Definitive Proxy Statement

As filed with the Securities and Exchange Commission on August 18, 2011

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

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  ¨

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¨ Preliminary Proxy Statement

 

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x Definitive Proxy Statement

 

¨ Definitive Additional Materials

 

¨ Soliciting Material Pursuant to Section 240.14a-12

GLOBAL PAYMENTS INC.

(Name of Registrant as Specified in Its Charter)

  

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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¨ Fee paid previously with preliminary materials.

 

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LOGO

GLOBAL PAYMENTS INC.

10 GLENLAKE PARKWAY, NORTH TOWER

ATLANTA, GEORGIA 30328

NOTICE OF 2011 ANNUAL MEETING OF SHAREHOLDERS

The 2011 annual meeting of shareholders (the “Annual Meeting”) of Global Payments Inc., or the Company, will be held at our offices at 10 Glenlake Parkway, North Tower, Atlanta, Georgia, 30328-3473 on September 27, 2011, at 11:00 a.m., Atlanta time, for the following purposes:

 

  1. To elect three Class II directors to serve until the annual meeting of shareholders in 2014, or until their successors are duly elected and qualified or until their earlier resignation, retirement, disqualification, removal from office or death;

 

  2. To approve the adoption of the Global Payments Inc. 2011 Incentive Plan;

 

  3. To hold an advisory vote on the compensation of our named executive officers;

 

  4. To hold an advisory vote on the frequency of an advisory vote on the compensation of our named executive officers;

 

  5. To ratify the reappointment of Deloitte & Touche LLP as the Company’s independent public accountants; and

 

  6. To transact any other business that may properly come before the Annual Meeting or any adjournments or postponements thereof.

Only shareholders of record at the close of business on August 8, 2011 are entitled to receive notice of, and to vote at, the Annual Meeting or any adjournment or postponement thereof. You may vote your shares via the Internet or by telephone, as instructed in the Notice of Electronic Availability of Proxy Materials, or if you received your proxy materials by mail, you may also vote by mail.

YOUR VOTE IS IMPORTANT

Submitting your proxy does not affect your right to vote in person if you attend the Annual Meeting. Instead, it benefits us by reducing the expenses of additional proxy solicitation. Therefore, you are urged to submit your proxy as soon as possible, regardless of whether or not you expect to attend the Annual Meeting. You may revoke your proxy at any time before its exercise by (i) delivering written notice of revocation to our Corporate Secretary, Suellyn P. Tornay, at the above address, (ii) submitting to us a duly executed proxy card bearing a later date, (iii) voting via the Internet or by telephone at a later date, or (iv) appearing at the Annual Meeting and voting in person; provided, however, that no such revocation under clause (i) or (ii) shall be effective until written notice of revocation or a later dated proxy card is received by the Corporate Secretary at or before the Annual Meeting, and no such revocation under clause (iii) shall be effective unless received on or before 1:00 a.m., Central Time, on September 27, 2011.

When you submit your proxy, you authorize Paul R. Garcia or Suellyn P. Tornay or either one of them, each with full power of substitution, to vote your shares at the Annual Meeting in accordance with your instructions or, if no instructions are given, for the election of the Class II nominees, for the approval of the adoption of the Global Payments Inc. 2011 Incentive Plan, for the approval, on an advisory basis, of the compensation of our named executive officers, for a frequency of every year (1 year) for future advisory votes on the compensation of our named executive officers, and for the ratification of the reappointment of Deloitte & Touche LLP (“Deloitte”) as the Company’s independent public accountants. The proxies, in their discretion, are further authorized to vote on any adjournments or postponements of the Annual Meeting, for the election of one or more persons to the Board of Directors if any of the nominees becomes unable to serve or for good cause will not serve, on matters which the Board does not know a reasonable time before making the proxy solicitations will be presented at the Annual Meeting, or any other matters which may properly come before the Annual Meeting and any postponements or adjournments thereto.

By Order of the Board of Directors,

LOGO

SUELLYN P. TORNAY,

Executive Vice President,

General Counsel and Corporate Secretary

Dated: August 18, 2011


August 18, 2011

GLOBAL PAYMENTS INC.

10 GLENLAKE PARKWAY, NORTH TOWER

ATLANTA, GEORGIA 30328

PROXY STATEMENT

 

A. Introduction

This Proxy Statement is being furnished to solicit proxies on behalf of the Board of Directors of Global Payments Inc. (the “Company” or “we”) for use at the 2011 annual meeting of shareholders (the “Annual Meeting”), and at any adjournments or postponements thereof. The Annual Meeting will be held at our offices at 10 Glenlake Parkway, North Tower, Atlanta, Georgia, 30328-3473 on September 27, 2011, at 11:00 a.m., Atlanta time, for the following purposes:

 

  1. To elect three Class II directors to serve until the annual meeting of shareholders in 2014, or until their successors are duly elected and qualified or until their earlier resignation, retirement, disqualification, removal from office or death;

 

  2. To approve the adoption of the Global Payments Inc. 2011 Incentive Plan;

 

  3. To hold an advisory vote on the compensation of our named executive officers;

 

  4. To hold an advisory vote on the frequency of an advisory vote on the compensation of our named executive officers;

 

  5. To ratify the reappointment of Deloitte & Touche LLP as the Company’s independent public accountants; and

 

  6. To transact any other business that may properly come before the Annual Meeting or any adjournments or postponements thereof.

Notice of Electronic Availability of Proxy Statement and Annual Report. As permitted by the Securities and Exchange Commission rules, we are making this proxy statement and our annual report available to our shareholders electronically via the Internet. The notice of electronic availability contains instructions on how to access this proxy statement and our annual report and vote online. You will not receive a printed copy of the proxy materials in the mail. Instead, the notice instructs you on how to access and review all of the important information contained in the proxy statement and annual report. The notice also instructs you on how you may submit your proxy over the Internet or by telephone. If you would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials contained in the notice.

The Notice of Electronic Availability of Proxy Materials and this Proxy Statement are first being mailed to shareholders on or about August 18, 2011.

 

B. Quorum and Voting

(1) Voting Shares. Pursuant to our Amended and Restated Articles of Incorporation, only the Company’s common shares, no par value (the “Common Stock”), may be voted at the Annual Meeting.

(2) Record Date. Only those holders of Common Stock of record at the close of business on August 8, 2011, are entitled to receive notice and to vote at the Annual Meeting or any adjournment or postponement thereof. On that date, there were 80,602,143 shares of Common Stock issued and outstanding, held by approximately 2,305 shareholders of record. These holders are entitled to one vote per share.

(3) Quorum. In order for any business to be conducted, the holders of a majority of the shares entitled to vote at the Annual Meeting must be present (a “Quorum”), either in person or represented by proxy. Abstentions and votes withheld, and shares represented by proxies reflecting abstentions or votes withheld, will be treated as present for

 

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purposes of determining the existence of a Quorum at the Annual Meeting. They will not be considered as votes “for” or “against” any matter for which the respective shareholders have indicated their intention to abstain or withhold their votes, but in some instances may be considered votes “cast.” Broker or nominee non-votes, which occur when shares held in “street name” by brokers or nominees who indicate that they do not have discretionary authority to vote on a particular matter, will not be considered as votes “for” or “against” that particular matter. Broker and nominee non-votes will be treated as present for purposes of determining the existence of a Quorum and may be entitled to vote on other matters at the Annual Meeting.

(4) Voting Options. The first proposal, which is the election of three directors in Class II, will require the vote of the holders of a plurality of the shares of Common Stock represented and entitled to vote at the Annual Meeting at which a Quorum is present. Shareholders may (i) vote “for” each nominee, or (ii) “withhold” authority to vote for any nominee. If a Quorum is present, a vote to “withhold” and a broker non-vote will have no effect on the outcome of the election of directors. The three nominees receiving the most votes will be elected to serve as the Class II Directors for a three-year term.

With respect to the second proposal, the approval of the Global Payments Inc. 2011 Incentive Plan requires the affirmative vote of a majority of the votes cast; provided that the total votes cast on the proposal must represent over 50% of the total outstanding shares of our Common Stock. Abstentions are counted as votes “cast” for purposes of this proposal, and therefore will result in the proposal receiving fewer votes and thus have the same effect as a vote against the proposal. Broker non-votes will be treated as not entitled to vote on this proposal, and therefore will affect the outcome of a vote only to the extent that broker non-votes could impair our ability to satisfy the NYSE requirement that the total votes cast on this proposal represent over 50% of the total outstanding shares of our Common Stock.

With respect to the third proposal, the approval, on an advisory (non-binding) basis, of the compensation of our named executive officers as described in this Proxy Statement requires that the votes cast in favor of the proposal exceed the votes cast against the proposal. Shareholders may (i) vote “for,” (ii) vote “against,” or (iii) “abstain” from voting on the proposal. Abstentions and broker non-votes will not affect the outcome of this proposal.

With respect to the fourth proposal, the advisory (non-binding) vote on the frequency of the advisory vote on the compensation of our named executive officers, shareholders have three options of frequency, and they may vote for every (i) 1 year, (ii) 2 years, (iii) 3 years, or (iv) “abstain” from voting on the proposal. The frequency option that receives the most affirmative votes of all the votes cast on proposal four is the frequency that will be deemed recommended by the Company’s shareholders. Abstentions and broker non-votes will have no effect in determining the frequency option that is recommended by shareholders.

With respect to the fifth proposal, the ratification of Deloitte as the Company’s independent public accountants for the fiscal year ending May 31, 2012, requires that the votes cast in favor of the proposal exceed the votes cast against the proposal. Shareholders may (i) vote “for,” (ii) vote “against,” or (iii) “abstain” from voting on the proposal. Abstentions will have no effect on the outcome of the reappointment of Deloitte as the Company’s independent public accountants.

(5) How to Vote. If you received a notice of electronic availability, you cannot vote your shares by filling out and returning the notice. The notice, however, provides instructions on how to vote by Internet, by telephone, or by requesting and returning a paper proxy card.

(6) Internet and Telephone Voting. Shareholders of record can simplify their voting and reduce our costs by voting their shares via the Internet or by telephone. Shareholders may submit their proxy voting instructions via the Internet or telephone by following the instructions provided in the notice of electronic availability. The Internet and telephone voting procedures are designed to authenticate shareholders’ identities, to allow shareholders to vote their shares, and to confirm that their instructions have been properly recorded. If your shares are held in the name of a bank or a broker, the availability of Internet and telephone voting will depend on the voting processes of the applicable bank or broker; therefore, it is recommended that you follow the voting instructions on the form you receive. If you received a printed version of the proxy materials by mail, you may vote by following the instructions provided with your proxy materials and on your proxy card.

(7) Default Voting. When a proxy is timely executed and not revoked, the shares represented by the proxy will be voted in accordance with the instructions indicated in the proxy. IF NO INSTRUCTIONS ARE INDICATED, HOWEVER, PROXIES WILL BE VOTED “FOR” THE ELECTION OF EACH OF THE DIRECTOR NOMINEES

 

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NAMED IN PROPOSAL 1, “FOR” THE APPROVAL OF THE ADOPTION OF THE GLOBAL PAYMENTS INC. 2011 INCENTIVE PLAN IN PROPOSAL 2, “FOR” THE APPROVAL, ON AN ADVISORY BASIS OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS IN PROPOSAL 3, “FOR” A FREQUENCY OF EVERY YEAR (1 YEAR) FOR FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION IN PROPOSAL 4, AND “FOR” PROPOSAL 5 RELATING TO THE RATIFICATION OF THE REAPPOINTMENT OF DELOITTE AS THE COMPANY’S INDEPENDENT PUBLIC ACCOUNTANTS.

The Board of Directors is not presently aware of any business to be presented for a vote at the Annual Meeting other than the proposals noted above. If any other matter properly comes before the meeting, the proxy holders will vote as recommended by the Board or, if no recommendation is made, in their own discretion.

(8) Revocation of a Proxy. A shareholder’s submission of a proxy via the Internet, by telephone, or by mail does not affect the shareholder’s right to attend in person. A shareholder who has given a proxy may revoke it at any time prior to its being voted at the Annual Meeting by (i) delivering written notice of revocation to our Corporate Secretary, Suellyn P. Tornay, at our address listed on the first page of this proxy statement, (ii) properly submitting to us a duly executed proxy card bearing a later date, (iii) voting via the Internet or by telephone at a later date, or (iv) appearing at the Annual Meeting and voting in person; provided, however, that no such revocation under clause (i) or (ii) shall be effective until written notice of revocation or a later dated proxy card is received by the Corporate Secretary at or before the Annual Meeting, and no such revocation under clause (iii) shall be effective unless received on or before 1:00 a.m. Central Time on September 27, 2011.

(9) Adjourned Meeting. If a Quorum is not present, the Annual Meeting may be adjourned by the holders of a majority of the shares of Common Stock represented at the Annual Meeting. The Annual Meeting may be rescheduled at the time of the adjournment with no further notice of the reconvened meeting if the date, time and place of the reconvened meeting are announced at the adjourned meeting before its adjournment; provided, however, that if a new record date is or must be fixed, notice of the reconvened meeting must be given to the shareholders of record as of the new record date. An adjournment will have no effect on the business to be conducted at the meeting.

PROPOSAL ONE:

ELECTION OF DIRECTORS; NOMINEES

Our Bylaws provide that the number of directors constituting the Board of Directors shall be not less than two or more than twelve, as determined from time to time by resolution of the shareholders or of the Board of Directors. Our Board of Directors has adopted a resolution that the Board should have nine members. The Board of Directors currently consists of nine members, who are divided into three classes, with the term of office of each class ending in successive years. Each class of directors serves staggered three-year terms.

The three directors in Class II, Paul R. Garcia, Gerald J. Wilkins, and Michael W. Trapp have been nominated for election at the Annual Meeting. The Class II Directors will be elected to hold office until the 2014 annual meeting of shareholders, or until their respective successors have been duly elected and qualified, or until their respective earlier resignation, retirement, disqualification, removal from office or death. In the event that any of the nominees is unable to serve (which is not anticipated), the persons designated as proxies will cast votes for such other person(s) as they may select.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF ALL OF THE NOMINEES FOR DIRECTOR.

The affirmative vote of the holders of a plurality of the shares of Common Stock represented and entitled to vote at the Annual Meeting at which a Quorum is present is required for the election of each of the nominees. If a choice is specified on the proxy card by a shareholder, the shares will be voted as specified. If no specification is made, the shares will be voted “FOR” each of the three nominees.

 

A. Certain Information Concerning the Nominees and Directors

The following table sets forth the names of the nominees and the directors continuing in office, their ages, the month and year in which they first became directors of the Company, their positions with the Company, their principal occupations and employers for at least the past five years, any other directorships held by them in the last five years in

 

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companies that are subject to the reporting requirements of the Securities Exchange Act of 1934 (the “Exchange Act”) or any company registered as an investment company under the Investment Company Act of 1940, as well as additional information The following table includes the experience that led the Board of Directors to conclude that the individual should continue to serve as a director of the Company. There is no family relationship between any of our executive officers or directors. There are no arrangements or understandings between any of our directors and any other person pursuant to which any of them was elected as a director, other than arrangements or understandings with the directors solely in their capacities as such. For information concerning membership on committees of the Board of Directors, see “Other Information about the Board and its Committees” below.

NOMINEES FOR DIRECTOR

Class II

Term Expiring Annual Meeting 2011

 

Name and Age

  

Month and Year First Became Director, Positions with the Company,

Principal Occupations During at Least the Past Five Years, and Other Directorships

Paul R. Garcia

(59)

   Chairman of the Board of the Company (since October 2002); Director and Chief Executive Officer of the Company (since February 2001); Chief Executive Officer of NDC eCommerce, a division of National Data Corporation (July 1999 - January 2001); President and Chief Executive Officer of Productivity Point International (March 1997 – September 1998); Group President of First Data Card Services (1995 – 1997); Chief Executive Officer of National Bancard Corporation (NaBANCO) (1989 – 1995).
   Mr. Garcia’s leadership skills, extensive knowledge of and experience in the payment services and financial services industries, and his understanding of our business and historical development give him unique insight into our company’s challenges, opportunities, and business.

Gerald J. Wilkins

(53)

  

Director of the Company (since November 2002)

President, WJG Consulting, Inc. (2003-2007 and 2008 to present) (1); Chief Financial Officer, Habitat for Humanity International (2007-2008) (2); Executive Vice President and Chief Financial Officer of AFC Enterprises, Inc. (2000-2003) (3); Chief Financial Officer of AFC Enterprises, Inc. (1995-2000); Vice President, International Business Planning, KFC International (1993-1995).

   Mr. Wilkins’ experience as a principal financial officer of several organizations provides an important perspective to our Board regarding finance and accounting matters.

Michael W. Trapp

(71)

  

Director of the Company (since July 2003)

President, Sands Partners, Inc. (since 2000) (4); Managing Partner, Southeast area, Ernst & Young LLP (1993-2000); Director, Ann Inc.

   Mr. Trapp brings to the Board expertise and knowledge regarding finance and accounting matters, enabling him to provide valuable leadership to the Board’s oversight of financial reporting. He serves as the Chairman of our Audit Committee and qualifies as an “audit committee financial expert” under the applicable SEC rules.

 

(1) Independent consulting firm.

 

(2) Nonprofit housing ministry.

 

(3) Franchisor and operator of quick-service restaurants.

 

(4) Investment business.

 

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MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE

Class III

Term Expiring Annual Meeting 2012

 

Name and Age

  

Month and Year First Became Director, Positions with the Company,

Principal Occupations During at Least the Past Five Years, and Other Directorships

Alex W. Hart

(71)

  

Director of the Company (since February 2001)

Business Consultant (since October 1997); Chief Executive Officer of Advanta Corporation (1995-1997); Executive Vice Chairman of Advanta Corporation (1994); President and Chief Executive Officer of MasterCard International (1988-1994); Director, Fair Isaac Corporation, Miter Systems, Inc., and VeriFone, Inc.; Chairman of the Board and Director, SVB Financial Group.

   Mr. Hart brings to our Board substantial experience in our industry, having served as the President and Chief Executive Officer of MasterCard and has served as a director of several companies. Because of such experience, we believe Mr. Hart has a deep understanding of the strategic and operational issues we face and provides useful insight to our Board as we review our strategic initiatives. Mr. Hart serves as the Chairman of our Governance, Nominating, and Risk Oversight Committee.

William I Jacobs

(69)

  

Director of the Company (since February 2001)

Business Advisor (since August 2002); Managing Director and Chief Financial Officer of The New Power Company (2000-2002) (1); Senior Executive Vice President, Strategic Ventures for MasterCard International (1999-2000); Executive Vice President, Global Resources for MasterCard International (1995-1999); Executive Vice President, Chief Operating Officer, Financial Security Assurance, Inc. (1984-1994); Director, Asset Acceptance Capital Corp.

   Mr. Jacobs’ executive management experience, leadership skills, board expertise, and legal training provide our Board with leadership and consensus building skills on matters of strategic importance. Mr. Jacobs serves a vital role as our lead director.

Alan M. Silberstein

(63)

  

Director of the Company (since September 2003)

President, Allston Associates LLP (previously Silco Associates Inc.) (since October 2004) (2); President and Chief Operating Officer, Debt Resolve, Inc. (2003-2004) (3); President and Chief Executive Officer, Western Union (2000-2001); Chairman and Chief Executive Officer, Claim Services, Travelers Property Casualty Insurance (1996-1997); Executive Vice President, Retail Banking, Midlantic Corporation (1992- 1995); Director, Capital Access Network, Inc. and Green Bancorp, Inc.

   Mr. Silberstein’s experience in the financial services industry and his experience managing several diverse companies provide an important point-of-view to our Board.

 

(1) National residential and small business energy provider.

 

(2) Management services firm.

 

(3) Provider of online collections services.

 

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Class I

Term Expiring Annual Meeting 2013

 

Name and Age

  

Month and Year First Became Director, Positions with the Company,

Principal Occupations During at Least the Past Five Years, and Other Directorships

Edwin H. Burba, Jr.

(74)

  

Director of the Company (since February 2001)

National Security Leadership and Business Consultant (since 1993); Commander in Chief, Forces Command, United States Army (1989-1993); Commanding General, Combined Field Army of the Republic of Korea and United States (1988-1989).

   General Burba had an extensive career in the military and retired from the army in 1993 as the Commander-in-Chief, Forces Command, Fort McPherson, Georgia. His leadership skills and experience managing people brings a unique perspective and useful insight to our Board which we have found to be invaluable. General Burba serves as the Chairman of our Compensation Committee.

