<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
TRANSACTION SYSTEMS ARCHITECTS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[TSA LOGO]
TRANSACTION SYSTEMS ARCHITECTS, INC.
January 23, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders which
will be held on Tuesday, February 24, 1998 at 10:00 A.M., at the offices of the
Company at 230 South 108th Avenue, Omaha, Nebraska.
Details of the business to be conducted at the annual meeting are given in
the attached Notice of Annual Meeting and Proxy Statement.
After reading the Proxy Statement, please mark, date, sign, and return the
enclosed proxy in the prepaid envelope, to assure that your shares will be
represented. YOUR SHARES CANNOT BE VOTED UNLESS YOU DATE, SIGN, AND RETURN THE
ENCLOSED PROXY OR ATTEND THE ANNUAL MEETING IN PERSON.
On behalf of the Board of Directors, I would like to express our
appreciation for your interest in the Company.
Sincerely,
[LOGO]
William E. Fisher
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
<PAGE>
TRANSACTION SYSTEMS ARCHITECTS, INC.
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 24, 1998
------------------------
The Annual Meeting of Stockholders of Transaction Systems Architects, Inc.
(the "Company") will be held at the offices of the Company at 230 South 108th
Avenue, Omaha, Nebraska, on February 24, 1998, at 10:00 A.M., for the following
purposes:
1. To elect six directors to hold office until the next Annual Meeting of
Stockholders;
2. To consider and vote upon a proposal to ratify the appointment of Arthur
Andersen LLP as the Company's independent auditors;
3. To transact such other business as may properly come before the Meeting
or any adjournment of the Meeting.
The Board of Directors has fixed the close of business on January 15, 1998,
as the record date for determining the stockholders entitled to notice of and to
vote at the Meeting and any adjournment of the Meeting. Each share of the
Company's Class A Common Stock is entitled to one vote on all matters presented
at the Annual Meeting.
ALL HOLDERS OF THE COMPANY'S CLASS A COMMON STOCK (WHETHER THEY EXPECT TO
ATTEND THE ANNUAL MEETING OR NOT) ARE REQUESTED TO PROMPTLY COMPLETE, DATE,
SIGN, AND RETURN THE PROXY CARD ENCLOSED WITH THIS NOTICE.
[LOGO]
David P. Stokes
SECRETARY
January 23, 1998
<PAGE>
TRANSACTION SYSTEMS ARCHITECTS, INC.
------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 24, 1998
------------------------
This Proxy Statement is being furnished in connection with the solicitation
by and on behalf of the Board of Directors of Transaction Systems Architects,
Inc. (the "Company") of proxies to be used at the Annual Meeting of Stockholders
of the Company (the "Annual Meeting") to be held on February 24, 1998, and any
postponement or adjournment thereof. A copy of the Company's Annual Report to
Stockholders for the fiscal year ended September 30, 1997, which includes the
Company's financial statements as of September 30, 1997, accompanies this Proxy
Statement. STOCKHOLDERS MAY OBTAIN A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K AND A LIST OF THE EXHIBITS THERETO WITHOUT CHARGE BY WRITTEN REQUEST TO
INVESTOR RELATIONS, 224 SOUTH 108TH AVENUE, OMAHA, NEBRASKA 68154. This Proxy
Statement and the accompanying form of proxy are being mailed to stockholders on
or about January 23, 1998.
PROXY SOLICITATION
The shares represented by the proxies received pursuant to this solicitation
and not revoked will be voted at the Annual Meeting. A stockholder who has given
a proxy may revoke it prior to its exercise by giving written notice of
revocation to the Secretary of the Company or by giving a duly executed proxy
bearing a later date. Attendance in person at the Annual Meeting does not itself
revoke a proxy; however, any stockholder who does attend the Annual Meeting may
revoke a proxy previously submitted by voting in person. Subject to any such
revocation, all shares represented by properly executed proxies will be voted in
accordance with specifications on the enclosed proxy. If no such specifications
are made, proxies will be voted FOR the election of the six nominees for
director listed in this Proxy Statement, FOR ratification of the appointment of
Arthur Andersen LLP as the Company's independent auditors for the September 30,
1998 fiscal year and, as to any other matter that may be brought before the
Annual Meeting, in accordance with the judgement of the person or persons voting
the same.
