merchant accounts of TSYS de Mexico and 40,000 merchant accounts of an
existing customer previously processed by another processor.
During 1994, TSYS met all Visa and MasterCard requirements for servicing
commercial cards and became the first processor fully certified to process these
cards. At December 31, 1995, TSYS was processing approximately 2.0 million
commercial card accounts, compared to approximately 1.3 million at year-end
1994, representing a 53.8% increase over 1994.
A significant amount of the Company's revenues are derived from certain
major customers who are processed under long-term contracts. For the years ended
December 31, 1995, 1994 and 1993, two customers accounted for approximately 34%,
36% and 37% of total revenues, respectively. As a result, the loss of one of the
Company's major customers could have a material adverse effect on the Company's
results of operations.
In January of 1996, TSYS successfully completed the conversion of
approximately 20,000 Bank of America cardholder accounts to TS2, and in early
February of 1996, Bank of America began opening new cardholder accounts on TS2.
TSYS' conversion schedule with Bank of America contemplated completion of the
conversion of the balance of Bank of
Total System Services, Inc.(SM) 19
The following table sets forth certain revenue and expense items as a percentage
of total revenues and the percentage increase or decrease in those items from
the table of Selected Financial Data:
<TABLE>
<CAPTION>
Percentage Change
in Dollar Amounts
Percentage of ---------------------
Total Revenues 1995 1994
Years Ended December 31, vs vs
1995 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C>
Revenues:
Bankcard data processing services ..................................... 87.7% 88.6 89.9 31.7 21.6
Other services ........................................................ 12.3 11.4 10.1 43.9 38.6
- -----------------------------------------------------------------------------------------------------------
Total revenues ................................................ 100.0 100.0 100.0 33.1 23.3
- -----------------------------------------------------------------------------------------------------------
Expenses:
Salaries and other personnel expense .................................. 38.0 38.9 35.8 30.0 34.0
Net occupancy and equipment expense ................................... 25.8 27.3 28.6 25.9 18.1
Other operating expenses .............................................. 19.0 15.0 14.1 68.1 30.8
- -----------------------------------------------------------------------------------------------------------
Total operating expenses ...................................... 82.8 81.2 78.5 35.6 27.6
- -----------------------------------------------------------------------------------------------------------
Operating income .............................................. 17.2 18.8 21.5 22.3 7.6
- -----------------------------------------------------------------------------------------------------------
Other nonoperating income (expense):
Gain (loss) on disposal of equipment, net ............................. (0.0) 0.0 0.2 nm nm
Interest income (expense), net ........................................ 0.3 0.1 (0.1) nm nm
- -----------------------------------------------------------------------------------------------------------
Total other nonoperating income (expense) ..................... 0.3 0.1 0.1 118.2 28.6
- -----------------------------------------------------------------------------------------------------------
Income before income taxes and equity in
income (loss) of joint venture ........................ 17.5 18.9 21.6 23.2 7.7
Income taxes .................................................................. 6.4 6.9 8.3 23.6 2.2
- -----------------------------------------------------------------------------------------------------------
Income before equity in income (loss) of joint venture ........ 11.1 12.0 13.3 22.9 11.2
Equity in income (loss) of joint venture ...................................... 0.0 (0.0) -- nm nm
- -----------------------------------------------------------------------------------------------------------
Net income ............................................................ 11.1% 12.0 13.3 23.3 11.2
===========================================================================================================
nm = not meaningful
</TABLE>
America's cardholder accounts by the end of 1996; however, there have been
delays, and this conversion schedule may be changed, and portions of Bank of
America's cardholder accounts may be converted in 1997. While delays in Bank of
America's conversion schedule allow Bank of America certain remedies, including
the receipt of financial penalties and the right to terminate its relationship
with TSYS, TSYS' management believes all of Bank of America's cardholder
accounts will be successfully converted. The conversion and processing of Bank
of America's cardholder accounts is not expected to have a material impact on
TSYS' 1996 financial condition or results of operations.
20 Total System Services, Inc.(SM)
[Omitted Assets Graph is represented by the following table.]
Assets
(Millions of Dollars)
91 $107.0
92 $122.0
93 $133.3
94 $165.0
95 $199.0
[Omitted Shareholders' Equity Graph is represented by the following table]
Shareholders' Equity
(Millions of Dollars)
91 $ 70.1
92 $ 85.9
93 $102.3
94 $123.0
95 $144.5
[Omitted Working Capital Graph is represented by the following table.]
Working Capital
(Millions of Dollars)
91 $30.0
92 $31.8
93 $30.6
94 $33.4
95 $40.2
Revenues from other services consist primarily of revenues generated by
TSYS' wholly owned subsidiaries, Columbus Depot Equipment Company ("CDEC"),
Mailtek, Inc. ("Mailtek"), Lincoln Marketing, Inc. ("LMI"), and Columbus
Productions, Inc. ("CPI"). CDEC provides TSYS customers with an option to lease
certain equipment necessary for on-line communications and use of TSYS
applications; Mailtek and LMI provide TSYS customers and others with mail and
correspondence processing services, and CPI provides full-service commercial
printing services to TSYS customers and others.
Operating Expenses
As a percentage of revenues, operating expenses increased in 1995 to 82.8%,
compared to 81.2% and 78.5% for 1994 and 1993, respectively. The principal
increases in operating expenses resulted from the addition of personnel and
equipment; the cost of materials associated with the services provided by all
companies, particularly the supplies related to processing the increased number
of accounts on THE TOTAL SYSTEM; certain processing provisions, and certain
costs associated with the conversion of customers to TS2 and the start-up of
TSYS de Mexico.
A significant portion of TSYS' operating expenses relates to salaries and
other personnel costs. During 1995, the average number of employees increased to
2,087, compared to 1,874 in 1994 and 1,504 in 1993. In addition to the growth in
number of employees, the increase in salaries and other personnel costs is
attributable to normal salary increases and related employee benefits.
Nonemployee compensation, including contract programmers, also contributed to
the increase in employment expenses. Employment expenses capitalized in 1995
were $8.4 million, compared to $14.5 million and $9.7 million in 1994 and 1993,
respectively, the majority of which related to the development of TS2. The core
of TS2 was completed in September 1994, and, since that time, employment
expenses capitalized relate primarily to enhancements to TS2 and costs
associated with the conversion of customers under new long-term contracts to
TS2.
Total System Services, Inc.(SM) 21
Due to the importance of technology to our business, a large portion of
TSYS' employees are programmers -- approximately 35.7% in 1995 compared to
approximately 31.6% in 1994. TSYS has utilized a number of sources to supply its
programmer needs. Offices have been established in Atlanta, Georgia, and
Jacksonville, Florida, to take advantage of those markets. In addition, training
programs in conjunction with the state of Georgia and Columbus College have been
successful in providing additional programmers. One such program, Programmer
Associate Training, began a new, six-month class of 100 participants in February
1996. While in training, these students are paid employees of TSYS. Contract
programmers will continue to be utilized to fill additional needs.
Net occupancy and equipment expense increased 25.9% in 1995 over 1994,
compared to 18.1% in 1994 over 1993. A portion of this increase can be
attributable to amortization of TS2, which commenced in October 1994 and was
$3.3 million in 1995 compared to $826,000 in 1994.
Equipment and software rentals, which represents the largest component of
net occupancy and equipment expense, increased 35.1% in 1995 compared to 1994
and 17.8% in 1994 compared to 1993. Substantial new, technologically advanced
equipment was obtained in order to meet growth needs in 1995 and anticipated
future growth, including significant upgrades of certain mainframe computers and
significant additional direct access storage devices. Purchasing and leasing
mainframe computers, laser printers and direct access storage drives are part of
TSYS' strategy of supporting infrastructure growth. Due to the rapidly changing
technology in computer equipment, leasing provides a way for TSYS to acquire new
equipment while minimizing some of the risks associated with investing in
state-of-the-art computer equipment.
TSYS continues to monitor and assess its building and equipment needs as it
positions itself for future growth and expansion. In 1995, a new, 110,000
square-foot building was purchased to accommodate current space needs and
facilitate future growth. Additional space was leased in 1995, 1994 and 1993 for
various purposes such as warehousing, administrative offices and programming
needs.
Other operating expenses increased 68.1% in 1995 compared to 1994 and 30.8%
in 1994 compared to 1993. A number of factors contributed to this increase. The
volume of supplies related to the processing of accounts increased due to the
growth in number of accounts serviced, coupled with an increase in the cost of
supplies, especially paper. Travel expenses were up significantly in 1995 as a
result of travel necessitated by the start-up of TSYS de Mexico. On-site
training by TSYS staff of personnel in banks being converted in Mexico, as well
as Bank of America, also generated increased travel expenses. In the second half
of 1995, management fees totaling $3.2 million were paid to an affiliate for
various services; these management fees are included in other operating expenses
in the second half of 1995 and would have been reflected as salaries and other
personnel expenses in the first half of 1995 and in 1994. Other operating
expenses also increased in 1995 as a result of certain provisions made for
contractual or negotiated processing commitments. These provisions were deemed
necessary in view of the increased risks associated with the significant growth
in the number of accounts processed. Also contributing to the growth in other
operating expenses are costs related to the conversion of clients to TS2.
22 Total System Services, Inc.(SM)
Operating Income
Operating income increased 22.3% to $42.9 million in 1995, compared to $35.1
million in 1994, an increase of 7.6% compared to 1993. The growth in operating
income is primarily attributable to the Company's increased revenue growth rate
in 1995 as compared to 1994. Operating income margin decreased to 17.2% in 1995,
compared to 18.8% in 1994, and 21.5% in 1993, due to higher operating costs and
greater discounts provided to high-volume customers.
Other Nonoperating Income (Expense)
Interest income (expense), net, includes interest expense of $156,692, $151,584
and $604,969 and interest income of $996,373, $415,565 and $524,738 for 1995,
1994 and 1993, respectively.
Interest expense increased only slightly -- 3.4% -- in 1995, as compared to
1994, due to new debt obtained in early 1995 and paid off in November 1995.
Interest expense decreased in 1994, as compared to 1993, primarily due to
significant reductions in the amount of outstanding debt in 1993 through
prepayments of long-term debt and the termination of a capital lease obligation.
Also in 1993, a note payable to CB&T in the amount of $5.0 million was paid off.
During 1993, the Company prepaid $3.4 million on the Industrial Development
bonds issued in conjunction with the construction of the operations center in
north Columbus, Georgia; these bonds were retired in the first quarter of 1995.
Interest income increased 139.8% in 1995, as compared to 1994, and
decreased 20.8% in 1994, as compared to 1993. The changes are the result of both
fluctuations in cash available for investment and short-term interest rates.
Income Taxes
Income tax expense was $16.0 million, $12.9 million and $12.6 million in 1995,
1994 and 1993, respectively, representing effective tax rates of 36.6%, 36.5%
and 38.5%. The decline in TSYS' effective income tax rate for 1995 and 1994, as
compared to 1993, is attributable to the realization of certain income tax
planning strategies, including the identification and recognition of research
and experimentation credits for ongoing development activities and reduction in
effective state income tax rates.
Net Income
Net income increased 23.3% to $27.7 million ($.43 per share) in 1995, compared
to an 11.2% increase to $22.5 million ($.35 per share) for 1994, up from $20.2
million ($.31 per share) in 1993.
Financial Condition, Liquidity
and Capital Resources
The Consolidated Statements of Cash Flows detail the Company's cash flows from
operating, investing and financing activities. TSYS' primary method for funding
liquidity requirements for TSYS has been cash generated from current operations
and the occasional use of borrowed funds to supplement financing of capital
expenditures. The major uses of cash generated from operations have been the
addition of property and equipment, computer software developed internally and
purchased, investment in TSYS de Mexico, principal payments on long-term debt
and the payment of cash dividends.
During 1995, TSYS purchased and leased computer hardware and related
equipment, including additional soft-
Total System Services, Inc.(SM) 23
ware. Capital expenditures for land, buildings and equipment were $17.0 million
in 1995, compared to $8.7 million in 1994, and $8.0 million in 1993.
Expenditures for purchased computer software were $5.5 million in 1995, compared
to $3.1 million in 1994 and $1.9 million in 1993. Additions to internally
developed computer software, principally TS2 and enhancements to TS2, totaled
$2.6 million in 1995, $10.6 million in 1994, and $11.7 million in 1993. In
November 1995, as a result of evaluating investment alternatives and yields, the
Company repaid debt in the amount of $2.0 million, obtained earlier in 1995 for
the purchase of a state-of-the-art printing press.
The project to develop the core TS2 bankcard processing and support
software concluded in late September 1994 with the successful conversion of
First Omni Bank's 750,000 cardholder accounts. Costs associated with the
development of TS2 were capitalized, and amortization began in October 1994,
over a useful life of ten years. Amortization of TS2 resulted in 1995
amortization expense of $3.3 million and $826,000 in 1994. Costs associated with
the development of additional features of TS2 continue to be capitalized upon
establishing technological feasibility and are amortized when they become
available for general customer use. Costs associated with the conversion of
customers under new long-term contracts to TS2 are capitalized as contract
acquisition costs and are amortized over the life of the new processing
contracts. Capitalized conversion costs, included in contract acquisition costs,
at December 31, 1995, 1994 and 1993, amounted to $5.4 million, $2.5 million and
$457,000, respectively. Total costs associated with customer conversions to TS2
have not yet been specifically determined. Management believes that the
amortization of these increased software development and contract acquisition
costs in future years will be substantially offset by increases in revenues from
existing customers and new customers attributable to the expanded product
offerings of TS2 and its relative technological superiority as compared to
alternatives currently available in the marketplace.
In late 1994, TSYS invested in a Mexican joint venture, TSYS de Mexico,
which began generating revenues in June 1995 from its new facility in Toluca
near Mexico City. TSYS de Mexico is now providing credit card related processing
for 19 banks, representing approximately 75% of Mexican card-issuing banks. TSYS
de Mexico performs card and statement production services, while subcontracting
bankcard processing to TSYS.
TSYS contributed additional start-up capital to TSYS de Mexico in 1995 in
the amount of $3.5 million, for a total capital investment of $6.2 million,
representing an equity interest of 49%. At December 31, 1995, cumulative
currency translation adjustments decreased the Company's equity investment in
TSYS de Mexico by $1.1 million. TSYS' share of earnings from the joint venture,
in U.S. dollars, for 1995 was approximately $69,000. TSYS' revenues, in U.S.
dollars, in 1995 for processing services provided to TSYS de Mexico were
approximately $8.3 million.
The economic conditions in Mexico still remain largely unpredictable.
Nineteen ninety-five was a year of great change and difficulty for the credit
card industry in Mexico, and, as a result, the Mexican operations were
negatively affected by these changes. The Company believes that predictions of
increased stability of both interest and exchange rates
24 Total System Services, Inc.(SM)
in 1996 will improve the financial picture of both the joint venture and its
customers. Because 1995 was the start-up year for TSYS de Mexico, its earnings
are expected to increase significantly in 1996 over 1995.
On August 16, 1995, TSYS and Visa U.S.A. Inc. ("Visa") announced an
agreement in principle to merge their merchant and point-of-sale processing
operations. The planned venture will be a new, stand-alone processing company to
offer fully integrated merchant transaction and related electronic information
services to financial and nonfinancial institutions and their merchant
customers. The new organization, to be known as Vital Processing Services L.L.C.
