UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

(Amendment No. )

Filed by the Registrant          þ
Filed by a Party other than the Registrant          o

Check the appropriate box:
þ   Preliminary Proxy Statement
o   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o   Definitive Proxy Statement
o   Definitive Additional Materials
o   Soliciting Material Pursuant to § 240.14a-12

Total System Services, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
þ   No fee required.
o   Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	1)		Title of each class of securities to which transaction applies:
	2)		Aggregate number of securities to which transaction applies:
	3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
	4)		Proposed maximum aggregate value of transaction:
	5)		Total fee paid:

o		Fee paid previously with preliminary materials.
o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

	1)		Amount Previously Paid:
	2)		Form, Schedule or Registration Statement No.:
	3)		Filing Party:
	4)		Date Filed:

 

Philip W. Tomlinson

Chairman of the Board and

Chief Executive Officer

October [  ], 2007

 

Dear TSYS Shareholder:

 

This is an exciting time for TSYS. As you may be aware, TSYS and Synovus Financial Corp., TSYS’ indirect 80.8% shareholder, recently entered into an agreement and plan of distribution. Subject to the terms and conditions of the agreement and plan of distribution, Synovus has agreed to “spin-off” TSYS by distributing all of Synovus’ shares of TSYS common stock to Synovus shareholders. Prior to the spin-off and in accordance with the agreement and plan of distribution, TSYS expects to pay a one-time special cash dividend, in the amount of $600 million, to all TSYS shareholders, including Synovus.

 

Following the distribution, TSYS will, for the first time in its history, operate as an independent, stand-alone publicly-traded corporation.

 

Although shareholder approval is not required for the distribution of TSYS shares by Synovus or for the special dividend, we are holding a special meeting of shareholders to consider and vote on proposals to amend our Articles of Incorporation and Bylaws. These documents were adopted when Synovus was a substantial majority shareholder, and the TSYS Board of Directors believes that changes to these documents are appropriate as part of the spin-off. Shareholder approval of the amendments to the Articles of Incorporation and Bylaws is a condition to the distribution of TSYS shares by Synovus.

 

In addition, we are also asking our shareholders to approve the adoption of our 2008 Omnibus Plan so that we will have the capability and flexibility to compensate our employees and align their interests with those of our shareholders as we move forward as a stand-alone company.

 

Synovus has agreed to vote in favor of the proposals to amend our Articles of Incorporation and Bylaws and to adopt the 2008 Omnibus Plan. Accordingly, approval of these proposals is assured. If the distribution of TSYS shares by Synovus is not completed for any reason, the amendments to our Articles of Incorporation and Bylaws and the 2008 Omnibus Plan, even if approved by shareholders, will be abandoned and will not become effective.

 

You are cordially invited to attend the special meeting of shareholders at [          ] on [          ],[          ] [          ], 2007, at the TSYS Riverfront Campus Auditorium, 1600 First Avenue, Columbus, Georgia.

 

Whether you own a few or many TSYS shares, and whether or not you plan to attend in person, please submit your proxy promptly by telephone or via the Internet in accordance with the instructions on the enclosed proxy card or by completing, dating and returning your proxy card in the enclosed envelope. Returning the proxy card or otherwise submitting your proxy does not deprive you of your right to attend the special meeting and vote in person.

 

We are very excited about our future as a stand-alone public company and believe it will better position TSYS for the future. Thank you for helping us make TSYS what it is today. We look forward to your continued support.

 

Sincerely yours,

 

Philip W. Tomlinson

 

TOTAL SYSTEM SERVICES, INC.^®

 

NOTICE OF THE SPECIAL MEETING OF SHAREHOLDERS

 

 

G. Sanders Griffith, III

Secretary

 

Columbus, Georgia

October [  ], 2007

 

 

TABLE OF CONTENTS

 

 

 

 

PROXY STATEMENT
VOTING INFORMATION

 

Purpose

 

This Proxy Statement and the accompanying proxy card are being mailed to TSYS shareholders beginning on or about [          ], 2007. The TSYS Board of Directors is soliciting proxies to be used at the Special Meeting of TSYS Shareholders which will be held on [          ], at [          ], at the TSYS Riverfront Campus Auditorium, 1600 First Avenue, Columbus, Georgia. The Special Meeting is being held for shareholders to consider and vote on (1) amendments to our Articles of Incorporation contained in the Amended and Restated Articles of Incorporation; (2) amendments to our Bylaws contained in the Amended and Restated Bylaws; and (3) adopting our 2008 Omnibus Plan.

 

These items of business are being proposed for consideration by shareholders in connection with the potential distribution by Synovus Financial Corp. (“Synovus”) of its TSYS shares, held indirectly through its wholly owned subsidiary Columbus Bank and Trust Company (“CB&T”), which we refer to in this proxy statement as the “spin-off”. Shareholder approval of the amendments to our Articles of Incorporation and Bylaws is a condition to completing the spin-off. If the spin-off is not completed for any reason, the amendments to our Articles of Incorporation and Bylaws, and the 2008 Omnibus Plan, even if approved by shareholders, will be abandoned and will not become effective.

 

Proxies are solicited to give all shareholders of record an opportunity to vote on matters to be presented at the Special Meeting. In the following pages of this Proxy Statement, you will find more information on the matters to be voted on at the Special Meeting or any adjournment of that meeting.