The Company will bear the expense of preparing, printing and mailing this
Proxy Statement and proxies solicited hereby and will reimburse banks, brokerage
firms and nominees for their reasonable expenses in forwarding solicitation
materials to beneficial owners of shares held of record by such banks, brokerage
firms and nominees. The Company has retained Norwest Bank to assist in the
solicitation of proxies at a cost of approximately $10,000 plus normal
out-of-pocket expenses.
OUTSTANDING SHARES AND VOTING RIGHTS
Only stockholders of record at the close of business on January 15, 1998
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting.
At the close of business on the Record Date, there were 26,932,921 shares of the
Company's Class A Common Stock, $0.005 par value (the "Common Stock"), issued
and outstanding, excluding 845 shares of Class A Common Stock held as treasury
stock by the Company. Also at the close of business on the Record Date, there
were 1,171,252 shares of the Company's Class B Common Stock, $0.005 par value,
issued and outstanding. The shares held as treasury stock and Class B Common
Stock are not entitled to be voted. Each holder of Common Stock is entitled to
one vote per share for the election of directors and on all other matters to be
voted on by the Company's stockholders. Holders of Common Stock may not cumulate
their votes in the election of directors.
The presence in person or by proxy at the Annual Meeting of the holders of a
majority of the issued and outstanding Common Stock shall constitute a quorum.
Election of a director requires affirmative
1
<PAGE>
votes of the holders of a plurality of the Common Stock present in person, or
represented by proxy, at a meeting (at which a quorum is present). Therefore,
the six persons receiving the greatest number of votes shall be elected as
directors. Since only affirmative votes count for this purpose, withheld votes
will not affect the outcome, except that they will count in determining the
presence of a quorum.
With respect to the ratification of the appointment of independent auditors,
a stockholder may mark the accompanying form of proxy to (i) vote for the
matter, (ii) vote against the matter or (iii) abstain from voting on the matter.
Assuming that a quorum is present at the Annual Meeting, the affirmative vote of
a majority of the shares of Common Stock represented at the Annual Meeting and
entitled to vote on the matter is required for ratification of the appointment
of independent auditors. Proxies marked to abstain from voting with respect to
the ratification of independent auditors will have the effect of being
represented for quorum purposes but not voted. The shares represented by broker
proxies which are not voted with respect to the ratification of the appointment
of independent auditors will be considered represented at the meeting and
entitled to vote only as to those matters actually voted.
1. ELECTION OF DIRECTORS
The Company's Board of Directors currently consist of six members. The Board
of Directors has nominated the following persons, all of whom currently are
serving as directors, for election as directors to serve until the 1998 Annual
Meeting of Stockholders and thereafter until their respective successors are
duly elected and qualified. The Company expects that each of the nominees will
be available for election, but if any of them is not a candidate at the time the
election occurs, it is intended that such proxy will be voted for the election
of another nominee to be designated by the Board of Directors to fill any such
vacancy.
NOMINEES
WILLIAM E. FISHER, CHAIRMAN OF THE BOARD OF DIRECTORS. Mr. Fisher has been
Director, Chairman of the Board, President and Chief Executive Officer of the
Company since its formation in 1993. Mr. Fisher has also served as Chief
Executive Officer of Applied Communications, Inc. (a subsidiary of the Company,
"ACI") since 1991. Since joining ACI in 1987, he has served in various other
capacities, including Vice President of Financial Systems, Senior Vice President
of Software and Services, Executive Vice President and Chief Operating Officer,
and President. Prior to joining ACI, he held the position of President for the
Government Services Division of First Data Resources ("FDR"), an information
processing company. Mr. Fisher is a director of BA Merchant Services, Inc.
(NYSE: BPI), West TeleServices Corporation (Nasdaq: WTSC) and Hypercom
Corporation (NYSE: HYC). BA Merchant Services provides payment processing and
related information products and services to merchants who accept credit and
debit cards as payment for goods and services. West TeleServices is a provider
of outsourced customized telecommunications-based services, inbound operator
services, automated voice response services and outbound direct teleservices.
Hypercom is a provider of point-of-sale payment products and enterprise
networking products. Mr. Fisher is 51 years old.