("Vital"), is being structured with its own management team and a separate Board
of Directors. The corporate headquarters of Vital will be located in Phoenix,
Arizona, with other locations in Columbus, Georgia, and Atlanta, Georgia. TSYS
and Visa will be equal owners in the joint venture. The parties are currently
negotiating a definitive agreement. The impact of this venture on TSYS' future
results of operations has not been determined at this time.
Effective July 1, 1995, a new, wholly owned subsidiary of Synovus Financial
Corp., Synovus Administrative Services Corp. ("SASC"), was formed which is
providing certain administrative services to TSYS and other related companies.
Services provided by SASC include human resources, maintenance, security,
communications, corporate education, travel and administration. In connection
with the formation of this new company, approximately 110 TSYS employees were
transferred to SASC, and TSYS sold to the new company property and equipment
with a market value of approximately $438,000.
In each quarter of 1995, the Board of Directors declared a dividend on
TSYS' common stock of $.0225 per share. Total dividends declared in 1995 were
$5.8 million, compared to $5.2 million in 1994 and $4.5 million in 1993.
Although the impact of inflation on its operations cannot be precisely
determined, the Company believes that by controlling its operating expenses and
by taking advantage of the economies of scale through utilization of more
efficient computer hardware and software, it can minimize the impact of
inflation.
Management expects that TSYS will continue to be able to fund a significant
portion of its capital expenditure needs through internally generated cash in
the future, as evidenced by TSYS' current ratio of 2.1:1. At December 31, 1995,
TSYS had working capital of $40.2 million, compared to $33.4 million in 1994 and
$30.6 million in 1993.
Management believes that outside sources for capital will be available to
finance expansion projects and possible acquisitions should the Company decide
to pursue such financing. The form of any such financing will vary depending
upon prevailing market and other conditions and may include short-term or
long-term borrowings from financial institutions, or the issuance of additional
equity securities. However, there can be no assurance that funds will be
available on terms acceptable to TSYS. The Company did not require any
short-term borrowings during 1995, 1994 or 1993.
Total System Services, Inc.(SM) 25
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents (includes $16,742,926 and $13,862,765 on
deposit with an affiliated company in 1995 and 1994, respectively) ............ $ 18,849,623 14,684,674
Accounts receivable, net of allowance for doubtful accounts of
$714,374 and $255,768 at 1995 and 1994, respectively .......................... 49,614,779 36,102,888
Prepaid expenses and other current assets ............................................. 9,362,500 7,850,804
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets .......................................................... 77,826,902 58,638,366
Property and equipment, net (Note 3) .......................................................... 54,572,903 47,895,253
Computer software, net (Note 4) ............................................................... 39,215,561 39,239,821
Other assets (Note 10) ........................................................................ 27,384,435 19,268,890
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets .................................................................. $ 198,999,801 165,042,330
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable ...................................................................... $ 5,811,334 5,496,449
Current portion of long-term debt and obligations under capital leases (Note 5) ....... 243,786 255,631
Accrued employee benefits ............................................................. 10,412,551 6,265,044
Other current liabilities (Note 10) ................................................... 21,113,104 13,200,247
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities ..................................................... 37,580,775 25,217,371
Long-term debt and obligations under capital leases,
excluding current portion (Note 5) .................................................... 686,955 906,567
Deferred income taxes (Note 7) ................................................................ 16,260,050 15,914,554
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities ............................................................. 54,527,780 42,038,492
- ------------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity (Notes 2 and 6):
Common stock $.10 par value. Authorized 100,000,000 shares;
64,730,772 and 64,728,694 issued in 1995 and 1994, respectively;
64,633,372 and 64,631,294 outstanding in 1995 and 1994, respectively .......... 6,473,077 6,472,869
Additional paid-in capital ............................................................ 10,918,832 10,312,015
Treasury stock, at cost ............................................................... (475,789) (475,789)
Cumulative currency translation adjustments ........................................... (1,052,081) --
Retained earnings ..................................................................... 128,607,982 106,694,743
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders equity ..................................................... 144,472,021 123,003,838
- ------------------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 9)
Total liabilities and shareholders equity ..................................... $ 198,999,801 165,042,330
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
26 Total System Services, Inc.(SM)
Consolidated Statements of Income
<TABLE>
<CAPTION>
Years Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Bankcard data processing services ..................................... $ 218,953,101 166,194,263 136,649,698
Other services ........................................................ 30,754,596 21,376,564 15,424,257
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues (Notes 2 and 11) ............................... 249,707,697 187,570,827 152,073,955
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Salaries and other personnel expense .................................. 94,946,370 73,050,930 54,516,789
Net occupancy and equipment expense ................................... 64,548,541 51,282,584 43,421,419
Other operating expenses .............................................. 47,291,267 28,138,822 21,520,946
- ------------------------------------------------------------------------------------------------------------------------------------
Total operating expenses (Note 2) ............................. 206,786,178 152,472,336 119,459,154
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income .............................................. 42,921,519 35,098,491 32,614,801
- ------------------------------------------------------------------------------------------------------------------------------------
Other nonoperating income (expense):
Gain (loss) on disposal of equipment, net ............................. (122,790) 64,539 335,670
Interest income (expense), net (Note 2) ............................... 839,681 263,981 (80,231)
- ------------------------------------------------------------------------------------------------------------------------------------
Total other nonoperating income ............................... 716,891 328,520 255,439
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes and equity
in income (loss) of joint venture ..................... 43,638,410 35,427,011 32,870,240
Income taxes (Note 7) ......................................................... 15,976,974 12,924,255 12,647,179
- ------------------------------------------------------------------------------------------------------------------------------------
Income before equity in income (loss) of joint venture ........ 27,661,436 22,502,756 20,223,061
Equity in income (loss) of joint venture ...................................... 68,666 (12,612) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income .................................................... $ 27,730,102 22,490,144 20,223,061
- ------------------------------------------------------------------------------------------------------------------------------------
Net income per share .......................................... $ .43 .35 .31
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding ........................................... 64,631,613 64,629,562 64,405,640
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
Total System Services, Inc.(SM) 27
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Years Ended December 31, 1995, 1994 and 1993
- ------------------------------------------------------------------------------------------------------------------------------------
Cumulative
Additional Currency
Common Stock Paid-in Treasury Translation Retained
Shares Amount Capital Stock Adjustments Earnings Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
At December 31, 1992 64,503,040 $6,450,304 6,310,534 (475,789) -- 73,660,435 $85,945,484
Amortization of restricted
stock awards (Note 6) -- -- 618,018 -- -- -- 618,018
Cash dividends declared
($.07 per share) -- -- -- -- -- (4,508,392) (4,508,392)
Net income -- -- -- -- -- 20,223,061 20,223,061
- ------------------------------------------------------------------------------------------------------------------------------------
At December 31, 1993 64,503,040 6,450,304 6,928,552 (475,789) -- 89,375,104 102,278,171
Common stock issued in
acquisitions (Note 2) 225,654 22,565 2,765,444 -- -- -- 2,788,009
Amortization of restricted
stock awards (Note 6) -- -- 618,019 -- -- -- 618,019
Cash dividends declared
($.08 per share) -- -- -- -- -- (5,170,505) (5,170,505)
Net income -- -- -- -- -- 22,490,144 22,490,144
- ------------------------------------------------------------------------------------------------------------------------------------
At December 31, 1994 64,728,694 6,472,869 10,312,015 (475,789) -- 106,694,743 123,003,838
Common stock issued
under restricted stock
awards (Note 6) 2,078 208 (208) -- -- -- --
Amortization of restricted
stock awards (Note 6) -- -- 607,025 -- -- -- 607,025
Increase in currency
translation adjustments -- -- -- -- (1,052,081) -- (1,052,081)
Cash dividends declared
($.09 per share) -- -- -- -- -- (5,816,863) (5,816,863)
Net income -- -- -- -- -- 27,730,102 27,730,102
- ------------------------------------------------------------------------------------------------------------------------------------
At December 31, 1995 64,730,772 $6,473,077 10,918,832 (475,789) (1,052,081) 128,607,982 $144,472,021
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
28 Total System Services, Inc.(SM)
Consolidated Statements of Cash Flows
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 27,730,102 22,490,144 20,223,061
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in (income) loss of joint venture (68,666) 12,612 --
Depreciation and amortization 20,285,123 16,389,812 14,981,970
Provision for doubtful accounts 458,606 (559,305) 137,848
Deferred income tax expense 963,384 2,823,772 4,389,755
(Gain) loss on disposal of equipment, net 122,790 (64,539) (335,670)
(Increase) decrease in:
Accounts receivable (13,970,497) (2,630,810) (5,386,678)
Prepaid expenses and other assets (10,049,764) (9,708,812) (6,950,719)
Increase (decrease) in:
Accounts payable 314,885 2,214,514 (1,109,303)
Accrued expenses and other current liabilities 12,137,363 5,772,622 2,722,579
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 37,923,326 36,740,010 28,672,843
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property and equipment (16,977,970) (8,736,909) (8,034,038)
Purchases of computer software (5,512,297) (3,140,016) (1,908,595)
Additions to internally developed software (2,617,445) (10,623,828) (11,687,596)
Proceeds from disposal of equipment 864,699 111,295 444,321
Proceeds from bonds called -- -- 37,000
Purchases of businesses, net of cash and
cash equivalents acquired -- 463,347 --
Investment in joint venture (3,455,865) (2,735,088) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (27,698,878) (24,661,199) (21,148,908)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from long-term debt 1,965,775 -- --
Principal payments on long-term debt and
capital lease obligations (2,208,457) (1,342,144) (10,729,388)
Dividends paid on common stock (5,816,817) (4,843,399) (4,508,392)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (6,059,499) (6,185,543) (15,237,780)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 4,164,949 5,893,268 (7,713,845)
Cash and cash equivalents at beginning of period 14,684,674 8,791,406 16,505,251
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 18,849,623 14,684,674 8,791,406
- ------------------------------------------------------------------------------------------------------------------------------------
Cash paid for interest $ 157,130 159,356 645,808
- ------------------------------------------------------------------------------------------------------------------------------------
Cash paid for income taxes $ 16,244,194 9,094,595 8,674,997
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
Total System Services, Inc.(SM) 29
Notes To Consolidated Financial Statements
NOTE 1 Basis of Presentation and Summary of Significant Accounting Policies
Business: Total System Services, Inc. ("TSYS" or "the Company") is an 80.8%
owned subsidiary of Columbus Bank and Trust Company ("CB&T"), which is a wholly
owned subsidiary of Synovus Financial Corp. ("Synovus"), whose stock is traded
on the NYSE under the symbol "SNV." TSYS provides bankcard data processing and
other related services to banks and other institutions.
Principles of Consolidation and Basis of Presentation: The accompanying
consolidated financial statements of Total System Services, Inc. include the
accounts of TSYS and its wholly owned subsidiaries, Columbus Depot Equipment
Company ("CDEC"), Mailtek, Inc. ("Mailtek"), Lincoln Marketing, Inc. ("LMI"),
and Columbus Productions, Inc. ("CPI"). Significant intercompany accounts and
transactions have been eliminated in consolidation.
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
Investment in Joint Venture: TSYS' 49% investment in Total System Services de
Mexico, S.A. de C.V. ("TSYS de Mexico"), a bankcard data processing operation
located in Mexico, is accounted for using the equity method of accounting.
Property and Equipment: Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation expense is computed
using the straight-line method over the estimated useful lives of the assets.
Computer Software: The Company capitalizes software development costs incurred
from the time technological feasibility of the software product or enhancement
is established until the software is ready for use in providing processing
services to customers. Research and development costs and other computer
software maintenance costs related to software development are expensed as
incurred. Software development costs related to the core of TS2 are amortized
using the greater of (1) the straight-line method over the estimated useful
lives of 10 years or (2) the ratio of current revenues to current and
anticipated revenues. All other software development costs and costs of
purchased computer software are amortized using the greater of (1) the
straight-line method over the estimated useful lives of three to five years or
(2) the ratio of current revenues to current and anticipated revenues.
The carrying value of computer software costs is reviewed for impairment by
the Company, and impairments are recognized when the expected undiscounted
future cash flows derived from such intangible assets are less than their
carrying value. If such review indicates a potential impairment, the Company
uses fair value in determining the amount that should be written off.
Revenue Recognition: The Company's bankcard data processing revenues are derived
from long-term processing contracts with banks and other institutions and are
recognized as revenues at the time the services are performed. The Company's
service contracts generally contain terms ranging from three to ten years.
30 Total System Services, Inc.(SM)
Contract Acquisition Costs: The Company capitalizes certain contract acquisition
costs related to signing a long-term contract. These costs, which primarily
consist of cash payments for rights to provide processing services, incremental
internal conversion and software development costs, and third-party software
development costs, are amortized using the straight-line method over the initial
contract term beginning when the customer's cardholder accounts are converted to
the Company's processing system. The Company evaluates the existence of
impairment on the basis of whether these costs are fully recoverable from
expected undiscounted cash flows of the related contract. If such review
indicates a potential impairment, the Company uses fair value in determining the
amount that should be written off. All costs incurred prior to contract
execution are expensed as incurred.
Goodwill: Goodwill results from the excess of cost over the fair value of net
assets of businesses acquired and is being amortized using the straight-line
method over periods of five to 15 years. The Company reviews goodwill for
impairment on the basis of whether the goodwill is fully recoverable from
expected undiscounted cash flows of the related business units. If such review
indicates a potential impairment, the Company uses fair value in determining the
amount that should be written off.
Income Taxes: Income tax expense reflected in TSYS' consolidated financial
statements has been computed based on the taxable income of TSYS as a separate
entity. A consolidated federal income tax return is filed for Synovus and its
majority owned subsidiaries, including TSYS.
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109 ("Statement 109"). Under the
asset and liability method of Statement 109, deferred income tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred income tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under Statement 109, the effect on deferred income tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Cash Flow Reporting: Cash equivalents are considered to be investments with a
maturity of three months or less when purchased.
Net Income per Share: Net income per share is based on the weighted average
number of shares of common stock outstanding during each period, including
shares issued under restricted stock awards. The dilutive impact of contingently
issuable shares and outstanding options to acquire common stock is not
significant to the computation of net income per share.
Fair Values of Financial Instruments: The Company uses financial instruments in
the normal course of its business. The carrying values of cash equivalents,
accounts receivable, accounts payable, and employee benefits and other current
liabilities approximate fair value due to the short-term maturities of these
assets and liabilities. The investment in joint venture is accounted for by the
equity method and pertains to
Total System Services, Inc.(SM) 31
a privately held company for which a fair value is not readily available. The
Company believes the fair value of its joint venture investment exceeds the
carrying value.
Foreign Currency Translation: Foreign currency financial statements of foreign
joint ventures are translated into U.S. dollars at current exchange rates,
except for revenues, costs and expenses, and net income which are translated at
average exchange rates during each reporting period. Net exchange gains or
losses resulting from the translation of assets and liabilities of equity
investments in foreign joint ventures are accumulated in a separate section of
shareholders' equity titled Cumulative Currency Translation Adjustments.
Reclassifications: Certain reclassifications have been made to the 1994 and 1993
financial statements to conform to the presentation adopted in 1995.
NOTE 2 Relationship with Affiliated Companies
At December 31, 1995, CB&T owned 52,200,646 shares (approximately 80.8%) of
TSYS' common stock.