Raymond L. Killian

(74)

  

Director of the Company (since September 2003)

Chairman Emeritus, Investment Technology Group, Inc. (since March 2007) (1); Chairman, Investment Technology Group, Inc. (1997-2007); President and Chief Executive Officer, Investment Technology Group, Inc. (1995-2002 and 2004-2007); Executive Vice President, Jefferies Group, Inc. (1985-1995); Vice President, Institutional Sales, Goldman Sachs & Co. (1982-1985).

   In addition to the specific experience described above, Mr. Killian brings to our Board his experience managing a complex, publicly traded company. With his skills and expertise in information technology issues, he serves as the Chairman of our Technology Committee.

Ruth Ann Marshall

(57)

  

Director of the Company (since September 2006)

President, Americas for MasterCard International (2000-2006) (2); Senior Executive Vice President, Concord, EFS (1995-1999); Director, American Standard Inc. and ConAgra, Inc.

   Because of Ms. Marshall’s deep knowledge of our business and industry as well as her detailed and in-depth knowledge of the issues, opportunities and challenges facing us, we believe that she is an invaluable member of our Board of Directors.

 

(1) Specialized agency brokerage and technology firm.

 

(2) A global payment solutions company.

 

B. Other Information about the Board and its Committees

(1) Meetings. During the fiscal year ended May 31, 2011 (the 2011 fiscal year), our Board of Directors held seven meetings. All directors attended 100% of the combined total of the Board of Directors meetings and meetings of the committees on which they served during the period for which the respective director served on the Board of Directors or the applicable committee.

(2) Fiscal Year 2011 Director Compensation. The following table reflects the compensation payable to the outside directors of the Company. Since we do not offer any non-equity incentive plan compensation or any pension benefits to our directors, and there was no other compensation required to be disclosed, columns (e) and (g) have been eliminated.

 

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2011 DIRECTOR COMPENSATION

 

Name

   Fees Earned or
Paid in Cash ($)
     Stock Awards
(1) ($)
     Option Awards
(2) ($)
     Change in
Nonqualified
Deferred
Compensation
Earnings (4) ($)
     Total ($)  
(a)    (b)      (c)      (d)      (f)      (h)  

Edwin H. Burba, Jr.

   $ 81,500       $ 80,017       $ 44,996         —         $ 206,513   

Paul R. Garcia (3)

     —           —           —           —           —     

Alex W. Hart

   $ 84,000       $ 80,017       $ 44,996         —         $ 209,013   

William I Jacobs

   $ 130,500       $ 105,007       $ 44,996         —         $ 280,503   

Raymond L. Killian

   $ 83,500       $ 80,017       $ 44,996         —         $ 208,513   

Ruth Ann Marshall

   $ 69,000       $ 80,017       $ 44,996       $ 0       $ 194,013   

Alan M. Silberstein

   $ 74,000       $ 80,017       $ 44,996       $ 0       $ 199,013   

Michael W. Trapp

   $ 92,500       $ 80,017       $ 44,996         —         $ 217,513   

Gerald J. Wilkins

   $ 69,500       $ 80,017       $ 44,996         —         $ 194,513   

 

(1) The amounts shown in the Stock Awards column reflect aggregate grant date fair value of such awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation – Stock Compensation (“FASB ASC Topic 718”). The amount shown in this column was determined by multiplying the number of shares received by the value of the Common Stock on the date of the grant. Additional details regarding the stock awards are set forth in the section entitled “Compensation Policy” below. Such shares are entitled to receive dividends once issued but at the same rate as all of the Company’s shareholders. As of May 31, 2011, the outside directors did not hold any unvested stock awards.

 

(2) The amounts shown in the Option Awards column reflect the aggregate grant date fair value of such awards computed in accordance with FASB ASC Topic 718. Assumptions made in the calculation of these amounts are included in Note 10 to the Company’s audited Financial Statements for the fiscal year ended May 31, 2011 included in the Company’s Annual Report on Form 10-K filed with the SEC on July 25, 2011. Additional details regarding the option awards are set forth in the section entitled “Compensation Policy” below. See the section entitled “Outstanding Options for Directors” below regarding the number of outstanding options for each non-employee director as of May 31, 2011.

 

(3) Mr. Garcia is a member of the Board of Directors and is also an employee of the Company and does not receive any additional compensation for his role as a director.

 

(4) All of the non-employee Directors are eligible to participate in the Global Payments Inc. Non-Qualified Deferred Compensation Plan described below. In fiscal year 2011, only Ms. Marshall and Mr. Silberstein participated. Neither Ms. Marshall, Mr. Silberstein nor any of the other non-employee Directors received any interest on deferred compensation at an above-market rate of interest in 2011.

(3) Compensation Policy. During fiscal year 2011, our policy regarding the compensation of directors provided that a non-employee director who served as the lead director was compensated at a rate of $105,000 per year in cash and received fully-vested shares of Common Stock worth approximately $105,000. A non-employee director who served as the chairperson of the audit committee received $75,000 in cash and fully-vested shares of Common Stock worth approximately $80,000. A non-employee director who served as the chairperson of the compensation committee received $65,000 in cash and fully-vested shares of Common Stock worth approximately $80,000. A non-employee director who served as a chairperson of any other committee received $60,000 in cash and fully-vested shares of Common Stock worth approximately $80,000. Each other non-employee director received an annual retainer of $55,000 in cash and fully vested shares of Common Stock worth approximately $80,000. All Common Stock granted pursuant to the director compensation policy described immediately above is valued at the market price as of the date of grant and is issued under our Amended and Restated 2005 Incentive Plan. Pursuant to the foregoing policy, Mr. Jacobs received 2,496 shares of Common Stock, and each of the other non-employee directors received 1,902 shares of Common Stock. Such Common Stock was issued and cash was paid on the business day following the annual meeting of shareholders in

 

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2010. We believe that paying part of the annual consideration in Common Stock encourages ownership of our Common Stock by our directors.

In addition, all non-employee directors received $1,500 per Board meeting attended, except for the lead director who received $2,500 per Board meeting. Non-employee directors who served on a committee received $1,500 per committee meeting, while the chairperson of such committee received $2,500 per committee meeting. Telephonic meetings and telephonic participation for both Board meetings and committee meetings are compensated at $1000 per meeting. We do not compensate a director who is also an employee of the Company for his or her services as a director. Directors were also compensated for their out-of-pocket expenses incurred in connection with attendance at Board and committee meetings.

Also, in fiscal year 2011, each of our non-employee directors received an option to purchase shares of Common Stock having a valuation according to the Black-Scholes option pricing model of $45,000. These options were issued on the day following the annual meeting of shareholders in 2010 pursuant to the Amended and Restated 2000 Non-Employee Director Stock Option Plan, as amended (the “2000 Director Plan”). We believe that the option grants advance the interests of the Company by encouraging ownership of our Common Stock by non-employee directors, thereby giving such directors an increased incentive to devote their efforts to our success. The options are granted to non-employee directors upon election or appointment to the Board and on the business day following each annual meeting of shareholders. Option grants under the 2000 Director Plan are pro-rated for partial years of service. All options granted in fiscal year 2011 under the 2000 Director Plan will become exercisable as to 25% of the shares after the first year, 25% after the second year, 25% after the third year, and 25% after the fourth year of service from the grant date, except that such options will become fully exercisable upon the death, disability or retirement of the grantee, or upon the grantee’s failure to be re-nominated or re-elected as a director. Upon a grantee’s termination as a director for any reason, the options held by such person under the 2000 Director Plan will remain exercisable for five years or until the earlier expiration of the option. The exercise price for each option granted under the 2000 Director Plan will be the fair market value of the shares of Common Stock subject to the option on the date of the grant. Each option granted under the 2000 Director Plan will, to the extent not previously exercised, terminate and expire on the date which is 10 years after the grant date of the option unless the 2000 Director Plan provides for earlier termination. During fiscal year 2011, the eight non-employee directors received a stock option grant for the purchase of 3,612 shares of Common Stock at an exercise price of $42.07 per share. The grant made to the directors on October 1, 2010 will be the last grant awarded from the 2000 Director Plan because it terminated on October 2, 2010 according to its terms.

(4) Outstanding Options for Directors. The following table reflects the outstanding options (vested and unvested) for each non-employee director as of May 31, 2011. The “spread” value contained in the third column is calculated by multiplying the number of options outstanding by the difference between the value of the Common Stock at the closing price on May 31, 2011, which was $51.96, and the exercise price of the option.

 

Non-employee

Directors

   Options Outstanding
as of May 31, 2011
(includes vested and
unvested)
     Value as of May 31, 2011
(includes vested and  unvested)
 

Edwin H. Burba, Jr.

     29,894       $ 313,258   

Alex W. Hart

     46,110       $ 845,988   

William I Jacobs

     50,050       $ 994,467   

Raymond L. Killian

     41,292       $ 664,422   

Ruth Ann Marshall

     25,124       $ 226,420   

Alan M. Silberstein

     41,292       $ 664,422   

Michael W. Trapp

     25,124       $ 226,420   

Gerald J. Wilkins

     29,894       $ 313,258   

(5) Non-Qualified Deferred Compensation Plan. The non-employee directors are eligible to participate in the Company’s Non-Qualified Deferred Compensation Plan, or “DC Plan.” Ms. Marshall and Mr. Silberstein are the only directors who participated in the DC plan during fiscal 2011. Pursuant to the DC Plan, non-employee directors are permitted to elect to defer up to 100% of their annual retainer and meeting fees. Participant accounts are credited with earnings based on the participant’s investment allocation among a menu of investment options selected by the DC Plan administrator. Participants are 100% vested in the participant deferrals and related earnings. The Company does not make contributions to the DC Plan and does not guarantee any return on participant account balances. Participants may

 

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allocate their plan accounts into sub-accounts that are payable upon separation from service or on designated specified dates. Except in the case of death or disability, participants may elect in advance to have their various account balances pay out in a single lump sum or in installments over a period of two to ten years. In the event a participant separates from service by reason of death or disability, the participant or his designated beneficiary will receive the undistributed portion of his or her account balances in a lump-sum payment. Subject to approval by the DC Plan administrator, in the event of an unforeseen financial emergency beyond the participant’s control, a participant may request a withdrawal from an account up to the amount necessary to satisfy the emergency (provided the participant does not have the financial resources to otherwise meet the hardship).

(6) Board Leadership Structure. The Board of Directors does not have a formal policy on whether the same person should serve as the Chairman of the Board and the Chief Executive Officer. Since 2002, however, Mr. Garcia has served in both roles. The Board believes the combined role of Chief Executive Officer and Chairman, together with a lead independent director having the duties described below, is in the best interest of the shareholders because it provides the appropriate balance between strategy development and independent oversight of management. The Board of Directors believes that having our Chief Executive Officer as Chairman of the Board facilitates the Board’s decision-making process because Mr. Garcia possesses detailed and in-depth knowledge of the issues, opportunities, and challenges facing the Company and its business and is thus best positioned to develop agendas (with input from the lead independent director) that ensure that the Board’s time and attention is focused on the most critical matters. His combined role enables decisive leadership, ensures clear accountability, and enhances the Company’s ability to communicate its message and strategy clearly and consistently to the Company’s shareholders, employees, customers, and suppliers.

Mr. Jacobs serves as our lead independent director. The lead independent director’s duties include providing input on the Board meeting agenda items, serving as the chairperson for all executive sessions of the independent directors, and communicating to the Chief Executive Officer the results of the independent executive Board sessions. Executive sessions of the independent directors are generally held immediately after each regularly scheduled meeting of the Board and do not include our only non-independent director. The independent directors of the Board met in executive session seven times during our fiscal year ended May 31, 2011.

Any interested party may contact the lead director by directing such communications to Mr. Jacobs in care of the Corporate Secretary at our address (10 Glenlake Parkway, North Tower, Atlanta, Georgia 30328-3473). Any such correspondence received by us will be forwarded to him.

(7) Director Independence. Each year the Board of Directors undertakes a review of director independence based on the standards for director independence included in the New York Stock Exchange corporate governance rules. The Board considers whether or not there existed any relationships and transactions during the past three years between each director or any member of his or her immediate family, on the one hand, and the Company and its subsidiaries and affiliates, on the other hand. The purpose of the review is to determine whether or not any such relationships and transactions existed and, if so, whether any such relationships or transactions were inconsistent with a determination that the director is independent. In fiscal year 2011, there were no such relationships or transactions between the non-employee directors and the Company to review and, as a result, the Board of Directors has determined that all of the directors, except Mr. Garcia (who serves as the Company’s Chief Executive Officer), are independent of the Company and its management.

(8) Committees. Our Board of Directors has a separately-designated Audit Committee, a Compensation Committee, a Governance, Nominating, and Risk Oversight Committee, and a Technology Committee. The Audit Committee has been established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Board of Directors has determined that all members of the four committees satisfy the independence requirements of the SEC and the New York Stock Exchange. Each of the committee charters and our corporate governance guidelines are available on our website (www.globalpaymentsinc.com), and will be provided free of charge, upon written request of any shareholder addressed to Global Payments Inc., 10 Glenlake Parkway, North Tower, Atlanta, Georgia 30328-3473, Attention: Investor Relations. Certain information regarding the functions of the Board’s committees and their present membership is provided below.

(9) Audit Committee. As of the end of fiscal year 2011, the members of the Audit Committee were Mr. Trapp (Chairperson), Mr. Wilkins, and Mr. Silberstein. The Audit Committee operates under a written charter adopted by the Board of Directors which is available on our website (www.globalpaymentsinc.com). The Audit Committee annually

 

11


reviews a report by the independent auditors describing the firm’s internal quality control procedures; reviews the scope, plan and results of the annual audit of the financial statements by our independent auditors; reviews the scope, plan and results of the internal audit program; reviews the nature and extent of non-audit professional services performed by the independent auditors; and annually recommends to the Board of Directors the firm of independent public accountants to be selected as our independent auditors for the next fiscal year. During fiscal year 2011, the Audit Committee held four meetings, each of which was separate from a regular Board meeting.

(10) Audit Committee Financial Expert. The Board of Directors has determined that the chairman of the Audit Committee, Mr. Trapp, is an audit committee financial expert and is independent as independence for audit committee members is defined under the rules established by the SEC and the New York Stock Exchange.

(11) Compensation Committee. As of the end of fiscal year 2011, the members of the Compensation Committee were General Burba (Chairperson), Mr. Hart, Mr. Jacobs, Mr. Killian, and Ms. Marshall. The Committee operates under a written charter which is available on our website (www.globalpaymentsinc.com). This Committee reviews levels of compensation, benefits, and performance criteria for our executive officers and administers the Amended and Restated 2000 Long Term Incentive Plan, the 2000 Employee Stock Purchase Plan, the 2000 Director Plan, and the Amended and Restated 2005 Incentive Plan. They also consider our compensation programs from a risk perspective. Additional information regarding risk consideration is contained in the Compensation Tables and Narratives section under the heading “Consideration of Risk.”

The Compensation Committee charter allows the Committee to delegate certain matters within its authority to individuals, and the Committee may form and delegate authority to subcommittees as appropriate. In addition, the Committee has the authority under its charter to retain outside advisors to assist the Committee in the performance of its duties, and for fiscal year 2011 the Committee retained the services of Meridian Compensation Partners LLC, an independent compensation consulting firm. The Compensation Discussion and Analysis section of this proxy statement describes our processes and procedures for the consideration and determination of executive compensation, including the role of the executive officers in determining compensation, and describes the role of the independent consultant in more detail.

During fiscal year 2011, the Compensation Committee also hired Meridian to assist with a review of the director compensation. The Compensation Committee, with Meridian’s assistance, made recommendations to the full Board, which were approved on September 30, 2010 and which took effect on October 2, 2010 and will remain in effect through our 2011 annual meeting. The executives have no role in determining Board compensation. During fiscal year 2011, the Compensation Committee held two meetings, both of which were separate from regular Board meetings.

(12) Compensation Committee Interlocks and Insider Participation. None of the members of the Compensation Committee (a) has ever served as an officer or an employee of the Company or any of its subsidiaries and (b) has ever had any relationship requiring disclosure by the Company under Item 404 of Regulation S-K. None of the Company’s executive officers serves as a member of the board of directors or compensation committee, or similar committee, of any other company that has one or more of its executive officers serving as a member of the Company’s Board of Directors or Compensation Committee.

(13) Technology Committee. As of the end of fiscal year 2011, the members of the Technology Committee were Mr. Killian (Chairperson), Mr. Hart, and Mr. Silberstein. The Committee operates under a written charter which is available on our website (www.globalpaymentsinc.com). This committee is to serve as a liaison between the Board and management with regard to matters related to information technology and information security and to review the practices and key initiatives of the Company related to information technology and information security. During fiscal year 2011, the Technology Committee held three meetings, all of which were separate from regular Board meetings.

(14) Governance, Nominating, and Risk Oversight Committee. As of the end of fiscal year 2011, the members of the Governance, Nominating, and Risk Oversight Committee (the “Governance Committee”) were Mr. Hart (Chairperson), General Burba, Mr. Jacobs, and Ms. Marshall. The Committee operates under a written charter which is available on our website (www.globalpaymentsinc.com). This committee is responsible for developing and recommending to the Board of Directors a set of corporate governance principles applicable to us, determining the structure of the Board and its committees, for overseeing the Company’s enterprise risk management process (as described in more detail below), and for identifying, nominating, proposing, and qualifying nominees (including incumbent directors) for open seats on the Board of Directors, based primarily on the following criteria:

 

12


   

Experience as a member of senior management or director of a significant business corporation, educational institution, or not-for-profit organization;

 

   

Particular skills or experience that enhances the overall composition of the Board of Directors;

 

   

Serves on no more than five other boards of directors of publicly-held corporations; and

 

   

Serves on no more than three other audit committees of boards of directors of publicly-held corporations.

We do not have a formal diversity policy. However, as part of its evaluation of director candidates and in addition to other standards the Governance Committee may deem appropriate from time to time for the overall structure and composition of the Board, the Committee considers whether each candidate, if elected, assists in achieving a mix of board members that represent a diversity of background and experience. Accordingly, the Board seeks members from diverse professional backgrounds who combine a broad spectrum of relevant industry and strategic experience and expertise that, in concert, offer the Company and its shareholders diversity of opinion and insight in the areas most important to us and our corporate mission. The Committee also considers the independence of candidates for director nominees, including the appearance of any conflict in serving as a director. Candidates for director nominees who do not meet all of these criteria may still be considered for nomination to the Board if the Committee believes the candidate will make an exceptional contribution to the Company and its shareholders. In evaluating nominees, the Committee will also take into account the consideration that members of the Board of Directors should collectively possess a broad range of skills, expertise, industry knowledge and other knowledge, business experience and other experience useful to the effective oversight of our business.

The Governance Committee considers candidates for director who are recommended by other members of the Board of Directors and by management, as well as those identified by any outside consultants who are periodically retained by the Committee to assist in identifying possible candidates. The Governance Committee will evaluate potential nominees for open Board positions suggested by shareholders on the same basis as all other potential nominees. To recommend a potential nominee, you may send a letter to the Corporate Secretary, Global Payments Inc., 10 Glenlake Parkway, North Tower, Atlanta, Georgia, 30328. Such letter should include the following information:

 

   

Name and address of the shareholder making the recommendation, as it appears on our books and records;

 

   

Number of shares of our capital stock that are owned by such shareholder;

 

   

Name, age, business and residential address, educational background, current principal occupation or employment, and principal occupation or employment for the preceding five full fiscal years of the individual recommended for consideration as a director nominee;

 

   

All other information relating to the recommended candidate that would be required to be disclosed in solicitations of proxies for the election of directors or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act, including the recommended candidate’s written consent to being named in the proxy statement as a nominee and to serving as a director if approved by the board of directors and elected; and

 

   

A written statement from the shareholder making the recommendation stating why such recommended candidate meets our criteria and would be able to fulfill the duties of a director.

Members of the Governance Committee must discuss and evaluate possible candidates prior to recommending them to the Board. This committee had two meetings during fiscal year 2011.

(15) Majority Voting. The Board of Directors has approved the corporate governance guideline described below regarding majority voting. In an uncontested election of directors (i.e., an election where the only nominees are those recommended by the Board), any nominee for director who receives a greater number of votes “withheld” from his or her election (excluding broker and nominee non-votes) than votes “for” his or her election will be required to promptly tender his or her resignation to the Board following certification of the shareholder vote in accordance with the Director Code of Conduct and Ethics.