DAVID C. RUSSELL, DIRECTOR. Mr. Russell has been a Director of the Company
since its formation in 1993. Mr. Russell has been President of ACI since April
1996. Since joining ACI in 1989, he has served in various other capacities,
including Vice President of Strategic Planning, Vice President of Customer
Support, and Vice President of Software and Services. From 1984 to 1989, he held
various operations and planning positions at FDR. Mr. Russell is 49 years old.
PROMOD HAQUE, DIRECTOR. Mr. Haque has been a Director of the Company since
January 1994. Mr. Haque is Vice President and General Partner of Norwest Venture
Capital, Inc. ("NVCM"), an affiliate of Norwest Equity Capital, LLC ("NEC") in
Minneapolis, Minnesota. He joined NVCM in 1990 as Investment Manager and became
Vice President in 1992. Mr. Haque is a director of Connect, Inc. (Nasdaq: CNKT),
Information Advantage, Inc. (Nasdaq: IACO), Optical Sensors, Inc. (Nasdaq:
OPSI), Prism
2
<PAGE>
Solutions (Nasdaq: PRZM), and Raster Graphics, Inc. (Nasdaq: RGFX). Connect is a
provider of electronic procurement applications for the Internet. Information
Advantage is a provider of decision support data analysis and reporting
software. Optical Sensors is a provider of blood gas sensors for acute care.
Prism Solutions is a provider of data warehouse management systems. Raster
Graphics is a provider of color electrostatic printing systems. Mr. Haque is 49
years old.
CHARLES E. NOELL, III, DIRECTOR. Mr. Noell has been a Director of the
Company since January 1994. Mr. Noell is the Managing Partner of JMI Equity
Fund, L.P. ("JMI"), a private investment fund. Prior to joining JMI in 1992, Mr.
Noell served at various positions at Alex. Brown & Sons Incorporated, including
Managing Director and head of the Technology Group. Mr. Noell is a director of
Expert Software, Inc. (Nasdaq: XPRT). Expert Software is a provider of consumer
based software. Mr. Noell is also a director of Peregrine Systems, Inc.
(Nasdaq:PRGN). Peregrine is a provider of enterprise wide help desk software.
Mr. Noell is 46 years old.
JIM D. KEVER, DIRECTOR. Mr. Kever was appointed to the Board of Directors
on November 11, 1996. Mr. Kever is currently President and Co-Chief Executive
Officer of Envoy Corporation (Nasdaq: ENVY). Envoy provides electronic
processing services, primarily to the healthcare industry. He joined Envoy as
Treasurer and General Counsel in October 1981. Mr. Kever has been a director of
Envoy since 1981 and from 1984 until June 1995 he was Executive Vice President
of Envoy. Before joining Envoy he was employed by Datanet, a corporation
providing pharmaceutical software. From 1977 until 1979, Mr. Kever was with the
certified public accounting firm of Peat, Marwick, Mitchell & Co. in the tax
division. Mr. Kever is 45 years old.
LARRY G. FENDLEY, DIRECTOR. Mr. Fendley was appointed to the Board of
Directors on November 11, 1996. Mr. Fendley is currently Executive Vice
President, Product Delivery Services for CSG Systems, Inc., a subsidiary of CSG
Systems International, Inc. (Nasdaq: CSGS). CSG Systems provides customer
management solutions to the communications industry. Prior to joining CSG
Systems in 1996, he was with Citibank, NA for ten years, most recently as
General Manager of Information Services for the European, North America Card
Products Division. Prior to Citibank, Mr. Fendley was with FDR as Vice President
- -Computer Technology and with Motorola in the Communications Products Division
as International Operations Manager. Mr. Fendley is 56 years old.
INFORMATION REGARDING THE BOARD AND ITS COMMITTEES
Each of Messrs. Haque, Noell, Kever and Fendley receive a $3,125 fee per
quarter for their services. Such fees for Messrs. Haque and Noell are paid to
their affiliated management company. Messrs. Fisher and Russell do not receive
any compensation for their services as directors. All directors are reimbursed
for expenses incurred in connection with attendance at Board of Director and
committee meetings.