TSYS has entered into agreements with CB&T and certain of its affiliates,
pursuant to which TSYS performs bankcard data processing services. Such bankcard
data processing service revenues approximated $1,805,000, $1,495,000 and
$1,461,000 during the years ended December 31, 1995, 1994 and 1993,
respectively. Bankcard data processing revenues related to TSYS de Mexico, the
Company's Mexican joint venture, were approximately $8.3 million for the year
ended December 31, 1995. Revenues from other services provided by TSYS to
Synovus and its affiliates approximated $718,000, $614,000 and $203,000 during
the years ended December 31, 1995, 1994 and 1993, respectively.
TSYS maintains an unsecured credit agreement with CB&T. The credit
agreement has a maximum available principal balance of $5.0 million, with
interest at prime. TSYS did not use the credit facility during 1995 or 1994.
In 1995, 1994 and 1993, TSYS received interest income from CB&T amounting
to $837,356, $384,070 and $338,230, respectively. Also, in 1995, 1994 and 1993,
TSYS paid CB&T interest expense of $78,318, $60,193 and $429,136, respectively.
During 1995, 1994 and 1993, Synovus Data Corp. paid TSYS $701,159, $732,136
and $715,254, respectively, for data links, network services and other
miscellaneous items.
TSYS leases a portion of its facilities from Synovus Data Corp. and CB&T,
and leases portions of the buildings it owns to CB&T. TSYS made lease payments
for office facilities to Synovus Data Corp. of $214,650 in 1995, 1994 and 1993.
Lease payments received from CB&T amounted to $20,203 in 1995, $30,716 in 1994,
and $19,088 in 1993; TSYS made lease payments to CB&T of $54,313 in 1995 and
$71,720 in 1994. Before the Company acquired Columbus Productions, Inc. in 1994,
TSYS paid CPI an aggregate amount of $469,422 for printing services in 1993.
TSYS has entered into a management agreement with Synovus pursuant to which
TSYS pays for management, legal and tax services provided by Synovus. Such
management fees amounted to $1,039,693, $915,215 and $582,300 for the years
ended December 31, 1995, 1994 and 1993, respectively. Synovus paid TSYS
management fees of $361,093 and $409,438 in 1995 and 1994, respectively, for
payroll processing support services.
In July 1995, Synovus formed a separate company, Synovus Administrative
Services Corp. ("SASC"), to provide human resource, payroll, security,
maintenance and other
32 Total Sytem Services, Inc.(SM)
administrative services to TSYS and other affiliated companies. TSYS paid SASC
$3,158,695 for these services in 1995. TSYS received $198,578 in rent from SASC
in 1995.
TSYS maintains deposit accounts with CB&T, the majority of which are
interest-earning and on which TSYS receives market rates of interest. Included
in cash and cash equivalents are deposit balances with CB&T of $16,742,926 and
$13,862,765 at December 31, 1995 and 1994, respectively.
Certain officers of TSYS participate in the Synovus 1994 Long-Term
Incentive Plan. These officers were provided restricted stock awards and
nonqualified options for Synovus stock in 1995 and 1994 as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Number of Shares
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Restricted stock awards ...... 17,122 12,217
Stock options ................ 127,370 36,651
</TABLE>
The restricted stock awards were valued at the price paid for the Synovus
shares which was $389,526 and $210,743 in 1995 and 1994, respectively, and
recognized as compensation expense over the five-year vesting period. The stock
options were granted with an exercise price equal to the market value of Synovus
common stock at the date of grant. The options are exercisable in two or three
years and expire eight years from date of grant.
On January 2, 1994, TSYS acquired Columbus Productions, Inc., provider of
full-service commercial printing and related services, from CB&T in exchange for
202,246 newly issued shares of TSYS common stock with a market value of $2.7
million at the date of acquisition; the assets and liabilities of CPI were
recorded at their historical cost in a manner similar to a pooling of interests.
The Company believes the terms and conditions of transactions between TSYS,
CB&T, Synovus, SASC and other affiliated companies are comparable to those which
could have been obtained in transactions with unaffiliated parties.
NOTE 3 Property and Equipment
Property and equipment balances at December 31 were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Land ........................ $ 2,482,820 2,255,820
Buildings ................... 38,071,521 33,423,379
Computer equipment .......... 38,122,588 35,574,895
Furniture and other equipment 30,840,053 27,516,732
Construction in progress .... -- 592,964
- --------------------------------------------------------------------------------
109,516,982 99,363,790
Less accumulated depreciation
and amortization ............ 54,944,079 51,468,537
- --------------------------------------------------------------------------------
Property and equipment, net . $ 54,572,903 47,895,253
================================================================================
</TABLE>
Depreciation of property and equipment was $9,768,665, $9,802,873 and
$10,381,060 for 1995, 1994 and 1993, respectively.
NOTE 4 Computer Software
Computer software at December 31 is summarized as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
TS2 ......................... $33,048,872 33,048,872
Other internally developed
software including TS2
enhancements ................ 5,346,071 3,803,910
Purchased computer software . 17,137,936 11,780,949
- --------------------------------------------------------------------------------
55,532,879 48,633,731
Less accumulated amortization 16,317,318 9,393,910
- --------------------------------------------------------------------------------
Computer software, net ...... $39,215,561 39,239,821
================================================================================
</TABLE>
Total System Services, Inc.(SM) 33
Capitalized software development costs for the years ended December 31, 1995,
1994 and 1993 were $2,617,445, $10,623,828 and $11,687,596, respectively.
Amortization expense related to computer software costs was $7,357,544,
$3,669,448 and $2,174,887 for the years ended December 31, 1995, 1994 and 1993,
respectively.
NOTE 5 Long-Term Debt and Obligations Under Capital Leases
Long-term debt and obligations under capital leases at December 31 consists of
the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
9.75% Industrial Development
Authority bonds payable,
principally held by CB&T
and its affiliates ................. $ -- 25,000
Capital lease obligations, with
interest rates ranging from
7.85% to 13.48%, payable
monthly through 1999,
secured by equipment with
a carrying value of $495,264 ....... 582,949 750,775
Note payable with an interest rate
of 9.23%, maturing in 2003 ......... 347,792 386,423
- --------------------------------------------------------------------------------
Total long-term debt and obligations
under capital leases ............... 930,741 1,162,198
Less: current portion .............. 243,786 255,631
- --------------------------------------------------------------------------------
Noncurrent portion of long-
term debt and obligations
under capital leases ............... $686,955 906,567
================================================================================
</TABLE>
NOTE 6 Shareholders' Equity
Restricted Stock Awards: The Company has issued its common stock to certain
executive officers under restricted stock awards. The market value of the common
stock at the date of issuance is included as a reduction of additional paid-in
capital in the Company's consolidated balance sheets and is amortized as
compensation expense over the vesting period of the awards. Compensation expense
relating to these awards was $607,025, $618,019 and $618,018 for the years ended
December 31, 1995, 1994 and 1993, respectively, and unamortized compensation at
December 31, 1995, was $1,113,834. Common stock issued under restricted stock
awards is considered outstanding for purposes of the computation of net income
per share. The amounts and terms of common stock issued under restricted awards
are summarized as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Market Value at Vesting
Date of Issuance of Shares Date of Issuance Period
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
July 21, 1992 217,600 $1,332,800 60 months
February 24, 1992 262,000 1,801,250 72 months
November 6, 1995 2,078 46,495 36 months
</TABLE>
Long-Term Incentive Plan: In 1992, the Total System Services, Inc. Long-Term
Incentive Plan ("LTI Plan") was adopted to enable Total System Services, Inc.
and subsidiaries to attract, retain, motivate and reward employees who make a
significant contribution to the Company's long-term success, and to enable such
employees to acquire and maintain an equity interest in the Company. The LTI
Plan is administered by the Compensation Committee of the Company's Board of
Directors and enables the Company to grant stock options, stock appreciation
rights, restricted stock and performance awards. Four hundred thousand shares of
the Company's common stock are reserved for distribution under the terms of the
34 Total System Services, Inc.(SM)
LTI Plan. During 1994, the Company awarded compensatory options to acquire
99,650 shares of common stock to certain key employees. All options granted were
nonqualified stock options with an exercise price of $6 per share and are
exercisable beginning in June 1997 and expiring in June 2002. The Company is
recording compensation expense of $454,638 for the difference between the
exercise price and the fair market value of the Company's common stock at the
date of grant over the period from the date of grant through June 1997, the
vesting date. As of December 31, 1995, options to acquire 95,600 shares remained
outstanding after cancellations with none of these options exercisable.
NOTE 7 Income Taxes
The provision for income taxes includes income taxes currently payable and those
deferred because of temporary differences between the financial statement and
tax bases of assets and liabilities.
Income tax expense for the years ended December 31, 1995, 1994 and 1993,
consists of:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Current Deferred Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1995:
Federal ....... $13,522,207 1,620,553 15,142,760
State ......... 1,491,383 (657,169) 834,214
- --------------------------------------------------------------------------------
$15,013,590 963,384 15,976,974
================================================================================
1994:
Federal ....... $ 9,550,558 2,247,759 11,798,317
State ......... 549,925 576,013 1,125,938
- --------------------------------------------------------------------------------
$10,100,483 2,823,772 12,924,255
================================================================================
1993:
Federal ....... $ 7,953,505 3,155,452 11,108,957
State ......... 303,919 1,234,303 1,538,222
- --------------------------------------------------------------------------------
$ 8,257,424 4,389,755 12,647,179
================================================================================
</TABLE>
Income tax expense differed from the amounts computed by applying the
statutory U.S. federal income tax rate of 35% to income before income taxes and
equity in income (loss) of joint venture as a result of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed "expected"
tax expense ............. $15,273,444 12,395,040 11,504,584
Increase (decrease)
in income taxes
resulting from:
State income tax
expense, net of
federal income
tax benefit ............. 542,239 731,860 999,844
Other, net .............. 161,291 (202,645) 142,751
- --------------------------------------------------------------------------------
$15,976,974 12,924,255 12,647,179
================================================================================
</TABLE>
The tax effects of temporary differences that gave rise to the deferred
income tax assets and liabilities at December 31, 1995 and 1994, are presented
below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred income tax assets,
primarily accruals not
deductible until paid .......... $ 3,392,874 1,173,911
Deferred income tax liabilities:
Computer software
development costs
and other costs ................ (17,653,794) (15,400,212)
Other, net ..................... (1,999,130) (1,688,253)
- --------------------------------------------------------------------------------
Total deferred income
tax liability .................. (19,652,924) (17,088,465)
- --------------------------------------------------------------------------------
Net deferred income
tax liability .................. $(16,260,050) (15,914,554)
================================================================================
</TABLE>
Total System Services, Inc.(SM) 35
NOTE 8 Employee Benefit Plans
The Company provides certain benefits to its employees by allowing employees to
participate in certain defined contribution plans. These employee benefit plans
are described as follows:
Profit Sharing Plan: The Company's employees are eligible to participate in the
Synovus Financial Corp./Total System Services, Inc. ("Synovus/TSYS") Profit
Sharing Plan. The Company's contributions to the plan are contingent upon
achievement of certain financial goals. The terms of the plan limit the
Company's contribution to 9% (15% in 1994 and 1993) of participant compensation,
as defined, not to exceed the maximum allowable deduction under Internal Revenue
Service guidelines. TSYS' annual contributions to the plan charged to expense
are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
1995 .............. $4,429,998
1994 .............. 4,947,261
1993 .............. 4,435,756
</TABLE>
Stock Purchase Plan: The Company maintains stock purchase plans for directors
and employees, whereby TSYS makes contributions equal to one-half of employee
and director voluntary contributions. The funds are used to purchase presently
issued and outstanding shares of TSYS common stock for the benefit of
participants. TSYS' contributions to these plans charged to expense are as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
1995 .............. $962,829
1994 .............. 692,208
1993 .............. 532,065
</TABLE>
Money Purchase Plan: In 1995, the Company's employees became eligible to
participate in the Synovus/TSYS Money Purchase Pension Plan, a defined
contribution pension plan. The terms of the plan provide for the Company to make
annual contributions to the Plan equal to 7% of participant compensation, as
defined. The Company's contribution to the plan charged to expense for the year
ended December 31, 1995, was $3,417,057.
401(k) Plan: Also in 1995, the Company's employees became eligible to
participate in the Synovus/TSYS 401(k) Plan. The terms of the plan allow
employees to contribute up to 10% of pretax compensation with a discretionary
company contribution up to a maximum of 5% of participant compensation, as
defined, based upon the Company's attainment of certain financial goals. The
Company's contribution to the plan charged to expense for the year ended
December 31, 1995, was $1,601,939.
Pension Plan: The Company terminated its defined benefit pension plan during
1995. No significant gain or loss resulted from the Company's termination of the
plan. Total pension expense for 1994 and 1993 was $623,788 and $420,658,
respectively.
Postretirement Medical Benefits Plan: TSYS provides certain medical benefits to
qualified retirees through a postretirement medical benefits plan. The benefit
expense and accrued benefit cost associated with the plan are not material to
the Company's consolidated financial statements.
36 Total System Services, Inc.(SM)
NOTE 9 Commitments and Contingencies
Lease Commitments: TSYS is obligated under noncancel-able operating leases for
computer equipment and facilities. Management expects that, as these leases
expire, they will be renewed or replaced by similar leases. The future minimum
lease payments under noncancelable operating leases with remaining terms greater
than one year for the next five years and in the aggregate as of December 31,
1995, are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
1996 .............. $27,194,187
1997 .............. 22,591,272
1998 .............. 4,927,017
1999 .............. 3,553,809
2000 .............. 1,360,557
- --------------------------------------------------------------------------------
$57,252,868
================================================================================
</TABLE>
Total rental expense under all operating leases in 1995, 1994 and 1993 was
$34,862,784, $26,408,605 and $22,017,438, respectively.
Contractual Commitments: In the normal course of its business, the Company
maintains processing contracts with its customers. These processing contracts
contain commitments, including, but not limited to, minimum standards and time
frames against which the Company's performance is measured. In the event the
Company does not meet its contractual commitments with its customers, the
Company may incur penalties and/or certain customers may have the right to
terminate their contracts with the Company. The Company does not believe that it
will fail to meet its contractual commitments to an extent that will result in a
material adverse effect on its financial condition or results of operations.
Contingencies: The Company is subject to lawsuits, claims and other complaints
arising out of the ordinary conduct of its business. In the opinion of
management, based in part upon the advice of legal counsel, all matters are
adequately covered by insurance or, if not covered, are without merit or are of
such kind or involve such amounts as would not have a material effect on the
financial condition or results of operations of the Company if disposed of
unfavorably.
NOTE 10 Supplementary Balance Sheet Information Significant components of other
assets are summarized as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Contract acquisition costs, net ..... $17,628,448 10,383,099
Investment in joint venture, net ..... 4,506,686 2,722,476
</TABLE>
Significant components of other current liabilities are summarized as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Accrued salaries and
related liabilities .......... $ 4,523,723 2,529,320
</TABLE>
NOTE 11 Major Customers
For the years ended December 31, 1995, 1994 and 1993, two customers accounted
for approximately 34%, 36% and 37% of total revenues, respectively.