The Governance Committee will promptly consider any resignation submitted by a director in accordance with the foregoing paragraph and the Governance Committee will recommend to the Board whether to accept or reject the tendered resignation, or whether other action should be taken. In considering whether to accept or reject the tendered resignation, the Governance Committee will consider all factors deemed relevant by the members of the Governance Committee including, without limitation, the stated reasons why shareholders “withheld” votes for election from such

 

13


director, the length of service and qualifications of the director whose resignation has been tendered, the director’s contributions to the Company, and the Company’s Corporate Governance Guidelines.

The Board will act on the Governance Committee’s recommendation and publicly disclose its decision within 90 days from the date of the certification of the election results. In considering the Governance Committee’s recommendation, the Board will consider the factors considered by the Governance Committee and such additional information and factors the Board believes to be relevant. Following the Board’s decision on the Governance Committee’s recommendation, the Company will promptly publicly disclose the Board’s decision whether to accept the resignation as tendered (providing an explanation of the process by which the decision was reached and, if applicable, the reasons for rejecting the tendered resignation) in a Form 8-K filed with the Securities and Exchange Commission. Any director who tenders his or her resignation pursuant to this provision will not participate in the Governance Committee’s or the Board’s recommendation or decision, or any deliberations related thereto.

(16) Role in Risk Oversight by the Board of Directors. Managing risk is an ongoing process inherent in all decisions made by management. The Board of Directors discusses risk throughout the year, particularly at Board and Committee meetings when specific actions are considered for approval. The Board of Directors has ultimate responsibility to oversee the Company’s enterprise risk management program (“ERM”). The Governance Committee has been appointed by our Board of Directors to coordinate the oversight of ERM by the Board.

In connection with the Company’s ERM, the Company has formed a management risk committee which is comprised of the Company’s senior management and which is responsible for identifying, assessing, prioritizing, and developing action plans to mitigate the material risks affecting the Company including monitoring the business environment for changes in and emergence of significant risks. The Governance Committee’s role in overseeing the management of the process is primarily accomplished through the management reporting process, including receiving reports from the chairman of the management risk committee and other members of senior management on areas of material risk to the Company. The Chairman of the Governance Committee will update the full Board of Directors on the process after each Committee meeting and, periodically, the chairman of the management risk committee will also present directly to the full board and seek their input and direction on the process.

The Audit Committee receives reports from the Chairman of the Governance Committee regarding the Company’s ERM, receives a report periodically from the chairman of the management risk committee as described above, and receives reports regularly from the internal auditor, who has responsibility for providing an independent assessment of the effectiveness of management’s risk mitigation activities developed by management. The Audit Committee directly provides oversight of risks related to the integrity of the consolidated financial statements, internal control over financial reporting, and the internal audit function. The Compensation Committee oversees the management of risks related to management succession planning and the Company’s executive compensation program.

(17) Communications from Security Holders. Any security holder may contact any member of the Board of Directors by directing such communication to such Board member in care of the Corporate Secretary at our address (10 Glenlake Parkway, North Tower, Atlanta, Georgia 30328-3473). Any such correspondence received by us shall be forwarded to the applicable Board member.

(18) Attendance at Annual Meeting. All directors are expected to attend our annual meeting of shareholders. All nine members of our Board of Directors attended our fiscal year 2010 annual shareholder meeting.

(19) Certain Legal Proceedings. William I Jacobs, a member of the Board of Directors, was the Chief Financial Officer and Managing Director of The New Power Company, a subsidiary of NewPower Holdings, Inc. Both The New Power Company and NewPower Holdings, Inc. filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Northern District of Georgia on June 11, 2002.

 

14


PROPOSAL TWO:

APPROVAL OF THE COMPANY’S 2011 INCENTIVE PLAN

The Board of Directors has adopted, subject to shareholder approval at the Annual Meeting, the Global Payments Inc. 2011 Incentive Plan (the “2011 Plan”). The 2011 Plan will become effective as of the date it is approved by the shareholders.

The 2011 Plan is intended to serve as the successor to the Company’s Third Amended and Restated 2005 Incentive Plan (the “2005 Plan”). As of August 5, 2011, there were approximately 977,296 shares of our Common Stock reserved and available for future awards under the 2005 Plan. If our shareholders approve the 2011 Plan, all future equity awards will be made from the 2011 Plan, and we will not grant any additional awards under the 2005 Plan. However, the Company reserves the right to pay other types of compensation outside of this new plan.

The Board of Directors recommends that the shareholders vote “FOR” approval of adoption of the 2011 Plan. The proxies solicited on behalf of the Board of Directors will be voted in favor of approval of adoption of the 2011 Plan unless otherwise specified. This proposal No. 2 will be approved if the votes cast in favor of the proposal exceed the votes cast against the proposal (including abstentions); provided that the total votes cast on the proposal (including abstentions) must represent over 50% of the total outstanding shares of our Common Stock.

A summary of the 2011 Plan is set forth below. This summary is qualified in its entirety by the full text of the 2011 Plan, which is attached to this Proxy Statement as Appendix A.

 

A. Summary of the 2011 Incentive Plan

(1) Purpose and Eligibility. The purpose of the 2011 Plan is to promote the Company’s success by linking the personal interests of its employees, officers, directors and consultants to those of the Company’s shareholders, and by providing participants with an incentive for outstanding performance. As of May 31, 2011, approximately 1343 employees and 8 non-employee directors would be eligible to participate in the 2011 Plan.

(2) Administration. The 2011 Plan will be administered by the Compensation Committee of the Board of Directors or such other committee of the Board as may be designated by the Board to administer the 2011 Plan, either of which we refer to as the “Committee” in this Proposal. The Committee will have the authority to: designate participants; grant awards; determine the type or types of awards to be granted to each participant and the number, terms and conditions thereof; establish, adopt or revise any rules and regulations as it may deem advisable to administer the 2011 Plan; and make all other decisions and determinations that may be required under the 2011 Plan.

(3) Awards to Non-Employee Directors. Notwithstanding the above, awards granted under the 2011 Plan to the Company’s non-employee directors will be made only in accordance with the terms, conditions and parameters of a plan, program or policy for the compensation of non-employee directors as in effect from time to time. The Committee may not make discretionary grants under the 2011 Plan to non-employee directors outside of such established program for director compensation.

(4) Permissible Awards. The 2011 Plan authorizes the granting of awards in any of the following forms:

 

   

market-priced options to purchase shares of our Common Stock, which may be designated under the Internal Revenue Code (the “Code”) as nonqualified stock options (which may be granted to all participants) or incentive stock options (which may be granted to officers and employees but not to consultants or non-employee directors);

 

   

stock appreciation rights (“SARs”), which give the holder the right to receive the difference (payable in cash or stock, as specified in the award agreement) between the fair market value per share of our Common Stock on the date of exercise over the base price of the award (which cannot be less than the fair market value of the underlying stock as of the grant date);

 

   

restricted stock, which is subject to restrictions on transferability and subject to forfeiture on terms set by the Committee;

 

   

stock units, which represent the right to receive shares of Common Stock (or an equivalent value in cash or other property, as specified in the award agreement) at a designated time in the future and subject to any

 

15


 

vesting requirement as may be set by the Committee;

 

   

performance awards, which represent any award of the types listed above which have a performance-vesting component based on the achievement, or the level of achievement, of one or more performance goals during a specified performance period, as established by the Committee;

 

   

other stock-based awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on shares of Common Stock, including unrestricted stock grants, purchase rights, or other rights or securities that are convertible or exchangeable into shares of Common Stock;

 

   

dividend equivalents, which entitle the participant to payments (or an equivalent value payable in stock or other property) equal to any dividends paid on the shares of stock underlying an award other than an option or stock appreciation right; and

 

   

cash-based awards, including performance-based annual bonus awards.

(5) Shares Available for Awards. The aggregate number of shares of Common Stock that may be issued under the 2011 Plan is 7,000,000 shares, subject to proportionate adjustment in the event of stock splits and similar events. Shares underlying options and SARs will count as four tenths of 1 share, and shares underlying all other stock-based awards will count as 1 share, against the number of shares available for issuance under the 2011 Plan. Shares subject to awards that terminate or expire unexercised, or are cancelled, forfeited or lapse for any reason, and shares underlying awards that are ultimately settled in cash, will again become available for future grants of awards under the 2011 Plan. To the extent that the full number of shares subject to a full-value award is not issued for any reason, including by reason of failure to achieve maximum performance goals, the unissued shares originally subject to the award will be added back to the plan share reserve. Shares delivered by the participant or withheld from an award to satisfy tax withholding requirements, and shares delivered or withheld to pay the exercise price of an option, will not be used to replenish the plan share reserve. The Committee may grant awards under the 2011 Plan in substitution for awards held by employees of another entity who become employees of the Company as a result of a business combination, and such substitute awards will not count against the plan share reserve. No awards may be granted under the 2011 Plan after the tenth anniversary of the effective date.

(6) Limitations on Awards. The maximum aggregate number of shares of Common Stock subject to time-vesting options or time-vesting SARs that may be granted under the 2011 Plan in any 12-month period to any one participant is 600,000 each. The maximum aggregate dollar value or number of shares of Common Stock subject to performance-vesting awards under the 2011 Plan that may be paid in any 12-month period to any one participant is as follows:

 

   

performance awards settled in Common Stock, the greater of 600,000 shares or shares having a fair market value of $30 million as of the date of grant of the award; and

 

   

performance awards settled in cash or property other than shares of Common Stock, $10 million.

For purposes of applying these limits in the case of multi-year performance periods, the amount of cash or property or number of shares deemed paid in any one 12-month period is the total amount payable or shares earned for the performance period divided by the number of 12-month periods in the performance period.

(7) Minimum Vesting Requirements. Except in the case of substitute awards granted in a business combination as described above, full-value awards shall either (i) be subject to a minimum vesting period of three years (which may include graduated vesting within such three-year period), or one year if the vesting is based on performance criteria other than continued service, or (ii) be granted solely in exchange for foregone cash compensation. However, the Committee may accelerate vesting of such full-value awards in the event of the participant’s termination or upon the occurrence of a change in control and the minimum vesting requirements shall not apply to awards made to non-employee directors.

(8) Qualified Performance-Based Awards. All options and stock appreciation rights granted under the 2011 Plan are designed to be exempt from the $1,000,000 deduction limit imposed by Code Section 162(m). The Committee may designate any other award granted under the 2011 Plan as a qualified performance-based award in order to make the award fully deductible without regard to the $1,000,000 deduction limit imposed by Code Section 162(m). If an award is so designated, the Committee must establish objectively determinable performance goals for the award based on one or more of the following business criteria, which may be expressed in terms of Company-wide objectives or in terms of objectives that relate to the performance of an affiliate or a division, region, department or function within the Company or an affiliate over a performance term to be designated by the Committee that may be as short as a calendar quarter or other three-month period:

 

16


   

Revenue (premium revenue, total revenue or other revenue measures)

 

   

Sales

 

   

Profit (net profit, gross profit, operating profit, economic profit, profit margins or other corporate profit measures)

 

   

Earnings (EBIT, EBITDA, earnings per share, or other corporate earnings measures)

 

   

Net income (before or after taxes, operating income or other income measures)

 

   

Cash (cash flow, cash generation or other cash measures)

 

   

Stock price or performance

 

   

Total shareholder return (stock price appreciation plus reinvested dividends divided by beginning share price)

 

   

Economic value added

 

   

Return measures (including, but not limited to, return on assets, capital, equity, investments or sales, and cash flow return on assets, capital, equity, or sales)

 

   

Market share

 

   

Improvements in capital structure

 

   

Expenses (expense management, expense ratio, expense efficiency ratios or other expense measures)

 

   

Business expansion (acquisitions)

 

   

Internal rate of return or increase in net present value

 

   

Productivity measures

 

   

Cost reduction measures

 

   

Strategic plan development and implementation

The Committee must establish such goals within the first 25% of the period for which such performance goal relates (or such later date as may be permitted under applicable tax regulations) and the Committee may for any reason reduce (but not increase) any award, notwithstanding the achievement of a specified goal. The Committee may not waive the achievement of any specified goal, except in the case of death or disability of the participant or a change in control. The Committee may provide, at the time the performance goals are established, that any evaluation of performance shall exclude or otherwise objectively adjust for any specified circumstance or event that occurs during a performance period, including by way of example but without limitation the following: (a) asset write-downs or impairment charges; (b) litigation or claim judgments or settlements; (c) the effect of changes in tax laws, accounting principles or other laws or provisions affecting reported results; (d) accruals for reorganization and restructuring programs; (e) extraordinary nonrecurring items as described in then-current accounting principles; (f) extraordinary nonrecurring items as described in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to shareholders for the applicable year; (g) acquisitions or divestitures; and (h) foreign exchange gains and losses. Any payment of an award granted with performance goals will be conditioned on the written certification of the Committee in each case that the performance goals and any other material conditions were satisfied.

(9) Treatment of Awards upon a Participant’s Termination of Service. Unless otherwise provided in an award agreement or any special plan document governing an award, upon the termination of a participant’s service due to death:

 

   

all of that participant’s outstanding options and stock appreciation rights will become fully vested and exercisable and will remain exercisable for one year thereafter (or the earlier end of the term of the award) and

 

   

all time-based vesting restrictions on that participant’s outstanding awards will lapse as of the date of termination.

In addition, subject to limitations applicable to certain qualified performance-based awards, the Committee may, in its discretion accelerate awards upon the termination of service of a participant or the occurrence of a change in control. The Committee may discriminate among participants or among awards in exercising such discretion.

 

17


(10) Anti-dilution Adjustments. In the event of a transaction between us and our shareholders that causes the per-share value of our Common Stock to change (including, without limitation, any stock dividend, stock split, spin-off, rights offering or large nonrecurring cash dividend), the share authorization limits and annual award limits under the 2011 Plan will be adjusted proportionately, and the Committee shall make such adjustments to the 2011 Plan and awards as it deems necessary, in its sole discretion, to prevent dilution or enlargement of rights immediately resulting from such transaction. In the event of a stock split, a stock dividend, or a combination or consolidation of the outstanding shares of our Common Stock into a lesser number of shares, the authorization limits and annual award limits under the 2011 Plan will automatically be adjusted proportionately, and the shares then subject to each award will automatically be adjusted proportionately without any change in the aggregate purchase price.

(11) Amendment and Termination of the 2011 Plan. The Board or the Committee may amend, suspend or terminate the 2011 Plan at any time, except that no amendment may be made without the approval of the Company’s shareholders if shareholder approval is required by any federal or state law or regulation or by the rules of any stock exchange on which the Common Stock may then be listed, or if the amendment, alteration or other change materially increases the number of shares available under the 2011 Plan, expands the types of awards available under the 2011 Plan, materially expands the class of participants eligible to participate in the Plan, materially extends the term of the Plan, or if the Board or Committee its discretion determines that obtaining such shareholder approval is for any reason advisable. No termination or amendment of the 2011 Plan may, without the written consent of the participant, reduce or diminish the value of an outstanding award. The Committee may amend or terminate outstanding awards. However, such amendments may require the consent of the participant and, unless approved by our shareholders, the exercise price of an outstanding option or stock appreciation right may not be reduced, directly or indirectly, and the original term of an option or stock appreciation right may not be extended.

(12) Prohibition on Repricing. As indicated above under “Amendment and Termination,” outstanding stock options and SARs cannot be repriced, directly or indirectly, without the prior consent of the Company’s shareholders. The exchange of an “underwater” option or SAR (i.e., an option or SAR having an exercise or base price in excess of the current market value of the underling stock) for another award or for a cash payment would be considered an indirect repricing and would, therefore, require the prior consent of the Company’s shareholders.

(13) Limitations on Transfer; Beneficiaries. No right or interest of a participant in any award may be pledged or encumbered to or in favor of any person other than the Company, or be subject to any lien, obligation or liability of the participant to any person other than the Company or an affiliate. Except to the extent otherwise determined by the Committee with respect to awards other than incentive stock options, no award may be assignable or transferable by a participant otherwise than by will or the laws of descent and distribution, and any option or other purchase right shall be exercisable during the participant’s lifetime only by such participant. A beneficiary, guardian, legal representative or other person claiming any rights under the 2011 Plan from or through a participant will be subject to all the terms and conditions of the 2011 Plan and any award agreement applicable to the participant.

(14) Clawback Policy. Awards under the 2011 Plan will be subject to any compensation recoupment policy (sometimes referred to as a “clawback policy”) of the Company as adopted from time to time.

 

B. Federal Income Tax Consequences

The U.S. federal income tax discussion set forth below is intended for general information only and does not purport to be a complete analysis of all of the potential tax effects of the 2011 Plan. It is based upon laws, regulations, rulings and decisions now in effect, all of which are subject to change. State, local and ex-U.S. income tax consequences are not discussed, and may vary from jurisdiction to jurisdiction.

(1) Nonqualified Stock Options. There will be no federal income tax consequences to the optionee or to the Company upon the grant of a Nonqualified stock option under the 2011 Plan. When the optionee exercises a Nonqualified option, however, he or she will recognize ordinary income in an amount equal to the excess of the fair market value of the stock received upon exercise of the option at the time of exercise over the exercise price, and the Company will be allowed a corresponding federal income tax deduction. Any gain that the optionee realizes when he or she later sells or disposes of the option shares will be short-term or long-term capital gain, depending on how long the shares were held.

 

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(2) Incentive Stock Options. There will be no federal income tax consequences to the optionee or to the Company upon the grant of an incentive stock option. If the optionee holds the option shares for the required holding period of at least two years after the date the option was granted and one year after exercise, the difference between the exercise price and the amount realized upon sale or disposition of the option shares will be long-term capital gain or loss, and the Company will not be entitled to a federal income tax deduction. If the optionee disposes of the option shares in a sale, exchange, or other disqualifying disposition before the required holding period ends, he or she will recognize taxable ordinary income in an amount equal to the excess of the fair market value of the option shares at the time of exercise over the exercise price, and the Company will be allowed a federal income tax deduction equal to such amount. While the exercise of an incentive stock option does not result in current taxable income, the excess of the fair market value of the option shares at the time of exercise over the exercise price will be an item of adjustment for purposes of determining the optionee’s alternative minimum taxable income.

(3) Stock Appreciation Rights. A participant receiving a stock appreciation right under the 2011 Plan will not recognize income, and the Company will not be allowed a tax deduction, at the time the award is granted. When the participant exercises the stock appreciation right, the amount of cash and the fair market value of any shares of stock received will be ordinary income to the participant and the Company will be allowed a corresponding federal income tax deduction at that time.

(4) Restricted Stock. Unless a participant makes an election to accelerate recognition of the income to the date of grant as described below, a participant will not recognize income, and the Company will not be allowed a tax deduction, at the time a restricted stock award is granted, provided that the award is nontransferable and is subject to a substantial risk of forfeiture. When the restrictions lapse, the participant will recognize ordinary income equal to the fair market value of the stock as of that date (less any amount he or she paid for the stock), and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m). If the participant files an election under Code Section 83(b) within 30 days after the date of grant of the restricted stock, he or she will recognize ordinary income as of the date of grant equal to the fair market value of the stock as of that date (less any amount paid for the stock), and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m). Any future appreciation in the stock will be taxable to the participant at capital gains rates. However, if the stock is later forfeited, the participant will not be able to recover the tax previously paid pursuant to the Code Section 83(b) election.

(5) Stock Units. A participant will not recognize income, and the Company will not be allowed a tax deduction, at the time a stock unit award is granted. Upon receipt of shares of stock (or the equivalent value in cash or other property) in settlement of a stock unit award, a participant will recognize ordinary income equal to the fair market value of the stock or other property as of that date (less any amount he or she paid for the stock or property), and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m).

(6) Performance Awards. A participant will not recognize income, and the Company will not be allowed a tax deduction, at the time a performance award is granted (for example, when the performance goals are established). Upon receipt of cash, stock or other property in settlement of a performance award, the participant will recognize ordinary income equal to the cash, stock or other property received, and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m). Performance awards granted under the 2011 Plan are intended to qualify for the “performance based compensation” exception from Code Section 162(m).

(7) Code Section 409A. The 2011 Plan permits the grant of various types of incentive awards, which may or may not be exempt from Code Section 409A. If an award is subject to Section 409A, and if the requirements of Section 409A are not met, the taxable events as described above could apply earlier than described, and could result in the imposition of additional taxes and penalties. Restricted stock awards, and stock options and stock appreciation rights as that comply with the terms of the 2011 Plan, are designed to be exempt from the application of Code Section 409A. Restricted stock units and performance awards granted under the 2011 Plan would be subject to Section 409A unless they are designed to satisfy the short-term deferral exemption from such law. If not exempt, such awards must be specially designed to meet the requirements of Section 409A in order to avoid early taxation and penalties.