Each of Messrs. Kever and Fendley were granted a stock option for 20,000
shares of Common Stock upon their appointment to the Board of Directors on
November 11, 1996. These options were granted under the Transaction Systems
Architects, Inc. 1996 Stock Option Plan at an exercise price of $33.25 per
share, which was the market price of the Common Stock on that day. Vesting of
the options is 20% per year at the end of each of five years. Additionally, each
of Messrs. Kever and Fendley shall receive options for 4,000 additional shares
of Common Stock on the anniversary of their respective election to the Board in
each of the four succeeding years so long as they remain a member of the Board
of Directors on such anniversary date. Accordingly, on November 11, 1997, each
of Messrs. Kever and Fendley were granted a stock option for 4,000 shares of
Common Stock at an exercise price of $39.125 per share.
The Company has standing audit and compensation committees of the Board of
Directors. The audit committee consists of Messrs. Noell and Fendley. The audit
committee monitors the effectiveness of the audit conducted by the Company's
independent auditors and of the Company's internal financial
3
<PAGE>
controls. The auditors have full and free access to the audit committee without
the presence of management. The audit committee held one meeting in November
1997, primarily to discuss the results of the fiscal 1997 independent audit and
to recommend the appointment of independent auditors for fiscal 1998. The
compensation committee consists of Messrs. Haque and Kever. This committee
approves the compensation of the Company's executive officers. The compensation
committee held one meeting in November 1997.
During fiscal 1997, there were four regular meetings of the Board of
Directors. Each incumbent director who was a member of the Board of Directors
during fiscal year 1997 attended all of the regular meetings except Mr. Fisher
and Mr. Kever each of whom attended three of four regularly scheduled board
meetings.
INFORMATION REGARDING STOCK OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of December 31, 1997, by (i) each of
the Company's directors, (ii) each of the executive officers named in the
Summary Compensation Table below, (iii) all executive officers and directors of
the Company as a group, and (iv) each person known to the Company who
beneficially owns more than 5% of the outstanding shares of its Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNER NUMBER OF SHARES PERCENT
- -------------------------------------------------------------------------- ------------------ ------------
<S> <C> <C>
Pilgrim Baxter & Associates, Ltd.(1) ..................................... 2,826,000 10.5
825 Duportail Road, Wayne PA 19087
Warburg, Pincus Asset Management, Inc. (2).............................. . 2,297,000 8.5
466 Lexington Avenue, New York NY 10017
Norwest Equity Capital, LLC (3) .......................................... 1,583,495 5.6
2800 Piper Jaffray Tower, 222 South Ninth Street
Minneapolis, MN 55402
Charles E. Noell, III (4)................................................. 22,600 *
Jim D. Kever (5).......................................................... 4,000 *
Larry G. Fendley (6)...................................................... 4,950 *
Promod Haque (7).......................................................... 14,347 *
William E. Fisher (8)(9).................................................. 650,000 2.4
David C. Russell (8)(11).................................................. 231,660 *
Edward H. Mangold (8)..................................................... 135,092 *
Fred L. Grabher (8)....................................................... 73,092 *
Gregory J. Duman (8)(10).................................................. 160,328 *
All Directors and Executive Officers as a Group
(16 persons) (12)........................................................ 1,704,010 6.2
</TABLE>
- ------------------------
* Less than 1% of the outstanding Common Stock
(1) The number of shares in the table is based on a Schedule 13G dated January
10, 1998.
(2) The number of shares in the table is based on a Schedule 13G dated January
12, 1998, which indicates that Warburg, Pincus Asset Management, Inc. has
sole dispositive power over all of these shares, sole voting power over
1,550,800 shares and shared voting power over 675,000 shares.
4
<PAGE>
(3) Of the shares indicated, 412,243 shares are shares of Class A Common Stock,
and 1,171,252 shares are shares of Class B Common Stock, which have no
voting rights. The shares of Class B Common Stock will automatically
convert into shares of Class A Common Stock at such time as either (a) NEC
elects to convert them or (b) they are transferred to another person or
entity that is both not an affiliate of NEC and not subject to the
restrictions on ownership of shares of voting capital stock by reason of
the Bank Holding Company Act of 1956 or other statute or regulation. NEC is
a limited liability company whose sole managing member is Itasca NEC,
L.L.C., a Minnesota limited liability company ("Itasca"), whose sole
managing members are Daniel J. Haggerty, George J. Still, Jr., and John E.
Lindahl. By virtue of their positions as the managing members of NEC and
Itasca, respectively, Itasca and Messrs. Haggerty, Still, and Lindahl may
be deemed to indirectly beneficially own the shares held by NEC.