Total System Services, Inc.(SM) 37
Report of Independent Auditors
303 Peachtree Street, N.E.
Suite 2000
Atlanta, GA 30308
The Board of Directors and Shareholders
Total System Services, Inc.:
We have audited the accompanying consolidated balance sheets of Total System
Services, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, shareholders equity, and cash flows
for each of the years in the three-year period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Total System
Services, Inc. and subsidiaries at December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995 in conformity with generally accepted accounting
principles.
/s/KPMG Peat Marwick LLP
January 26, 1996
38 Total System Services, Inc.(SM)
Quarterly Financial Data, Stock Price, Dividend Information
TSYS' common stock trades on the New York Stock Exchange ("NYSE") under the
symbol "TSS." Price and volume information appears under the abbreviation
"TotlSysSvc" in NYSE daily stock quotation listings. As of December 21, 1995,
there were 4,755 holders of record of TSYS common stock, some of whom are
holders in nominee name for the benefit of different shareholders.
The fourth quarter dividend was declared on December 11, 1995, and was paid
January 2, 1996, to shareholders of record on December 21, 1995. Total dividends
declared in 1995 amounted to $5.8 million, as compared to $5.2 million in 1994.
It is the present intention of the Board of Directors of TSYS to continue to pay
cash dividends on its common stock.
Presented here is a summary of the unaudited quarterly financial data for the
years ended December 31, 1995 and 1994.
[Omitted Revenues Graph is represented by the following table.]
<TABLE>
<CAPTION>
Revenues
(Millions of Dollars)
1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
QTR 1 ............ $41.0 $53.4
QTR 2 ............ 44.8 59.1
QTR 3 ............ 47.9 66.1
QTR 4 ............ 53.8 71.1
</TABLE>
[Omitted Net Income Graph is represented by the following table.]
<TABLE>
<CAPTION>
Net Income
(Millions of Dollars)
1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
QTR 1 ............ $4.3 $4.8
QTR 2 ............ 5.2 6.0
QTR 3 ............ 5.7 7.4
QTR 4 .......... 7.2 9.5
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth
(in thousands except per share data) Quarter Quarter Quarter Quarter
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 Revenues ........................... $53,380 59,134 66,108 71,086
Operating income ................... 7,763 10,021 10,746 14,392
Net income ......................... 4,784 6,013 7,390 9,543
Net income per share ............... .08 .09 .11 .15
Cash dividends declared per share .. .0225 .0225 .0225 .0225
Stock prices:
High ............................ 18 1/8 17 1/4 24 1/8 31 5/8
Low ............................. 16 1/8 13 3/8 14 3/4 21 1/4
- ---------------------------------------------------------------------------------------
1994 Revenues ........................... $40,977 44,836 47,938 53,820
Operating income ................... 7,060 8,481 8,517 11,040
Net income ......................... 4,349 5,225 5,717 7,200
Net income per share ............... .07 .08 .09 .11
Cash dividends declared per share .. .0175 .0175 .0225 .0225
Stock prices:
High ............................ 14 1/8 13 16 5/8 19 5/8
Low ............................. 12 3/4 10 1/8 9 5/8 15 1/2
Total System Services, Inc.(SM) 39
</TABLE>
[LOGO]
Richard W. Ussery March 15, 1996
Chairman of the Board
Dear Shareholder:
The Annual Meeting of the Shareholders of Total System Services, Inc. will
be held on April 15, 1996, at The Columbus Museum, Columbus, Georgia, beginning
at 10:00 o'clock A.M., E.T., for the purposes set forth in the accompanying
Notice of Annual Meeting of Shareholders and Proxy Statement.
We hope that you will be able to be with us and let us give you a review of
1995. Whether you own a few or many shares of stock and whether or not you plan
to attend in person, it is important that your shares be voted on matters that
come before the meeting. To make sure your shares are represented, we urge you
to complete and mail the enclosed Proxy Card promptly.
Thank you for helping us make 1995 a good year. We look forward to your
continued support in 1996 and another good year.
Sincerely yours,
/s/ Richard W. Ussery
RICHARD W. USSERY
Total System Services, Inc. Post Office Box 2506 Columbus, Georgia 31902-2506
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 15, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of Total
System Services, Inc.(SM) ("TSYS(R)") will be held at The Columbus Museum, 1251
Wynnton Road, Columbus, Georgia, on April 15, 1996, at 10:00 o'clock A.M., E.T.,
for:
(1) The election of five nominees as Class I directors of TSYS to serve
until the 1999 Annual Meeting of Shareholders;
(2) To approve the Synovus Financial Corp. Executive Bonus Plan (TSYS
is an 80.8% owned subsidiary of Synovus Financial Corp.); and
(3) The transaction of such other business as may properly come before the
Annual Meeting.
Information relating to the above matters is set forth in the accompanying
Proxy Statement.
Only shareholders of record at the close of business on February 22, 1996
will be entitled to notice of and to vote at the Annual Meeting.
/s/ G. Sanders Griffith, III
G. SANDERS GRIFFITH, III
Secretary
Columbus, Georgia
March 15, 1996
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE ANNUAL MEETING IN PERSON, PLEASE
VOTE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE
ENCLOSED RETURN ENVELOPE WHICH DOES NOT REQUIRE ANY POSTAGE IF MAILED IN THE
UNITED STATES.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 15, 1996
I. INTRODUCTION
A. Purposes of Solicitation - Terms of Proxies.
The Annual Meeting of the Shareholders ("Annual Meeting") of Total System
Services, Inc. ("TSYS") will be held on April 15, 1996 for the purposes set
forth in the accompanying Notice of Annual Meeting of Shareholders and in this
Proxy Statement. The enclosed Proxy Card ("Proxy") is solicited BY AND ON BEHALF
OF TSYS' BOARD OF DIRECTORS in connection with such Annual Meeting or any
adjournment thereof. The costs of the solicitation of Proxies by TSYS' Board of
Directors will be paid by TSYS. Forms of Proxies and Proxy Statements will also
be distributed through brokers, banks, nominees, custodians and other like
parties to the beneficial owners of shares of the $.10 par value common stock of
TSYS ("TSYS Common Stock"), and TSYS will reimburse such parties for their
reasonable out-of-pocket expenses therefor. TSYS' mailing address is Post Office
Box 2506, Columbus, Georgia 31902-2506.
The shares represented by the Proxy in the accompanying form, which when
properly executed, returned to TSYS' Board of Directors and not revoked, will be
voted in accordance with the instructions specified in such Proxy. If a choice
is not specified in the Proxy, the shares represented by such Proxy will be
voted "FOR" the election of the five nominees for Class I directors named herein
and in accordance with the recommendations of the Board of Directors on the
other matters brought before the Meeting.
Each Proxy granted may be revoked in writing at any time before the
authority granted thereby is exercised. Attendance at the Annual Meeting will
constitute a revocation of the Proxy for such Meeting if the maker thereof
elects to vote in person.
This Proxy Statement and the enclosed Proxy are being first mailed to
shareholders on or about March 15, 1996.
B. TSYS Securities Entitled to Vote and Record Date.
TSYS' outstanding voting securities are TSYS Common Stock, each share of
which entitles the holder thereof to one vote on any matter coming before a
meeting of TSYS' shareholders. Only shareholders of record at the close of
business on February 22, 1996 are entitled to vote at the Annual Meeting or any
adjournment thereof. As of that date, there were 64,644,361 shares of TSYS
Common Stock outstanding and entitled to vote. TSYS owned 97,400 shares of TSYS
Common Stock on February 22, 1996 as treasury shares, which are not considered
to be outstanding and are not entitled to be voted at the Annual Meeting.
C. Shareholder Proposals.
From time to time, TSYS' shareholders may present proposals which may be
proper subjects for inclusion in TSYS' Proxy Statement for consideration at
TSYS' Annual Meeting. To be considered for inclusion, shareholder proposals must
be submitted on a timely basis. Proposals for TSYS' 1997 Annual Meeting, which
has been tentatively scheduled for April 14, 1997, must be received by TSYS no
later than November 15, 1996, and any such proposals, as well as any questions
related thereto, should be directed to the Secretary of TSYS.
1
D. Columbus Bank and Trust Company.
Columbus Bank and Trust Company(R) (CB&T") owned individually 52,200,646
shares, or 80.8%, of the outstanding shares of TSYS Common Stock on February 22,
1996. CB&T(R) is a wholly-owned banking subsidiary of Synovus Financial Corp.(R)
("Synovus"), a multi-financial services company having 77,264,014 shares of
$1.00 par value voting common stock ("Synovus Common Stock") outstanding on
February 22, 1996.
II. ELECTION OF DIRECTORS
A. Information Concerning Number and Classification of Directors and
Nominees.
(1) Number and Classification of Directors.
In accordance with the vote of shareholders taken at TSYS' 1988 Annual
Meeting, the number of members of TSYS' Board of Directors was fixed at 18.
TSYS' Board of Directors is currently comprised of 15 members, and TSYS has
three directorships which remain vacant, one of which positions was made vacant
by the ascension of a Class II director to emeritus status. These vacant
directorships could be filled in the future at the discretion of TSYS' Board of
Directors. This discretionary power gives TSYS' Board of Directors the
flexibility of appointing new directors in the periods between TSYS' Annual
Meetings should suitable candidates come to its attention. Any person appointed
by TSYS' Board of Directors to fill the vacant Class II directorship would serve
the remainder of the Class II term, which expires at the 1997 Annual Meeting.
Any person so appointed by TSYS' Board of Directors to the remaining vacant
directorships would not be appointed to serve a classified, three-year term but
would only serve as a director until the next succeeding Annual Meeting. At such
Annual Meeting, such appointee would stand before TSYS' shareholders for
election to a classified term of office as a director. Proxies cannot be voted
at the 1996 Annual Meeting for a greater number of persons than the number of
nominees named.
Pursuant to TSYS' Articles of Incorporation and bylaws, the members who
comprise TSYS' Board of Directors are divided into three classes of directors:
Class I, Class II and Class III directors, with each of such Classes of
directors to be as nearly equal in number as possible. Each Class of directors
serves a staggered 3-year term. At TSYS' 1995 Annual Meeting, Class III
directors were elected to serve 3-year terms to expire at TSYS' 1998 Annual
Meeting, and at TSYS' 1994 Annual Meeting, Class II directors were elected to
serve 3-year terms to expire at TSYS' 1997 Annual Meeting. The terms of office
of the Class I directors expire at TSYS' 1996 Annual Meeting.
(2) Nominees for Class I Directors and Vote Required.
TSYS' Board of Directors has selected five nominees which it proposes for
election to TSYS' Board as Class I directors. The five nominees for Class I
directors of TSYS will be elected to serve 3-year terms that will expire at
TSYS' 1999 Annual Meeting. The five nominees for Class I directors of TSYS are:
Griffin B. Bell, Kenneth E. Evans, H. Lynn Page, Philip W. Tomlinson and Richard
W. Ussery.
Under TSYS' bylaws and Georgia law, a majority of the issued and
outstanding shares of TSYS Common Stock entitled to vote must be represented at
the 1996 Annual Meeting in order to constitute a quorum and all shares
represented at the Meeting, including shares abstaining and withholding
authority, are counted for purposes of determining whether a quorum exists. The
nominees for election as directors at the Annual Meeting who receive the
greatest number of votes (a plurality), a quorum being present, shall become
directors at the conclusion of the tabulation of votes. Thus, once a quorum has
been established, abstentions and broker non-votes have no effect upon the
election of directors. The shares represented by Proxies executed for TSYS' 1996
Annual Meeting in such manner as not to withhold authority to vote for the
election of any nominee for election as a Class I director on TSYS' Board of
Directors shall be voted "FOR" the election of the five nominees for Class I
directors on TSYS' Board named herein.
2
If any nominee for Class I director of TSYS becomes unavailable for any
reason before TSYS' 1996 Annual Meeting, the shares represented by executed
Proxies may be voted for such substitute nominee as may be determined by the
holders of such Proxies. It is not anticipated that any nominee will be
unavailable for election.
TSYS' BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF THE FIVE
NOMINEES FOR ELECTION AS CLASS I DIRECTORS ON TSYS' BOARD SET FORTH HEREIN.
B. Information Concerning Directors and Nominees for Class I Directors.
(1) General Information.
The following sets forth the name, age, principal occupation and employment
(which, except as noted, has been for the past five years) of each of the
nominees for election as Class I directors of TSYS and the remaining directors
presently serving on TSYS' Board of Directors, his director classification, his
length of service as a director of TSYS, any family relationships with other
directors or executive officers of TSYS, and any Board of Directors of which he
is a member with respect to any company with a class of securities registered
with the Securities and Exchange Commission ("SEC") pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended ("Exchange Act"), including
Synovus, or any company which is subject to the requirements of Section 15(d) of
that Act, or any company registered with the SEC as an investment company under
the Investment Company Act of 1940 ("Public Company").
<TABLE>
<CAPTION>
TSYS Year
Director First Principal Occupation
Classifi- Elected and Other Directorships
Name Age cation Director of Public Companies
<S> <C> <C> <C> <C>
- ------------------------ ------- ---------- ----------- -------------------------------------------------------
Griffin B. Bell 77 I 1987 Senior Partner, King & Spalding (Law Firm).
James H. Blanchard 54 II 1982 Chairman of the Board and Chief Executive Officer,
Synovus Financial Corp.; Chairman of the
Executive Committee, Total System Services, Inc.;
Director, BellSouth Corporation.
Richard Y. Bradley <F1> 57 II 1991 Partner, Bradley & Hatcher (Law Firm). Director,
Synovus Financial Corp.
Salvador
Diaz-Verson, Jr.<F2> 44 III 1983 Chairman of the Board, Diaz-Verson Capital
Investments, Inc. (Investments and Money
Management); Chairman of the Board, Diaz-Verson
Funds Inc.; Director, Clemente Capital, Inc., Miramar
Securities, Inc. and Synovus Financial Corp.
Kenneth E. Evans <F3> 47 I 1990 President, Synovus Administrative Services Corp.
Gardiner W. Garrard, Jr. 55 II 1982 President, The Jordan Company (Real Estate
Development); Director, Synovus Financial Corp.
John P. Illges, III 61 II 1982 Senior Vice President and Financial Consultant, The
Robinson-Humphrey Company, Inc. (Stockbroker);
Advisory Director, Synovus Financial Corp.
Mason H. Lampton 48 III 1986 President, The Hardaway Company (Construction
Company); Director, Synovus Financial Corp.
W. Walter Miller, Jr.<F4> 47 II 1993 Senior Vice President, Total System Services, Inc.
H. Lynn Page 55 I 1982 Vice Chairman of the Board (Retired) and Director,
Synovus Financial Corp., Columbus Bank and Trust
Company and Total System Services, Inc.
3
Philip W. Tomlinson <F5> 49 I 1982 President, Total System Services, Inc.
William B. Turner <F4> 73 III 1982 Chairman of the Executive Committee, W.C. Bradley
Co. (Metal Manufacturer and Real Estate);
Chairman of the Board, Columbus Bank and Trust
Company; Director, The Coca-Cola Company;
Chairman of the Executive Committee, Synovus
Financial Corp.
Richard W. Ussery <F6> 48 I 1982 Chairman of the Board and Chief Executive Officer,
Total System Services, Inc.
George C. Woodruff, Jr. 67 III 1982 Real Estate and Personal Investments; Director,
Synovus Financial Corp. and United Cities Gas
Company.
