CONCORD EFS, INC.
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
To Be Held on May 14, 1998
To the Stockholders of
Concord EFS, Inc.
Notice is hereby given that the Annual Meeting of Stockholders of Concord
EFS, Inc. ("Concord" or the "Company") will be held at Colonial Country Club,
2736 Countrywood Parkway, Memphis Tennessee on May 14, 1998 beginning at 9:30
a.m. local time, for the following purposes:
1. To elect directors to serve for the ensuing year;
2. To approve the Amendment to the Certificate of Incorporation to increase
Number of Authorized Shares of Common Stock;
3. To transact such other business as may properly come before the annual
meeting and any adjournments thereof.
The Board of Directors has fixed the close of business on March 9, 1998 as
the record date for determination of the stockholders entitled to notice of and
to vote at the Annual Meeting. The By-Laws of the Company require that the
holders of a majority of all stock issued, outstanding and entitled to vote be
present in person or represented by proxy at the meeting in order to constitute
a quorum.
By Order of the Board of Directors
Richard M. Harter
Secretary
April 10, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING,
PLEASE SIGN AND RETURN THE ENCLOSED PROXY.
No postage is required if mailed in the United States.
<PAGE>
CONCORD EFS, INC.
PROXY STATEMENT
April 10, 1998
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Concord EFS, Inc. ("Concord" or the "Company") of
proxies for use at the Annual Meeting of Stockholders to be held on May 14, 1998
and any adjournments thereof. Shares as to which proxies have been executed will
be voted as specified in the proxies. A proxy may be revoked at any time by
notice in writing received by the Secretary of the Company before it is voted. A
majority in interest of the outstanding shares represented at the meeting in
person or by proxy shall constitute a quorum for the transaction of business.
Votes withheld from any nominee, abstentions and broker "non-votes" are counted
as present or represented for purposes of determining the presence of absence of
a quorum for the meeting. A "non-vote" occurs when a nominee holding shares for
a beneficial owner votes on one proposal, but does not vote on another proposal
because the nominee does not have discretionary voting power and has not
received instructions from the beneficial owner. Abstentions are included in the
number of shares present or represented and voting on each matter. Broker
"non-votes" are not so included.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The Company's only issued and outstanding class of voting securities is its
Common Stock, par value $.33 1/3 per share. Each stockholder of record on March
9, 1998 is entitled to one vote for each share registered in such stockholder's
name. As of that date, the Company's Common Stock was held by approximately
13,650 stockholders.
The following table sets forth, as of March 9, 1998, the ownership of the
Company's Common Stock by each person who is known by the Company to own
beneficially more than 5% of the Company's outstanding Common Stock, by each
director who owns shares and by all directors and officers of the Company as a
group.
Percent of
Shares Outstanding
Beneficial Owner (1) Owned Shares (2)
- ---------------------------------- ---------- -----------
Dan M. Palmer (3), Chairman 859,454 1.4%
Edward A. Labry III (4), Director 565,960 0.9%
Joyce Kelso, Director 217,099 0.4%
Richard P. Kiphart, Director 2,477,080 4.0%
Richard M. Harter (5), Director 56,844 0.1%
Jerry D. Mooney (5), Director 24,944 0.0%
Douglas C. Altenbern(6), Director 8,000 0.0%
David C. Anderson (5), Director 11,506 0.0%
J. Richard Buchignani (5), Director 9,648 0.0%
Paul Whittington (5), Director 9,819 0.0%
All officers, directors and nominees
as a group (10 persons) (7) 4,240,354 6.7%
<PAGE>
William Blair & Company, LLC
222 West Adams Street
Chicago, IL 60606 (8) 8,715,161 14.1%
Pilgrim Baxter & Associates, Ltd.