(4) Mr. Noell's business mailing address is, 12680 High Bluff Drive, Number
200, San Diego, CA 92130-2002.
(5) Consists of 4,000 shares issuable upon exercise of options. Mr. Kever's
business mailing address is, Two Lakeview Place, 15 Century Boulevard,
Suite 600, Nashville, NC 37214.
(6) Consists of 4,000 shares issuable upon exercise of options and 950 shares
owned by Mr. Fendley's spouse. Mr. Fendley's business mailing address is PO
Box 34965, Omaha, NE 68134.
(7) Mr. Haque is also an officer of NEC, which holds an aggregate of 1,583,495
shares, and a non-managing member of Itasca. See footnote (3) above for
information with respect to direct and indirect beneficial ownership of the
shares held by NEC. Mr. Haque disclaims beneficial ownership of all shares
directly or indirectly beneficially owned by NEC, Itasca, and the managing
members thereof and the number of shares set forth in the table as owned by
Mr. Haque does not include the shares directly or indirectly beneficially
owned by NEC, Itasca, and the managing members thereof.
(8) The business address is 330 South 108th Avenue, Omaha, NE 68154.
(9) Includes 450,000 shares held by a corporation of which Mr. Fisher is a
principal shareholder. Mr. Fisher has sole investment discretion and voting
authority over such shares.
(10) Includes 1,200 shares owned by Mr. Duman's children.
(11) Includes 103,116 shares owned by Mr. Russell's spouse.
(12) Includes 122,916 shares issuable upon exercise of options.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
and the rules of the Securities and Exchange Commission (the "Commission")
thereunder require the Company's directors, certain officers, and beneficial
owners of more than ten percent of the Common Stock to file reports of their
ownership and changes in ownership of Common Stock with the Commission.
Personnel of the Company generally prepare these reports on behalf of its
executive officers on the basis of information obtained from them and review the
forms submitted to the Company by its non-employee directors and beneficial
owners of more than ten percent of the Common Stock. Based on such information,
the Company believes that all reports required by Section 16(a) of the Exchange
Act to be filed by its directors and officers during the last fiscal year were
filed on time, except that NEC failed to include one transaction on an otherwise
timely filed Form 4, and Mr. Haque failed to include one transaction on an
otherwise timely filed Form 4 and failed to timely file two Form 4's to report a
total of three transactions. NEC and Mr. Haque subsequently filed the
appropriate forms.
5
<PAGE>
INFORMATION REGARDING EXECUTIVE OFFICER COMPENSATION
The following table sets forth certain compensation information as to the
Chief Executive Officer ("CEO") and the four highest paid executive officers
(collectively, the "Named Executive Officers") of the Company for each of the
years ended September 30, 1995, 1996 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS (2)
--------------
ANNUAL COMPENSATION SECURITIES
------------------------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS(#)(2) COMPENSATION($)(3)(4)
- ------------------------------------ --------- ----------- ------------ -------------- -----------------------
<S> <C> <C> <C> <C> <C>
William E. Fisher 1997 $ 150,000 $ 189,334 100,000 $ 4,952
Chairman of the Board 1996 150,000 195,510 None 4,779
Chief Executive Officer 1995 149,375 199,534 None 4,793
David C. Russell 1997 $ 140,000 $ 145,299 100,000 $ 5,035
Senior Vice President 1996 128,333 141,255 None 4,696
1995 117,917 126,469 None 5,241
Gregory J. Duman 1997 $ 110,004 $ 110,082 35,000 $ 4,952
Vice President and 1996 110,004 106,895 None 4,952
Chief Financial Officer 1995 108,754 104,747 None 5,491
Edward H. Mangold 1997 $ 80,748 $ 264,435 85,000 $ 5,114
Senior Vice President 1996 80,748 339,601 None 3,793
Americas Region 1995 80,748 333,121 None 4,312
Fred L. Grabher 1997 $ 112,653 $ 164,748 25,000 $ 1,265
Vice President 1996 95,000 156,005 None 2,279
Crystal Clear Technology 1995 95,000 210,541 None 4,669
</TABLE>
- ------------------------
(1) The Company's executive officers are eligible for quarterly cash bonuses.
Such bonuses are generally based upon achievement of corporate, geographic
or product performance objectives including sales, pretax profit, backlog,
and cash flow.