 

19


(8) Tax Withholding. The Company has the right to deduct or withhold, or require a participant to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes (including employment taxes) required by law to be withheld with respect to any exercise, lapse of restriction or other taxable event arising as a result of the 2011 Plan.

 

C. New Plan Benefits

Grants and awards under the 2011 Plan, which may be made to Company executive officers, directors and other employees, are not presently determinable. If the shareholders approve the Plan, such grants and awards will be made at the discretion of the Committee.

The 2011 Plan will be approved if the votes cast in favor of the proposal exceed the votes cast against the proposal (including abstentions); provided that the total votes cast on the proposal (including abstentions) must represent over 50% of the total outstanding shares of the Company’s Common Stock.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE GLOBAL PAYMENTS INC. 2011 INCENTIVE PLAN.

EQUITY COMPENSATION PLAN INFORMATION

The following table gives information about the Company’s Common Stock that may be issued upon the exercise of options, warrants and rights under all of the Company’s existing equity compensation plans as of the end of our 2011 fiscal year, including the Company’s Third Amended and Restated 2005 Incentive Plan, the Company’s Amended and Restated 2000 Long-Term Incentive Plan, the Company’s 2000 Non-Employee Director Stock Option Plan, and the Company’s 2000 Employee Stock Purchase Plan, each of which has previously been approved by the Company’s shareholders. The shareholders are being asked to approve the Company’s 2011 Incentive Plan, as provided in Proposal 2 above and to allow 7,000,000 additional shares.

 

Plan category

  Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
    Weighted-average exercise
price of outstanding
options, warrants and
rights
    Number of securities
remaining available for future
issuance under equity
compensation plans (excluding
securities

reflected in column (a))
 
    (a)     (b)     (c)  

Equity compensation plans approved by security holders:

    2,470,456      $ 33.00        3,305,550 (1) 

Equity compensation plans not approved by security holders:

    0        0        0   

Total

    2,470,456      $ 33.00        3,305,550   

 

(1) This includes shares available from both our 2000 Employee Stock Purchase Plan and our Third Amended and Restated 2005 Incentive Plan, including 1,825,295 shares available for issuance pursuant to awards under the Third Amended and Restated 2005 Incentive Plan (or up to 912,647 full value awards) as of May 31, 2011.

 

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PROPOSAL THREE:

ADVISORY VOTE ON THE COMPENSATION

OF OUR NAMED EXECUTIVE OFFICERS

In accordance with recently adopted Section 14A of the Exchange Act, the Board of Directors is asking shareholders to approve an advisory resolution on executive compensation. The advisory vote is a non-binding vote on the compensation of the Company’s named executive officers. The vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. The text of the resolution is as follows:

Resolved, that the shareholders of Global Payments Inc. approve, on an advisory basis, the compensation of the Company’s named executive officers as disclosed in the proxy statement for the Company’s 2011 annual meeting of shareholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis section and the Summary Compensation Table and related compensation tables and narrative discussion.

The Company urges you to read the Compensation Discussion and Analysis in this proxy statement, which discusses how our compensation policies and procedures implement our compensation philosophy. You should also read the Summary Compensation Table and other related compensation tables and narrative disclosure which provide additional details about the compensation of the executive officers in fiscal year 2011 whose compensation is disclosed in this proxy statement. We have designed our compensation and benefits program and philosophy to attract, retain and motivate talented, qualified and committed executive officers who share our philosophy and desire to work toward our goals. We believe that our executive compensation program aligns individual compensation with the short-term and long-term performance of the Company in ways such as the following:

 

   

Pay opportunities are appropriate to the size of the Company when compared to peer companies

 

   

The pay program is heavily performance-based using multiple measures which are fully disclosed in the proxy statement

 

   

Long-term incentives are linked to shareholders through performance shares that change in value as stock price changes

 

   

There has been no backdating or re-pricing of stock options

 

   

Perquisites are a minor part of our compensation program

 

   

Our insider trading policy prohibits directors and employees from engaging in any transaction in which they profit if the value of GPN’s common stock falls

 

   

Executives are subject to stock ownership guidelines

 

   

Change-in-control agreements are double trigger, and future arrangements will not have excise tax gross-ups

 

   

The Committee engages an independent compensation consultant

The vote regarding the compensation of the named executive officers described in this Proposal No. 3, referred to as a “say-on-pay advisory vote,” is advisory, and is, therefore, not binding on the Company or the Board of Directors. Although non-binding, the Board of Directors values the opinions that shareholders express in their votes and will review the voting results and take them into consideration when making future decisions regarding our executive compensation programs as they deem appropriate.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE

APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS,

AS DISCLOSED IN THIS PROXY STATEMENT.

PROPOSAL FOUR:

ADVISORY VOTE ON FREQUENCY OF THE VOTE

ON EXECUTIVE COMPENSATION

As described in Proposal No. 3 above, the Company’s shareholders are being provided the opportunity to cast an advisory vote on the Company’s executive compensation program. The advisory vote on executive compensation described in Proposal No. 3 above is referred to as a “say-on-pay vote.”

 

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This Proposal No. 4 affords shareholders the opportunity to cast an advisory vote on how often the Company should include a say-on-pay vote in its proxy materials for future annual shareholder meetings (or special shareholder meetings for which the Company must include executive compensation information in the proxy statement for that meeting). Under this Proposal No. 4, shareholders may vote to have the say-on-pay vote every year, every two years or every three years. Shareholders may also abstain from voting. This is an advisory vote and is, therefore, non-binding.

The Company believes that say-on-pay votes should be conducted every year so that shareholders may annually express their views on the Company’s executive compensation program and, accordingly, the Board recommends that this vote be held every year. It should be noted, however, that shareholders are not voting to approve or disapprove the Board’s recommendation on this matter. The Compensation Committee, which administers the Company’s executive compensation program, values the opinions expressed by shareholders in these votes and will continue to consider the outcome of these votes in making its decisions on executive compensation.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE TO HOLD AN ADVISORY VOTE ON EXECUTIVE COMPENSATION EVERY YEAR (“1 YEAR”), AS OPPOSED TO EVERY TWO YEARS OR EVERY THREE YEARS.

PROPOSAL FIVE:

RATIFICATION OF THE REAPPOINTMENT OF AUDITORS

 

A. Deloitte & Touche LLP

The Audit Committee recommends, and the Board of Directors selects, independent public accountants for the Company. The Audit Committee has recommended that Deloitte & Touche LLP, or Deloitte, who served during the fiscal year ended May 31, 2011, be selected for the fiscal year ending May 31, 2012, and the Board has approved the selection. Unless a shareholder directs otherwise, proxies will be voted for the approval of the selection of Deloitte as independent public accountants for fiscal year ending May 31, 2012. If the appointment of Deloitte is not ratified by the shareholders, the Board will consider the selection of other independent public accountants for 2012.

A representative of Deloitte will be present at the 2011 Annual Meeting. The representative will be given the opportunity to make a statement, if he or she desires to do so, and will be available to respond to appropriate questions from shareholders.

 

B. Audit Fees

The aggregate fees billed by Deloitte for professional services rendered for the audit of our annual financial statements and the reviews of the financial statements included in our quarterly reports on Form 10-Q were $2,541,199 for fiscal year 2011 and $2,411,141 for fiscal year 2010.

 

C. Audit-Related Fees

Audit-related fees are the fees billed by Deloitte for professional services rendered for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements. There were no audit-related fees billed during fiscal year 2011 or during fiscal year 2010.

 

D. Tax Fees

The aggregate fees billed by Deloitte for professional services rendered for tax compliance, tax advice, and tax planning services were $302,350 for fiscal year 2011 and $379,700 for fiscal year 2010. In fiscal year 2011, $67,350 of such fees was for tax return preparation and compliance and $235,000 was for tax consulting and advisory services. In fiscal year 2010, $47,000 of such fees was for tax return preparation and compliance and $332,700 was for tax consulting and advisory services.

 

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E. All Other Fees

For fiscal year 2011, Deloitte was engaged to perform advisory services related to network security procedures, which resulted in $69,000 of other fees. Except as described above, there were no other fees billed by Deloitte for professional services in fiscal year 2010.

 

F. Audit Committee Pre-Approval Policies

The Audit Committee must approve any audit services and any permissible non-audit services provided by Deloitte prior to the commencement of the services. In making its pre-approval determination, the Audit Committee considers whether providing the non-audit services is compatible with maintaining the auditor’s independence. To minimize relationships which could appear to impair the objectivity of the independent registered public accounting firm, it is generally the Audit Committee’s practice to restrict the non-audit services that may be provided to us by our independent auditor to audit-related services, tax services and merger and acquisition due diligence and integration services, but other permissible non-audit services are approved on a case by case basis.

The Audit Committee has delegated to the Chair of the Audit Committee the authority to approve non-audit services by the independent registered public accounting firm within the guidelines set forth above, provided that the fees associated with the applicable engagement are not anticipated to exceed $100,000. Any decision by the Chair to pre-approve non-audit services must be presented to the full Audit Committee for ratification at its next scheduled meeting. All of the services described under the headings “Audit Fees,” “Audit-Related Fees,” “Tax Fees,” and “All Other Fees” were approved by the Audit Committee in accordance with the foregoing policy.

 

G. Audit Committee Review

Our Audit Committee has reviewed the services rendered and the fees billed by Deloitte for the fiscal year ended May 31, 2011. The Audit Committee has considered whether or not the provision of non-audit services described above under the headings “Audit-Related Fees” and “All Other Fees” is compatible with maintaining Deloitte’s independence and has determined that the provision of such services does not affect Deloitte’s independence.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE REAPPOINTMENT OF THE INDEPENDENT PUBLIC ACCOUNTANTS.

 

23


CERTAIN INFORMATION CONCERNING THE EXECUTIVE OFFICERS

The following table sets forth the names of our executive officers as of May 31, 2011, their ages, their positions with the Company, and their principal occupations and employers for at least the past five years. There are no arrangements or understandings between any of our executive officers and any other person pursuant to which any of them was elected an officer, other than arrangements or understandings with our officers acting solely in their capacities as such. Our executive officers serve at the pleasure of our Board of Directors.

 

Name

   Age   

Current Position

  

Position with Global Payments and

Other Principal Business Affiliations

Paul R. Garcia

   59   

Chairman of the Board

of Directors and Chief

Executive Officer

   Chairman of the Board of Directors (since October 2002); Chief Executive Officer of Global Payments (since February 2001); Chief Executive Officer of NDC eCommerce (July 1999–January 2001); President and Chief Executive Officer of Productivity Point International (March 1997– September 1998); Group President of First Data Card Services (1995–1997); Chief Executive Officer of National Bancard Corporation (NaBANCO) (1989–1995).

Jeffrey S. Sloan

   44    President    President, Global Payments Inc. (since June 2010); Partner, Goldman Sachs Group, Inc. (1) (December 2004 - May 2010) heading the Financial Technology Group in New York and focused on mergers and acquisitions and corporate finance; Managing Director, Goldman Sachs Group, Inc. (December 2001 – November 2004); Vice President, Goldman Sachs Group, Inc. (September 1998 - November 2001).

David E. Mangum

   45   

Senior Executive Vice

President and

Chief Financial Officer

   Senior Executive Vice President and Chief Financial Officer (since August 2011) of Global Payments; Executive Vice President and Chief Financial Officer (November 2008 – August 2011) of Global Payments; Executive Vice President of Fiserv Corp., which acquired CheckFree Corporation (2) in December 2007, (December 2007 – August 2008) leading the integration of the CheckFree acquisition; Executive Vice President and Chief Financial Officer of CheckFree Corporation (July 2000 to December 2007); Senior Vice President, Finance and Accounting of CheckFree Corporation (September 1999 – May 2000); Vice President, Finance and Administration, Managed Systems Division for Sterling Commerce, Inc. (July 1998 – September 1999).

 

24


Joseph C. Hyde

   37    President - International    President - International (since November 2008) of Global Payments; Executive Vice President and Chief Financial Officer (October 2005 – November 2008) of Global Payments; Senior Vice President of Finance of Global Payments (December 2001 – October 2005); Vice President of Finance of Global Payments (February 2001- December 2001); Vice President of Finance of NDC eCommerce (June 2000–January 2001); Associate, Alvarez & Marsal (1998–2000); Analyst, The Blackstone Group (1996-1998).

Suellyn P. Tornay

   50   

Executive Vice

President and General

Counsel

   Executive Vice President (since June 2004) and General Counsel for the Company (since February 2001); Interim General Counsel for National Data Corporation (1999–2001); Group General Counsel, eCommerce Division of National Data Corporation (1996–1999); Senior Attorney, eCommerce Division of National Data Corporation (1987–1995); Associate at Powell, Goldstein, Frazer, & Murphy (1985–1987).

Morgan M. Schuessler

   41   

Executive Vice

President and Chief

Administrative Officer

   Executive Vice President and Chief Administrative Officer (since November 2008) of Global Payments; Executive Vice President, Human Resources and Corporate Communications of Global Payments (June 2007 - November 2008); Senior Vice President, Human Resources and Corporate Communications of Global Payments (June 2006 – June 2007); Senior Vice President, Marketing and Corporate Communications of Global Payments (October 2005 – June 2006); Vice President, Global Purchasing Solutions of American Express Company (February 2002 – February 2005). (3)

Daniel C. O’Keefe

   45   

Senior Vice President

and Chief Accounting

Officer

   Senior Vice President and Chief Accounting Officer of the Company (since August 2008); Vice President, Accounting Policy of the Company (April 2008-August 2008); Vice President and Chief Accounting Officer of Ocwen Financial Corporation (November 2006-April 2008) (4); Vice President, Business Management of RBS Lynk (February 2005-October 2006) (5); Assistant Controller, External Reporting of Beazer Homes USA, Inc. (November 2002-February 2005) (6).

 

(1) Investment banking firm.

 

(2) Provider of financial services technology.

 

(3) A global payments network and travel company.

 

(4) Business process outsourcing provider to the financial services industry, specializing in loan servicing, mortgage fulfillment and receivables management services.

 

(5) Provider of payment processing services.

 

(6) Residential homebuilder.

 

25


COMMON STOCK OWNERSHIP OF MANAGEMENT

The following table sets forth information as of June 30, 2011, with respect to the beneficial ownership of the Company’s Common Stock by the nominees to the Board, by the directors of the Company, by each of the persons named in the Summary Compensation Table, and by the 15 persons, as a group, who were directors and/or executive officers of the Company on June 30, 2011.

Except as explained in the footnotes below, the named persons have sole voting and investment power with regard to the shares shown as beneficially owned by them.

 

Name and Address of Beneficial Owner (1)    Amount and Nature of
Beneficial Ownership
    Percent of
Class (2)
 

Paul R. Garcia

     1,230,773         (3     1.49

Edwin H. Burba, Jr.

     25,420         (4     *   

Alex W. Hart

     49,510         (5     *   

William I Jacobs

     70,732         (6     *   

Raymond L. Killian, Jr.

     37,528         (7     *   

Ruth Ann Marshall

     18,524         (8     *   

Alan M. Silberstein

     37,528         (9     *   

Michael W. Trapp

     21,598         (10     *   

Gerald J. Wilkins

     25,100         (11     *   

Jeffrey S. Sloan

     57,944         (12     *   

David E. Mangum

     46,221         (13     *   

Joseph C. Hyde

     80,312         (14     *   

Suellyn P. Tornay

     87,197         (15     *   

All Directors and Executive Officers as a group

     1,838,236         (16     2.23

 

  * Less than one percent

 

(1) The address of each of the directors and officers listed is c/o Global Payments Inc., 10 Glenlake Parkway, North Tower, Atlanta, Georgia 30328.

 

(2) The percentage calculations are based on 80,319,006 shares of Common Stock outstanding on June 30, 2011, plus shares that could be acquired through the exercise of stock options that were exercisable as of June 30, 2011 or will become exercisable within 60 days of June 30, 2011.

 

(3) This amount includes 70,893 shares of restricted stock over which Mr. Garcia currently has sole voting power and includes options to purchase 848,510 shares which are currently exercisable or will become exercisable within 60 days. This amount includes 102,804 shares held by a grantor-retained annuity trust of which Mr. Garcia’s wife is the trustee.

 

(4) This amount includes options to purchase 17,691 shares which are currently exercisable or will become exercisable within 60 days. This amount includes 7,729 shares held in a trust of which General Burba and his wife are co-trustees.

 

(5) This amount includes options to purchase 33,907 shares which are currently exercisable or will become exercisable within 60 days.

 

(6) This amount includes options to purchase 37,847 shares which are currently exercisable or will become exercisable within 60 days.

 

(7) This amount includes options to purchase 29,089 shares which are currently exercisable or will become exercisable within 60 days.

 

(8) This amount includes options to purchase 12,921 shares which are currently exercisable or will become exercisable within 60 days.

 

(9) This amount includes options to purchase 29,089 shares which are currently exercisable or will become exercisable within 60 days.

 

(10) This amount includes options to purchase 12,921 shares which are currently exercisable or will become exercisable within 60 days. This amount includes 8,677 shares held in a trust of which Mr. Trapp and his wife are co-trustees.

 

(11) This amount includes options to purchase 17,691 shares which are currently exercisable or will become exercisable within 60 days.

 

26


(12) This amount includes 44,694 shares of restricted stock over which Mr. Sloan has sole voting power and includes options to purchase 6,250 shares which are currently exercisable or will become exercisable within 60 days.

 

(13) This amount includes 18,923 shares of restricted stock over which Mr. Mangum has sole voting power and includes options to purchase 20,058 shares which are currently exercisable or will become exercisable within 60 days.

 

(14) This amount includes 15,253 shares of restricted stock over which Mr. Hyde has sole voting power and options to purchase 49,975 shares which are currently exercisable or will become exercisable within 60 days.

 

(15) This amount includes 11,895 shares of restricted stock over which Ms. Tornay currently has sole voting power and options to purchase 59,891 shares which are currently exercisable or will become exercisable within 60 days.

 

(16) This amount includes 1,196,337 options which are currently exercisable or will become exercisable within 60 days.

 

27


COMMON STOCK OWNERSHIP BY CERTAIN OTHER PERSONS

The following table sets forth information as of the date indicated with respect to the only persons who are known by the Company to be the beneficial owners of more than 5% of the outstanding shares of Common Stock.

 

Name and Address

of Beneficial Owner

   Amount and Nature of
Beneficial Ownership
     Percent of Class as
Reflected in the

Applicable
13G Filing
 

T. Rowe Price Associates, Inc. (1)

100 East Pratt Street

Baltimore, Maryland 21202

     11,223,912         14.0

Janus Capital Management LLC (2)

151 Detroit Street

Denver, Colorado 80206

     5,658,225         7.1

TimesSquare Capital Management, LLC (3)

1177 Avenue of the Americas 39th Floor

New York, New York 10036

     4,925,840         6.2

Blackrock, Inc. (4)

40 East 52nd Street

New York, New York 10022

     4,535,702         5.7

Goldman Sachs Asset Management (5)

200 West Street

New York, New York 10282

     4,351,095         5.5

 

(1) This information is contained in a Schedule 13G filed by T. Rowe Price Associates, Inc. and T. Rowe Price Mid-Cap Growth Fund, Inc. with the Securities and Exchange Commission on February 14, 2011. T. Rowe Price Associates, Inc. reports sole dispositive power of all shares listed above and sole voting power for 2,475,040 shares, while T. Rowe Price Mid-Cap Growth Fund, Inc. reports sole dispositive power over none of the shares listed above and sole voting power for 5,350,000 shares.

 

(2) This information is contained in a Schedule 13G filed by Janus Capital Management LLC with the Securities and Exchange Commission on February 14, 2011. Of the aggregate number of shares shown above, Janus Capital reports sole voting and dispositive power over 1,537,310 shares, Perkins Investment Management LLC, a subsidiary of Janus Capital, reports shared voting and dispositive power over 4,126,515 shares, and INTECH Investment Management, also a subsidiary of Janus Capital, reports shared voting and dispositive power over 4,400 shares. Each of these entities reports that it is a registered investment advisor, and they do not have the right to receive any dividends on the shares, or the proceeds from any sale of the shares, and they disclaim any ownership associated with such rights.

 

(3) This information is contained in a Schedule 13G filed by TimesSquare Capital Management, LLC with the Securities and Exchange Commission on February 8, 2011. TimesSquare Capital Management, LLC reports sole dispositive power of all shares listed above and sole voting power for 4,019,440 shares.

 

(4) This information is contained in a Schedule 13G filed by Blackrock, Inc. with the Securities and Exchange Commission on January 21, 2011. Blackrock, Inc. reports sole dispositive power of all shares listed above and sole voting power for all shares listed above.