1255 Drummers Lane, Suite 300
Wayne, Pennsylvania 19087 (9) 4,324,434 7.0%
AMVESCAPP PLC and Subsidiaries
11 Devonshire Square
London EC2M 4YR England (10) 4,438,637 7.2%
The Capital Group Companies Inc. and
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA. 90071 (11) 4,449,900 7.2%
(1) The address of each beneficial owner that is also a director, is the same as
the Company's.
(2) Percentage ownership is based on 61,997,502 shares issued and outstanding,
plus the number of shares subject to options exercisable within 60 days from the
record date by the person or the aggregation of persons for which such
percentage ownership is being determined.
(3) Shares owned are unexercised stock options.
(4) Shares owned include 563,908 shares covered by unexercised stock options.
(5) Shares owned include 6,444 shares covered by unexercised stock options.
(6) Shares owned include 50 June 25, 1998 option contracts.
(7) Shares owned include 1,455,582 shares covered by unexercised stock options.
(8) Based on a Schedule 13G dated as of February 14, 1998, filed by William
Blair & Company, LLP (Blair). Includes 1,328,658 shares as to which Blair has
sole voting power and 8,715,161 shares as to which Blair has sole dispositive
power. Blair disclaims beneficial ownership as to 7,386,503 of such shares.
(9) Based on a Schedule 13G dated as of January 20, 1998, filed by Pilgrim
Baxter & Associates.
(10) Based on a Schedule 13G dated as of February 9, 1998, filed by AMVESCAP PLC
and Subsidiaries.
(11) Based on a Schedule 13G dated as of February 10, 1998, filed by The Capital
Group Companies, Inc. and Capital Research and Management Company (Capital).
Capital, acting as investment advisers, disclaims beneficial ownership of these
shares pursuant to Rule 13d-4.
ELECTION OF DIRECTORS
Ten directors are to be elected to hold office until the next annual
meeting of stockholders and until their successors are elected and qualified.
Unless a proxy is executed to withhold authority for the election of any or all
of the directors, then the persons named in the proxy will vote the shares
represented by the proxy for the election of the following ten nominees. If the
proxy indicates that the stockholder wishes to withhold a vote from one or more
nominees for director, such instruction will be followed by the persons named in
the proxy. All ten of the nominees are now members of the Board of Directors.
The Board of Directors has no reason to believe that any of the nominees will be
<PAGE>
unable to serve. In the event that any nominee should not be available, the
persons named in the proxies will vote for the others and may vote for a
substitute for such nominee. An affirmative vote of a majority of the Company's
Common Stock represented in person or by proxy at the meeting is necessary for
the election of the individuals named below.
Recommended Vote
The Board of Directors recommends that you vote "FOR" the election of these
ten individuals as directors.
The following table lists the name of each proposed nominee; his/her age;
his/her business experience during at least the past five years, including
principal offices with the Company or a subsidiary of the Company; and the year
since which he/she has served as a director of the Company. There are no family
relationships among the nominees.
Office With the Company, Business
Nominees and Ages Experience and Year First Elected Director
- -------------------------- ----------------------------------------------------
Dan M. Palmer (55) Mr. Palmer became Chairman of the Board in February
1991. Mr. Palmer has been Chief Executive Officer
of the Company since August 1989, and a Director of
the Company since May 1987. Mr. Palmer has been
the Chief Executive Officer of EFS National Bank
(formerly EFS, Inc.) since its inception in 1982.
He joined Union Planters National Bank in June 1982
and founded the EFS operations within the bank. He
continued as President and Chief Executive Officer
of EFS when it was acquired by Concord in March
1985.
Joyce Kelso (56) Mrs. Kelso has been a Director since May 1991. She
was Vice President in charge of Customer Service
when EFS began operations. In August 1990, she was
elected Senior Vice President of the Company.
January 1, 1995, Mrs. Kelso semi-retired and on
January 1, 1997, she became fully retired.
Edward A. Labry III (35) Mr. Labry joined EFS in 1984. He was made Director
of Marketing in March 1987 and Vice President of
Sales in February 1988. In August 1990, he was
elected to Chief Marketing Officer of the Company.