 

Who Can Vote

 

You are entitled to vote if you were a shareholder of record of TSYS stock as of the close of business on [          ], 2007. Your shares can be voted at the meeting only if you are present or represented by a valid proxy.

 

Quorum, Required Votes and Shares Outstanding

 

A majority of the outstanding shares of TSYS stock must be present, either in person or represented by proxy, in order to conduct the Special Meeting of TSYS Shareholders.

 

The affirmative vote of shareholders holding at least 80% of the total issued and outstanding shares of TSYS stock as of [          ], 2007, is needed to approve the amendments to TSYS’ Articles of Incorporation and, due to the nature of the amendments proposed, to approve the amendments to TSYS’ Bylaws. The affirmative vote of a majority of the votes cast is needed to approve the adoption of the 2008 Omnibus Plan.

 

On [          ], 2007, [197,382,904] shares of TSYS common stock were outstanding.

 

Columbus Bank and Trust Company

 

CB&T owned individually 159,630,980 shares, or 80.8%, of the outstanding shares of TSYS common stock on [          ], 2007. CB&T is a wholly owned banking subsidiary of Synovus. CB&T has agreed to vote FOR all proposals. Accordingly, we expect that all proposals will receive the requisite shareholder approval.

 

Proxies

 

The Board of Directors of TSYS has designated two individuals to serve as proxies to vote the shares represented by proxies at the Special Meeting of TSYS Shareholders. If you properly submit a proxy card or submit a proxy by telephone or via the Internet but do not specify how you want your shares to be voted, your shares will be voted by the designated proxies: (1) FOR the approval of all of the amendments to TSYS’ Articles of Incorporation; (2) FOR the approval of all of the amendments to TSYS’ Bylaws; and (3) FOR the adoption of the 2008 Omnibus Plan.

At this time, we are unaware of any matters, other than as set forth above, that may properly come before the Special Meeting. If any other matters properly come before the Special Meeting, the persons named in the enclosed proxy, or their duly constituted substitutes acting at the Special Meeting or any adjournment or postponement of the Special Meeting, will be deemed authorized to vote or otherwise act on such mattes in accordance with their judgment.

 

Voting of Shares

 

Each share of TSYS common stock represented at the Special Meeting is entitled to one vote on each matter properly brought before the meeting. All shares entitled to vote and represented in person or by valid proxies received by phone, Internet or mail will be voted at the Special Meeting in accordance with the instructions indicated on those proxies. If a proxy does not specify how the shares represented by that proxy should be voted, the designated proxies will vote in the manner described in the section entitled “Proxies” above.

 

TSYS Dividend Reinvestment and Direct Stock Purchase Plan:  If you participate in this Plan, your proxy card represents shares held in the Plan, as well as shares you hold in certificate form registered in the same name.

 

Abstentions and Broker Non-Votes

 

Under certain circumstances, brokers are prohibited from exercising discretionary authority for beneficial owners who have not provided voting instructions to the broker (a “broker non-vote”). In these cases, and in cases where the shareholder abstains from voting on a matter, those shares will be counted for the purpose of determining if a quorum is present. Abstentions and broker non-votes will have the same effect as a vote against the amendments to TSYS’ Articles of Incorporation and TSYS’ Bylaws and will have no effect on the outcome of the vote to adopt the 2008 Omnibus Plan.

 

How You Can Vote

 

If you hold your shares in your own name, you may submit a proxy by telephone, via the Internet or by mail or vote by attending the Special Meeting and voting in person.

 

Vote By Telephone:

 

You can vote your shares by telephone until 11:59 p.m. Eastern Standard Time on [          ], 2007 by calling the toll-free telephone number (at no cost to you) shown on your proxy card. Telephone voting is available 24 hours a day, seven days a week. Easy-to-follow voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded. Our telephone voting procedures are designed to authenticate the shareholder by using individual control numbers. If you vote by telephone, you do NOT need to return your proxy card.

 

Vote By Internet:

 

You can also choose to vote on the Internet until 11:59 p.m. Eastern Standard Time on [          ], 2007 by accessing the website listed on your proxy card. Internet voting is available 24 hours a day, seven days a week. You will be given the opportunity to confirm that your instructions have been properly recorded. If you vote on the Internet, you do NOT need to return your proxy card.

 

Vote By Mail:

 

If you choose to vote by mail, simply mark your proxy card, date and sign it, and return it in the postage-paid envelope provided.

 

If your shares are held in the name of a bank, broker or other nominee, you will receive instructions from the holder of record that you must follow for your shares to be voted. Please follow their instructions carefully. Also, please note that if the holder of record of your shares is a broker, bank or other nominee and you wish to vote in person at the special meeting, you must request a legal proxy from your bank, broker or other nominee that holds your shares and present that proxy and proof of identification at the Special Meeting.

Revocation of Proxy

 

If you vote by proxy, you may revoke that proxy at any time before it is voted at the Special Meeting. You may do this by (1) signing another proxy card with a later date and returning it to us prior to the Special Meeting, (2) voting again by telephone or on the Internet (only your last telephone or Internet proxy will be counted) before 11:59 p.m. Eastern Standard Time on [          ], 2007, or (3) attending the Special Meeting in person and casting a ballot (your attendance at the Special Meeting, in and of itself, will not revoke the proxy).

 

If your TSYS shares are held by a bank, broker or other nominee, you must follow the instructions provided by the bank, broker or other nominee if you wish to change your vote.