(2) Includes options granted under the 1997 Management Stock Option Plan. Each
of the Named Executive Officers paid for such options at the rate of $3.00
for each underlying share.
(3) Includes contributions made to the Company's retirement plans. For fiscal
1997, employer contributions to ACI's Profit Sharing Plan were $2,299 each
for Messrs. Fisher, Mangold, Grabher, Duman and Russell. Employer
contributions to ACI's 401(k) Retirement Plan were $2,500, $2,019, $1,188,
$2,500 and $2,583 for Messrs. Fisher, Mangold, Grabher, Duman and Russell,
respectively.
(4) Each of the Named Executive Officers and certain other executive officers
are a party to an agreement pursuant to which each has agreed not to compete
with the Company for so long as he or she is a stockholder of the Company.
At the election of the Company, the non-compete agreement may remain in
effect for two years after termination of employment (even if he or she is
no longer a stockholder) if the Company pays him or her for two years. No
amounts were paid in 1997 under this arrangement.
6
<PAGE>
STOCK OPTIONS
The following table sets forth information concerning the grant of stock
options to each of the Named Executive Officers in fiscal year 1997:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES GRANT DATE
OPTIONS IN EXERCISE EXPIRATION PRESENT
NAME GRANTED(#)(1) FISCAL YEAR PRICE ($/SH) DATE VALUE($)(2)
- ------------------------------------------- -------------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
William E. Fisher 100,000 7.21% $ 24.00 3/6/07 $ 1,110,007
David C. Russell 100,000 7.21% $ 24.00 3/6/07 $ 1,110,007
Gregory J. Duman 35,000 2.52% $ 24.00 3/6/07 $ 388,502
Edward H. Mangold 85,000 6.13% $ 24.00 3/6/07 $ 943,506
Fred L.Grabher 25,000 1.80% $ 24.00 3/6/07 $ 277,502
</TABLE>
- ------------------------
(1) The options referred to in this table were granted under the Company's 1997
Management Stock Option Plan. Each of the Named Executive Officers paid for
such options at the rate of $3.00 for each underlying share. Vesting of the
options occurs on an annual pro rata basis over a term of four years from
March 1997, the date of the issuance of the options.
(2) Grant date present value is determined using a modified Black-Scholes option
pricing model. The estimated values under the model are based on several
assumptions, including a weighted-average expected volatility of 38%, a
weighted-average risk-free rate of return of 6.3%, no dividend yield and
expected option lives of 5.8 years and may not be indicative of actual
value. The actual gain, if any, the option holder may realize will equal the
excess of the actual market price of the stock on the date the option is
exercised over the sum of the amount paid for the options plus the exercise
price. There is no assurance that the value that may be realized by the
option holder will be at or near the value estimated by the modified
Black-Scholes model.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AT MONEY OPTIONS
SHARES ACQUIRED FISCAL YEAR-END(#) FISCAL YEAR-END($)
ON VALUE -------------------------- ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ---------------------------- --------------- ------------- -------------------------- ----------------------------
<S> <C> <C> <C> <C>
William E. Fisher -- -- --/100,000 --/$ 1,662,500
David C. Russell -- -- --/100,000 --/$ 1,662,500
Gregory J. Duman -- -- --/ 35,000 --/$ 581,875
Edward H. Mangold -- -- --/ 85,000 --/$ 1,413,125
Fred L. Grabher -- -- --/ 25,000 --/$ 415,625
</TABLE>
- --------------------------
(1) "In-the-Money" options are options outstanding at the end of the last fiscal
year for which the fair market value of the Common Stock at the end of the
last fiscal year ($40.625 per share) exceeded the exercise price of the
options.
7
<PAGE>
REPORT ON EXECUTIVE COMPENSATION
All issues relating to executive officer compensation are addressed by the
Board of Director's Compensation Committee. The Compensation Committee, which is
comprised of Messrs. Haque and Kever approves base salary and incentive
compensation for all executive officers. This report is submitted by the
Compensation Committee.
The components of the Company's executive compensation program consist of
base salaries and annual incentive plans. The Company's compensation program is
intended to provide executive officers with overall levels of compensation
opportunity that are competitive within the software and computer services
industries, as well as within a broader spectrum of companies of comparable size
and complexity. The Company's compensation program is structured and
administered to support the Company's business mission and generate favorable
returns for its stockholders.