 

(5) This information is contained in a Schedule 13G filed by Goldman Sachs Asset Management, L.P. and GS Investment Strategies, LLC with the Securities and Exchange Commission on February 8, 2011. Goldman Sachs Asset Management, L.P. and GS Investment Strategies, LLC report shared dispositive power of all shares listed above and shared voting power over 4,264,807 shares.

 

28


COMPENSATION AND OTHER BENEFITS:

COMPENSATION DISCUSSION AND ANALYSIS

2011 Compensation Highlights

We concluded another successful year in fiscal year 2011. We believe that our executive compensation programs are materially aligned with Company performance and that our pay practices contributed to our success. Of particular note:

 

   

Compared to the companies against whom we benchmark our compensation opportunities, we have performed at the 70th percentile or above in five key performance measures, including 3-year and 5-year revenue growth and total shareholder return.

 

   

Our 5 year compound annual growth rates (CAGR) for revenue and normalized EPS are 15% and 12% respectively.

 

   

Our CEO and his leadership team have an average tenure of 9 years with Global Payments and its predecessor, National Data Corporation, and more than a century’s worth of cumulative experience within the payments industry.

We continue to evaluate our plans every year against various sets of market data to ensure they effectively align our pay practices with performance. For fiscal year 2012, we are modifying our long-term incentive plan to further enhance the performance-based nature of the plan.

Below is a summary of compensation decisions made and performance achieved during the year illustrating our focus on paying for performance.

 

   

In aggregate, the Named Executive Officers (as set forth in Section A below) earned 97.1% of target in fiscal year 2011 bonus payouts. These payouts were a result of achieving specific revenue, diluted EPS, and individual goals set in early fiscal year 2011.

 

   

In aggregate, the Named Executive Officers earned 94.3% of target in performance-based restricted stock. These payouts were a result of achieving specific revenue, diluted EPS and margin goals set in early fiscal year 2011, with vesting over an additional three years. The value of each share of performance-based restricted stock changes as our stock price changes, thereby aligning executive and shareholder interests.

 

   

Stock option awards were granted with an exercise price equal to the price of our common stock on the grant date, and will create no value to executives unless the stock price exceeds that level when the options vest and are exercised.

 

   

The Named Executive Officers received salary increases for fiscal year 2011 in line with market practice, individual performance, and other factors.

The following contains additional detail regarding our executive pay program.

 

A. Introduction

In the paragraphs that follow, we provide an overview and analysis of our compensation program and policies, the material compensation decisions we have made under those programs and policies, and the material factors that we considered in making those decisions. Following this section is a series of tables containing specific information about the compensation earned or paid in fiscal year 2011 to the following individuals, to whom we refer as our “Named Executive Officers” or “NEOs” for the purposes of this proxy statement.

Paul R. Garcia—Chairman and Chief Executive Officer

David E. Mangum—Senior Executive Vice President and Chief Financial Officer

Jeffrey S. Sloan—President

Joseph C. Hyde—President, International

Suellyn P. Tornay—Executive Vice President and General Counsel

The discussion below is intended to help you understand the detailed information provided in those tables and put that information into context within our overall compensation program.

 

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B. Objectives of Compensation Policies

We design our compensation program with a view to retaining and attracting executive leadership of a caliber and level of experience necessary to effectively manage our complex, growth-oriented, and global businesses. Our objective is to have a compensation program that will allow us to:

 

   

Support the financial and business objectives of the organization;

 

   

Attract, motivate, and retain highly qualified executives;

 

   

Create an environment where performance is expected and rewarded;

 

   

Deliver an externally competitive total compensation structure; and

 

   

Align the interests of our executives with our shareholders.

In order to do this effectively, our program must:

 

   

Provide our executives with total compensation opportunities at levels that are competitive for comparable positions;

 

   

Provide variable, at-risk incentive awards opportunities that are only payable if specific goals are achieved;

 

   

Provide significant upside opportunities for better-than-expected performance; and

 

   

Align our executives’ interests with those of our shareholders by making stock-based incentives a core element of our executives’ compensation.

 

C. Role of the Independent Compensation Consultant

The Compensation Committee retained an independent compensation consultant from Meridian Compensation Partners, LLC during fiscal year 2011. The consultant takes guidance from and reports directly to the Compensation Committee. She advises the Compensation Committee on current and future trends and issues in executive compensation and on the competitiveness of the compensation structure and levels of our executives, including the Named Executive Officers. At the request of the Committee and to provide context for the Committee’s compensation decisions made for fiscal year 2011, the consultant performed the following services for the Committee late in fiscal year 2010:

 

   

Conducted a market review and analysis for the Named Executive Officers to determine whether their total targeted compensation opportunities were competitive with positions of a similar scope in similarly sized companies in similar industries;

 

   

Conducted pay and performance relationship analyses to evaluate the correlation of prior year Company performance and pay levels to those of the peer group companies;

 

   

Prepared tally sheets on the Named Executive Officers to allow the Compensation Committee to review the total wealth accumulated during each executive’s tenure with the Company and to assess its reasonableness, and to show the impact to the Company of a termination event by an executive or change in control; and

 

   

Attended Committee meeting(s) to discuss these items with the Committee in early fiscal year 2011.

The same individual consultant was retained throughout the year. Meridian performed no services for the company which were not executive or director compensation related during fiscal year 2011.

The tally sheets referred to above allowed the Committee to assess the impact of compensation decisions over time. The Committee did not deem any changes to be necessary to the compensation decisions as the result of its review of the information contained in such tally sheets.

 

30


D. Market Data

We consider the compensation levels, programs, and practices of certain other companies to assist us in setting our executive compensation so that it is market competitive. For fiscal year 2011, the peer group listed below was utilized for this purpose. These companies were chosen because each such company is in the transaction processing or data services business, is publicly traded, and, in terms of our revenue compared to that of the peer group, we would fall near the median. We compete for talent with several of these peer companies.

 

Acxiom Corp

Alliance Data Systems

Broadridge Financial Solutions

Convergys Corporation

CSG Systems International

  

Equifax

Euronet Worldwide

Fair Isaac Corporation

Fidelity National Info Services

Global Cash Access Holdings

   Heartland Payment Systems
Moneygram International

Paychex

Total System Services

The Compensation Committee annually reviews and updates the list of companies comprising the peer group to ensure it provides an appropriate marketplace focus.

Before the Compensation Committee met in executive session to set fiscal year 2011 compensation, the independent consultant collected and analyzed comprehensive market data for its use. The consultant presented market figures representing the size-adjusted median of the market for base salary, target short term incentive opportunity and long term incentive opportunity. The consultant used peer group proxy data as the primary data source and supplemented it as necessary with general industry information from an executive compensation database maintained by Aon Hewitt. The Committee reviewed the data for each of the Named Executive Officers for the different elements of compensation and then made individual compensation decisions, taking into consideration such factors as performance, retention, internal equity, individual development, and succession planning. Given that, some actual pay opportunities for our executives are higher than the size-adjusted market median and some are lower.

 

E. How Decisions Are Made and the Role of Executive Officers

Our Chief Executive Officer (Paul R. Garcia), with the assistance of our human resources department, developed compensation recommendations for the executive officers who report directly to him (including the Named Executive Officers) based upon market data supplied by the independent consultant, the Company’s performance relative to goals approved by the Compensation Committee, individual performance versus personal objectives, and other individual contributions to the Company’s performance. The Compensation Committee decided on all aspects of Mr. Garcia’s compensation. Mr. Garcia did not determine his own compensation. The Compensation Committee reviewed and approved all compensation elements for the Named Executive Officers and set the compensation of the CEO after reviewing market information provided by its consultant.

 

F. Overview of Executive Compensation Program Elements

The following elements comprise our compensation program for executives:

 

   

base salary;

 

   

short term incentives;

 

   

long term incentives;

 

   

retirement benefits; and

 

   

other benefits, including limited perquisites.

 

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To provide flexibility in using the different elements of compensation from year to year, the Compensation Committee’s policy with regard to the allocation of the major elements of compensation, including base salary, short term incentives, and long term incentives is to approximate the mix of pay inherent in the size-adjusted median market data provided by its consultant. The following executive pay at target levels was set by the Compensation Committee for fiscal year 2011:

 

Name

   Base salary      Cash
Incentive
     Performance Units     Stock Options  

Paul R. Garcia

   $ 1,000,000       $ 1,200,000         77,986        58,490   

David E. Mangum

   $ 450,000       $ 337,500         20,054        15,041   

Jeffrey S. Sloan

   $ 600,000       $ 510,000         n/a (1)      n/a (1) 

Joseph C. Hyde

   $ 412,000       $ 288,400         15,041        11,281   

Suellyn P. Tornay

   $ 375,000       $ 225,000         12,255        9,192   

 

(1) Mr. Sloan did not participate in the fiscal year 2011 long-term incentive program and did not receive performance shares; however, he did receive 25,000 stock options and 50,000 time-based restricted stock shares upon his hire in June 2010.

When the Committee established the EPS goals for the annual performance and performance unit plans that are described throughout this narrative, it calculated the relationship between additional earnings and the incremental short-term incentive and performance unit payouts that would be earned as a result of the executives reaching their goals. This maintains equilibrium between shareholder reward and executive reward between the target and maximum goal levels.

(1) Base Salary. Base salary provides our executive officers with a level of compensation consistent with their skills, responsibilities, experience and performance in relation to comparable positions in the marketplace. Base salary is the one fixed component of our executives’ compensation. The Compensation Committee reviews the base salaries of our executive officers annually. The Named Executive Officers received base salary increases for fiscal year 2011 as follows: Mr. Garcia—$1,000,000, which increased 5.3% from $950,000 in fiscal year 2010; Mr. Mangum—$450,000, which increased 12.5% from $400,000 in fiscal year 2010 in order to bring Mr. Mangum closer to market levels; Mr. Sloan was hired at $600,000; Mr. Hyde—$412,000, which increased 3% from $400,000 in fiscal year 2010; and Ms. Tornay—$375,000, increased 7.1% from $350,000 in fiscal year 2010.

(2) Short Term Incentives. We provide our Named Executive Officers with short term incentive opportunities to motivate and reward them for the achievement of the Company’s defined business goals and objectives and to reward individual performance. Our short term incentive program includes an annual performance plan and our commitment and accountability program.

(a) Annual Performance Plan. The annual performance plan provides an opportunity for executives to earn variable at-risk cash compensation. Each executive is assigned a target award opportunity, expressed as a percentage of base salary. In general, the total fiscal year 2011 target opportunities were at the market levels provided by the consultant. Based on the review of the data, the Compensation Committee increased only Ms. Tornay’s opportunity for fiscal year 2011. Target bonus opportunities for fiscal year 2011 were as follows: Mr. Garcia—$1,200,000 or 120% of his base salary, Mr. Mangum—$337,500 or 75% of his base salary, Mr. Sloan—$510,000 or 85% of his base salary, Mr. Hyde—$288,400 or 70% of his base salary, and Ms. Tornay—$225,000 or 60% of her base salary, which was increased from 55% of her base salary fiscal year 2010.

For fiscal year 2011, there were three weighted performance metrics under the annual performance plan. There were two Company objectives, diluted earnings per share (EPS) and revenue, and a set of individual objectives that varied from person to person. The rationale for using each component in the plan is outlined in the following table:

 

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Metric

  

Definition

  

Rationale for Use

EPS    GAAP diluted earnings per share, excluding the impact of restructuring and other non-recurring charges and the impact of changes in foreign currency.    We believe EPS most closely aligns the performance of executives to the interests of shareholders, given that it is the primary metric we use to evaluate new business opportunities as well as the performance of existing operations.
Revenue    GAAP revenue, excluding the impact of restructuring and other non-recurring charges and the impact of changes in foreign currency.    As a growth-oriented company, we consider revenue growth critical to the Company’s success.
Individual Objectives    Objectives differ by executive.    Individual objectives promote accountability for personal performance regarding areas under the executive’s responsibility.

The three parts of the annual performance plan were calculated separately. The target opportunity was allocated among the three elements based upon the table below.

 

Name

   Diluted EPS     Revenue     Individual Objectives  

Paul R. Garcia

     50     30     20

All Other NEOs

     40     30     30

The range of possible payouts for each performance measure varied by person, by measure and in total as shown in the tables below. Each executive could earn up to 100% of the individual objectives component. For each of the corporate components, Mr. Garcia could earn up to 225%, Mr. Sloan could earn up to approximately 215%, and the other NEOs could earn up to 200%. Once calculated, all bonus payments are totaled and then rounded to the nearest dollar.

For Mr. Garcia:

 

Degree of Performance Attainment

   Diluted EPS
Weighted 50%
    Revenue
Weighted 30%
    Individual
Objectives
Weighted 20%
    Total
Opportunity
 

Maximum

     225     225     100     200

Target

     100     100     100     100

Threshold

     50     50     0     40

Below Threshold

     0     0     0     0

 

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For Mr. Sloan:

 

Degree of Performance Attainment

   Diluted EPS
Weighted 40%
    Revenue
Weighted 30%
    Individual
Objectives
Weighted 30%
    Total
Opportunity
 

Maximum

     215     215     100     180

Target

     100     100     100     100

Threshold

     50     50     0     35

Below Threshold

     0     0     0     0

For the Executives (other than Mr. Garcia and Mr. Sloan):

 

Degree of Performance Attainment

   Diluted EPS
Weighted 40%
    Revenue
Weighted 30%
    Individual
Objectives
Weighted 30%
    Total
Opportunity
 

Maximum

     200     200     100     170

Target

     100     100     100     100

Threshold

     50     50     0     35

Below Threshold

     0     0     0     0

For example, an executive (other than Mr. Garcia or Mr. Sloan) with a base salary of $200,000 per year and a target bonus of 50% of his base salary would have a target bonus of $100,000. Based upon the relative weighting set forth in the table above, the target bonus would be apportioned $40,000 for diluted EPS results (40%), $30,000 for revenue results (30%), and $30,000 for individual goals (30%). The executive’s target diluted EPS payout was $40,000, so he could earn from zero to 200% (or from $0 to $80,000) for this portion of the bonus. The executive’s target revenue bonus was $30,000, so he could earn from zero to 200% (or from $0 to $60,000) for this portion of the bonus. Finally, the executive’s target bonus for individual goals was $30,000, so he could earn from zero to 100% (or from $0 to $30,000) for performance against individual goals. The total payout opportunity in this example is from 0% to 170% (or from $0 to $170,000).

(i) Diluted EPS Payout

The following table contains the range of diluted EPS goals for fiscal year 2011 and the applicable payout percentages. The diluted EPS goal excludes the impact of restructuring, other non-recurring charges and changes in foreign currency and includes the Spain acquisition as of the purchase date.

 

Degree of Performance Attainment

   Diluted EPS      Percentage of target bonus
apportioned to Diluted EPS
 
      Mr.
Garcia
    Mr.
Sloan
    Other
NEOs
 

Maximum

   $ 2.95         225     215     200

Target

   $ 2.77         100     100     100

Threshold

   $ 2.64         50     50     50

Below Threshold

   Less than $ 2.64         0     0     0

The metric at target was established at a level that reflected growth over fiscal year 2010 results. The actual diluted EPS result for the Company for fiscal year 2011 on a GAAP basis was $2.60, which represents a 4.8% increase from fiscal year 2010 GAAP EPS of $2.48. Factoring in the adjustments described above, diluted EPS for fiscal year 2011

 

34


was $2.72. Using straight line interpolation, the payout was approximately 81% for all Named Executive Officers of the target amount of the bonus apportioned to diluted EPS results. The diluted EPS performance resulted in the following payouts to the Named Executive Officers: Mr. Garcia—$484,615; Mr. Mangum—$109,038; Mr. Sloan—$164,769; Mr. Hyde—$93,175; and Ms. Tornay—$72,692.

(ii) Revenue Payout

The following table contains the range of revenue goals for fiscal year 2011 and the applicable payout percentages. The revenue goal excludes the impact of restructuring, other non-recurring charges and changes in foreign currency and includes the Spain acquisition as of the purchase date.

 

Degree of Performance Attainment

   Revenue (millions)      Percentage of target bonus
apportioned to revenue
 
      Mr.
Garcia
    Mr.
Sloan
    Other
NEOs
 

Maximum

   $ 1,921         225     215     200

Target

   $ 1,830         100     100     100

Threshold

   $ 1,724         50     50     50

Below Threshold

   Less than $ 1,724         0     0     0

The metric at target was established at a level that reflected growth over fiscal year 2010 results. The actual revenue for the Company for fiscal year 2011 on a GAAP basis was $1,860 million, rounded to the nearest $1 million, which represents an increase of 13.3% over fiscal year 2010 GAAP revenue of $1,642 million. Factoring in the adjustments described above, revenue for fiscal 2011 was $1,845 million. Using straight line interpolation, the payout was approximately 121% for Mr. Garcia, approximately 119% for Mr. Sloan and approximately 116% for all other executives of the target amount of the bonus apportioned to revenue results. The revenue performance resulted in the following payouts to the Named Executive Officers: Mr. Garcia—$434,176; Mr. Mangum—$117,940; Mr. Sloan—$181,823; Mr. Hyde—$100,782; and Ms. Tornay—$78,626.

(iii) Payout Based upon Individual Performance Objectives

The third component of the bonus payout was based upon individual performance objectives. Each of the executives could earn from zero to 100% of the payout amount allocated to individual performance. Individual performance objectives are established annually in writing. The Compensation Committee and the Lead Director set the individual performance objectives for the CEO, and the CEO approves the individual objectives for the other executives. Examples of actual individual performance objectives for our Named Executive Officers for fiscal year 2011 included:

 

   

financial objectives within the individual’s business or functional area

 

   

the development and execution of specific business strategies

 

   

the completion of business development activities

 

   

the timely implementation of technology projects

 

   

changes and/or improvements to internal processes

 

   

success of recruiting key employees

 

   

items specific to the individual’s professional development

This individual assessment promotes accountability for each executive’s personal performance and helps differentiate our executives’ compensation based on individual contributions. At the end of the year, the CEO reviews the performance of each Named Executive Officer (other than himself) against his or her objectives, which are weighted according to proportional importance and impact, and makes a recommendation to the Compensation Committee regarding this portion of the bonus. The Lead Director and the Compensation Committee review Mr. Garcia’s performance against his objectives and determine the amount payable. Based upon the performance against such objectives, the payouts for each executive were as follows: Mr. Garcia—$235,200 or 98% of target; Mr. Mangum—

 

35


$98,972 or approximately 98%; Mr. Sloan—$145,427 or approximately 95%; Mr. Hyde—$86,520 or 100%; and Ms. Tornay—$64,294 or approximately 95%.

(iv) Summary of the Annual Performance Plan

The following table summarizes the final annual performance incentive plan payouts for each executive based on fiscal year 2011 performance:

 

Name

   Diluted EPS
($)
     Revenue
($)
     Individual
Objectives
($)
     Total Payout
($)
 

Paul R. Garcia

   $ 484,615       $ 434,176       $ 235,200       $ 1,153,991   

David E. Mangum

   $ 109,038       $ 117,940       $ 98,972       $ 325,950   

Jeffrey S. Sloan

   $ 164,769       $ 181,823       $ 145,427       $ 492,019   

Joseph C. Hyde

   $ 93,175       $ 100,782       $ 86,520       $ 280,477   

Suellyn P. Tornay

   $ 72,692       $ 78,626       $ 64,294       $ 215,612   

In addition to the above, the Summary Compensation Table reflects certain payments we made to Mr. Mangum who as of December 2010 had responsibility for our information technology function. Mr. Mangum was not compensated for this additional responsibility at the time he assumed it. As a result, we calculated a retroactive payment in the amount of $94,568. This payment reflects Mr. Mangum’s new fiscal year 2012 base salary ($530,000) and bonus target (85%), applied retroactively to December 2010, and in the case of the bonus, subject to the same performance payout percentage as his fiscal year 2011 short-term incentive performance plan payout.

(b) Commitment and Accountability Discretionary Awards. In addition to the annual performance plan, all employees, including the executives, can earn discretionary bonuses. These bonuses are paid for specific accomplishments during the year that were not anticipated at the beginning of the year or were in addition to the executive’s individual objectives. Examples of the type of accomplishments that could result in a discretionary bonus would be the closing of a major acquisition or the completion of a major project. For fiscal year 2011, Ms. Tornay received a discretionary award of $75,000 based on her achievement of certain objectives related to enterprise risk management.