 

 

SPECIAL DIVIDEND, SPIN-OFF AND PLAN OF DISTRIBUTION

 

On October 25, 2007, TSYS entered into an Agreement and Plan of Distribution with Synovus and CB&T, a wholly owned banking subsidiary of Synovus and approximately 80.8% parent of TSYS, which we refer to in this proxy as the “Plan of Distribution.” Subject to the terms and conditions of the Plan of Distribution, CB&T will distribute all of its shares of TSYS common stock to Synovus and then Synovus will distribute all of those shares to Synovus shareholders, after which distributions TSYS will become a fully independent, publicly owned company. In this proxy, we refer to the distributions of TSYS shares by CB&T and Synovus as the “spin-off.” Prior to the spin-off and in accordance with the Plan of Distribution, TSYS expects to pay a one-time aggregate cash dividend of $600 million to all TSYS shareholders, including CB&T, which we refer to in this proxy as the “special dividend.” The special dividend is expected to be funded by a combination of TSYS’ cash on hand and a revolving credit facility expected to be entered into by TSYS prior to the spin-off. Synovus shareholders who receive shares of TSYS stock in the spin-off will not be entitled to the special dividend.

 

Shareholder approval of the special dividend, the spin-off, and the Plan of Distribution is not required and is not being sought in connection with this proxy statement. However, shareholder approval of the amendments to the TSYS Articles of Incorporation contained in the Amended and Restated Articles of Incorporation and approval of the amendments to the TSYS Bylaws contained in the Amended and Restated Bylaws is a condition to the spin-off and is being sought in connection with this proxy statement.

 

 

PROPOSALS TO BE VOTED ON

 

INTRODUCTION TO PROPOSALS 1 AND 2:
AMENDMENTS TO THE COMPANY’S

ARTICLES OF INCORPORATION AND BYLAWS

 

In connection with the proposed spin-off, the Board of Directors, together with the Corporate Governance and Nominating Committee and the Special Committee formed to consider the spin-off, undertook a review of our Articles of Incorporation and Bylaws. The Articles of Incorporation and Bylaws contain a number of provisions requiring the affirmative vote of shareholders holding at least 80% of the issued and outstanding shares of TSYS. These provisions were included in the Articles of Incorporation and Bylaws at a time when Synovus was a substantial majority shareholder. Other provisions in these documents have not been updated to reflect changes to the statutory language contained in the Georgia Business Corporations Code (the “GBCC”) since these documents were adopted.

 

As a result of this review, the Board of Directors adopted (1) the Amended and Restated Articles of Incorporation attached hereto as Appendix A-1, subject to shareholder approval and completion of the spin-off; (2) an amendment to Article III, Section 11 of the Bylaws relating to dividends, (3) the Amended and Restated Bylaws attached hereto as Appendix B-1, subject to completion of the spin-off; and (4) the Amended and Restated Bylaws attached hereto as Appendix C-1, subject to shareholder approval and completion of the spin-off. A summary of the amendments to these documents, as adopted by the Board of Directors, follows.

 

Summary of Amendments

 

The Amended and Restated Articles of Incorporation amend our Articles of Incorporation, subject to shareholder approval and completion of the spin-off, by:

 

 

The amendment to Article III, Section 11 of the Bylaws eliminated the provision regarding net earnings and earned surplus restrictions on distributions to shareholders and replaced it with a provision conforming to the GBCC. As amended, the Bylaws provide that a distribution may not be made if, after giving it effect, the corporation is not able to pay its debts as they become due or the corporation’s total assets are less than the sum of its total liabilities plus the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy any preferential rights of shareholders whose preferential rights are superior to those receiving the distribution.

The Amended and Restated Bylaws adopted by the Board of Directors that do not require shareholder approval, and which are effective only upon completion of the spin-off, address the following principal topics:

 

 

The Amended and Restated Bylaws adopted by the Board of Directors that do require shareholder approval, and which (following shareholder approval) are effective only upon completion of the spin-off, eliminate supermajority provisions for calling special meetings of shareholders, declassifying the Board of Directors and approving mergers and similar transactions. In addition, these Amended and Restated Bylaws eliminate the shareholders’ ability to fix the number of directors, permit removal of directors only for cause and decrease the required shareholder vote to remove directors from 80% to 662/3%.

 

Attached hereto as (1) Appendix A-2 is a marked version of our Amended and Restated Articles of Incorporation including the full text of every change proposed to be made to our existing Articles of Incorporation, (2) Appendix B-2 is a marked version of our Amended and Restated Bylaws, including the full text of every change to be made to our existing Bylaws, adopted by the Board (and not requiring shareholder approval), and (3) Appendix C-2 is a marked version of our Amended and Restated Bylaws reflecting the full text of every change proposed to be made to the Amended and Restated Bylaws requiring shareholder approval. Words and phrases that are marked through with a single line represent deletions to our Articles of Incorporation and Bylaws, and words and phrases that appear in bold text and underlined represent additions to our Articles of Incorporation and Bylaws.

 

Overview of Material Amendments

 

Although the following discussion highlights only the material changes to the Articles of Incorporation and Bylaws it does not highlight every change. Therefore, shareholders are urged to read carefully the following discussion as well as the marked version of the Amended and Restated Articles of Incorporation attached hereto as Appendix A-2 and the marked versions of the Amended and Restated Bylaws attached hereto as Appendix B-2 and Appendix C-2 before voting on the proposals to amend the Articles of Incorporation and to amend the Bylaws.