In February 1991, he was elected Senior Vice
President of the Company. He became President of the
Company in October 1994, and President of EFS
National Bank in December 1994.
Richard M. Harter (61)* Mr. Harter has been the Company's Secretary and a
Director since the Company's formation. He is a
partner of Bingham Dana LLP, legal counsel to the
Company.
Jerry D. Mooney (45)* + Mr. Mooney has been a Director of the Company since
August 1992. Since August 1997, he has been
President and CEO of ServiceMaster Employer
Services, Inc. Prior to then he was President of
Healthcare New Business Initiatives and formerly
served as Chairman, President and CEO of Service-
Master Diversified Health Services, Inc. (formerly
VHA Long Term Care) since 1981.
<PAGE>
David C. Anderson (55)* + Mr. Anderson has been a Director of the Company
since August 1992. Mr. Anderson was Senior Vice
President and Chief Financial Officer with Federal
Express in Memphis, Tennessee for seven years and
Executive Vice President and Chief Financial Officer
at Burlington Northern in Fort Worth, Texas for
three years prior to his retirement in 1995.
J. Richard Buchignani (49)* Mr. Buchignani has been a Director of the Company
since August 1992. He is a partner in the Memphis,
Tennessee office of the law firm of Wyatt, Tarrant
& Combs, who also serves as local counsel to the
Company. Mr. Buchignani has been affiliated with
the law firm since 1995 when most of the members of
his firm of 18 years joined Wyatt, Tarrant & Combs.
Paul L. Whittington (62)* + Mr. Whittington has been a Director of the Company
since May 1993. Mr. Whittington had been the
Managing Partner of the Memphis, Tennessee and
Jackson, Mississippi offices of Ernst & Young from
1988 until his retirement in 1991. Since 1979, he
had been the partner in charge of consulting at
various Ernst & Young offices.
Richard P. Kiphart (55)* Mr. Kiphart has been a Director of the Company since
March 1997. In 1972 he became a General Partner of
William Blair & Company, LLC. He served as head of
Equity Trading from 1972 to 1980. He joined the
Corporate Finance Department in 1980, and was made
head of that department in January 1995.
Douglas C. Altenbern (61) Mr. Altenbern was voted a Director of the Company in
February 1998. Mr. Altenbern served as Vice Chairman
of First Financial Management Corporation until
1989, at which time he resigned to found Argosy
Network Corporation, of which he served as Chairman
and CEO. In 1992 he sold his interest in Argosy and
in 1993 founded Pay Systems of America, of which he
served as Chairman and CEO through December 1996.
He currently is a private investor and serves as a
Director on the Boards of The Bradford Funds, Inc.,
OPTS, Inc., Interlogics, Inc., CSM, Inc., and
Equitas.
* Member of the Board's Audit Committee.
+ Member of the Board's Compensation Committee.
Compensation of Directors
The Company currently pays an annual fee of $8,000 plus $2,000 for each
meeting attended to each non-employee Director of the Company. There are
normally four meetings per year. In addition, non-employee directors are granted
options to purchase 3,000 shares of the Company's common stock at closing market
value on the date of the annual meeting of stockholders. Directors are
reimbursed for expenses incurred in attending meetings of the Board of
Directors. Two of the ten nominees are employees of the Company and are not
separately compensated for serving as directors.
Executive Compensation
The following summary compensation table is intended to provide a
comprehensive overview of the Company's executive pay practices. It includes the
cash compensation paid or accrued by the Company and its subsidiaries for
services in all capacities during the fiscal year ended December 31, 1997, to or
on behalf of each of the Company's named executives. Named executives include
the Chief Executive Officer and the President of the Company.