(3) Long Term Incentive Program. Each year the Company grants long term incentive awards, which we refer to as LTIs, to executives and other key employees throughout the Company. All LTI grants are made pursuant to our Amended and Restated 2005 Incentive Plan, the material terms of which were approved by our shareholders. All grants of LTIs to the Named Executive Officers are approved by the Compensation Committee. We believe the LTIs align the executives’ interests with those of the shareholders by linking their compensation to stock price. The LTI grants for Named Executive Officers represent pay opportunity at target for expected performance for Mr. Garcia—$3,500,000, Mr. Mangum—$900,000, Mr. Hyde—$675,000, and Ms. Tornay—$550,000. Mr. Sloan did not participate in the LTI plan for FY11 because he joined the company in June 2010 and received a new hire grant in lieu thereof. Figures represent contingent pay that will be realized only if stock price increases a certain amount or other goals are met. LTI opportunities will not necessarily result in any payout.

In fiscal year 2011, the LTIs granted to the executives included stock options as well as performance-based restricted stock units (performance units), with 25% of the LTI value allocated to stock options and 75% allocated to performance units (expressed at target). In order to determine the number of stock options to grant, we established a per share value equal to 40% of the fair market value of a share of our Common Stock on the grant date ($37.40) which resulted in a per share value of $14.96. We then divided the dollar amount of the stock option portion of the LTI grant by the per share value ($14.96) to determine the number of stock options that would be granted at the $37.40 strike price. In order to determine the number of performance units to grant, we established a per share value equal to 90% of the fair market value of a share of our Common Stock on the grant date ($37.40) which resulted in a per share value of $33.66. We then divided the dollar amount of the performance unit portion of the LTI grant by the per share value ($33.66) to determine the number of performance units that would be granted at the target level. Any fractional shares were rounded up to the nearest whole share. The 40% and 90% figures set forth above were derived by the independent consultant and represent the risk-adjusted present value of the grants consistent with the methodology used to develop the market data for long-term incentives.

For example, if an executive’s LTI grant value was $200,000, we would have multiplied $200,000 by 25% to derive the portion of the grant to be allocated to stock options ($50,000), reserving the remaining 75% of the grant value

 

36


($150,000) to be allocated to performance units. Then, we would have divided the stock option allocation by the estimated per-option grant value of $14.96, and the performance-based restricted stock allocation by the estimated per-share grant value of $33.66. As a result, the executive would have received 3,343 options at an exercise price of $37.40 and 4,457 performance shares at target level.

(a) Stock Options. Stock options provide an incentive for long term creation of shareholder value. Stock options only have value to the extent the price of the Company’s stock appreciates relative to the exercise price. The exercise price is the fair market value of the stock on the grant date determined by the closing price on such date. We do not grant discounted options nor have we re-priced existing options. The granted stock options vest over a four-year period at a rate of 25% per year. During fiscal year 2011, the Compensation Committee approved the following stock option grants for each of the Named Executive Officers:

 

Name

   Number of Shares
Granted
     Date Granted      Exercise Price  

Paul R. Garcia

     58,490         7/29/2010       $ 37.40   

David E. Mangum

     15,041         7/29/2010       $ 37.40   

Jeffrey S. Sloan (1)

     n/a         n/a         n/a   

Joseph C. Hyde

     11,281         7/29/2010       $ 37.40   

Suellyn P. Tornay

     9,192         7/29/2010       $ 37.40   

 

(1) Mr. Sloan did not participate in the fiscal year 2011 long-term incentive program; however, he did receive 25,000 stock options and 50,000 time-based restricted shares upon his hire in June 2010. The date of his grant was June 1, 2010 and the stock price was $41.44 a share.

Beginning in fiscal year 2012, we replaced the portion of LTI previously granted in stock options with performance shares, to be earned based on our future 3-year total shareholder return compared to the constituent companies in the S&P 500 as of June 1, 2011, with 3-year cliff vesting. The design of the new grants is intended to continue to align the interests of executives with those of our shareholders, while rewarding for management contributions on a level economic playing field relative to our peer companies and enhancing retention capability.

(b) Performance-Based Restricted Stock Units (Performance Units). In addition to stock options, we issued performance units under our LTI program in order to motivate employees, reward the achievement of specified financial goals, and encourage increased stock ownership by executives. Performance units were converted into a time-based restricted stock grant if the Company’s performance during the fiscal year exceeded pre-established goals. The amount of performance units awarded to each NEO at target is allocated equally among three criteria: diluted EPS, revenue and operating margin results.

By design, the LTI plan is distinguished from the short-term plan to ensure that our executives are focused on the long-term objectives of our shareholders. The five principal design differences are:

 

   

Operating margin, which is only part of the LTI plan, is a key component of long-term shareholder value creation and is a driver of stock price performance.

 

   

Unlike the short-term incentive plan, the LTI plan does not include individual objectives, in order to focus the executives on the overall performance of the Company.

 

   

Awards earned via the LTI plan are paid in time-based restricted shares.

 

   

LTI plan uses a 4-year vesting period in order to reflect and reward for long-term shareholder value creation.

 

   

We require executives to hold shares in accordance with Target Stock Ownership Guidelines as illustrated in Section J.

Because of the above factors, the payouts for our executives under the LTI plan and the short-term incentive plan have always been different, ensuring appropriate rewards based on both long-term and short-term results.

 

37


The rationale for using each component in the plan is summarized in the following table:

Long Term Incentive – Performance-Based Restricted Stock Plan

 

Metric

  

Definition

  

Rationale for Use

EPS

   GAAP diluted earnings per share, excluding the impact of restructuring and other non-recurring charges and the impact of changes in foreign currency.    We believe EPS most closely aligns the performance of executives to the interests of shareholders given it is the primary metric we use to evaluate new business opportunities as well as the performance of existing operations.

Revenue

   GAAP revenue, excluding the impact of restructuring and other non-recurring charges and the impact of changes in foreign currency.    As a growth-oriented company, we consider revenue growth critical to the Company’s success.

Operating Margin

   Ratio of operating income to revenue on a GAAP basis, excluding the impact of restructuring and other non-recurring charges and the impact of changes in foreign currency.    We use this measure to assess the quality and efficiency of our operations and as discussed above, to promote a long-term outlook.

The following table summarizes the structure of the grant of performance units:

 

Degree of Performance Attainment

   % of Target Award
Applicable to Diluted
EPS Results Earned
    % of Target Award
Applicable to Revenue
Results Earned
    % of Target Award
Applicable to Operating
Margin Results Earned
    Total  

Maximum

     66.66     66.66     66.67     200

Target

     33.33     33.33     33.34     100

Threshold

     16.67     16.67     16.66     50

Below Threshold

     0     0     0     0

The following is a table summarizing the target performance units granted during fiscal year 2011.

 

Name

   Target
Performance Units
Based on Diluted
EPS Results
     Target
Performance Units
Based on Revenue
Results
     Target
Performance Units
Based on Margin
Results
     Total
Performance Units

at  Target
Opportunity for
Fiscal Year 2011
 

Paul R. Garcia

     25,993         25,993         26,000         77,986   

David E. Mangum

     6,684         6,684         6,686         20,054   

Jeffrey S. Sloan (1)

     n/a         n/a         n/a         n/a   

Joseph C. Hyde

     5,013         5,013         5,015         15,041   

Suellyn P. Tornay

     4,085         4,085         4,085         12,255   

 

(1) Mr. Sloan did not participate in the fiscal year 2011 long-term incentive program; however, he did receive 25,000 stock options and 50,000 time-based restricted shares upon his hire in June 2010. The date of his grant was June 1, 2010 and the stock price was $41.44 a share.

Depending on the diluted EPS, revenue and operating margin results, the executives could earn from 0% to 200% of the applicable target amount.

 

38


(i) Portion Attributable to Diluted EPS Results

The following table contains the diluted EPS goals and the applicable reward amounts for fiscal year 2011. The diluted EPS goals exclude the impact of restructuring, other non-recurring charges and changes in foreign currency and include the Spain acquisition as of the purchase date.

 

Degree of Performance Attainment

   Diluted EPS      % of Target Award
Allocable to
Diluted EPS results
    % of Total Target Award
Applicable to

EPS Results
Earned
 

Maximum

   $ 2.95         200     66.66

Target

   $ 2.77         100     33.33

Threshold

   $ 2.64         50     16.67

Below Threshold

   Less than $ 2.64         0     0

The metric at target was established at a level that reflected growth over fiscal year 2010 results. The actual diluted EPS result for the Company for fiscal year 2011 on a GAAP basis was $2.60, which represents a 4.8% increase from fiscal year 2010 GAAP EPS of $2.48. Factoring in the adjustments described above, diluted EPS for fiscal 2011 was $2.72. Using straight line interpolation, the payout was approximately 81%. This resulted in each of the executives, who were employees on July 29, 2011, receiving the following number of performance units: Mr. Garcia – 20,994; Mr. Mangum – 5,399; Mr. Sloan – n/a; Mr. Hyde – 4,049; and Ms. Tornay – 3,299.

(ii) Portion Attributable to Revenue Results

The following table contains the revenue goals and the applicable award amounts for fiscal year 2011. The revenue goals exclude the impact of restructuring, other non-recurring charges and changes in foreign currency and include the Spain acquisition as of the purchase date.

 

Degree of Performance Attainment

   Revenue (Millions)      % of Target Award
allocable to
Revenue Results
    % of Total Target Award
Applicable to

Revenue Results
Earned
 

Maximum

   $ 1,921         200     66.66

Target

   $ 1,830         100     33.33

Threshold

   $ 1,724         50     16.67

Below Threshold

   Less than $ 1,724         0     0

The metric at target was established at a level that reflected growth over fiscal year 2010 results. The actual revenue for the Company for fiscal year 2011 on a GAAP basis was $1,860, rounded to the nearest $1 million, which represents an increase of 13.3% over fiscal year 2010 GAAP revenue of $1,642 million. Factoring in the adjustments described above, revenue for fiscal year 2011 was $1,845 million. Using straight line interpolation, the payout was approximately 117%. This resulted in each of the executives, who were employees on July 29, 2011, receiving the following number of performance units: Mr. Garcia – 30,277; Mr. Mangum – 7,786; Mr. Sloan – n/a; Mr. Hyde – 5,840; and Ms. Tornay – 4,758.

 

39


(iii) Portion Attributable to Operating Margin Results

The following table contains the operating margin goals and the applicable award amounts for fiscal year 2011. The operating margin goals exclude the impact of restructuring, other non-recurring charges and changes in foreign currency and include the Spain acquisition as of the purchase date.

 

Degree of Performance Attainment

   Operating
Margin
    % of Target Award
allocable to
Operating Margin
Results
    % of Total Target Award
Applicable to

Operating Margin
Results Earned
 

Maximum

     21.1     200     66.67

Target

     19.1     100     33.34

Threshold

     17.7     50     16.66

Below Threshold

     Less than 17.7     0     0

The actual operating margin result for the Company for fiscal year 2011 on a GAAP basis was 17.8%, which represents a 9.6% decrease from fiscal year 2010 GAAP operating margin of 19.7% . Factoring in the adjustments described above, operating margin for fiscal 2011 was 18.7% . Using straight line interpolation, the payout was approximately 86%. This resulted in each of the executives, who were employees on July 29, 2011, receiving the following number of performance units: Mr. Garcia – 22,286; Mr. Mangum – 5,731; Mr. Sloan – n/a; Mr. Hyde –4,298; and Ms. Tornay – 3,502.

(iv) Conversion of Performance Units into a Restricted Stock Grant

Once the results were certified, the Committee determined the number of performance units earned by each executive, and such units were converted on a 1-for-1 basis into shares of restricted stock on July 29, 2011. Such shares of restricted stock vest in accordance with the following schedule: 25% vested on July 29, 2011 and the remaining 75% of the shares in three equal installments over the next three years. The following table summarizes the conversion of the performance shares to restricted stock for each executive, which equates to approximately 94.3% of the targeted grant for each:

 

Name

   Actual
Performance Units
Based on Diluted
EPS Results
     Actual
Performance Units
Based on Revenue
Results
     Actual
Performance Units
Based on Margin
Results
     Total Actual
Performance Units for
Fiscal Year 2011
 

Paul R. Garcia

     20,994         30,277         22,286         73,557   

David E. Mangum

     5,399         7,786         5,731         18,916   

Jeffrey S. Sloan (1)

     n/a         n/a         n/a         n/a   

Joseph C. Hyde

     4,049         5,840         4,298         14,187   

Suellyn P. Tornay

     3,299         4,758         3,502         11,559   

 

(1) Mr. Sloan did not participate in the FY2011 long-term incentive plan and did not receive performance units.

(4) Retirement Benefits. The only retirement benefit provided to all of our executives consists of the Company’s 401(k) plan. We have a pension plan that formerly was available to all employees but was closed to new employees hired after June 1, 1998. Ms. Tornay is the only Named Executive Officer who was hired before such time and, therefore, is the only Named Executive Officer who participates in the pension plan. Additional information regarding the pension plan is contained in the Compensation Tables and Narratives section under the heading “Pension Benefits.”

 

40


(5) Other Benefits. The Named Executive Officers are eligible to participate in other health and welfare programs that are available to substantially all full-time salaried employees. The only other benefits are limited to perquisites and certain tax gross-ups, which are set forth in footnote (3) to the Summary Compensation Table contained in the Compensation Tables and Narratives section.

Perquisites offered to the Named Executive Officers on an annual basis are financial planning and certain business club dues. These items create taxable income to the executive, which we do not gross up. In addition, we ask Named Executive Officers and their spouses to participate in President’s Club/Chairman’s Club trips offered as rewards to certain other employees for excellent sales or other performance. Tax rules require that we treat the expenses of spouses as taxable income to the executives. Because spousal participation is at the request of the Company and can be disruptive to other plans they may have, we gross-up that taxable income.

In addition, the Summary Compensation Table reflects certain payments we made in connection with the relocation of Mr. Sloan that were critical to his acceptance of our offer to join our Company. We actively pursued Mr. Sloan while he was employed in a higher-paying position and persuaded him to fill a key role at our company. Mr. Sloan was not inclined to leave his position without reimbursement of the many additional expenses created by relocation. In the transition to our company, he forfeited a partial year bonus in excess of $1 million, and we recruited him at annual compensation levels significantly less than his annual compensation at the time.

Our discussions with Mr. Sloan took place at a difficult time in the economic cycle, and the price he could sell his house for fell and continued to fall as the discussions progressed. As a result, rather than structure the necessary monetary incentives as a sign-on bonus, we structured them as relocation payments and as payments to protect Mr. Sloan against the inability to sell his house for what he had paid for it, both with income tax gross-ups as any home loss would be non-deductible for tax purposes. Mr. Sloan is obligated to repay those amounts if he terminates employment with us prior to specified dates under certain circumstances.

After taking into consideration compensation trends, the Committee decided to no longer enter into new arrangements that provide home loss or special relocation benefits.

 

G. Employment Agreements

We offer employment agreements to a limited number of key employees, which includes all of the Named Executive Officers. We believe this is necessary in order to retain and attract highly-qualified executives, but we also believe that the employment agreements provide benefit to the Company. Each of the Named Executive Officers who is a party to an employment agreement has agreed not to disclose confidential information or compete with us, and not to solicit our customers or recruit our employees, for a period of 24 months following the termination of his or her employment. In exchange, we offer limited income and benefit protections to the executive.

Historically, we have provided a gross-up for excise taxes that may be due with respect to the change of control provisions contained in some of the employment agreements. Commencing with fiscal year 2011, we no longer include such a gross-up provision in new or revised employment agreements. Also, all new employment agreements have a defined term. The section entitled “Potential Payments Upon Termination or Change in Control” includes more detail regarding the employment agreements for the Named Executive Officers.

 

H. Policy Regarding Timing of Equity Grants

Our current policy regarding the timing of equity grants, which has been in place for several years, is to make the annual grant to all eligible employees on the next business day following the filing of our annual report on Form 10-K based upon the closing price of the Common Stock on that day.

 

I. Anti-Hedging Policy

Our insider trading policy prohibits directors and employees from engaging in any transaction in which they profit if the value of the Company’s Common Stock falls.

 

J. Target Stock Ownership Guidelines

The Compensation Committee has implemented stock ownership guidelines for executives and directors. This fosters Common Stock ownership and aligns the interests of our executives with our shareholders. Within five years of

 

41


the later of (1) June 1, 2007 or (2) the executive’s initial appointment to his or her position, each executive should own shares valued as a percentage of base salary as follows: CEO—5 times base salary, and the other executives—2 times base salary. Within three years of becoming a director, each director should own a number of shares of Company stock valued at least three times the then current annual cash retainer payable to such director.

 

K. Clawback Policy

The Compensation Committee anticipates fully complying with mandatory recoupment provisions of the Dodd-Frank Act at such time as they are implemented by SEC rule making.

 

L. Tax Considerations

Section 162(m) of the Internal Revenue Code places a limit of $1,000,000 on the amount of compensation that we may deduct in any one year with respect to any one of our Named Executive Officers. However, qualifying performance-based compensation will not be subject to the deduction limit if certain requirements are met. To maintain flexibility in compensating our executives, the Compensation Committee reserves the right to use its judgment to authorize compensation payments that may be subject to the limit when the Compensation Committee believes that such payments are appropriate. Accordingly, certain components of our executive compensation program are designed to be qualifying performance-based compensation under 162(m) while others are not.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the foregoing section entitled “Compensation Discussion and Analysis” with management. Based on such review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement, which is to be incorporated by reference into our annual report on Form 10-K for fiscal year 2011.

COMPENSATION COMMITTEE

Edwin H. Burba, Jr., Chairperson

Alex W. Hart

William I Jacobs

Raymond L. Killian

Ruth Ann Marshall

COMPENSATION TABLES AND NARRATIVES

 

A. Summary Compensation Table

The following table presents certain summary information concerning compensation paid or accrued by the Company for services rendered in all capacities during the fiscal year ended May 31, 2011 (“2011 fiscal year”), during the fiscal year ended May 31, 2010 (“2010 fiscal year”), and during the fiscal year ended May 31, 2009 (“2009 fiscal year”), for (i) the principal executive officer of the Company; (ii) the principal financial officer of the Company, and (iii) each of the three other most highly compensated executive officers of the Company who were acting as executive officers at the end of the last completed fiscal year. The persons referenced in (i) through (iii) above are our “Named Executive Officers.”

 

42


SUMMARY COMPENSATION TABLE

 

Name and Principal Position

  FY     Salary
($)
    Bonus
($)
    Stock
Awards
($)(1)
    Option
Awards ($)
(2)
    Non- Equity
Incentive Plan
Compensation
($)
    Change in
Pension value
and
Nonqualified
Deferred
Compensation
Earnings
($)
    All Other
Compensation
($)
    Total
($)
 
(a)   (b)     (c)     (d)     (e)     (f)     (g)     (h)     (i)     (j)  

Paul R. Garcia
Chairman and Chief Executive Officer

   
 
 
2011
2010
2009
  
  
  
  $

$

$

1,000,000

950,000

950,000

  

  

  

   

 

$

—  

—  

436,500

  

  

  

  $

$

$

2,916,676

2,666,704

2,333,374

  

  

  

  $

$

$

663,550

649,099

530,898

  

  

  

  $

$

$

1,153,991

1,153,000

1,625,000

  

  

  

   

 

 

—  

—  

—  

  

  

  

  $

$

$

32,467

38,443

39,444

(3) 

  

  

  $

$

$

5,766,684

5,457,246

5,915,216

  

  

  

David E. Mangum
Senior Executive Vice President and Chief Financial Officer

   
 
 
2011
2010
2009
  
  
  
  $

$

$

450,000

400,000

230,769

  

  

  

  $
 

 

94,568
—  

—  

  
  

  

  $

$

$

750,020

708,371

630,450

  

  

  

  $

$

$

170,635

172,419

248,430

  

  

  

  $

$

$

325,950

299,000

413,000

  

  

  

   

 

 

—  

—  

—  

  

  

  

  $

$

$

26,407

16,868

16,000

(3) 

  

  

  $

$

$

1,817,580

1,596,658

1,538,649

  

  

  

Jeffrey S. Sloan
President

   
 
 
2011
2010
2009
  
  
  
  $

 

 

600,000

—  

—  

(4) 

  

  

   

 

 

—  

—  

—  

  

  

  

  $

 

 

2,072,000

—  

—  

  

  

  

  $
 

 

322,011
—  

—  

  
  

  

  $

 

 

492,019

—  

—  

  

  

  

   

 

 

—  

—  

—  

(5) 

  

  

  $

 

 

2,391,626

—  

—  

(3) 

  

  

  $

 

 

5,877,656

—  

—  

  

  

  

Joseph C. Hyde
President—International

   
 
 
2011
2010
2009
  
  
  
  $

$

$

412,000

400,000

400,000

  

  

  

   

$

$

—  

85,000

100,800

  

  

  

  $

$

$

562,533

562,512

554,201

  

  

  

  $

$

$

127,979

136,922

126,097

  

  

  

  $

$

$

280,477

279,000

413,000

  

  

  

   

 

 

—  

—  

—  

  

  

  

  $

$

$

292,645

284,643

83,517

(3) 

  

  

  $

$

$

1,675,157

1,748,077

1,677,615

  

  

  

Suellyn P. Tornay
Executive Vice President and General Counsel

   
 
 
2011
2010
2009
  
  
  
  $

$

$

375,000

350,000

350,000

  

  

  

  $

 

$

75,000

—  

99,000

  

  

  

  $

$

$

458,337

458,370

383,374

  

  

  

  $

$

$

104,280

111,569

87,227

  

  

  

  $

$

$

215,612

191,000

284,000

  

  

  

  $

$

$

25,207

28,089

465

(5) 

(5) 

(5) 

  $

$

$

26,158

21,358

14,337

(3) 

  

  

  $

$

$

1,279,594

1,160,386

1,218,403

  

  

  

 

43


 

(1) The amounts in the Stock Awards column reflect the aggregate grant date fair value of restricted stock and performance unit awards in accordance with FASB ASC Topic 718. The values disclosed are based upon the value of the underlying shares and the probable outcome of performance-based vesting conditions on the grant date, excluding the effect of estimated forfeitures. Assumptions made in the calculation of these amounts are included in Note 10 to the Company’s audited financial statements for the fiscal year ended May 31, 2011, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on July 25, 2011.