 

As more fully discussed below, our Board of Directors believes that each of the amendments contained in the Amended and Restated Articles of Incorporation and the Amended and Restated Bylaws is advisable and in the best interests of TSYS and our shareholders.

 

The general overview in this Introduction to Proposals 1 and 2 is followed by a more detailed discussion of each amendment separately in the sections of this Proxy Statement which discuss Proposal 1 and Proposal 2.

 

Reasons for Adopting the Amended and Restated Articles of Incorporation and Amended and Restated Bylaws.  Our existing Articles of Incorporation and Bylaws contain a number of provisions requiring approval by shareholders holding at least 80% of the issued and outstanding shares of common stock to take certain actions. Our Board of Directors believes that these supermajority provisions will no longer be appropriate once the TSYS shares are distributed by Synovus and TSYS is a stand-alone public company. In addition, some provisions of our Articles of Incorporation and Bylaws have not been updated to reflect changes in the GBCC made since the time the Articles of Incorporation and Bylaws were adopted.

The amendments also would reduce our vulnerability to an unsolicited takeover proposal. The amendments include provisions that will discourage or make it more difficult to initiate a merger, tender offer or proxy contest, to bring about the assumption of control by a holder of a large block of our securities, and to remove incumbent directors without the approval of our Board of Directors. The Board of Directors believes that any strategic transaction involving TSYS should be undertaken pursuant to a reasoned and informed process designed to maximize shareholder value. The amendments are not being proposed in response to any effort of which our Board of Directors is aware to accumulate capital stock or to obtain control of TSYS at this time. However, our Board of Directors has observed the use of coercive takeover tactics, and believes that it is in the best interests of TSYS and our shareholders to adopt the amendments, which contain defenses against coercive efforts to gain control of TSYS without the approval of our Board of Directors.

 

Potential Anti-Takeover Effect of the Amendments.  Our Board of Directors believes that the provisions contained in the Amended and Restated Articles of Incorporation and Amended and Restated Bylaws will encourage persons seeking to acquire control of TSYS to initiate such acquisitions through arms length negotiations with our Board of Directors rather than through a hostile takeover attempt.

 

A hostile takeover bid may be unfair or disadvantageous to TSYS and our shareholders because, among other reasons (1) it may be timed to take advantage of temporarily depressed stock prices, (2) it may be designed to foreclose or minimize the possibility of more favorable competing bids or alternative transactions, and (3) it may involve the acquisition of only a controlling interest in our stock, without affording all shareholders the opportunity to receive the same economic benefits.

 

By contrast, in a transaction where a potential hostile bidder must negotiate with our Board of Directors, our Board of Directors has the opportunity to take into account the underlying and long-term value of our business, the possibilities for alternative transactions on more favorable terms, anticipated favorable developments in our business not yet reflected in the stock price and equality of treatment of all shareholders. Our Board of Directors further believes that it is preferable to implement defensive measures now, when they can be considered carefully by our shareholders and our officers and directors, rather than attempt to implement such defensive measures in response to an unsolicited attempt to gain control of TSYS.

 

Although our Board of Directors believes the adoption of the amendments is in the best interests of TSYS and our shareholders, shareholders should be aware of potential undesirable overall effects of certain of the proposed amendments contained in the Amended and Restated Articles of Incorporation and Amended and Restated Bylaws. The amendments, if adopted, may have the effect of discouraging a merger, tender offer, proxy contest or the assumption of control by a holder of a large block of our securities that may be in the best interests of our shareholders or other transactions in which our shareholders might receive a substantial premium for their shares over then-current market prices. In addition, certain provisions contained in the amendments make the removal of directors, including incumbent directors, more difficult even if such removal would be beneficial to our shareholders.

 

Our Board of Directors does not presently intend to propose other anti-takeover measures in other proxy solicitations, although our Board of Directors may determine to propose one or more such measures at a later date if it determines that it is in the best interests of TSYS and our shareholders to implement additional anti-takeover measures. In addition, we may in the future enter into agreements with our officers and directors from time to time that contain change in control provisions that could have anti-takeover effects.

 

Existing Anti-Takeover Measures and Statutory Provisions

 

Certain provisions of our Articles of Incorporation and Bylaws as well as certain provisions of Georgia law may also have the effect of making more difficult and discouraging, to varying degrees and in various circumstances, an attempt to acquire control of TSYS without approval of our Board of Directors, even if such acquisition of control may be favorable to the interests of some or all of our shareholders.

 

Classified Board.  Our existing Articles of Incorporation provide that our directors are divided into three classes, and that each director be elected for a full term of three years. This “classified board” structure helps enhance the continuity and stability of our Board of Directors by providing for a three-year term for each director, thereby reducing the possibility that a third party could effect a sudden or

surprise change of control of our Board of Directors because they could potentially only replace those directors due for reelection in any given year.

 

Unanimous Written Consent.  Our existing Articles of Incorporation permit shareholders to act without a meeting only if the unanimous written consent of all shareholders entitled to vote on the matter is obtained. Since TSYS is a publicly traded company, obtaining unanimous written consent is not a practical means to carry out shareholder actions, such as removing directors or amending the Articles of Incorporation, without holding a meeting. Accordingly, a potential hostile bidder could not effectively act to effect a change in control of the Board of Directors or take any other hostile action without a meeting of shareholders. Although we are proposing to delete this provision from the Amended and Restated Articles of Incorporation and Amended and Restated Bylaws, this unanimous written consent requirement is the default rule contained in the GBCC and will continue to apply to TSYS.