James D. Yancey <F7> 54 III 1982 Vice Chairman of the Board, Synovus Financial Corp.
and Columbus Bank and Trust Company.
- -------------------
<FN>
<F1>Richard Y. Bradley formed Bradley & Hatcher in September, 1995. From 1991 until 1995, Mr. Bradley served
as President of Bickerstaff Clay Products Company, Inc.
<F2>Salvador Diaz-Verson, Jr. founded Diaz-Verson Capital Investments, Inc. in September, 1991. From 1985 until
1991, Mr. Diaz-Verson, Jr. was President of AFLAC Incorporated.
<F3>Kenneth E. Evans was elected President of Synovus Administrative Services Corp. in July, 1995. From 1990
until 1995, Mr. Evans served in various capacities with TSYS, including Vice Chairman of the Board.
<F4> Mr. Miller's spouse is the niece of William B. Turner.
<F5>Philip W. Tomlinson was elected President of TSYS in February, 1992. From 1982 until 1992, Mr. Tomlinson
served as Executive Vice President of TSYS.
<F6>Richard W. Ussery was elected Chairman of the Board of TSYS in February, 1992. From 1982 until 1992, Mr.
Ussery served as President of TSYS.
<F7>James D. Yancey was elected Vice Chairman of the Board of Synovus in March, 1992. Prior to 1992, Mr.
Yancey served in various capacities with Synovus and CB&T, including Vice Chairman of the Board and
President of both Synovus and CB&T.
</TABLE>
4
(2) TSYS Common Stock Ownership of Directors and Management.
The following table sets forth, as of December 31, 1995, the number of
shares of TSYS Common Stock beneficially owned by each of TSYS' directors and
TSYS' six most highly compensated executive officers. Information relating to
beneficial ownership of TSYS Common Stock is based upon information furnished by
each person or entity using "beneficial ownership" concepts set forth in the
rules of the SEC under Section 13(d) of the Exchange Act.
<TABLE>
<CAPTION> Shares of TSYS Shares of TSYS Shares of TSYS Percentage of
Common Stock Common Stock Common Stock Outstanding
Beneficially Beneficially Beneficially Shares Shares of
Owned with Owned with Owned with of TSYS TSYS Common
Sole Voting Shared Voting Sole Voting but Common Stock Stock
and Investment and Investment no Investment Beneficially Beneficially
Power as of Power as of Power as of Owned as of Owned as of
Name 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
-------------------------- ------------------- -------------------- ------------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Griffin B. Bell 26,364 3,500 --- 29,864 .05%
James H. Blanchard 260,400 120,741 --- 381,141 .59
Richard Y. Bradley 6,733 --- --- 6,733 .01
Salvador Diaz-Verson, Jr. 18,502 1,800 --- 20,302 .03
Kenneth E. Evans 63,000 --- 46,200 109,200 .17
Gardiner W. Garrard, Jr. 2,865 --- --- 2,865 .004
John P. Illges, III 60,990 --- --- 60,990 .09
Mason H. Lampton 8,752 34,210<F1> --- 42,962 .07
James B. Lipham 16,652 --- 14,080 30,732 .05
W. Walter Miller, Jr. 16,750 4,068 14,080 34,898 .05
H. Lynn Page 229,307 31,882 --- 261,189 .40
William A. Pruett 53,649 --- 17,600 71,249 .11
Philip W. Tomlinson 229,600 --- 46,200 275,800 .43
William B. Turner 50,057 192,000 --- 242,057 .37
Richard W. Ussery 203,894 24,175 51,700 279,769 .43
George C. Woodruff, Jr. 35,575 2,000 --- 37,575 .06
M. Troy Woods 8,085 --- 14,740 22,825 .04
James D. Yancey 288,380 8,000 --- 296,380 .46
- --------
<FN>
<F1> Includes 9,600 shares of TSYS Common Stock held in a trust for which Mr.
Lampton is not the trustee. Mr. Lampton disclaims beneficial ownership of such
shares.
</TABLE>
The following table sets forth information, as of December 31, 1995, with
respect to the beneficial ownership of TSYS Common Stock by all directors and
executive officers of TSYS as a group.
<TABLE>
Percentage of
<CAPTION> Shares of Outstanding Shares of
TSYS Common Stock TSYS Common Stock
Name of Beneficially Owned Beneficially Owned
Beneficial Owner as of 12/31/95 as of 12/31/95
- ----------------------- ----------------------- -----------------------------
<S> <C> <C>
All directors
and executive
officers of TSYS 2,213,005 3.42%
as a group
(includes
19 persons)
</TABLE>
For a detailed discussion of the beneficial ownership of Synovus Common
Stock by TSYS' named executive officers and directors and by all directors and
executive officers of TSYS as a group, see Section V(C) hereof captioned
"Synovus Common Stock Ownership of Directors and Management."
5
C. Board Committees and Attendance.
The business and affairs of TSYS are under the direction of TSYS' Board of
Directors. During 1995, TSYS' Board of Directors held six regular meetings.
During 1995, each of TSYS' incumbent directors attended at least 75% of the
meetings of TSYS' Board of Directors and the committees thereof on which he sat,
except Salvador Diaz-Verson, Jr., who attended 67%.
TSYS' Board of Directors has three principal standing committees -- an
Executive Committee, an Audit Committee and a Compensation Committee. There is
no Nominating Committee of TSYS' Board of Directors.
Executive Committee. The members of TSYS' Executive Committee are: James H.
Blanchard, Chairman, Richard W. Ussery, Philip W. Tomlinson, William B. Turner,
James D. Yancey, Gardiner W. Garrard, Jr., Richard Y. Bradley and Kenneth E.
Evans. During the intervals between meetings of TSYS' Board of Directors, TSYS'
Executive Committee possesses and may exercise any and all of the powers of
TSYS' Board of Directors in the management and direction of the business and
affairs of TSYS with respect to which specific direction has not been previously
given by TSYS' Board of Directors. During 1995, TSYS' Executive Committee did
not meet.
Audit Committee. The members of TSYS' Audit Committee are: Gardiner W.
Garrard, Jr., Chairman, Mason H. Lampton and Salvador Diaz-Verson, Jr. The
primary functions to be engaged in by TSYS' Audit Committee include: (i)
annually recommending to TSYS' Board the independent certified public
accountants ("Independent Auditors") to be engaged by TSYS for the next fiscal
year; (ii) reviewing the plan and results of the annual audit by TSYS'
Independent Auditors; (iii) reviewing and approving the range of management
advisory services provided by TSYS' Independent Auditors; (iv) reviewing TSYS'
internal audit function and the adequacy of the internal accounting control
systems of TSYS; (v) reviewing the results of regulatory examinations of TSYS;
(vi) periodically reviewing the financial statements of TSYS; and (vii)
considering such other matters with regard to the internal and independent audit
of TSYS as, in its discretion, it deems to be necessary or desirable,
periodically reporting to TSYS' Board as to the exercise of its duties and
responsibilities and, where appropriate, recommending matters in connection with
the audit function with respect to which TSYS' Board should consider taking
action. During 1995, TSYS' Audit Committee held six meetings.
Compensation Committee. The members of the Compensation Committee of TSYS'
Board of Directors are: William B. Turner, Chairman, George C. Woodruff, Jr. and
Gardiner W. Garrard, Jr. The primary functions to be engaged in by TSYS'
Compensation Committee include: (i) evaluating the remuneration of senior
management and board members of TSYS and its subsidiaries and the compensation
and fringe benefit plans in which officers, employees and directors of TSYS are
eligible to participate; and (ii) recommending to TSYS' Board whether or not it
should modify, alter, amend, terminate or approve such remuneration,
compensation or fringe benefit plans. During 1995, TSYS' Compensation Committee
held one meeting.
D. Executive Officers.
The following table sets forth the name, age and position with TSYS of each
executive officer of TSYS.
<TABLE>
<CAPTION>
Name Age Position with TSYS
- ---------------------------- --- --------------------------------------
<S> <C> <C>
James H. Blanchard 54 Chairman of the Executive Committee
Richard W. Ussery 48 Chairman of the Board
and Chief Executive Officer
Philip W. Tomlinson 49 President
William A. Pruett 42 Executive Vice President
James B. Lipham 47 Executive Vice President
and Chief Financial Officer
M. Troy Woods 44 Executive Vice President
G. Sanders Griffith, III 42 General Counsel and Secretary
6
</TABLE>
All of the executive officers of TSYS are members of TSYS' Board of
Directors, except William A. Pruett, James B. Lipham, M. Troy Woods and G.
Sanders Griffith, III. William A. Pruett was elected as Executive Vice President
of TSYS in February, 1993. From 1976 until 1993, Mr. Pruett served in various
capacities with CB&T and/or TSYS, including Senior Vice President. James B.
Lipham was elected as Executive Vice President and Chief Financial Officer of
TSYS in July, 1995. From 1984 until 1995, Mr. Lipham served in various financial
capacities with Synovus and/or TSYS, including Senior Vice President and
Treasurer. M. Troy Woods was elected as Executive Vice President of TSYS in
July, 1995. From 1987 until 1995, Mr. Woods served in various capacities with
TSYS, including Senior Vice President. G. Sanders Griffith, III has served as
General Counsel of TSYS since 1988 and was elected as Secretary of TSYS in June,
1995. Mr. Griffith currently serves as Senior Executive Vice President, General
Counsel and Secretary of Synovus and has held various positions with Synovus
since 1988.
All of the executive officers of TSYS serve at the pleasure of TSYS' Board
of Directors. There are no family relationships between any of TSYS' executive
officers, and there are no arrangements or understandings between any such
executive officer or any other person pursuant to which any such officer was
elected.
III. DIRECTORS' PROPOSAL TO APPROVE THE
SYNOVUS FINANCIAL CORP. EXECUTIVE BONUS PLAN
TSYS' executive compensation program will include short-term incentive
bonus awards under the Synovus Financial Corp. Executive Bonus Plan (the "Plan")
beginning in 1996. The purposes of the Plan are to reward selected executive
officers for superior corporate performance and to attract and retain top
quality executive officers. Subject to approval by TSYS' shareholders,
compensation paid pursuant to the Plan to TSYS' officers is intended, to the
extent reasonable, to qualify for tax deductibility under Section 162(m) of the
Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder, as may be amended from time to time ("Section 162(m)").
Eligibility and Participation. The Chief Executive Officer and the four
highest compensated officers of Synovus and any publicly-traded subsidiary of
Synovus (including TSYS) are eligible to participate in the Plan. Approximately
10 employees are eligible to participate in the Plan. The Committee, as
described below, has discretion to select participants from among eligible
employees from year to year.
Description of Awards Under the Plan. Pursuant to the Plan, Synovus may
award incentive bonus opportunities to participants. Each fiscal year, the
Committee shall establish, in writing, the performance goals applicable to such
and/or any succeeding fiscal year. The performance measures which shall be used
to determine the amount of the incentive bonus award for each such performance
period shall be chosen from among the following for Synovus, any of its business
segments and/or any of its business units, unless and until the Committee
proposes a change in such measures for shareholder vote or applicable tax and/or
securities laws change to permit the Committee discretion to alter such
performance measures without obtaining shareholder approval: (i) number of
cardholder, merchant and/or other customer accounts processed and/or converted
by TSYS; (ii) successful negotiation or renewal of contracts with new and/or
existing customers by TSYS; (iii) productivity and expense control; (iv) stock
price; (v) return on capital compared to cost of capital; (vi) net income; (vii)
operating income; (viii) earnings per share and/or earnings per share growth;
(ix) return on equity; (x) return on assets; (xi) nonperforming assets and/or
loans as a percentage of total assets and/or loans; (xii) noninterest expense as
a percentage of total expense; (xiii) loan charge-offs as a percentage of total
loans; and (xiv) asset growth. Awards shall be determined based on the
achievement of such preestablished performance goals, and shall be awarded based
on a percentage of a participant's base salary.
The Committee shall have no discretion to increase the amount of any award
under the Plan, but will retain the ability to eliminate or decrease an award
otherwise payable to a participant. The Committee shall certify, in writing,
that the performance goals have been met before any payments to participants may
be made. Payment of the incentive bonus award earned, if any, shall be made in
cash, as soon as practicable thereafter.
Termination of Employment. Any participant not employed by Synovus or a
publicly-traded subsidiary of Synovus on December 31 of any fiscal year will not
be entitled to an award unless otherwise determined by the Committee.
7
Maximum Amount Payable to Any Participant. The maximum amount payable for
each performance period under the Plan to any participant is one hundred fifty
percent (150%) of such participant's base salary; provided, however, that no
participant may receive an award for any performance period in excess of $1.5
million.
Deferral of Bonus Awards. Participants may elect to defer all or a portion
of an incentive bonus award payable under the Plan by providing an election, in
writing, to Synovus prior to the beginning of the year in which the incentive
bonus is to be earned. Deferred amounts shall earn interest at a rate equal to
the average annual short-term prime rate established by CB&T for each fiscal
year.
Distributions of deferred amounts and interest earned thereon to
participants, or their beneficiaries, as applicable, shall be made in cash in
one lump sum or in up to 120 approximately equal monthly installments, as
determined by the Committee. Commencement of payment, in the form determined by
the Committee, shall begin within 30 days after the last day of the month of the
participant's termination of employment by reason of death (except by suicide)
or total disability, or at such time as determined by the Committee in the event
of termination of employment for any other reason; provided that no distribution
shall begin later than the date the participant attains age 70 1/2.
Amendment of the Plan. The Board of Directors of Synovus may amend the Plan
at any time, including amendments that increase the costs of the Plan and
allocate benefits differently between persons and groups in the table below;
provided, however, that no amendment shall be made without shareholder approval
that increases the maximum amount payable to any participant in excess of the
limits set forth above.
Duration of the Plan. The Plan shall remain in effect from the date it is
approved by TSYS' shareholders until the date it is terminated by the Board of
Directors of Synovus. The Board of Directors of Synovus may terminate the Plan
at any time.
Administration. The Plan will be administered by the Compensation Committee
of the Synovus Board of Directors (the "Committee") with the approval, as to
matters involving TSYS employees, of the Compensation Committee of the Board of
Directors of TSYS. The Synovus and TSYS Compensation Committees will be
comprised of two or more Synovus and TSYS "outside" directors within the meaning
of Section 162(m).
Estimate of Benefits. The amounts that will be paid pursuant to the Plan
are not currently determinable. The amounts that would have been awarded for
fiscal year 1995 if the Plan had been in effect and if the Chief Executive
Officer and the five highest compensated officers of TSYS participated in the
Plan are as follows:
<TABLE>
New Plan Benefits
Synovus Financial Corp. Executive Bonus Plan
<CAPTION>
Name Position Dollar Value ($)
- -------------------------- ------------------------------------- ---------------
<S> <C> <C>
Richard W. Ussery Chairman of the Board and $204,750
Chief Executive Officer
Philip W. Tomlinson President 160,500
William A. Pruett Executive Vice President 103,800
M. Troy Woods Executive Vice President 59,375
James B. Lipham Executive Vice President and 48,125
Chief Financial Officer
Kenneth E. Evans Vice Chairman of the Board 130,500
Executive Group 707,050
Non-Executive Director Group -0-
Non-Executive Officer Employee -0-
Group
</TABLE>
Adoption of the proposal requires an affirmative vote by the holders of a
majority of the votes cast thereon. Any shares not voted (whether by absention,
broker non-vote, or otherwise) have no impact on the vote.