 

(2) The amounts in the Option Awards column reflect the aggregate grant date fair value of such awards computed in accordance with FASB ASC Topic 718. Assumptions made in the calculation of these amounts are included in Note 10 to the Company’s audited financial statements for the fiscal year ended May 31, 2011, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on July 25, 2011.

 

(3) The table below provides additional detail regarding the components of the “All Other Compensation” column for fiscal year 2011.

ALL OTHER COMPENSATION FOR FISCAL YEAR 2011

 

      Garcia      Mangum      Sloan      Hyde      Tornay  

Defined Contribution Company Match

   $ 10,400       $ 12,092       $ 9,800       $ 9,388       $ 10,823   

Financial Planning

   $ 19,775       $ 14,315       $ 9,300          $ 15,335   

Attendance at Company’s President’s Club/Chairman’s Club Award Trip

         $ 1,003         

Club Dues

   $ 2,292               

Airfare for Spouse and Children re: Foreign Assignment of Executive

            $ 15,709      

Tax Services for UK / US

            $ 2,244      

Tax on Expat Benefits

            $ 114,155      

Utilities re: Temporary Foreign Assignment

            $ 18,841      

Rent re: Temporary Foreign Assignment

            $ 73,935      

Health Benefits re: Temporary Foreign Assignment

            $ 11,230      

Executive Relocation One Time Allowance

         $ 500,000         

Reimbursement for Loss Associated With Selling Home

         $ 864,448         

Stipend for Foreign Assignments

            $ 36,923      

Tax Gross up Payments (*)

         $ 1,007,075       $ 10,220      

Total

   $ 32,467       $ 26,407       $ 2,391,626       $ 292,645       $ 26,158   

All amounts in the table above reflect the aggregate incremental cost to the Company of providing the benefit.

 

* The amounts included in this row for Mr. Sloan are for compensation associated with attendance at the Company’s President’s Club and/or Chairman’s Club award trips, relocation allowance and reimbursement for loss associated with selling home. For Mr. Hyde this total includes amounts for rent and utilities, home furnishings, and airfare for his spouse and child, all related to a foreign assignment.

 

44


 

(4) Mr. Sloan did not begin to work for the Company until June 1, 2010.

 

(5) All of the Named Executive Officers are eligible to participate in the Global Payments Inc. Non-Qualified Deferred Compensation Plan described below. In fiscal year 2011, only Mr. Sloan participated. Neither Mr. Sloan nor any of the other Named Executive Officers received any interest on deferred compensation at an above-market rate of interest in 2009, 2010, or 2011. The amount shown in this column reflects the increase in actuarial present value of Ms. Tornay’s benefit under the defined benefit pension plan during the applicable fiscal year.

 

B. Grants of Plan-Based Awards

The following table sets forth information concerning grants of plan-based awards during the 2011 fiscal year to the Named Executive Officers, all of which were made pursuant to the Amended and Restated 2005 Incentive Plan.

GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2011

 

Name

  Grant Date     Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
(1)
    Estimated Future Payouts
Under Equity Incentive Plan
Awards (2)
    All
Other
Stock
Awards
Number
of
Shares
of Stock
or Units
(4)
    All Other
Option
Awards:
Number of
Securities
Underlying
Options
    Exercise
Price of
Option
Awards
    Grant Date
Fair Value
of Stock
and Option
Awards (3)
 
    Threshold
($)
    Target
($)
    Max. ($)     Threshold
(#)
    Target
(#)
    Max. (#)     (#)     (#)     ($/sh)     ($)  
        (a)   (b)     (c)     (d)     (e)     (f)     (g)     (h)     (i)     (j)     (k)     (l)  

Garcia

   
 
 
7/29/2010
7/29/2010
7/29/2010
  
  
  
    480,000        1,200,000        2,400,000        38,948        77,986        155,972          58,490        37.40       

 

 

n/a

2,916,676

663,550

  

  

  

Mangum

   
 
 
7/29/2010
7/29/2010
7/29/2010
  
  
  
    118,125        337,500        573,750        10,027        20,054        40,108          15,041        37.40       

 

 

n/a

750,020

170,635

  

  

  

Sloan

   
 
 
7/29/2010
6/1/2010
6/1/2010
  
  
  
    178,500        510,000        918,000        n/a        n/a        n/a        50,000        25,000        41.44       

 

 

n/a

2,072,000

322,011

  

  

  

Hyde

   
 
 
7/29/2010
7/29/2010
7/29/2010
  
  
  
    100,940        288,400        490,280        7,521        15,041        30,082          11,281        37.40       

 

 

n/a

562,533

127,979

  

  

  

Tornay

   
 
 
7/29/2010
7/29/2010
7/29/2010
  
  
  
    78,750        225,000        382,500        6,128        12,255        24,510          9,192        37.40       

 

 

n/a

458,337

104,280

  

  

  

 

(1) The amounts contained in columns (c), (d), and (e) reflect the annual incentive opportunities under the Company’s Annual Performance Plan, which are further described in the Compensation Discussion and Analysis section under the sub-heading “Annual Performance Plan.” At the time of the filing of this proxy statement, the actual results were certified, and each of the Named Executive Officers received the following amounts: Mr. Garcia—$1,153,991; Mr. Mangum—$325,950; Mr. Sloan—$ 492,019; Mr. Hyde—$280,477; and Ms. Tornay—$215,612. The dollar amounts listed in the foregoing sentence are the amounts that are reflected in the Summary Compensation Table under column (g).

 

(2) The number of performance-based restricted stock units contained in columns (f), (g), and (h) reflect threshold, target, and maximum award opportunities which are further described in the Compensation Discussion and Analysis section under the sub-heading “Performance-Based Restricted Stock Units.” At the time of the filing of this proxy statement, the actual results were certified, and each of the Named Executive Officers received the following restricted stock awards: Mr. Garcia—73,557; Mr. Mangum—18,916, Mr. Sloan—n/a; Mr. Hyde—14,187; and Ms. Tornay—11,559. As described in the Compensation Discussion and Analysis section, such performance-based restricted stock units were converted into a restricted stock grant dated July 29, 2011—25% of the shares were paid to the executive immediately, and the remaining 75% of the shares will vest in three equal installments over the next three years.

 

45


     The grantees did not have the right to vote the underlying shares, and dividends were not payable to the grantees with respect to such performance-based restricted stock units, until they were converted into a restricted stock grant after the results for fiscal year 2011 were certified. Once converted, dividends will be paid on such shares at the same rate as all of the Company’s shareholders.

 

(3) The amounts in column (l) reflect the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718. Assumptions made in the calculation of these amounts are included in Note 10 to the Company’s audited Financial Statements for the fiscal year ended May 31, 2011 included in the Company’s Annual Report on Form 10-K filed with the SEC on July 25, 2011.

 

(4) The restricted stock grant to Mr. Sloan referred to in this column will vest over a four-year period in four equal installments on the anniversary date of the grant. Mr. Sloan will be paid dividends on the restricted stock, but at the same rate as all of the Company’s shareholders. He also has the right to vote the shares even while they are restricted.

 

46


C. Outstanding Equity Awards at Fiscal Year End

The following table provides the outstanding equity grants for each Named Executive Officer on May 31, 2011. The table includes outstanding equity grants from past years as well as current-year equity grants. Since the Company has not issued options pursuant to an equity incentive plan referred to in column (d), that column has been eliminated.

OUTSTANDING EQUITY AWARDS AT 2011 FISCAL YEAR-END

 

     Option Awards      Stock Awards  

Name

   Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
(1)
     Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
(2)
     Option
Exercise
Price ($)
     Option
Expiration
Date
     Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(#)(3)
     Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($)(4)
     Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units, or
Other
Rights
That
Have Not
Vested
(#)(5)
     Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested ($)(6)
 
(a)    (b)      (c)      (e)      (f)      (g)      (h)      (i)      (j)  

Paul R. Garcia

     200,000         0       $ 18.235         6/3/2012         70,893       $ 3,683,600         77,986       $ 4,052,153   
     140,000         0       $ 16.905         8/7/2013               
     154,000         0       $ 23.350         6/1/2014               
     180,000         0       $ 31.575         7/19/2015               
     65,000         0       $ 45.860         6/2/2016               
     31,158         10,386       $ 37.400         7/31/2017               
     19,757         19,756       $ 44.290         7/31/2018               
     11,854         35,562       $ 42.180         7/29/2019               
     0         58,490       $ 37.400         7/29/2020               

Total

     801,769         124,194         —           —                 

David E. Mangum

     10,000         10,000       $ 42.030         11/3/2018         18,923       $ 983,239         20,054       $ 1,042,006   
     3,149         9,446       $ 42.180         7/29/2019               
     0         15,041       $ 37.400         7/29/2020               

Total

     13,149         34,487         —           —                 

Jeffrey S. Sloan

     0         25,000       $ 41.44         6/1/2020         50,000       $ 2,598,000         0       $ 0   

Total

     0         25,000                     

Joseph C. Hyde

     3,000         0       $ 31.575         7/19/2015         15,253       $ 792,546         15,041       $ 781,530   
     9,000         0       $ 32.200         8/24/2015               
     17,000         0       $ 45.860         6/2/2016               
     6,648         2,216       $ 37.400         7/31/2017               
     4,693         4,692       $ 44.290         7/31/2018               
     2,501         7,501       $ 42.180         7/29/2019               
     0         11,281       $ 37.400         7/29/2020               

Total

     42,842         25,690         —           —                 

Suellyn P. Tornay

     30,000         0       $ 31.575         7/19/2015         11,895       $ 618,064         12,255       $ 636,770   
     12,000         0       $ 45.860         6/2/2016               
     4,986         1,662       $ 37.400         7/31/2017               
     3,246         3,246       $ 44.290         7/31/2018               
     2,038         6,112       $ 42.180         7/29/2019               
     0         9,192       $ 37.400         7/29/2020               

Total

     52,270         20,212                     

 

47


(1) The vesting schedule for the exercisable options reflected in column (b) for each Named Executive Officer is contained in the following tables. Awards were granted under our 2000 Long Term Incentive Plan, as amended and restated (“2000”), or our Amended and Restated 2005 Incentive Plan (“2005”):

 

Name

   Grant Date      Vest Date      Plan      Shares      Price  

Garcia, Paul R.

     6/3/2002         6/3/2004         2000         40,000       $ 18.235   
     6/3/2002         6/3/2005         2000         50,000       $ 18.235   
     6/3/2002         6/3/2006         2000         50,000       $ 18.235   
     6/3/2002         6/3/2007         2000         60,000       $ 18.235   
     8/7/2003         8/7/2004         2000         35,000       $ 16.905   
     8/7/2003         8/7/2005         2000         35,000       $ 16.905   
     8/7/2003         8/7/2006         2000         35,000       $ 16.905   
     8/7/2003         8/7/2007         2000         35,000       $ 16.905   
     6/1/2004         6/1/2005         2000         38,500       $ 23.350   
     6/1/2004         6/1/2006         2000         38,500       $ 23.350   
     6/1/2004         6/1/2007         2000         38,500       $ 23.350   
     6/1/2004         6/1/2008         2000         38,500       $ 23.350   
     7/19/2005         7/19/2006         2005         45,000       $ 31.575   
     7/19/2005         7/19/2007         2005         45,000       $ 31.575   
     7/19/2005         7/19/2008         2005         45,000       $ 31.575   
     7/19/2005         7/19/2009         2005         45,000       $ 31.575   
     6/2/2006         6/2/2007         2005         16,250       $ 45.860   
     6/2/2006         6/2/2008         2005         16,250       $ 45.860   
     6/2/2006         6/2/2009         2005         16,250       $ 45.860   
     6/2/2006         6/2/2010         2005         16,250       $ 45.860   
     7/31/2007         7/31/2008         2005         10,386       $ 37.400   
     7/31/2007         7/31/2009         2005         10,386       $ 37.400   
     7/31/2007         7/31/2010         2005         10,386       $ 37.400   
     7/31/2008         7/31/2009         2005         9,879       $ 44.290   
     7/31/2008         7/31/2010         2005         9,878       $ 44.290   
     7/29/2009         7/29/2010         2005         11,854       $ 42.180   

Total outstanding options vested on or before 5/31/11

              801,769      

Name

   Grant Date      Vest Date      Plan      Shares      Price  

Mangum, David E.

     11/3/2008         11/3/2009         2005         5,000       $ 42.030   
     11/3/2008         11/3/2010         2005         5,000       $ 42.030   
     7/29/2009         7/29/2010         2005         3,149       $ 42.180   

Total outstanding options vested on or before 5/31/11

              13,149      

Name

   Grant Date      Vest Date      Plan      Shares      Price  

Sloan, Jeffrey S.

     n/a         n/a         n/a         n/a         n/a   

Total outstanding options vested on or before 5/31/11

              0      

 

48


Name

   Grant Date      Vest Date      Plan      Shares      Price  

Hyde, Joseph C.

     7/19/2005         7/19/2009         2005         3,000       $ 31.575   
     8/24/2005         8/24/2008         2005         4,000       $ 32.200   
     8/24/2005         8/24/2009         2005         5,000       $ 32.200   
     6/2/2006         6/2/2007         2005         4,250       $ 45.860   
     6/2/2006         6/2/2008         2005         4,250       $ 45.860   
     6/2/2006         6/2/2009         2005         4,250       $ 45.860   
     6/2/2006         6/2/2010         2005         4,250       $ 45.860   
     7/31/2007         7/31/2008         2005         2,216       $ 37.400   
     7/31/2007         7/31/2009         2005         2,216       $ 37.400   
     7/31/2007         7/31/2010         2005         2,216       $ 37.400   
     7/31/2008         7/31/2009         2005         2,347       $ 44.290   
     7/31/2008         7/31/2010         2005         2,346       $ 44.290   
     7/29/2009         7/29/2010         2005         2,501       $ 42.180   

Total outstanding options vested on or before 5/31/11

              42,842      

Name

   Grant Date      Vest Date      Plan      Shares      Price  

Tornay, Suellyn P.

     7/19/2005         7/19/2006         2005         7,500       $ 31.575   
     7/19/2005         7/19/2007         2005         7,500       $ 31.575   
     7/19/2005         7/19/2008         2005         7,500       $ 31.575   
     7/19/2005         7/19/2009         2005         7,500       $ 31.575   
     6/2/2006         6/2/2007         2005         3,000       $ 45.860   
     6/2/2006         6/2/2008         2005         3,000       $ 45.860   
     6/2/2006         6/2/2009         2005         3,000       $ 45.860   
     6/2/2006         6/2/2010         2005         3,000       $ 45.860   
     7/31/2007         7/31/2008         2005         1,662       $ 37.400   
     7/31/2007         7/31/2009         2005         1,662       $ 37.400   
     7/31/2007         7/31/2010         2005         1,662       $ 37.400   
     7/31/2008         7/31/2009         2005         1,623       $ 44.290   
     7/31/2008         7/31/2010         2005         1,623       $ 44.290   
     7/29/2009         7/29/2010         2005         2,038       $ 42.180   

Total outstanding options vested on or before 5/31/11

              52,270      

 

(2) The vesting schedule for the unexercisable options reflected in column (c) for each Named Executive Officer is contained in the following tables:

 

Name

   Grant Date      Vest Date      Plan      Shares      Price  

Garcia, Paul R.

     7/31/2007         7/31/2011         2005         10,386       $ 37.400   
     7/31/2008         7/31/2011         2005         9,878       $ 44.290   
     7/31/2008         7/31/2012         2005         9,878       $ 44.290   
     7/29/2009         7/29/2011         2005         11,854       $ 42.180   
     7/29/2009         7/29/2012         2005         11,854       $ 42.180   
     7/29/2009         7/29/2013         2005         11,854       $ 42.180   
     7/29/2010         7/29/2011         2005         14,622       $ 37.400   
     7/29/2010         7/29/2012         2005         14,622       $ 37.400   
     7/29/2010         7/29/2013         2005         14,623       $ 37.400   
     7/29/2010         7/29/2014         2005         14,623       $ 37.400   

Total outstanding options which were unvested on 5/31/11

              124,194      

 

49


Name

   Grant Date      Vest Date      Plan      Shares      Price  

Mangum, David E.

     11/3/2008         11/3/2011         2005         5,000       $ 42.030   
     11/3/2008         11/3/2012         2005         5,000       $ 42.030   
     7/29/2009         7/29/2011         2005         3,149       $ 42.180   
     7/29/2009         7/29/2012         2005         3,149       $ 42.180   
     7/29/2009         7/29/2013         2005         3,148       $ 42.180   
     7/29/2010         7/29/2011         2005         3,760       $ 37.400   
     7/29/2010         7/29/2012         2005         3,760       $ 37.400   
     7/29/2010         7/29/2013         2005         3,760       $ 37.400   
     7/29/2010         7/29/2014         2005         3,761       $ 37.400   

Total outstanding options which were unvested on 5/31/11

              34,487      

Name

   Grant Date      Vest Date      Plan      Shares      Price  

Sloan, Jeffrey S.

     6/1/2010         6/1/2011         2005         6,250       $ 41.44   
     6/1/2010         6/1/2012         2005         6,250       $ 41.44   
     6/1/2010         6/1/2013         2005         6,250       $ 41.44   
     6/1/2010         6/1/2014         2005         6,250       $ 41.44   

Total outstanding options which were unvested on 5/31/11

              25,000      

Name

   Grant Date      Vest Date      Plan      Shares      Price  

Hyde, Joseph C.

     7/31/2007         7/31/2011         2005         2,216       $ 37.400   
     7/31/2008         7/31/2011         2005         2,346       $ 44.290   
     7/31/2008         7/31/2012         2005         2,346       $ 44.290   
     7/29/2009         7/29/2011         2005         2,501       $ 42.180   
     7/29/2009         7/29/2012         2005         2,500       $ 42.180   
     7/29/2009         7/29/2013         2005         2,500       $ 42.180   
     7/29/2010         7/29/2011         2005         2,821       $ 37.400   
     7/29/2010         7/29/2012         2005         2,820       $ 37.400   
     7/29/2010         7/29/2013         2005         2,820       $ 37.400   
     7/29/2010         7/29/2014         2005         2,820       $ 37.400   

Total outstanding options which were unvested on 5/31/11

              25,690      

Name

   Grant Date      Vest Date      Plan      Shares      Price  

Tornay, Suellyn P.

     7/31/2007         7/31/2011         2005         1,662       $ 37.400   
     7/31/2008         7/31/2011         2005         1,623       $ 44.290   
     7/31/2008         7/31/2012         2005         1,623       $ 44.290   
     7/29/2009         7/29/2011         2005         2,037       $ 42.180   
     7/29/2009         7/29/2012         2005         2,038       $ 42.180   
     7/29/2009         7/29/2013         2005         2,037       $ 42.180   
     7/29/2010         7/29/2011         2005         2,298       $ 37.400   
     7/29/2010         7/29/2012         2005         2,298       $ 37.400   
     7/29/2010         7/29/2013         2005         2,298       $ 37.400   
     7/29/2010         7/29/2014         2005         2,298       $ 37.400   

Total outstanding options which were unvested on 5/31/11

              20,212      

 

50


(3) The vesting schedule for unvested restricted stock held on May 31, 2011, which is reflected in column (g) for each Named Executive Officer, is contained in the following table:

 

Name

   Grant Date      Plan      Vest Date      Shares  

Garcia, Paul R.