 

Business Combination Statute.  If the spin-off is completed, our Bylaws will include an election to opt into Sections 14-2-1131 through 1133 of the GBCC. In general, these provisions prohibit a purchaser who acquires 10% or more of outstanding TSYS voting stock, an “interested shareholder,” without the approval of our Board of Directors, from completing a business combination with TSYS for five years unless (1) prior to the time the person becomes an interested shareholder, the Board of Directors approved either the business combination or the transaction that resulted in the person becoming an interested shareholder or (2) the interested shareholder acquires 90% or more of the outstanding common stock of the company (excluding shares owned by directors and officers of the company, subsidiaries of the company and shares owned in certain employee stock plans) either in the business combination, or prior to the business combination.

 

Sections 14-2-1131 through 1133 encourage persons interested in acquiring TSYS to negotiate in advance with our Board of Directors because of the first exception to the prohibition described above. It also tends to discourage the accumulation of large blocks of our securities by third parties which may be disruptive to the stability of our relationships with stakeholders such as our employees, customers, and major lenders.

 

Vote required and effectiveness of amendments to the Articles of Incorporation and the Bylaws

 

Vote required.  The affirmative vote of shareholders holding at least 80% of our issued and outstanding shares of common stock is required for the adoption of the amendments contained in our Amended and Restated Articles of Incorporation and for the adoption of those amendments to our Amended and Restated Bylaws that require shareholder approval.

 

Effectiveness.  If the spin-off is completed, and shareholder approval of all of the parts of Proposal 1 is obtained, the Amended and Restated Articles of Incorporation attached hereto as Appendix A-1 will become effective upon the later to occur of (1) the time the spin-off is completed and (2) the date on which the amendments are filed with the Secretary of State of the State of Georgia. The Amended and Restated Bylaws adopted by the Board of Directors which do not require shareholder approval and attached hereto as Appendix B-1 will become effective at the time the spin-off is completed. In addition, if shareholder approval of all of the parts of Proposal 2 is obtained, the additional amendments to the Amended and Restated Bylaws requiring shareholder approval and attached hereto as Appendix C-1 will become effective at the time the spin-off is completed.

 

If the spin-off is not completed for any reason, the amendments contained in our Amended and Restated Articles of Incorporation and Amended and Restated Bylaws, even if approved by shareholders, will be abandoned and the Articles of Incorporation and the Bylaws will remain unchanged.

 

The Board of Directors recommends that you vote “FOR” the approval of the amendments contained in our Amended and Restated Articles of Incorporation and “FOR” the approval of the amendments contained in our Amended and Restated Bylaws.

 

PROPOSAL 1: APPROVAL OF AMENDMENTS CONTAINED IN THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION

 

Summary

 

In connection with the proposed spin-off, the Board of Directors, together with the Corporate Governance and Nominating Committee and the Special Committee formed to consider the spin-off, undertook a review of our Articles of Incorporation and Bylaws.

 

This section summarizes each proposed amendment contained in our Amended and Restated Articles of Incorporation which, together, comprise Proposal 1. The overview of material amendments to our Articles of Incorporation and Bylaws on pages 5 through to 8 of this Proxy Statement applies to each proposed amendment.

 

The full text of each proposed amendment discussed below (as well as minor revisions that do not require shareholder approval under Georgia law) is highlighted in the marked version of the Amended and Restated Articles of Incorporation attached hereto as Appendix A-2. You should carefully review the discussion of the proposed amendments which follows, the full text of the proposed amendments in Appendix A-2 and the information on pages 5 through to 8 of this Proxy Statement before making a decision whether to vote in favor of each proposal comprising Proposal 1 of this Proxy Statement.

 

The amendments contained in our Amended and Restated Articles of Incorporation are divided into ten proposals, Proposal 1a through Proposal 1j. Shareholders will vote on each of these proposals as a separate item.

 

Proposal 1a: Enlarge our business purpose

 

Effect.  Our Articles of Incorporation generally limit the purpose of our company to (1) engaging in providing data processing and data transmission services, databases and facilities for the internal operations of certain Synovus affiliates, (2) engaging in providing data processing and transmission services, facilities and databases to third-parties where the data to be processed and transmitted is of a financial, banking or economic nature, (3) engaging in providing purchasing services to certain Synovus affiliates, (4) the purchase, ownership and maintenance of real and personal property in connection with the foregoing and (5) any other lawful business or activity relating to the foregoing. These limited purposes were originally adopted pursuant to a regulatory requirement of the Georgia Department of Banking and Finance upon the formation of TSYS as a subsidiary of CB&T, a Georgia state chartered bank. The proposed changes to the purpose clause would permit TSYS to engage in any lawful business.

 

Advantages.  The Board of Directors believes the existing business purpose provision will not be appropriate once TSYS is separated from Synovus and that it is appropriate to provide for a broad purpose that will give TSYS the flexibility it needs as a stand-alone public company. At present, our Board of Directors has no specific plans, proposals or arrangements to change the business carried on by TSYS.

 

Disadvantages.  A broad business purpose provides the Board of Directors with an opportunity to change the nature of the business carried on by TSYS without having to obtain the prior approval of our shareholders.

 

The Board of Directors recommends that you vote “FOR” the approval of Proposal 1a.