TSYS' BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
SYNOVUS FINANCIAL CORP. EXECUTIVE BONUS PLAN.
8
IV. EXECUTIVE COMPENSATION
(1) Summary Compensation Table.
The following table summarizes the cash and noncash compensation for each
of the last three fiscal years for the chief executive officer of TSYS and for
the other five most highly compensated executive officers of TSYS.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION> Long-Term
Annual Compensation Compensation Awards
-------------------------------------------------------- ------------------------------
Other Restricted Securities All
Annual Stock Underlying Other
Name and Compen- Award(s) Options/ Compen-
Principal Position<F1> Year Salary<F2> Bonus sation <F3> <F4> SARs sation <F5>
- ----------------------- ------ -------------- ----------- ------------ -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard W. Ussery 1995 $331,400 $204,750 -0- $222,015 25,991 $102,439
Chairman of the 1994 255,000 162,105 -0- 79,505 13,827 47,400
Board and Chief 1993 222,200 110,000 -0- -0- -0- 77,197
Executive Officer
Philip W. Tomlinson 1995 283,900 160,500 -0- 157,133 18,396 87,508
President 1994 221,350 129,830 -0- 56,252 9,783 42,602
1993 195,950 96,875 -0- -0- -0- 72,023
William A. Pruett 1995 173,000 103,800 -0- 59,604 6,978 50,628
Executive Vice 1994 138,500 88,100 -0- 22,494 3,912 29,428
President 1993 110,500 72,750 -0- -0- -0- 20,679
M. Troy Woods 1995 150,000 59,375 -0- -0- 3,600 35,356
Executive Vice 1994<F6> -- -- -- -- -- --
President 1993<F6> -- -- -- -- -- --
James B. Lipham 1995 122,500 48,125 -0- -0- 3,600 30,302
Executive Vice President 1994 95,000 23,750 -0- -0- 2,400 22,774
and Chief Financial 1993 84,000 21,000 -0- -0- -0- 13,952
Officer
Kenneth E. Evans 1995 233,900 130,500 -0- 114,057 13,352 51,487
Vice Chairman <F7> 1994 213,900 125,300 -0- 52,492 9,129 37,114
of the Board 1993 195,950 96,875 $51,932 -0- -0- 106,524
- --------------------
<FN>
<F1> Mr. Blanchard received no cash compensation from TSYS during 1995, other
than director fees.
<F2> Amount consists of base salary and director fees for Messrs. Ussery,
Tomlinson and Evans.
<F3> Perquisites and other personal benefits are excluded because the aggregate
amount does not exceed the lesser of $50,000 or 10% of annual salary and
bonus for the named executives.
<F4> Amount consists of value of award, net of consideration paid by the
executive. As of December 31, 1995, Messrs. Ussery, Tomlinson, Pruett,
Woods, Lipham and Evans held 64,052, 50,441, 20,970 14,740, 14,080 and
53,086 restricted shares, respectively, with a value of $1,930, 426,
$1,522,062, $633,267, $449,570, $429,440 and $1,606,212, respectively. On
September 5, 1995, restricted stock was awarded in the amount of 8,664,
6,132, 2,326 and 4,451 shares of Synovus Common Stock to Messrs. Ussery,
Tomlinson, Pruett and Evans, respectively, with the following vesting
schedule: 20% on September 5, 1996; 20% on September 5, 1997; 20% on
September 5, 1998; 20% on September 5, 1999; and 20% on September 5, 2000.
On June 28, 1994, restricted stock was awarded in the amount of 4,609,
3,261, 1,304 and 3,043 shares of Synovus Common Stock to Messrs. Ussery,
Tomlinson, Pruett and Evans, respectively, with the following vesting
schedule: 20% on June 28, 1995; 20% on June 28, 1996; 20% on June 28, 1997;
20% on June 28, 1998; and 20% on June 28, 1999. Dividends are paid on all
restricted shares.
9
<F5> The 1995 amount consists of contributions or other allocations to defined
contribution plans of $30,000 for each executive; allocations pursuant to
defined contribution excess benefit agreements of $61,306, $46,123,
$20,194, $4,996 and $14,332 for each of Messrs. Ussery, Tomlinson, Pruett,
Woods and Evans, respectively; premiums paid for group term life insurance
coverage of $720, $648, $434, $360, $302 and $605 for each of Messrs.
Ussery, Tomlinson, Pruett, Woods, Lipham and Evans, respectively; the
economic benefit of life insurance coverage related to split-dollar life
insurance policies of $80, $86 and $177 for each of Messrs. Ussery,
Tomlinson and Evans, respectively; and the dollar value of the benefit of
premiums paid for split-dollar life insurance policies (unrelated to term
life insurance coverage) projected on an actuarial basis of $10,333,
$10,651 and $6,373 for each of Messrs. Ussery, Tomlinson and Evans,
respectively.
<F6> Disclosure is not required for 1994 and 1993.
<F7> Mr. Evans was elected President of Synovus Administrative Services Corp. in
July, 1995.
</TABLE>
(2) Stock Option Exercises and Grants.
The following tables provide certain information regarding stock options granted
and exercised in the last fiscal year and the number and value of unexercised
options at the end of the fiscal year.
<TABLE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION> Individual Grants
- ------------------------------------------------------------------------------
% of Total Potential
Options/ Realized Value at
SARs Exercise Assumed Annual Rates of
Options/ Granted to or Stock Price Appreciation
SARs Employees Base For Option Term <F2>
Granted in Fiscal Price Expiration --------------------------
Name (#)<F1> Year ($/Share) Date 5%($) 10%($)
- ------------------- ----------- ------------- -------- -------------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Richard W. Ussery 25,991 3.57% $22.75 09/04/03 $282,262 $676,286
Philip W. Tomlinson 18,396 2.53% 22.75 09/04/03 199,781 478,664
William A. Pruett 6,978 0.96% 22.75 09/04/03 75,781 181,568
M. Troy Woods 3,600 0.49% 22.75 09/04/03 39,096 93,672
James B. Lipham 3,600 0.49% 22.75 09/04/03 39,096 93,672
Kenneth E. Evans 13,352 1.84% 22.75 09/04/03 145,003 347,419
- ---------------
<FN>
<F1> Options granted on September 4, 1995 at fair market value to executives in
tandem with restricted stock awards as part of the Synovus 1994 Long-Term
Incentive Plan. Options become exercisable on September 4, 1997.
<F2> The dollar gains under these columns result from calculations using the
identified growth rates and are not intended to forecast future price
appreciation of Synovus Common Stock.
</TABLE>
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<CAPTION> Number of Securities Value of
Underlying Unexercised Unexercised In-the-Money
Shares Value Options/SARs at FY-End (#) Options/SARs at FY-End ($)<F1>
Acquired on Realized -------------------------- -----------------------------
Name Exercise (#) ($)<F1> Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------- ------------ ----------- -------------------------- -----------------------------
<C> <C> <C> <C> <C>
Richard W. Ussery -0- -0- 0 / 39,818 0 / $309,979
Philip W. Tomlinson -0- -0- 0 / 28,179 0 / $219,359
William A. Pruett -0- -0- 0 / 10,890 0 / $85,495
M. Troy Woods -0- -0- 0 / 3,600 0 / $21,150
-0- -0- 0 / 3,000<F2> 0 / $73,500
James B. Lipham -0- -0- 0 / 3,600 0 / $21,150
-0- -0- 0 / 2,400<F2> 0 / $58,800
Kenneth E. Evans -0- -0- 0 / 22,481 0 / $182,285
- -----------
10
<FN>
<F1> Market value of underlying securities at exercise or year-end, minus the
exercise or base price.
<F2> Options pertain to shares of TSYS Common Stock.
</TABLE>
(3) Compensation of Directors.
Compensation. During 1995, TSYS' directors received a $12,000 retainer, a
fee of $800 for regular and special meetings of TSYS' Board of Directors they
personally attended and a fee of $500 for meetings of the committees of TSYS'
Board of Directors they personally attended. In addition, directors of TSYS are
entitled to receive an $800 fee for one regular meeting and a fee of $800 for
one special meeting of TSYS' Board of Directors, despite the fact they are
unable to personally attend such meetings.
Director Stock Purchase Plan. TSYS' Director Stock Purchase Plan ("DSPP")
is a non-tax-qualified, contributory stock purchase plan pursuant to which
qualifying TSYS directors can purchase, with the assistance of contributions
from TSYS, presently issued and outstanding shares of TSYS Common Stock. Under
the terms of the DSPP, qualifying directors can elect to contribute up to $1,000
per calendar quarter to make purchases of TSYS Common Stock, and TSYS
contributes an additional amount equal to 50% of the directors' cash
contributions. Participants in the DSPP are fully vested in, and may request the
issuance to them of, all shares of TSYS Common Stock purchased for their benefit
thereunder.
(4) Change in Control Arrangements.
Messrs. Ussery, Tomlinson, Pruett, Lipham, Woods and Evans each hold shares
of restricted stock of, and options to purchase stock of, Synovus and/or TSYS
which were issued pursuant to the 1992 Total System Services, Inc. Long-Term
Incentive Plan and the Synovus Financial Corp. 1994 Long-Term Incentive Plan.
Under the terms of the 1992 Total System Services, Inc. Long-Term Incentive Plan
and the Synovus Financial Corp. 1994 Long-Term Incentive Plan, in the event of a
change in control of TSYS or Synovus, the vesting of any stock options, stock
appreciation and other similar rights, restricted stock and performance awards
will be accelerated so that all awards not previously exercisable and vested
will become fully exercisable and vested.
Effective January 1, 1996, TSYS entered into Change of Control Agreements
("Agreements") with Messrs. Ussery, Tomlinson, Pruett, Woods and Lipham and
certain other executive officers. The Change of Control Agreements provide
severance pay and continuation of certain benefits in the event of a Change of
Control of Synovus or TSYS. In order to receive benefits under the Agreements,
the executive's employment must be terminated involuntarily, without cause,
whether actual or "constructive" within one year following a Change of Control
or the executive may voluntarily or involuntarily terminate employment during
the thirteenth month following a Change of Control. With respect to Synovus, a
"Change of Control" generally is deemed to occur in any of the following
circumstances: (1) the acquisition by any person of 20% or more of the
"beneficial ownership" of Synovus' outstanding voting stock, with certain
exceptions for Turner family members; (2) the persons serving as directors of
Synovus as of January 1, 1996 and those replacements or additions subsequently
approved by a two-thirds (2/3) vote of the Board ceasing to comprise at least
two-thirds (2/3) of the Board; (3) a merger, consolidation, reorganization or
sale of Synovus' assets unless (a) the previous beneficial owners of Synovus own
more than two-thirds (2/3) of the new company, (b) no person owns more than 20%
of the new company, and (c) two-thirds (2/3) of the new company's Board were
members of the incumbent Board which approved the business combination; or (4) a
"triggering event" as defined in the Synovus Rights Agreement. With respect to
TSYS, a Change of Control is generally defined in the same manner as a Change of
Control of Synovus, except that (1) a spin-off of TSYS stock to Synovus
shareholders and (2) any transaction in which Synovus continues to own more than
50% of the outstanding voting stock of TSYS are specifically excluded from the
definition of Change of Control.
Under the Agreements, severance pay would equal three times current base
salary and bonus, with bonus being defined as the average of the previous three
years measured as a percentage of base salary multiplied by current base salary.
Medical, life, disability and other welfare benefits will be provided at the
expense of TSYS for three years with the level of coverage being determined by
11
the amount elected by the executive during the open enrollment period
immediately preceding the Change of Control. Executives would also receive a
short-year bonus for the year of separation based on the greater of a half
year's maximum bonus or pro rata maximum bonus to the date of termination and a
cash amount in lieu of a long-term incentive award for the year of separation.
If the executive has already received a long-term incentive award in the
separation year, the amount would equal 1.5 times the market grant and if the
executive has not, the amount would equal 2.5 times market grant.
Executives who are impacted by the Internal Revenue Service excise tax that
applies to certain change of control agreements would receive additional gross
up payments so that they are in the same position as if there were no excise
tax. The Agreements do not provide for retirement benefits or perquisites.
Notwithstanding anything to the contrary set forth in any of TSYS' previous
filings under the Securities Act of 1933, as amended, or the Exchange Act that
might incorporate future filings, including this Proxy Statement, in whole or in
part, the following Performance Graph and Compensation Committee Report on
Executive Compensation shall not be incorporated by reference into any such
filings.
(5) Stock Performance Graph.
The following graph compares the yearly percentage change in cumulative
shareholder return on TSYS Common Stock with the cumulative total return of the
Standard & Poor's 500 Index and the Standard & Poor's Computer Software &
Services Index for the last five fiscal years (assuming a $100 investment on
December 31, 1990 and reinvestment of all dividends).
[Omitted Stock Performance Graph is represented by the following table.]
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
TSYS, S&P 500 AND S&P COMPUTER SOFTWARE & SERVICES INDEX
<CAPTION>
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
TSYS $100 $ 79 $ 90 $166 $218 $390
S&P 500 $100 $130 $140 $154 $156 $215
S&P CS&S $100 $207 $245 $270 $360 $501
</TABLE>
12
(6) Compensation Committee Report on Executive Compensation.
The Compensation Committee (the "Committee") of the Board of Directors of
TSYS is responsible for evaluating the remuneration of senior management and
board members of TSYS and its subsidiaries and the compensation and fringe
benefit plans in which officers, employees and directors of TSYS and its
subsidiaries are eligible to participate. Because TSYS' mission is to exceed the
expectations of its customers through the delivery of superior service and
continuous quality improvement that rewards its employees and enhances the value
of its shareholders' investment, the Committee's executive compensation policies
and practices are designed to attract, retain and reward its executives for
their performance in accomplishing TSYS' mission.
Elements of Executive Compensation. The four elements of executive
compensation at TSYS are:
o Base Salary
o Annual Bonus
o Long-Term Incentives
o Other Benefits
The Committee believes that a substantial portion, though not a majority,
of an executive's compensation should be "at-risk" based upon TSYS' short-term
performance (through the annual bonus and the Synovus/TSYS Profit Sharing Plan
and the Synovus/TSYS 401(k) Savings Plan) and long-term performance (through
long-term incentives including stock options and restricted stock awards). The
remainder of each executive's compensation is primarily based upon the
competitive practices of companies similar in size to TSYS ("similar companies")
with certain adjustments as described below. The companies used for comparison
are not the same companies included in the peer group index appearing in the
Stock Performance Graph above. A description of each element of executive
compensation and the factors and criteria used by the Committee in determining
these elements is discussed below:
Base Salary. Base salary is an executive's annual rate of pay without
regard to any other elements of compensation. Prior to 1995, the primary
consideration in determining an executive's base salary had been a market
comparison of the base salaries at similar companies for similar positions based
upon the executive's level of responsibility and experience. Beginning in 1995,
however, the Committee desired to change this approach because it believed a
"size-based" approach did not reflect the fact that TSYS has had outstanding
stock performance over the previous 10 years, resulting in significant market
value added for its shareholders. The Committee had considerable difficulty,
however, in obtaining data that reflected the appropriate market for the
compensation of TSYS executives. Positions for which market matches could be
found were targeted at the median level. The Committee added a premium, however,
to the size-based market data designed to reflect pay at companies with similar
strong stock performance and market value added. Positions for which such market
data could not be obtained were slotted using internal equity considerations.