     7/31/2008         2005         7/31/2011         14,662   
     7/31/2008         2005         7/31/2011         3,568   
     7/31/2009         2005         7/31/2011         4,830   
     7/31/2009         2005         7/31/2012         4,830   
     7/29/2009         2005         7/29/2011         14,334   
     7/29/2009         2005         7/29/2012         14,334   
     7/29/2009         2005         7/29/2013         14,335   
              70,893 Total   

Mangum, David E.

     11/3/2008         2005         11/3/2011         3,750   
     11/3/2008         2005         11/3/2012         3,750   
     7/29/2009         2005         7/29/2011         3,808   
     7/29/2009         2005         7/29/2012         3,808   
     7/29/2009         2005         7/29/2013         3,807   
              18,923 Total   

Sloan, Jeffrey S.

     6/1/2010         2005         6/1/2011         12,500   
     6/1/2010         2005         6/1/2012         12,500   
     6/1/2010         2005         6/1/2013         12,500   
     6/1/2010         2005         6/1/2014         12,500   
              50,000 Total   

Hyde, Joseph C.

     7/31/2008         2005         7/31/2011         3,128   
     7/31/2008         2005         7/31/2011         761   
     7/31/2009         2005         7/31/2011         1,147   
     7/31/2009         2005         7/31/2012         1,147   
     7/29/2009         2005         7/29/2011         3,023   
     7/29/2009         2005         7/29/2012         3,024   
     7/29/2009         2005         7/29/2013         3,023   
              15,253 Total   

Tornay, Suellyn P.

     7/31/2008         2005         7/31/2011         2,346   
     7/31/2008         2005         7/31/2011         571   
     7/31/2009         2005         7/31/2011         794   
     7/31/2009         2005         7/31/2012         793   
     7/29/2009         2005         7/29/2011         2,464   
     7/29/2009         2005         7/29/2012         2,464   
     7/29/2009         2005         7/29/2013         2,463   
              11,895 Total   

 

(4) The market value included in this column is the number of shares contained in column (g) multiplied by Company’s closing stock price on May 31, 2011, which was $51.96.

 

(5) On July 29, 2010, each Named Executive Officer was granted a target award of performance-based restricted stock units which could be adjusted up or down depending upon the performance of the Company. The adjustment factors are described in the Compensation Discussion and Analysis section under the sub-heading “Performance-Based Restricted Stock Units.” The number shown in this column reflects such target award.

 

(6) The market value included in this column is the number of shares contained in column (i) multiplied by the Company’s closing stock price on May 31, 2011, which was $51.96.

 

51


D. Options Exercises and Stock Vested

The following table provides information on options exercised and stock awards that vested in fiscal year 2011. The shares shown as acquired on exercise or on vesting represent shares of the Company’s Common Stock.

2011 OPTION EXERCISES AND STOCK VESTED

 

     Option Awards      Stock Awards  

Name

   Number of
Shares Acquired
on Exercise (#)
     Value Realized
on Exercise ($) (1)
     Number of
Shares Acquired
on Vesting (#)
     Value Realized
on Vesting ($) (2)
 
(a)    (b)      (c)      (d)      (e)  

Paul R. Garcia

     110,000       $ 4,067,250         45,586       $ 1,731,202   

David E. Mangum

     0       $ 0         7,558       $ 291,144   

Jeffrey S. Sloan

     0       $ 0         0       $ 0   

Joseph C. Hyde

     24,750       $ 350,892         9,698       $ 368,102   

Suellyn P. Tornay

     0       $ 0         7,267       $ 275,500   

 

(1) Value realized represents the excess of the fair market value of the shares at the time of exercise over the exercise price of the options.

 

(2) Value realized represents the fair market value of the shares on the vesting date.

 

E. Pension Benefits

We maintain a noncontributory defined benefit pension plan covering our United States employees who have met the eligibility provisions, named the “Global Payments Inc. Employees Retirement Plan” or “the Plan.” The Plan was closed to new participants beginning June 1, 1998. Ms. Tornay is the only Named Executive Officer who was hired before June 1, 1998 and, therefore, is the only Named Executive Officer who participates in the Plan. All participants were vested and their years of credited service were frozen on June 1, 1998. Benefits are based on years of service and the ratio of an employee’s compensation during the highest five consecutive years of earnings out of the last ten years of service, divided by his or her Final Average Earnings (as defined below) as of December 31, 1998. Effective May 31, 2004, we modified the Plan to cease benefit accruals for increases in compensation levels.

We calculate the present values shown in the table below using: (i) a 7% discount rate, which is the same discount rates the Company uses for calculations for benefit obligation calculations for financial statement reporting purposes; and (ii) age 65, which is the Plan’s earliest unreduced benefit retirement age based on the participant’s age and service. The present values shown in the table reflect post-retirement mortality, based on RP2000 Combined Mortality Table, the same assumptions used in the calculations for financial statement reporting purposes but do not include an assumption of pre-retirement termination, mortality, or disability.

The Plan provides participants with a monthly life annuity at normal retirement calculated by subtracting (b) from (a), and then multiplying the difference by (c) as defined below where:

 

  (a) = 1.65% of Final Average Earnings as of December 31, 1998 multiplied by years of credited benefit service (up to a maximum of 35 years).
  (b) = .75% of the participant’s Integration Level (as defined below) multiplied by years of credited benefit service (up to a maximum of 35 years).
  (c) = the ratio of Final Average Earnings as of the earlier of termination of employment or May 31, 2004 to Final Average Earnings as of December 31, 1998.

The monthly benefit will be 1/12th of the amount calculated above.

For purposes of these calculations, “Final Average Earnings” is the average of the participant’s annual earnings for the five consecutive calendar years, or the participant’s period of employment, if shorter, in which the participant had his or her highest annual earnings during the ten calendar years immediately preceding the earlier of (i) May 31, 2004, or

 

52


(ii) the participant’s normal retirement date. Earnings include all compensation paid to the participant such as base salary or wages, bonuses, and commissions, but they exclude the cost of group insurance premiums we pay, moving expenses, and taxable equity compensation. Annual earnings for purposes of the benefit calculation is limited to $200,000 adjusted for cost of living increases from January 1, 2002, in accordance with Section 401(a)(17) of the Internal Revenue Code.

The “Integration Level” is the lower of the participant’s (1) Three-Year Average Social Security Earnings and (2) Covered Compensation.

“Three-Year Average Social Security Earnings” is the average of the participant’s annual earnings for the last three consecutive calendar years before employment is terminated, or the period of employment, if shorter, provided that each year’s annual earnings cannot exceed the Social Security taxable wage base in effect on the first day of the year.

“Covered Compensation” is the average of the Social Security taxable wage bases for the 35 calendar years ending with the year in which the participant reaches the Social Security normal retirement age. If the participant terminates employment before the Social Security normal retirement age, then, for purposes of computing the participant’s covered compensation for any year, it will be assumed that the Social Security taxable wage base in effect at the beginning of the year will remain the same for all future years.

The following table provides the actuarial present value of each Named Executive Officer’s total accumulated benefit as of May 31, 2011.

 

Name

   Plan Name      Years of Credited
Service (#)
    Present value of
Accumulated
Benefit ($)
     Payments During
Last Fiscal Year
 
(a)    (b)      (c)     (d)      (e)  

Paul R. Garcia

     —           —          —           —     

David E. Mangum

     —           —          —           —     

Jeffrey S. Sloan

     —           —          —           —     

Joseph C. Hyde

     —           —          —           —     

Suellyn P. Tornay

    
 
 
Global Payments
Inc. Employees
Retirement Plan
  
  
  
     11.58 (1)    $ 130,990         0   

 

(1) Ms. Tornay has 24 actual years of service with the Company but this plan was frozen on June 1, 1998. As a result, the years credited for the pension plan are less than her actual years of service. For more information about the details of the plan, see the narrative above.

 

F. Non-Qualified Deferred Compensation Plan

The Named Executive Officers are eligible to participate in the Company’s Non-Qualified Deferred Compensation Plan, or “DC Plan.” Mr. Sloan is the only named executive officer who participated in the DC plan during fiscal 2011. Pursuant to the DC Plan, participants are permitted to elect to defer up to 100% of base salary and other forms of compensation (such as cash incentive bonus or equity-based compensation). Participant accounts are credited with earnings based on the participant’s investment allocation among a menu of investment options selected by the DC Plan administrator. Participants are 100% vested in the participant deferrals and related earnings. The Company does not make contributions to the DC Plan and does not guarantee any return on participant account balances. Participants may allocate their plan accounts into sub-accounts that are payable upon separation from service or on designated specified dates. Except in the case of death or disability, participants may elect in advance to have their various account balances pay out in a single lump sum or in installments over a period of two to ten years. In the event a participant separates from service by reason of death or disability, the participant or his designated beneficiary will receive the undistributed portion of his or her account balances in a lump-sum payment. Subject to approval by the DC Plan administrator, in the event of an unforeseen financial emergency beyond the participant’s control, a participant may request a withdrawal from an account up to the amount necessary to satisfy the emergency (provided the participant does not have the financial resources to otherwise meet the hardship).

 

53


The following table provides information on deferred compensation under the DC Plan for each Named Executive Officer during fiscal 2011.

NON-QUALIFIED DEFERRED COMPENSATION

 

Name

   Executive
Contributions
in Last
FY ($) (1)
     Registrant
Contributions
in Last FY ($)
     Aggregates
Earnings
in Last
FY ($)
     Aggregate
Withdrawals /
Distributions ($)
     Aggregate
Balance at
Last FYE ($)
 
(a)    (b)      (c)      (d)      (e)      (f)  

Paul R. Garcia

     —           —           —           —           —     

David E. Mangum

     —           —           —           —           —     

Jeffrey S. Sloan

   $ 12,692.35         —         $ 400.30         —         $ 13,092.65   

Joseph C. Hyde

     —           —           —           —           —     

Suellyn P. Tornay

     —           —           —           —           —     

 

(1) All of the amounts contributed by Mr. Sloan are included in the earnings reported in the Summary Compensation Table above.

 

G. Consideration of Risk

The Committee, with assistance from management and the independent compensation consultant, analyzed the Company’s compensation programs from a risk perspective. The independent compensation consultant provided a number of risk mitigation factors and potential risk aggravators to be identified in any employee compensation program. The Committee considered these in the context of our program, and has determined that our compensation program does not encourage excessive risk taking on behalf of our employees, is balanced, and is not reasonably likely to have a material adverse effect on the Company. This determination was based, in part, on the following factors:

 

   

The variety of performance measures diversify the risk associated with any single measure;

 

   

The balanced weighting of the various performance measures discourages excessive attention on one measure to the detriment of others;

 

   

Fixed maximum award levels limit overall potential payments;

 

   

The variety of compensation types—cash and equity-based incentives with different time horizons—drives appropriately balanced levels of attention to both short and long term performance and creates alignment with both Company performance and shareholder interests; and

 

   

Target stock ownership guidelines applicable to all of our Named Executive Officers, as described above, align executive and shareholder interests in long-term value creation.

 

H. Potential Payments Upon Termination or Change in Control

(1) Summary of Employment Agreements. Each of the Named Executive Officers is a party to an employment agreement with the Company. Mr. Garcia is also a party to a Key Position Agreement. The material terms of all of the aforementioned agreements are summarized below.

(a) Employment Agreements applicable to Mr. Garcia, Mr. Hyde and Ms. Tornay

Mr. Garcia, Mr. Hyde, and Ms. Tornay are entitled to a minimum annual salary, subject to yearly review, plus an annual at-risk incentive bonus opportunity, which is determined annually based on a range of specific financial objectives and other objectives reflecting his or her area and scope of responsibility. Each such executive is also entitled to participate in all incentive, savings and welfare benefit plans generally made available to all salaried employees of the Company.

Each such executive has agreed not to disclose confidential information or compete with the Company, and not to solicit the Company’s customers or recruit its employees, for a period of 24 months following the termination of his or her employment.

 

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Each such employment agreement may be terminated by the Company at any time for “cause” or “poor performance” (as defined therein) or for no reason, or by the applicable executive with or without “good reason” (as defined therein). Each employment agreement will also be terminated upon the death, disability or retirement of the executive. Depending on the reason for the termination and when it occurs, the executive will be entitled to certain severance benefits, as described below, which may be delayed for such time as may be necessary to avoid a violation of Code Section 409A.

If, prior to a change in control, the executive’s employment is terminated by the Company without cause (but not for poor performance) or he or she resigns for good reason, the Company will be required to pay such executive’s accrued salary and benefits through the date of termination, plus Mr. Garcia and Ms. Tornay will receive an amount equal to the greater of (i) 50% of his or her target annual bonus for the current year, or (ii) 100% of his or her target annual bonus, prorated through the date of termination and adjusted up or down by reference to year-to-date performance at the date of termination, and Mr. Hyde will receive 50% of his target annual bonus for the current year. In addition:

 

  (i) the executive will receive a lump sum payment equal to 6 months of his or her base salary, payable no less than 6 months after the date of termination, provided that he or she does not violate any of the restrictive covenants in the agreement,

 

  (ii) for a period of up to 12 additional months (or the earlier of the executive violating any restrictive covenants or, in the case of Ms. Garcia and Ms. Tornay, the executive becoming employed elsewhere, or, in the case of Mr. Hyde, the executive becoming employed with a subsequent employer or earning non-employee compensation reasonably anticipated to be more than $50,000 per year, the Company will continue to pay the executive his or her base salary, and

 

  (iii) the Company will continue to provide either health insurance coverage or reimbursement pursuant to COBRA for a period of time up to 18 months

In addition, all of the executive’s restricted stock awards will vest, and for Mr. Garcia and Ms. Tornay, those stock options that would have vested in the next 24 months will vest and remain exercisable for 90 days after the end of the severance period, while for Mr. Hyde those stock options that would have vested in the next 24 months will vest and remain exercisable for 90 days after the termination of his employment.

If, prior to a change in control, the executive’s employment is terminated by the Company for poor performance, the Company will be required to pay such executive’s accrued salary and benefits through the date of termination. In addition, Mr. Garcia and Ms. Tornay may receive 100% of his or her target annual bonus, prorated through the date of termination and adjusted up or down by reference to year-to-date performance at the date of termination. In addition:

 

  (i) the executive will receive a lump sum payment equal to 6 months of his or her base salary, payable no less than 6 months after the date of termination, provided that he or she does not violate any of the restrictive covenants in the agreement,

 

  (ii) for a period of up to 6 additional months, the Company will continue to pay the executive his or her base salary (in the case of each of (i) and (ii), provided the executive does not become employed elsewhere, does not violate any restrictive covenants and, in the case of Mr. Hyde, the executive does not earn non-employee compensation reasonably anticipated to be more than $50,000 per year), and

 

  (iii) the Company will provide either health insurance coverage or reimbursement pursuant to COBRA for a period of time up to 12 months.

In addition, the executive’s restricted stock awards and stock options that would have vested in the next 24 months will vest, and for Mr. Garcia and Ms. Tornay, those stock options remain exercisable for 90 days after the end of the severance period, while for Mr. Hyde those stock options remain exercisable for 90 days after the termination of his employment.

If, within 36 months after a change in control or in anticipation of a change in control, the executive’s employment is terminated by the Company without cause or such executive resigns for good reason, the Company will be required to pay such executive’s accrued salary and benefits through the date of termination plus 100% of his or her annual bonus opportunity for the current year. In addition:

 

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  (i) the executive will receive a lump sum payment equal to 6 months of his or her base salary, payable no less than 6 months after the date of termination, provided that he or she does not violate any of the restrictive covenants in the agreement,

 

  (ii) for a period of up to 18 additional months (or the earlier of the executive violating any restrictive covenants) the Company will continue to pay the executive his or her base salary, and

 

  (iii) the Company will provide either health insurance coverage or reimbursement pursuant to COBRA for a period of time (in the case of Mr. Garcia and Ms. Tornay, 24 months, and in the case of Mr. Hyde, 18 months). In addition, all of the restricted stock awards and stock options of the executive will vest, and for Mr. Garcia and Ms. Tornay, those stock options will remain exercisable for 90 days after the end of the severance period, while for Mr. Hyde those stock options will remain exercisable for 90 days after the termination of his employment.

Whether or not a change in control shall have occurred, if the employment of the executive is terminated by reason of his or her death, disability or retirement, such executive will be entitled to receive accrued salary and benefits through the date of termination and any death, disability or retirement benefits that may apply, but no additional severance amount. In addition, if the employment of the executive is terminated by reason of his or her death or disability, all of his or her restricted stock awards and stock options will vest in accordance with the terms of the plan, which is applicable to all employees who participate in the equity incentive plans. Furthermore, if the employment of Mr. Hyde is terminated by reason of his retirement, all of his restricted stock awards and stock options will vest pursuant to his agreement.

If the Company terminates the executive for cause, or if he or she resigns from the Company without good reason, such executive will be entitled to receive accrued salary and benefits through the date of termination, but no additional severance amount is payable under the terms of the employment agreements.

For purposes of these employment agreements, a change in control of the Company is generally defined as the acquisition by a third party of 35% or more of the voting power of the Company, or the consummation of certain mergers, asset sales or other major business combinations. A restructuring or separation of any line of business of the Company will not, of itself, constitute a change in control. Each of these employment agreements provides that the executive will be entitled to a tax gross-up payment from the Company to cover any excise tax liability such executive may incur as a result of payments or benefits contingent on a change in control, but such gross-up payment will be made only if the after-tax benefit to the executive of such tax gross-up is at least $50,000. If not, the benefits would be reduced to an amount that would not trigger the excise tax.

In addition, each of the agreements contains a waiver provision that provides that the failure of either party to insist, in one or more instances, on performance by the other in strict accordance with the terms and conditions of the agreement shall not be deemed a waiver or relinquishment of any right granted in the agreement or of the future performance of any such term or condition or of any other term or condition of the agreement, unless such waiver is contained in a writing signed by the party making the waiver.

(b) Employment Agreement with Mr. Mangum and Mr. Sloan

Mr. Mangum’s employment agreement was effective on March 1, 2010 and will remain in effect through May 31, 2013, with automatic renewals on a year to year basis unless either party provides notice that there will be no extension. Mr. Sloan’s employment agreement was effective on June 1, 2010 and will remain in effect through May 31, 2013 with automatic renewals on a year to year basis unless either party provides notice that there will be no extension. Pursuant to their agreements, Messrs. Mangum and Sloan are entitled to a minimum annual salary, subject to yearly review, plus an annual at-risk incentive bonus opportunity, which is based on the achievement of financial and performance objectives determined annually by the Compensation Committee. They are also entitled to participate in all incentive, savings and welfare benefit plans generally made available to all salaried employees of the Company.

Messrs. Mangum and Sloan both have agreed not to disclose confidential information and not to solicit the Company’s customers or recruit its employees, for a period of 24 months following the termination of his employment. If the executive’s employment is terminated (other than as a result of the Company failing to extend his employment agreement), he has agreed not to compete with the Company for a period of 24 months or, under certain circumstances, 18 months. The non-compete does not apply if the executive’s employment is terminated as a result of the Company failing to extend his employment agreement.

 

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The employment agreements may be terminated by the Company at any time for “cause” or for no reason, or by the executive with or without “good reason” (as defined therein). The employment agreements will also be terminated upon the executive’s death, disability or retirement. Depending on the reason for the termination and when it occurs, the executive will be entitled to certain severance benefits, as described below, which may be delayed for such time as may be necessary to avoid a violation of Code Section 409A.

If, prior to a change in control or on or after the second anniversary of a change in control, the executive’s employment is terminated by the Company without cause or he resigns for good reason, the Company will be required to pay his accrued salary and benefits through the date of termination plus a pro-rata portion of his annual bonus for the year of termination, based upon actual performance against certified pre-established bonus targets. In addition:

 

  (i) the Company will continue to pay his base salary for 6 months, or, if such payments are delayed by reason of Code Section 409A, make a lump sum payment equal to 6 months of his base salary on the first day of the seventh month after the date of termination, in each case provided that he does not violate any of the restrictive covenants in the agreement,

 

  (ii) for a period of up to 12 additional months (or the earlier of the executive becoming employed with a competitor or violating any restrictive covenants) the Company will continue to pay his base salary, and

 

  (iii) the Company will for a period of up to 12 months pay his COBRA premiums (however, this obligation will cease upon the executive obtaining other employment if h