BASE SALARY. Each executive officer's base salary, except for the CEO, is
based on the recommendation of Mr. Fisher to the Compensation Committee. Such
recommendations are derived primarily through a comparison of industry and
competitive labor markets for executive officer services from surveys conducted
by Culpepper and Associates, Inc. ("Culpepper"). In comparison to those surveys,
base salaries recommended are slightly lower than the average of other
comparably sized software companies. Other factors in formulating base salary
recommendations include the level of an executive's compensation in relation to
other executives in the Company with the same, more and less responsibilities,
the performance of the particular executive's business unit or department in
relation to established strategic plans, the Company's operating budget for the
year and the overall performance of the Company.
INCENTIVE COMPENSATION PLAN. For each executive officer, an incentive
compensation plan is established at the beginning of each fiscal year in
connection with the Company's strategic plans and annual operating budgets.
Except for the CEO, Mr. Fisher provides recommendations to the Compensation
Committee for incentive compensation for each executive officer. The level of
incentive compensation recommended for each executive officer is derived through
a comparison of industry and competitive labor markets from surveys conducted by
Culpepper. In comparison to those surveys, the incentive compensation
recommended approximates the average of other comparably sized software
companies. Under these incentive compensation plans, an executive's potential
incentive payment is related to the Company's profit attainment, ending backlog,
cash flow, and/or the financial performance of an executive's division or
department. Because growth in the Company's profit, backlog, cashflow and
divisional financial performance, all being substantial factors in the
calculation of incentive compensation, exceeded the Company's expectations in
fiscal 1997, bonuses for each of the Company's Named Executive Officers exceeded
target levels for fiscal 1997.
CEO COMPENSATION. Compensation for Mr. Fisher is based on the same criteria
used for executive officers generally, as described above. In addition to his
base salary, in 1997 Mr. Fisher was eligible to earn 110% of his base salary if
the Company attained 100% of its targets. As compared to industry surveys
conducted by Culpepper, Mr. Fisher's base salary was approximately 61% lower
than the average and his incentive compensation target for 1997 was
approximately 38% lower than the average. Mr. Fisher's actual combined earnings
for 1997 was approximately 48% less than the average. His maximum possible bonus
for 1997 was 165% of his base salary if the Company exceeded its targets. For
1997, the Company exceeded its targets and Mr. Fisher earned as a bonus 126% of
his base salary.
8
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COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). Section 162(m) of the
Internal Revenue Code, enacted in 1993, generally disallows a tax deduction to
public companies for compensation over $1,000,000 paid to the corporation's
Chief Executive Officer and the four other most highly compensated executive
officers. Qualifying performance-based compensation will not be subject to the
deduction limit if certain requirements are met. Although the Company has no
current plan to pay any of its executive officers annual compensation over
$1,000,000, it currently intends to structure the performance-based portion of
the compensation of its executive officers in a manner that complies with this
statute.
COMPENSATION COMMITTEE
Promod Haque
Jim D. Kever
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
PLANS
The current members of the Compensation Committee are Messrs. Haque and
Kever. None of these individuals was at any time during 1997, or at any other
time an officer or employee of the Company. No executive officer of the Company
serves as a member of the board of directors or compensation committee of any
entity that has one or more executive officers serving as a member of the
Company's Board of Directors or Compensation Committee.
9
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PERFORMANCE GRAPH
In accordance with Securities and Exchange Commission rules, the following
table shows a line-graph presentation comparing cumulative stockholder return on
an indexed basis with a broad equity market index and either a nationally
recognized industry standard or an index of peer companies selected by the
Company. The Company has selected the S&P 500 Index and the NASDAQ Computer &
Data Processing Services ("C&DP) Index for comparison.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TRANSACTION SYSTEMS ARCHITECTS, INC. S & P 500 NASDAQ COMPUTER & DATA PROCESSING
<S> <C> <C> <C>
2/24/95 100 100 100
Sep-95 150 123 141
Sep-96 473 148 175
Sep-97 455 207 236
</TABLE>
Assumes $100 invested on February 24, 1995 (the date of the Company's
Initial Public Offering ("IPO") at the closing price on the IPO date of $8.9375
per share adjusted for a two-for-one stock split effected in the form of a 100%
stock dividend in July 1996) in the Company's Common Stock, the S&P 500 Index
and the NASDAQ C&DP Index.