 

Proposal 1b: Authorize shares of preferred stock

 

Effect.  Our Articles of Incorporation authorize 600,000,000 shares of common stock, par value $0.10 per share, as the sole class of capital stock of TSYS. The Amended and Restated Articles of Incorporation would also authorize 100,000,000 shares of preferred stock. The preferred stock may be issued by the Board of Directors in one or more series, from time to time, with each such series to consist of such number of shares and to have such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, as shall be stated in the resolution or resolutions providing for the issuance of such series adopted by our Board of Directors.

 

Advantages.  The Board of Directors believes this change will provide TSYS with greater flexibility in structuring acquisitions, joint ventures and/or capital raising transactions. Being able to issue preferred

stock without shareholder approval also enables the Board of Directors to engage in financing transactions and acquisitions which take full advantage of changing market conditions with little or no delay. At present, our Board of Directors has no specific plans, proposals or arrangements to issue preferred stock.

 

Disadvantages.  Until the Board of Directors authorizes the issuance and determines the rights of any series of preferred stock, it is not possible to state the precise disadvantages that the issuance of such series might have on the holders of our common stock. However, potential disadvantages could include (1) a reduction in the amount available for the payment of dividends on our shares of common stock if dividends on the preferred stock are cumulative and in arrears and (2) limitations on the rights of holders of our common stock to share in any distribution of TSYS’ assets upon a liquidation of TSYS until satisfaction of any liquidation preference granted to holders of preferred stock and other secured creditors.

 

Potential Anti-Takeover Effect.  If the preferred stock amendment is approved, our Board of Directors would be authorized to issue shares of preferred stock that could, depending on the terms of such series, make more difficult or discourage an attempt to obtain control of TSYS. When, in the judgment of our Board of Directors, the action would be in the best interests of TSYS and our shareholders, such shares could be used to create impediments to a takeover attempt or to discourage persons seeking to gain control of TSYS. The authorization of shares of preferred stock, without the actual issuance thereof, could have the effect of discouraging hostile takeover attempts. The issuance of shares of preferred stock could also be used to dilute the stock ownership of a person seeking to obtain control of TSYS, should the Board of Directors consider the action of such person not to be in the best interests of TSYS or our shareholders.

 

Although there is no current intention to do so, the preferred stock amendment could also enable TSYS to adopt a traditional form of shareholder rights plan. Such a plan could provide additional protection to our shareholders against a hostile takeover attempt by encouraging potential acquirers to bring their proposals to the Board of Directors for evaluation by, and, if appropriate, negotiation with, the Board of Directors. The adoption of a shareholder rights plan may make more difficult or discourage an attempt to obtain control of TSYS.

 

The Board of Directors recommends that you vote “FOR” the approval of Proposal 1b.

 

Proposal 1c: Provide that the Board of Directors will fix the number of directors

 

Effect.  Our Articles of Incorporation require the affirmative vote of shareholders holding at least 80% of our issued and outstanding shares of common stock to establish the size of our Board of Directors. Our Amended and Restated Articles of Incorporation would provide that the size of our Board of Directors would be determined from time to time solely by our Board of Directors.

 

Advantages.  The Board of Directors believes this change will enhance the protections contained in the Articles of Incorporation, including the advantages of a classified Board of Directors. The amended provision avoids the possibility of a potential hostile bidder seeking to make a hostile takeover bid for TSYS by soliciting action by our shareholders to increase the size of the Board of Directors and filling the vacancies with its nominees, or by acquiring or controlling a majority of the voting stock in TSYS and then voting against the nomination of our incumbent directors, thereby diluting the effectiveness of the classified board structure.

 

Disadvantages.  A disadvantage of this change is that shareholders may not get an opportunity to realize value on their shares by selling them at a premium to the then-current market price, which a potential bidder might otherwise be prepared to offer, because of the deterrent effects of the change on potential changes in control.

 

Another disadvantage is the delay that this change, when taken together with the other anti-takeover protections in our Articles of Incorporation, may cause to any bid for control of TSYS, or any shareholder proposals that may have the effect of facilitating changes in control of the Board of Directors, even if a majority of shareholders entitled to vote believe the changes to be in the best interests of TSYS and our shareholders. For example, granting directors the sole discretion to fix the size of the Board of Directors would indirectly require a potential bidder to negotiate directly with the Board of Directors to change its size or composition, even if that potential bidder owns or controls a majority of the voting shares in TSYS.

Potential Anti-Takeover Effect.  This change has the potential anti-takeover effects as described in the discussion of its advantages and disadvantages above.

 

The Board of Directors recommends that you vote “FOR” the approval of Proposal 1c.

 

Proposal 1d: Provide that directors may be removed only for cause and decrease the required shareholder vote for removal of directors

 

Effect.  Our Articles of Incorporation provide that members of our Board of Directors may be removed upon the approval of shareholders holding at least 80% of our issued and outstanding shares of common stock. In addition, our Bylaws provide that directors may be removed with or without cause. The Amended and Restated Articles of Incorporation decreases the required shareholder vote from 80% to 662/3% and limits the basis upon which a director may be removed to removal for cause only. The Amended and Restated Articles of Incorporation would allow a director who is appointed by a different voting group of shareholders (e.g., a director appointed by holders of a series of preferred stock) to be removed by that voting group, based on the voting rights applicable to that voting group.