Based solely upon these comparisons, the Committee increased Mr. Ussery's base
salary in 1995. The Committee also increased the base salaries of TSYS' other
executive officers in 1995 based upon these comparisons and internal equity
considerations, as described above.
Annual Bonus. Annual bonuses are awarded to the executive officers of TSYS
pursuant to the terms of the Synovus Incentive Bonus Plan. Under the Incentive
Bonus Plan, bonus amounts are paid as a percentage of base pay based on
financial performance goals such as revenues and earnings. The maximum
percentage payouts under the Incentive Bonus Plan are 65% for Mr. Ussery, 60%
for Messrs. Tomlinson, Pruett and Evans and 25% (50% effective July 1, 1995) for
Messrs. Woods and Lipham. For Mr. Ussery and TSYS' other executive officers,
the 1995 goal under the Incentive Bonus Plan was a single net income goal for
TSYS. TSYS' financial performance and individual performance, separate from the
financial performance goals established at the beginning of the year, can reduce
bonus awards determined by the attainment of the established goals,
13
although this was not the case for any of TSYS' executive officers. Because the
net income goal for 1995 under the Incentive Bonus Plan was exceeded and the
overall financial results of TSYS were favorable, Mr. Ussery and TSYS' other
executive officers were awarded the maximum bonus amount for which each
executive was eligible. Beginning in 1996, annual bonuses for Mr. Ussery and
TSYS' other four most highly compensated executive officers will be awarded
under the Synovus Financial Corp. Executive Bonus Plan. See Section III hereof
captioned "Directors' Proposal to Approve the Synovus Financial Corp. Executive
Bonus Plan."
Long-Term Incentives. The two types of long-term incentives awarded to
executives to date are stock options and restricted stock awards. Because of the
relatively low number of previously traded shares of TSYS, the Committee has
decided to award stock options and restricted stock awards of Synovus stock to
TSYS executives, thereby linking their interests to the interests of TSYS and
Synovus shareholders. Restricted stock awards are designed to focus executives
on the long-term performance of TSYS and Synovus. Stock options provide
executives with the opportunity to buy and maintain an equity interest in TSYS
and Synovus and to share in the appreciation of the value of TSYS and Synovus
Common Stock. The Committee restructured its approach for granting long-term
incentive awards in 1994. During this restructuring, the Committee established a
payout matrix for future long-term incentive grants that uses total shareholder
return as measured by Synovus' performance (stock price increases plus
dividends) and how Synovus' total shareholder return compares to the return of a
peer group of companies. For the long-term incentive awards made in 1995, total
shareholder return and peer comparisons were measured during the 1992-1994
performance period. Applying the results of the 1992-1994 performance period to
the payout matrix, the Committee granted Mr. Ussery and TSYS' other executive
officers restricted stock awards and stock options in 1995.
Benefits. Benefits offered to executives serve a different purpose than the
other elements of total compensation. In general, these benefits provide either
retirement income or protection against catastrophic events such as illness,
disability and death. Executives generally receive the same benefits offered to
the general employee population, with the only exceptions designed to promote
tax efficiency or to replace other benefits lost due to regulatory limits. The
Synovus/TSYS Profit Sharing Plan and the Synovus/TSYS 401(k) Savings Plan,
including excess benefit arrangements designed to replace benefits lost due to
regulatory limits (collectively the "Plan"), is the largest component of TSYS'
benefits package for executives. The Plan is directly related to corporate
performance because the amount of employer contributions to the Plan (to a
maximum of 14% of an executive's compensation) is a function of TSYS'
profitability. For 1995, Mr. Ussery and TSYS' other executive officers received
a Plan contribution of 11.66% of their compensation based upon the
profitability formula under the Plan. The remaining benefits provided to
executives are primarily based upon the competitive practices of similar
companies.
In 1993, the Internal Revenue Code of 1986, as amended (the "Code"), was
amended to limit the deductibility for federal income tax purposes of annual
compensation paid by a publicly held corporation to its chief executive officer
and four other highest paid executives for amounts greater than $1 million
unless certain conditions are met. Although none of TSYS' executive officers are
currently affected by this provision, the Committee believes that this provision
could affect TSYS' executive officers in the future. Because the Committee seeks
to maximize shareholder value, the Committee has taken steps to ensure the
deductibility of compensation in excess of $1 million in the future, although
the Committee reserves the ability to make awards which do not qualify for full
deductibility under Section 162(m) of the Code if the Committee determines that
the benefits of so doing outweigh full deductibility.
The Committee believes that the executive compensation policies serve the
best interests of the shareholders and of TSYS. A substantial portion of the
compensation of TSYS' executives is directly related to and commensurate with
TSYS' performance. The Committee believes that the performance of TSYS to date
validates the Committee's compensation philosophy.
William B. Turner
Gardiner W. Garrard, Jr.
George C. Woodruff, Jr.
14
(7) Compensation Committee Interlocks and Insider Participation.
The members of TSYS' Compensation Committee during 1995 were William B.
Turner, Gardiner W. Garrard, Jr. and George C. Woodruff, Jr. No member of the
Committee is a current or former officer or employee of TSYS or its
subsidiaries.
Mr. Turner is Chairman of the Executive Committee of W.C. Bradley Co. James
H. Blanchard, Chairman of the Executive Committee of TSYS, serves on the Board
of Directors of W.C. Bradley Co. TSYS leases various properties in Columbus,
Georgia from W.C. Bradley Co. for office space and storage. The rent paid for
the space in 1995, which is approximately 107,295 square feet, is approximately
$746,508. The lease agreements were made substantially on the same terms as
those prevailing at the time for comparable leases for similar facilities with
an unrelated third party in Columbus, Georgia.
TSYS has entered into an agreement with CB&T with respect to the use of
aircraft owned or leased by B&C Company, a Georgia general partnership in which
CB&T and W.C. Bradley Co. are equal partners. CB&T and W.C. Bradley Co. have
each agreed to remit to B&C Company fixed fees for each hour they fly the
aircraft owned and/or leased by B&C Company. TSYS paid CB&T $239,131 for its use
of the B&C Company aircraft during 1995, which $239,131 was remitted to B&C
Company by CB&T. The charges payable by TSYS to CB&T in connection with its use
of this aircraft approximate charges made available to unrelated third parties
in the State of Georgia for use of comparable aircraft for commercial purposes.
William B. Turner, a director of TSYS, Chairman of the Board of CB&T and
Chairman of the Executive Committee of Synovus, is an officer, director and
shareholder of W.C. Bradley Co. James H. Blanchard, Chairman of the Executive
Committee of TSYS, Chairman of the Board of Synovus and a director of CB&T, is a
director of W.C. Bradley Co. W. Walter Miller, Jr., a director of W.C. Bradley
Co., is Senior Vice President and a director of TSYS. Elizabeth C. Ogie, the
niece of William B. Turner and the sister-in-law of W. Walter Miller, Jr., is a
director of W.C Bradley Co. and a director of CB&T and Synovus. Stephen T.
Butler, the nephew of William B. Turner and an officer and director of W.C.
Bradley Co., is a director of CB&T. Samuel M. Wellborn, III, President and a
director of CB&T, is a director of W.C. Bradley Co. W.B. Turner, Jr. and John T.
Turner, the sons of William B. Turner, are officers and directors of W.C.
Bradley Co. and are also directors of CB&T.
Gardiner W. Garrard, Jr. is President of The Jordan Company. On October 1,
1993, TSYS entered into a lease with The Jordan Company pursuant to which TSYS
leases from The Jordan Company approximately 10,000 square feet of office space
in Columbus, Georgia for $5,000 per month, payable in advance, which lease
expires on September 30, 1996. The lease was made on substantially the same
terms as those prevailing at the time for leases of comparable property between
unrelated third parties. Gardiner W. Garrard, Jr., a director of TSYS, CB&T and
Synovus, is an officer, director and shareholder of The Jordan Company. Richard
M. Olnick, the brother-in-law of Gardiner W. Garrard, Jr. and a director of
CB&T, is an officer, director and shareholder of The Jordan Company.
George C. Woodruff, Jr. is a shareholder of George C. Woodruff Co. During
1995, George C. Woodruff Co. received payments of $70,690 in connection with
landscaping services provided for TSYS. These payments were made in the ordinary
course of business on substantially the same terms as those prevailing at the
time for comparable transactions with unrelated third parties. George C.
Woodruff, Jr. is a director of TSYS, CB&T and Synovus.
(8) Transactions with Management.
During 1995, TSYS paid to Communicorp, Inc. an aggregate of $569,309. These
payments were made in the ordinary course of business on substantially the same
terms as those prevailing at the time for comparable transactions with unrelated
third parties, and were primarily for various printing and business
communication services provided by Communicorp, Inc. to TSYS. Communicorp, Inc.
is a wholly-owned subsidiary of AFLAC Incorporated. Daniel P. Amos, a director
of CB&T and Synovus, is Chief Executive Officer and a director of AFLAC
Incorporated.
15
King & Spalding, a law firm located in Atlanta, Georgia, performed legal
services on behalf of TSYS during 1995. Griffin B. Bell, a director of TSYS, is
a Senior Partner of King & Spalding.
For information about transactions with companies that are affiliates of
William B. Turner, Gardiner W. Garrard, Jr. and George C. Woodruff, Jr.,
directors of TSYS, see Section IV (7) hereof captioned "Compensation Committee
Interlocks and Insider Participation."
For a description of certain transactions between TSYS and its affiliated
companies, upon whose Boards of Directors certain of TSYS' directors also serve,
see Section V(D) hereof captioned "Bankcard Data Processing Services Provided
to CB&T and Certain of Synovus' Subsidiaries; Other Agreements Between TSYS,
Synovus, CB&T and Certain of Synovus' Subsidiaries."
V. RELATIONSHIPS BETWEEN TSYS, SYNOVUS, CB&T AND CERTAIN OF SYNOVUS'
SUBSIDIARIES
A. Beneficial Ownership of TSYS Common Stock by CB&T.
The following table sets forth, as of December 31, 1995, the number of
shares of TSYS Common Stock beneficially owned by CB&T, the only known
beneficial owner of more than 5% of the issued and outstanding shares of TSYS
Common Stock.
<TABLE>
Percentage of
<CAPTION> Shares of Outstanding Shares of
TSYS Common Stock TSYS Common Stock
Name and Address Beneficially Owned Beneficially Owned
Beneficial Owner as of 12/31/95 as of 12/31/95
- ------------------------ ------------------------ -----------------------------
<S> <C> <C>
Columbus Bank
and Trust Company 52,200,646 <F1> <F2> 80.8%
1148 Broadway,
Columbus, Georgia 31901
- ------------
<FN>
<F1> CB&T individually owns these shares.
<F2> As of December 31, 1995, Synovus Trust Company, a wholly-owned trust
company subsidiary of CB&T ("Synovus Trust"), held in various fiduciary
capacities a total of 316,617 shares (.49%) of TSYS Common Stock. Of this total,
Synovus Trust held 287,139 shares as to which it possessed sole voting or
investment power and 29,478 shares as to which it possessed shared voting and
investment power. In addition, as of December 31, 1995, Synovus Trust held in
various agency capacities an additional 492,982 shares of TSYS Common Stock as
to which it possessed no voting or investment power. Synovus and its
subsidiaries disclaim beneficial ownership of all shares of TSYS Common Stock
which are held by Synovus Trust in various fiduciary and agency capacities.
</TABLE>
CB&T, by virtue of its individual ownership of 52,200,646 shares, or 80.8%,
of the outstanding shares of TSYS Common Stock on December 31, 1995 is able to,
and intends to, elect a majority of TSYS' Board of Directors. CB&T presently
controls TSYS.
B. Interlocking Directorates of TSYS, Synovus and CB&T.
Eight of the fifteen members of and nominees to serve on TSYS' Board of
Directors also serve as members of the Boards of Directors of Synovus and CB&T.
They are James H. Blanchard, Richard Y. Bradley, Salvador Diaz-Verson, Jr.,
Gardiner W. Garrard, Jr., H. Lynn Page, William B. Turner, George C. Woodruff,
Jr., and James D. Yancey. John P. Illges, III serves as an Advisory Director of
Synovus and as a director of CB&T and Mason H. Lampton serves as an Advisory
Director of CB&T and as a director of Synovus.
C. Synovus Common Stock Ownership of Directors and Management.
The following table sets forth, as of December 31, 1995, the number of
shares of Synovus Common Stock beneficially owned by TSYS' directors and TSYS'
six most highly compensated executive officers.
16
<TABLE>
<CAPTION>
Shares of Shares of Shares of
Synovus Synovus Synovus Percentage
Common Stock Common Stock Common Stock of
Beneficially Beneficially Beneficially Total Outstanding
Owned with Owned with Owned with Shares of Shares of
Sole Voting Shared Sole Voting Synovus Synovus
and Voting and but no Common Stock Common Stock
Investment Investment Investment Beneficially Beneficially
Power as of Power as of Power as of Owned as of Owned as of
Name 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
- ------------------------ ------------- ------------ --------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Griffin B. Bell 10,425 6,000 --- 16,425 .02%
James H. Blanchard 448,729 7,381 24,526 480,636 .62
Richard Y. Bradley 4,521 37,481 --- 42,002 .05
Salvador Diaz-Verson, Jr. 17,806 175 --- 17,981 .02
Kenneth E. Evans 11,794 278 6,886 18,958 .02
Gardiner W. Garrard, Jr. 57,605 423,959 --- 481,564 .62
John P. Illges, III 166,468 77,630<F1> --- 244,098 .32
Mason H. Lampton 118,892 81,488<F2> --- 200,380 .26
James B. Lipham 705 --- --- 705 .001
W. Walter Miller, Jr. 11,668<F3> 18,889 --- 30,557 .04
H. Lynn Page 265,118 3,412 --- 268,530 .35
William A. Pruett 260 --- 3,370 3,630 .005
Philip W. Tomlinson 746 --- 8,741 9,487 .01
William B. Turner 27,661 9,002,249<F4> --- 9,029,910 11.69
Richard W. Ussery 7,671 1,163 12,352 21,186 .03
George C. Woodruff, Jr. 36,794 --- --- 36,794 .05
M. Troy Woods 705 --- --- 705 .001
James D. Yancey 306,393 13,275 14,658 334,326 .43
- -------------------
<FN>
<F1> Includes 18,568 shares of Synovus Common Stock held by a charitable
foundation of which Mr. Illges is a trustee.
<F2> Includes 74,118 shares of Synovus Common Stock held in a trust for which
Mr. Lampton is not the trustee. Mr. Lampton disclaims beneficial ownership of
such shares.
<F3> Includes 3,000 shares of Synovus Common Stock with respect to which Mr.
Miller has options to acquire.
<F4> Includes 760,950 shares held by a charitable foundation of which Mr. Turner
is a trustee.
</TABLE>
The following table sets forth information, as of December 31, 1995, with
respect to the beneficial ownership of Synovus Common Stock by all directors and
executive officers of TSYS as a group.