<PAGE>
Summary Compensation Table
Annual Compensation Long-Term Compensation
Name and Salary Bonus
Principal Position Year ($) ($) Options Awarded*
- ------------------------ ---- -------- ------- ----------------------
Dan M. Palmer 1997 427,392 262,000 800,000
Chairman of the Board 1996 425,000 125,000 237,500
Chief Executive Officer 1995 363,738 80,000 202,500
of the Company and
EFS National Bank
Edward A. Labry III 1997 417,777 262,000 800,000
President of the Company 1996 392,308 125,000 237,500
and EFS National Bank 1995 279,315 100,000 168,750
* Options awarded have been restated to reflect all stock splits.
Stock Options
The following tables present the following types of information for options
granted to the Company's named executives under the Company's 1993 Incentive
Stock Option Plan. Table I - options granted and the potential realizable value
of such options, and Table II - options exercised in the latest fiscal year and
the number of unexercised options held.
<TABLE>
Table I
Options Granted in 1997
<CAPTION>
Individual Grants
----------------------------------------- Potential Realizable
% 0f Total Value at Assumed
Options Annual Rates of Stock
Granted to Exercise Price Appreciation
Options Employees in price Expiration for Option Term
Name Granted 1997 ($/Share) Date 5% ($) 10% ($)
- ------------------- ------- ------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Dan M. Palmer 800,000 41% $22.88 3/6/2007 11,508,772 29,165,487
Edward A. Labry III 800,000 41% $22.88 3/6/2007 11,508,772 29,165,487
</TABLE>
Table II
Options Exercised in 1997 and 1997 Year End Option Values
Value of
Number of Unexercised
Shares Acquired Value ($) Unexercised In-the-Money
Name on Exercise (#) Realized(1) Options(#) Options($)(2)
- ------------------- --------------- ----------- ----------- -------------
Dan M. Palmer 200,000 4,743,443 859,454(E) 11,619,100(E)
788,672(U) 3,387,813(U)
Edward A. Labry III 200,000 4,950,644 563,908(E) 5,758,056(E)
773,906(U) 3,128,409(U)
(1) Values are calculated by subtracting the exercise price from the fair
market value of the stock as of the exercise date.
(2) Values are calculated by subtracting the exercise price from the fair
market value of the stock on December 31, 1997.
(E) = Exercisable at December 31, 1997
(U) = Unexercisable at December 31, 1997
<PAGE>
Committees; Attendance
The Board of Directors held four meetings during the fiscal year ended
December 31, 1997. Each of the directors attended at least 75% of the total
number of meetings of the Board.
The Audit Committee, consisting of Messrs. Anderson, Buchignani, Harter,
Mooney, Whittington and Kiphart met twice during the fiscal year ended December
31, 1997. The Audit Committee reviewed the results of the audit conducted by
outside auditors and management's response to the management letter prepared by
outside auditors.
The Board of Directors has no Nominating Committee.
Compensation Committee Report on Executive Compensation
The Board of Directors has a Compensation Committee consisting of Messrs.
Anderson, Mooney and Whittington who are not employees of the Company or any of
its affiliates and have never been employees of the Company or any of its
affiliates. It is the policy of the Compensation Committee to establish base
salaries, award bonuses and grant stock options to such executives and in such
amounts as will assure the continued availability to the Company of the services
of the executives and will recognize the contributions made by the executives to
the success of the Company's business and the growth over time in the market
capitalization of the Company. To achieve these goals, the Committee establishes
base salaries at levels it believes to be below the mid-point for comparable
executives in companies of comparable size and scope. The Committee then awards
cash bonuses reflecting individual performance during the year for which the
awards are made. For executives other than the Chief Executive Officer, the
Committee receives bonus award recommendations from the Chief Executive Officer.
The Committee grants stock options to senior and middle management executives of
the Company and its affiliates at levels which it believes to be higher than
average for comparable companies in order to give the executives significant
incentive to improve the revenue of the Company and its market capitalization.