 

Advantages.  The Board of Directors believes this change will enhance the protections contained in the Articles of Incorporation. It would operate to prevent a potential bidder from circumventing the protective effect of our classified board structure by acquiring control of a majority of the Board of Directors through the removal power. The change reinforces the stabilizing effect of our classified board structure and would require a potential bidder to negotiate with our Board of Directors to accomplish a business combination, rather than by acquiring a significant percentage of our voting stock and then running a proxy contest seeking to remove the incumbent Board of Directors without cause. With this change, a director’s continued service will not be affected by his or her position with respect to a dominant shareholder.

 

Disadvantages.  Eliminating our shareholders’ right to remove directors without cause will make the removal of any director more difficult, even if such removal is believed by the requisite majority of shareholders entitled to vote to be in the best interests of TSYS and our shareholders. Without the ability to remove a director without cause, our shareholders must either (1) act to remove the director for cause or (2) wait until the director has served his or her term and becomes a candidate for reelection, which occurs every three years.

 

Potential Anti-Takeover Effect.  This change has the effect of precluding the removal of a director by a hostile bidder of TSYS, unless removal for cause is warranted. A typical method of acquiring control of a company is for a hostile bidder to acquire a majority of the company’s voting shares (whether through a tender offer or on the open market) and use its voting power to remove the incumbent directors and replace them with nominees of the bidder. Eliminating the power of shareholders to remove a director without cause defeats this strategy and encourages potential hostile bidders to seek the cooperation of our Board of Directors for any proposed business combination.

 

The Board of Directors recommends that you vote “FOR” the approval of Proposal 1d.

 

Proposal 1e: Eliminate supermajority voting requirements for shareholder approval of mergers and similar transactions

 

Effect.  Our Articles of Incorporation require the approval of shareholders holding at least 80% of the issued and outstanding shares of our common stock for (1) the approval of any merger or consolidation of our company with or into any other corporation and (2) the sale, lease, exchange or other disposition of all or substantially all of our assets. Under our Amended and Restated Articles of Incorporation, this supermajority voting requirement would be eliminated and the required shareholder vote would be determined under applicable Georgia law.

 

Advantages.  This change removes the “veto” power that would otherwise apply to a significant shareholder or a group of significant shareholders with respect to the approval of mergers and similar transactions affecting all or substantially all of TSYS’ assets. A lower shareholder approval threshold can also increase a shareholder’s ability to effectively participate in corporate governance.

 

At present, our Board of Directors has no specific plans, proposals or arrangements for any merger or similar transaction.

Disadvantages.  The Board of Directors does not believe this change has any disadvantages.

 

The Board of Directors recommends that you vote “FOR” the approval of Proposal 1e.

 

Proposal 1f: Eliminate supermajority voting requirements for shareholder approval for most amendments to the Articles of Incorporation

 

Effect.  Our Articles of Incorporation require the approval of shareholders holding at least 80% of the issued and outstanding shares of our common stock for any amendment to our Articles of Incorporation. Under our Amended and Restated Articles of Incorporation, this supermajority voting requirement would be eliminated and the required shareholder vote would be determined under applicable Georgia law. Generally, Georgia law requires amendments to the Articles of Incorporation to be approved by shareholders holding a majority of the issued and outstanding shares of common stock. An exception exists under Georgia law for provisions requiring a greater shareholder vote, such as the proposed amendment requiring a vote of at least 662/3% of shares for removal of a director, which require such greater shareholder vote to be amended.

 

Advantages.  As with the change in Proposal 1e, this change removes the “veto” power that would otherwise apply to a significant shareholder or a group of significant shareholders with respect to the approval of most amendments to the Articles of Incorporation. As mentioned in Proposal 1e, a lower shareholder approval threshold can also increase a shareholder’s ability to effectively participate in corporate governance.

 

Disadvantages.  The Board of Directors does not believe this change has any disadvantages.

 

The Board of Directors recommends that you vote “FOR” the approval of Proposal 1f.

 

Proposal 1g: Eliminate supermajority requirements for shareholders to call a special meeting of shareholders

 

Effect.  Our Articles of Incorporation require 80% of the issued and outstanding shares of our common stock to take action to call a special meeting of shareholders. Under our Amended and Restated Articles of Incorporation, this supermajority requirement would be eliminated and shareholders holding a majority of the total number of votes entitled to be cast on any issue proposed to be considered at the special meeting would be required to call a special meeting, or a special meeting could be called by the Board of Directors.

 

Advantages.  As with the change in Proposal 1e, this change removes the “veto” power that would otherwise apply to a significant shareholder or a group of significant shareholders with respect to calling special meetings of shareholders. As mentioned in Proposal 1e, a lower shareholder approval threshold can also increase a shareholder’s ability to effectively participate in corporate governance.

 

Disadvantages.  The Board of Directors does not believe this change has any disadvantages.

 

The Board of Directors recommends that you vote “FOR” the approval of Proposal 1g.

 

Proposal 1h: Eliminate the provision requiring unanimous shareholder action by written consent

 

Effect.  Our Articles of Incorporation permit shareholders to take action without a meeting only if the written consent of each shareholder entitled to vote on the action is obtained. Under our Amended and Restated Articles of Incorporation, this provision would be eliminated. However, the default rule contained in the GBCC, which has the same requirement for shareholder actions taken without a meeting, will continue to apply.