<TABLE>
Percentage of
<CAPTION> Shares of Outstanding Shares of
Synovus Common Stock Synovus Common Stock
Name of Beneficially Owned Beneficially Owned
Beneficial Owner as of 12/31/95 as of 12/31/95
- ------------------------ ----------------------- -----------------------------
<S> <C> <C>
All directors
and executive
officers of TSYS as a 11,299,926 14.63%
group
(includes 19 persons)
</TABLE>
17
D. Bankcard Data Processing Services Provided to CB&T and Certain of Synovus'
Subsidiaries; Other Agreements Between TSYS, Synovus, CB&T and Certain of
Synovus' Subsidiaries.
During 1995, TSYS provided bankcard data processing services to CB&T and 30
of Synovus' other banking subsidiaries. The bankcard data processing agreement
between TSYS and CB&T can be terminated by CB&T upon 60 days prior written
notice to TSYS or terminated by TSYS upon 180 days prior written notice to CB&T.
During 1995, TSYS charged CB&T and 30 of Synovus' other banking subsidiaries
$2,641,337, in the aggregate, including the reimbursement of $836,057 of out of
pocket expenses, for the performance of bankcard data processing services. TSYS'
charges to CB&T and Synovus' other banking subsidiaries for bankcard data
processing services are comparable to, and are determined on the same basis as,
charges by TSYS to similarly situated unrelated third parties.
Synovus Administrative Services Corp. ("SASC"), a wholly-owned subsidiary
of Synovus, was formed in 1995 to provide administrative services to Synovus'
subsidiary companies, including TSYS. In connection with the formation of SASC,
TSYS sold SASC property and equipment at book value of approximately $438,000.
Additionally, TSYS and SASC are parties to a Lease Agreement pursuant to which
SASC leased from TSYS office space for lease payments aggregating $198,578
during 1995. The terms of these transactions are comparable to those which could
have been obtained in transactions with unaffiliated third parties.
TSYS and Synovus and TSYS and SASC are parties to Management Agreements
(having one year, automatically renewable, unless terminated, terms), pursuant
to which Synovus and SASC provide certain management services to TSYS. During
1995, these services included human resource services, maintenance services,
security services, communications services, corporate education services, travel
services, investor relations services, corporate governance services, legal
services, regulatory and statutory compliance services, executive management
services performed on behalf of TSYS by certain of Synovus' officers and
financial services. As compensation for management services provided during
1995, TSYS paid Synovus and SASC management fees of $1,039,693 and $3,158,695,
respectively. As compensation for payroll processing support services provided
by TSYS to Synovus during 1995, Synovus paid TSYS a management fee of $361,093.
Management fees are subject to future adjustments based upon the management
services then being provided based upon charges at the time by unrelated third
parties for comparable services.
During 1995, CB&T served as Trustee of various employee benefit plans of
TSYS. During 1995, TSYS paid CB&T trustee's fees under these plans of $187,374.
During 1995, Columbus Depot Equipment Company ("CDEC"), a wholly-owned
subsidiary of TSYS, and CB&T and 24 of Synovus' other subsidiaries were parties
to Lease Agreements pursuant to which CB&T and 24 of Synovus' other subsidiaries
leased from CDEC computer related equipment for bankcard and bank data
processing services for lease payments aggregating $155,813. During 1995, CDEC
sold CB&T and certain of Synovus' other subsidiaries computer related equipment
for bankcard and bank data processing services for payments aggregating
$107,534. In addition, CDEC was paid $25,925 by CB&T and certain of Synovus'
other subsidiaries for monitoring such equipment and $160 for servicing
various computer related equipment. The terms, conditions, rental rates and/or
sales prices provided for in these Agreements are comparable to corresponding
terms, conditions and rates provided for in leases and sales of similar
equipment offered by unrelated third parties.
During 1995, Synovus Data Corp., a wholly-owned subsidiary of Synovus, paid
TSYS $701,159 for data links, network services and other miscellaneous items
related to the data processing services which Synovus Data Corp. provides to its
customers, which amount was reimbursed to Synovus Data Corp. by its customers,
and $103,944 for management services. During 1995, TSYS paid Synovus Data Corp.
$96,000, primarily for computer processing services. The charges for processing
and other services are comparable to those between unrelated third parties.
During 1995, TSYS and Synovus Data Corp. were parties to a Lease
Agreement pursuant to which TSYS leased from Synovus Data Corp.
portions of its office building for lease payments
18
aggregating $214,650. During 1995, TSYS and CB&T were parties to Lease
Agreements pursuant to which CB&T leased from TSYS portions of its maintenance
and warehouse facilities for lease payments aggregating $20,203. In August,
1993, TSYS entered into a three-year Lease Agreement with CB&T pursuant to which
it leases office space from CB&T for lease payments of $4,483 per month. The
terms, conditions and rental rates provided for in these Lease Agreements are
comparable to corresponding terms, conditions and rates provided for in leases
of similar facilities offered by unrelated third parties in the Columbus,
Georgia area.
During 1995, Synovus, CB&T and other Synovus subsidiaries paid to Columbus
Productions, Inc., a wholly-owned subsidiary of TSYS, an aggregate of $523,660
for printing services. The charges for printing services are comparable to those
between unrelated third parties.
During 1995, TSYS purchased 17,122 shares of Synovus Common Stock from
Synovus for $389,526 and simultaneously granted the shares to certain executive
officers of TSYS as restricted stock awards. The per share purchase price of
such shares was equal to the fair market value of a share of Synovus Common
Stock on the date of purchase.
Most customers of the services marketed as THE TOTAL SYSTEM (SM) maintain
special clearing demand deposit accounts with CB&T to facilitate the settlement
of bankcard transactions between Visa(R), MasterCard(R), TSYS and the customers.
In certain cases, with the approval of CB&T, these special clearing accounts may
also be utilized by customers for other correspondent banking transactions with
CB&T.
During 1995, TSYS and its subsidiaries were paid $837,354 of interest by
CB&T in connection with deposit accounts with, and commercial paper purchased
from, CB&T. During 1995, a subsidiary of TSYS paid CB&T $77,709 of interest in
connection with a loan from CB&T. These interest rates are comparable to those
provided for between unrelated third parties.
Effective December 28, 1990, TSYS, the Development Authority of Columbus,
Georgia, and CB&T, as Trustee, consummated the issuance of, and various banking
subsidiaries of Synovus purchased, $15,000,000 of industrial development revenue
bonds, the proceeds of which were used by TSYS to acquire and construct its
210,000 square foot North Center production facility. As a result of the
consummation of such financing, TSYS will lease its North Center facility from
the Development Authority for a period of 30 years, with the lease payments to
be paid thereon being used by the Authority to satisfy its obligations to the
purchasers of the bonds. The terms of such bonds, including the 9.75% rate of
interest to be paid thereon and the schedule upon which principal will be repaid
included therein, and the various other documents pursuant to which such bonds
were issued, were arrived at as a result of arm's-length negotiations between
TSYS, the Authority, the Trustee and the various subsidiary banks of Synovus
which purchased the bonds, and are no less favorable than could be obtained from
unrelated third parties. During 1995, TSYS made principal payments of $25,000
and interest payments of $609 in connection with such bonds.
The Board of Directors of TSYS has resolved that transactions with
officers, directors, key employees and their affiliates shall be approved by a
majority of its independent and disinterested directors, if otherwise permitted
by applicable law, and will be on terms no less favorable than could be obtained
from unrelated third parties.
VI. COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act requires TSYS' officers and directors,
and persons who own more than ten percent of TSYS Common Stock, to file reports
of ownership and changes in ownership on Forms 3,4 and 5 with the SEC and the
New York Stock Exchange. Officers, directors and greater than ten percent
shareholders are required by SEC regulations to furnish TSYS with copies of all
Section 16(a) forms they file.
To TSYS' knowledge, based solely on its review of the copies of such forms
received by it, and written representations from certain reporting persons that
no Forms 5 were required for those persons, TSYS believes that during the fiscal
year ended December 31, 1995, all Section 16(a) filing requirements applicable
to its officers, directors, and greater than ten percent beneficial
19
owners were complied with, except that William M. McVay, a director of TSYS
during a portion of 1995, filed two amended Forms 4 reporting late three
transactions; Mr. Bell filed three amended Forms 4 and a corrective Form 5
reporting late ten transactions; and Raymond M. Wright, an emeritus director of
TSYS during a portion of 1995 who filed Section 16(a) reports during a portion
of 1995, filed one amended Form 4 reporting late one transaction. In addition,
Mr. Page filed an amended Form 4 to correct a previously filed timely report
that misstated the number of shares of TSYS Common Stock gifted to family
members.
VII. INDEPENDENT AUDITORS
On February 12, 1996, TSYS' Board of Directors appointed KPMG Peat Marwick
LLP as the independent auditors to audit the financial statements of TSYS and
its subsidiaries for the fiscal year ending December 31, 1996. The Board of
Directors knows of no direct or material indirect financial interest by KPMG
Peat Marwick LLP in TSYS or of any connection between KPMG Peat Marwick LLP and
TSYS in the capacity of promoter, underwriter, voting trustee, director,
officer, shareholder or employee.
Representatives of KPMG Peat Marwick LLP will be present at TSYS' 1996
Annual Meeting with the opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions.
VIII. FINANCIAL INFORMATION WITH REFERENCE TO TSYS CONTAINED IN TSYS' 1995
ANNUAL REPORT
Detailed financial information for TSYS and its subsidiaries for its 1995
fiscal year is included in TSYS' 1995 Annual Report that is being mailed to
TSYS' shareholders together with this Proxy Statement.
IX. OTHER MATTERS
At the time of preparation of this Proxy Statement, TSYS' Board of
Directors has not been informed of any matters to be presented by or on behalf
of TSYS' Board of Directors or its management for action at TSYS' 1996 Annual
Meeting which are not referred to herein. If any other matters come before the
Annual Meeting or any adjournment thereof, it is the intention of the persons
named in the accompanying Proxy to vote thereon in accordance with their best
judgment.
TSYS' shareholders are urged to vote, date and sign the enclosed Proxy Card
solicited on behalf of TSYS' Board of Directors and return it at once in the
envelope which is enclosed for that purpose. This should be done whether or not
the TSYS shareholder plans to attend TSYS' 1996 Annual Meeting.
By Order of the Board of Directors
/s/ Richard W. Ussery
Richard W. Ussery
Chairman of the Board, Total System Services, Inc.
Columbus, Georgia
March 15, 1996
20
SUBSIDIARIES OF TOTAL SYSTEM SERVICES, INC.
<TABLE>
<CAPTION>
<S> <C>
Columbus Depot Equipment Company 100%
A Georgia corporation
Mailtek, Inc. 100%
A Georgia corporation
Lincoln Marketing, Inc. 100%
A Georgia corporation
Columbus Productions, Inc. 100%
A Georgia corporation
</TABLE>
TSYS\subsid.doc
Independent Auditors' Consent
The Board of Directors
Total System Services, Inc.
We consent to the incorporation by reference in the Registration Statements (No.
2-92497 and No. 33-1736) on Form S-8 and (No. 33-52258) on Form S-3 of Total
System Services, Inc. of our report dated January 26, 1996, relating to the
consolidated balance sheets of Total System Services, Inc. and subsidiaries as
of December 31, 1995 and 1994, and the related statements of income,
shareholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1995, which report appears in the Total System
Services, Inc. 1995 Annual Report to Shareholders and is incorporated by
reference in the 1995 Annual Report on Form 1O-K of Total System Services, Inc.
KPMG PEAT MARWICK LLP
Atlanta, Georgia
Match 18, 1996
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, Total System Services, Inc. has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TOTAL SYSTEM SERVICES, INC.
(Registrant)
March 19, 1996 By:/s/ Richard W. Ussery
---------------------
Richard W. Ussery,
Chairman and
Principal Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James H. Blanchard, Richard W. Ussery and
Philip W. Tomlinson each of them, his true and lawful attorney(s)-in-fact and
agent(s), with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any or all amendments
to this report and to file the same, with all exhibits and schedules thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney(s)-in-fact and agent(s) full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney(s)-in-fact and agent(s), or their substitute(s), may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, this report has been signed by the following
persons in the capacities and on the dates indicated.
/s/James H. Blanchard Date: March 19, 1996
- -----------------------------------------------
James H. Blanchard,
Director and Chairman of the
Executive Committee
/s/Richard W. Ussery Date: March 19, 1996
- -----------------------------------------------
Richard W. Ussery,
Chairman of the Board
and Principal Executive Officer
/s/Philip W. Tomlinson Date: March 19, 1996
- -----------------------------------------------
Philip W. Tomlinson,
President
and Director
/s/James B. Lipham Date: March 19, 1996
- -----------------------------------------------
James B. Lipham,
Executive Vice President, Treasurer, Principal
Accounting and Financial Officer
/s/William A. Pruett Date: March 19, 1996
- -----------------------------------------------
William A. Pruett,
Exective Vice President
/s/M. Troy Woods Date: March 19, 1996
- -----------------------------------------------
M. Troy Woods,
Executive Vice President
/s/G. Sanders Griffith, III Date: March 19, 1996
- -----------------------------------------------
G. Sanders Griffith, III,
General Counsel and Secretary
/s/Griffin B. Bell Date: March 19, 1996
- -----------------------------------------------
Griffin B. Bell,
Director
/s/ Richard Y. Bradley Date: March 19, 1996
- -----------------------------------------------
Richard Y. Bradley,
Director
/s/Salvador Diaz-Verson, Jr. Date: March 19, 1996
- -----------------------------------------------
Salvador Diaz-Verson, Jr.,
Director
/s/Kenneth E. Evans Date: March 19, 1996
- -----------------------------------------------
Kenneth E. Evans,
Director
/s/Gardiner W. Garrard, Jr. Date: March 19, 1996
- -----------------------------------------------
Gardiner W. Garrard, Jr.,
Director
/s/ John P. Illges Date: March 19, 1996
- -----------------------------------------------
John P. Illges, III,
Director
/s/Mason H. Lampton Date: March 19, 1996
- -----------------------------------------------
Mason H. Lampton,
Director
/s/W. Walter Miller, Jr. Date: March 19, 1996
- -----------------------------------------------
W. Walter Miller, Jr.,
Director
/s/H. Lynn Page Date: March 19, 1996
- -----------------------------------------------
H. Lynn Page,
Director
/s/William B. Turner Date: March 19, 1996
- -----------------------------------------------
William B. Turner,
Director
/s/George C. Woodruff, Jr. Date: March 19, 1996
- -----------------------------------------------
George C. Woodruff, Jr.,
Director
/s/James D. Yancey Date: March 19, 1996
- -----------------------------------------------
James D. Yancey,
Director
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000721683
<NAME> TOTAL SYSTEM SERVICES, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 18,849,623
<SECURITIES> 0
<RECEIVABLES> 49,614,779
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 77,826,902
<PP&E> 109,516,982
<DEPRECIATION> 54,944,079
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<CURRENT-LIABILITIES> 37,580,775
<BONDS> 0
0
0
<COMMON> 6,473,077
<OTHER-SE> 137,998,944
<TOTAL-LIABILITY-AND-EQUITY> 198,999,801
<SALES> 249,707,697
<TOTAL-REVENUES> 249,707,697
<CGS> 0
<TOTAL-COSTS> 206,786,178
<OTHER-EXPENSES> 0
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<INCOME-PRETAX> 43,707,076
<INCOME-TAX> 15,976,974
<INCOME-CONTINUING> 27,730,102
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
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