Section 162(m) of the Internal Revenue Code limits the tax deduction to $1
million for compensation paid to certain executives of public companies. The
Committee has considered these new requirements and believes that the Company's
1993 Incentive Stock Option Plan meets the requirement that it be "performance
based" and, therefore, exempt from the limitations on deductibility.
Historically, the combined salaries and bonuses of the Company's executive
officers have been well under the $1 million limit. The Committee's present
intention is to comply with Section 162(m) unless the Committee feels that
required changes would not be in the best interest of the Company or its
stockholders.
The Chief Executive Officer's base salary, cash bonus and option grants are
established by the Committee based upon its members' own experience in their
companies and in other companies which they serve as directors or advisors. In
addition, the Committee received advice from a compensation consulting firm in
setting compensation levels for executive officers. In setting the bonus and
salary awards for 1997 for the Chief Executive Officer and President, the
Committee considered the 44% increase in revenues and the 51% increase in
diluted earnings per share in 1997 over 1996. Additionally, the Committee noted
that for the preceding three years the Company's revenue growth averaged
approximately 36% per year, that its market capitalization growth averaged
approximately 64% per year and that these individuals were responsible for past
growth and uniquely situated to contribute to the future growth of the Company.
David C. Anderson
Jerry D. Mooney
Paul L. Whittington
<PAGE>
Five Year Cummulative Stockholder Return
Below is a performance table which compares the Company's cumulative total
stockholder return during the previous five years with the NASDAQ stock market,
and the NASDAQ financial stocks (the Company's peer group).
NASDAQ NASDAQ
Date Concord EFS, Inc. Stock Market Financial Stocks
- -------- ----------------- ------------ ----------------
12/31/92 100.00 100.00 100.00
12/31/93 75.00 114.80 116.23
12/31/94 127.12 112.21 116.50
12/31/95 322.25 158.70 169.67
12/31/96 484.80 195.19 217.50
12/31/97 426.88 239.53 333.81
<PAGE>
AMEND CERTIFICATE OF INCORPORATION TO INCREASE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Company's authorized capital stock consists of 100,000,000 shares of
Common Stock, $.33 1/3 par value. The Board of Directors finds advisable that
the Company's Certificate of Incorporation be amended to increase the number of
authorized shares of Common Stock to 200,000,000 shares, $.33 1/3 par value.
The holders of Common Stock are not entitled to preemptive rights to
purchase Common Stock of the Company.
The authorized shares of Common Stock can be issued without stockholder
approval upon such terms and in consideration of such amounts as the Board of
Directors determines is in the best interest of the Company. The Board in the
past has issued stock to effect stock splits, to fulfill the exercise of stock
options and to make relatively small acquisitions. It has no present plans for
any further issuance other than to complete the proposed acquisition of Digital
Merchant Systems, Inc. and Affiliated Companies.
Dilutive Effect of Issuance of Additional Shares
The authorization of additional shares of Common Stock pursuant to this
proposal will have no dilutive effect upon the proportionate voting power of the
present stockholders of the Company. However, issuance of additional shares
could have a substantial dilutive effect on present stockholders.
Anti-takeover Effect
The issuance of additional shares of Common Stock by the Company may also
make it more difficult to obtain stockholder approval of various actions, such
as a merger or other corporate combination. The proposed increase in the number
of authorized shares of Common Stock could enable the Board of Directors to
render more difficult an attempt by another person or entity to obtain control
of the Company, though the Board of Directors has no present intention of
issuing additional shares for such purpose and no present knowledge of any
takeover efforts by any person or entity.
Recommended Vote
An affirmative vote of a majority of the Company's outstanding Common Stock
is necessary to adopt the amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock to
200,000,000 shares. The Board of Directors recommends that you vote "FOR" the
proposal.
OTHER MATTERS
The Board of Directors knows of no matters which are likely to be presented
for action at the Annual Meeting other than the proposals specifically set forth
in the Notice and referred to herein. If any other matter properly comes before
the Annual Meeting for action, it is intended that the persons named in the
accompanying proxy and acting thereunder will vote or refrain from voting in
accordance with their best judgment pursuant to the discretionary authority
conferred by the proxy.