10
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2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Arthur Andersen LLP,
independent public accountants, as the auditors of the Company for the fiscal
year ending September 30, 1998, subject to the ratification of such appointment
by stockholders at the Annual Meeting. Arthur Andersen LLP has audited the
Company's financial statements since the Company's inception in 1993.
If the foregoing appointment of Arthur Andersen LLP is not ratified by the
stockholders, the Board of Directors will appoint other independent accountants
whose appointment for any period subsequent to the 1998 Annual Meeting of
Stockholders will be subject to approval of stockholders at that meeting.
Representatives of Arthur Andersen LLP are expected to be present at the
Company's Annual Meeting and will have the opportunity to make statements and/or
respond to appropriate questions from stockholders present at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF ARTHUR
ANDERSEN LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
3. OTHER MATTERS
The Board of Directors does not know of any matters that are to be presented
at the Annual Meeting other than those stated in the Notice of Annual Meeting
and referred to in this Proxy Statement. If any other matters should properly
come before the Meeting, it is intended that the proxies in the accompanying
form will be voted as the persons named therein may determine in their
discretion.
STOCKHOLDERS PROPOSALS
Proposals of stockholders intended to be presented at the Company's next
Annual Meeting of Stockholders must be received at the Corporate Secretary's
office, 330 South 108th Avenue, Omaha, Nebraska 68154, no later than September
25, 1998, to be considered for inclusion in the proxy statement and form of
proxy for that meeting.
By Order of the Board of Directors,
[LOGO]
David P. Stokes
SECRETARY
11
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PROXY TRANSACTION SYSTEMS ARCHITECTS, INC.
1998 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby appoints William E. Fisher, Gregory J. Duman and
David P. Stokes, and each of them, with power to appoint a substitute, to vote,
in accordance with the specifications appearing below, all shares the
undersigned is entitled to vote at the Annual Meeting of Stockholders of
Transaction Systems Architects, Inc., a Delaware corporation, to be held on
Tuesday, February 24, 1998, at 10:00 a.m. CST at the offices of the Company at
230 South 108th Avenue, Omaha, Nebraska, and at all adjournments thereof, and,
in their discretion, upon all other matters that may properly come before the
Annual Meeting or any adjournment or adjournments thereof, and hereby revokes
all former proxies. The undersigned hereby acknowledges receipt of the Proxy
Statement for the Annual Meeting.
<TABLE>
<S> <C> <C> <C>
DIRECTORS
1. Directors recommend a vote FOR election of the following directors:
01 - William E. Fisher, 02 - David C. Russell, 03 - Jim D. Kever, 04 - Promod Haque,
05 - Charles E. Noell, III, 06 - Larry G. Fendley
/ / FOR ALL / / WITHHOLD ALL / / WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE. WRITE NUMBER(S) OF
NOMINEES NOMINEES NOMINEE(S) BELOW.
USE NUMBER ONLY --------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
DIRECTORS
PROPOSAL(S) RECOMMEND
2. Appointment of Independent Auditors.
/ / FOR / / AGAINST / / ABSTAIN FOR
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE
ANNUAL MEETING OR ANY ADJOURNMENT OR ADJOURNMENTS THEREOF.
</TABLE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS GIVEN, THIS PROXY SHALL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR
PROPOSAL 2.
<TABLE>
<C> <S>
Dated: ------------------------------, 1998
------------------------------
Signature
------------------------------
(If there are co-owners both must sign)
THE SIGNATURE(S) SHOULD BE EXACTLY AS THE NAME(S) APPEAR
PRINTED TO THE LEFT. IF A CORPORATION, PLEASE SIGN THE
CORPORATION NAME IN FULL BY A DULY AUTHORIZED OFFICER AND
INDICATE THE OFFICE OF THE SIGNER. WHEN SIGNING AS
EXECUTOR, ADMINISTRATOR, FIDUCIARY, ATTORNEY, TRUSTEE OR
GUARDIAN, OR AS CUSTODIAN FOR A MINOR, PLEASE GIVE FULL
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING TITLE AS SUCH. IF A PARTNERSHIP, SIGN IN THE PARTNERSHIP
THE ENCLOSED ENVELOPE NAME.
</TABLE>