CERTAIN TRANSACTIONS
Bingham Dana LLP serves as legal counsel to the Company. Richard M. Harter,
Secretary and Director of the Company, is a partner of that firm. Wyatt, Tarrant
and Combs also serves as legal counsel to the Company. J. Richard Buchignani,
Director of the Company, is a partner of that firm.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, as amended, the
Company's directors and certain of its officers and persons holding more than
ten percent of the Company's common stock are required to report their ownership
of the common stock and any changes in such ownership to the Securities and
Exchange Commission and the Company. The Company believes that Jerry D. Mooney,
one of the directors, filed one Form 4 later than the date required.
INFORMATION CONCERNING AUDITORS
Representatives of Ernst & Young LLP are expected to be at the Annual
Meeting and will have an opportunity to make a statement if they desire to do
so. Such representatives are also expected to be available to respond to
appropriate questions.
STOCKHOLDERS PROPOSALS
Stockholder proposals to be submitted for vote at the 1999 Annual Meeting
must be delivered to the Company on or before December 9, 1998.
<PAGE>
EXPENSES OF SOLICITATION
Solicitations of proxies by mail is expected to commence on April 10, 1998,
and the cost thereof will be borne by the Company. Copies of solicitation
materials will also be furnished to brokerage firms, fiduciaries and custodians
to forward to their principals, and the Company will reimburse them for their
reasonable expenses.
By Order of the Board of Directors
Richard M. Harter
Secretarty
ANNUAL REPORT ON FORM 10-K
The Company will deliver without charge to each of its stockholders, upon
their written request, a copy of the Company's most recent annual report on Form
10-K and any information contained in any subsequent reports filed with The
Securities and Exchange Commission. Request for such information should be
directed to Investor Relations, Concord EFS, Inc., 2525 Horizon Lake Drive,
Suite 120, Memphis, Tennessee 38133.
<PAGE>
(This is the front side of the proxy card.)
CONCORD EFS, Inc.
2525 Horizon Lake Drive, Suite 120
Memphis, Tennessee 38133
This proxy is solicited on behalf of the Board of Directors.
The undersigned hereby appoints Dan M. Palmer and Thomas J. Dowling or either of
them as Proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote as designated below, all the shares of
Common Stock of Concord EFS, Inc. held of record by the undersigned on March 9,
1998, at the Annual Meeting of Stockholders to be held on May 14, 1998 at
Colonial Country Club, 2736 Countrywood Parkway, Memphis, Tennessee beginning at
9:30 a.m. local time, or any adjournment thereof.
1. To elect directors.
___ FOR all nominees (except as marked to the contrary below)
___ WITHHOLD AUTHORITY for all nominees listed below
Dan M. Palmer Edward A. Labry III
Richard M. Harter Joyce Kelso
David C. Anderson Jerry D. Mooney
J. Richard Buchignani Paul L. Whittington
Richard P. Kiphart Douglas C. Altenbern
(Instruction: To withhold authority to vote for any individual(s), write the
name(s) of such nominee(s) on the space provided below.)
_____________________________________________________________________
2. To approve the Amendment of the Certificate of Incorporation to Increase
Number of Authorized Shares of Common Stock.
____FOR ____AGAINST ____ABSTAIN
<PAGE>
(This is the back side of the proxy card.)
This proxy, when properly executed, will be voted in the manner directed by the
undersigned stockholder. If no direction is made, this proxy will be voted FOR
all nominees for director and FOR the action described in Item No. 2. In their
discretion, the Proxies are authorized to vote upon such other business as may
properly come before the Annual Meeting or any adjournment thereof.
Please sign exactly as the name appears. When shares are held by joint tenants,
both should sign.
Dated___________________________________
Signature_______________________________
Signature_______________________________