 

Advantages.  This change has no net effect because an equivalent provision in the GBCC will apply to our shareholders in the absence of the provision in our Articles of Incorporation. Since TSYS is a publicly traded company, complying with the GBCC requirement would be an impractical means to carry out any shareholder action without a meeting. This provision encourages a potential hostile bidder to seek the cooperation of the Board of Directors for any business combination.

 

Disadvantages.  The operation of the equivalent GBCC provision as a takeover defense has the general disadvantage that shareholders may not get an opportunity to realize value on their shares by selling them at a premium to the then-current market price, which a potential bidder might otherwise be

prepared to offer, because of the deterrent effects of the operation of the GBCC provision (when taken together with the other anti-takeover protections in the Articles of Incorporation) on potential changes in control.

 

Potential Anti-Takeover Effect.  This change has no net effect. The operation of the statutory provision has the potential anti-takeover effects as described in the discussion of its advantages and disadvantages above.

 

The Board of Directors recommends that you vote “FOR” the approval of Proposal 1h.

 

Proposal 1i: Update the provision allowing the Board of Directors to consider non-economic impacts of tender offers to conform to current Georgia law so that the Board of Directors may consider the interests of constituencies in addition to shareholders when considering the best interests of the corporation

 

Effect.  The GBCC permits a Georgia corporation to include in its Articles of Incorporation a provision permitting its directors, in discharging their respective duties and determining what is in the best interests of the corporation, to consider the interests of employees, customers, suppliers and creditors of the corporation and its subsidiaries, the communities in which offices or other establishments of the corporation or its subsidiaries are located, and all other factors such directors consider pertinent. Our Articles of Incorporation generally permit our Board of Directors to take these considerations into account in connection with a tender offer or other offer for our securities. However, the Amended and Restated Articles of Incorporation would be updated to conform to the GBCC, including by being applicable to all Board decision making and not only in the context of tender offers.

 

Advantages.  This change allows our Board of Directors to consider, if and to the extent it determines appropriate, the interests of stakeholders other than our shareholders in determining what is in the best interests of the corporation.

 

Disadvantages.  The Board of Directors does not believe this change has any disadvantages.

 

The Board of Directors recommends that you vote “FOR” the approval of Proposal 1i.

 

Proposal 1j: Update the provision limiting the personal liability of directors to conform to current Georgia law

 

Effect.  The GBCC permits a Georgia corporation to include in its Articles of Incorporation a provision eliminating the liability of a director to the corporation or its shareholders for monetary damages for any action taken, or any failure to take any action, as a director, except liability (1) for any appropriation, in violation of the director’s duties, of any business opportunity of the corporation; (2) for actions or omissions which involve intentional misconduct or a knowing violation of law; (3) for unlawful distributions; and (4) for any transaction from which the director received an improper personal benefit. The Amended and Restated Articles of Incorporation conform our existing exculpation provision to align with the GBCC.

 

Advantages.  The Board of Directors believes that this change is consistent with current practice of public companies, will encourage talented individuals to join and remain on the Board for the duration of their tenure, and reflects good corporate governance.

 

Disadvantages.  The Board of Directors does not believe this change has any disadvantages.

 

The Board of Directors recommends that you vote ‘‘FOR” the approval of Proposal 1j.

 

PROPOSAL 2: APPROVAL OF AMENDMENTS CONTAINED
IN THE AMENDED AND RESTATED BYLAWS

 

Summary

 

As described above, in connection with the proposed spin-off, the Board of Directors, together with the Corporate Governance and Nominating Committee and the Special Committee formed to consider the spin-off, undertook a review of our Bylaws.

 

Amendments to our Bylaws not requiring shareholder approval

 

The Board of Directors has adopted certain amendments to our Bylaws, subject to completion of the spin-off. These changes do not require shareholder approval and address, among others, the following topics:

 

 

The full text of these amendments are highlighted in the marked version of the Bylaws attached hereto as Appendix B-2.

 

Amendments to our Bylaws requiring shareholder approval

 

This section summarizes each proposed amendment contained in our Amended and Restated Bylaws that requires shareholder approval and which, together, comprise Proposal 2. The overview of material amendments to our Articles of Incorporation and Bylaws on pages 5 through to 8 of this Proxy Statement applies to each proposed amendment.

 

The full text of each proposed amendment discussed below is highlighted in the marked version of the Bylaws attached hereto as Appendix C-2. You should carefully review the discussion of the proposed amendments which follows, the full text of the proposed amendments in Appendix C-2 and the information on pages 5 through to 8 of this Proxy Statement before making a decision whether to vote in favor of each proposal comprising Proposal 2 of this Proxy Statement.

 

The amendments contained in our Amended and Restated Bylaws which require shareholder approval are divided into five proposals, Proposal 2a through Proposal 2e. Shareholders will vote on each of these proposals as a separate item.

 

Proposal 2a: Eliminate supermajority requirements for shareholders to call a special meeting of shareholders

 

Effect.  As proposed for our Articles of Incorporation, we propose eliminating the requirement that 80% of the issued and outstanding shares of common stock must take action to call a special meeting of shareholders. Under our Amended and Restated Bylaws, shareholders holding a majority of the total number of votes entitled to be cast on any issue proposed to be considered at the special meeting would be required to call a special meeting, or a special meeting could be called by the Board of Directors. In addition, the related provision requiring that any amendment to the 80% requirement be approved by at least 80% of the issued and outstanding shares of common stock would also be eliminated.

 

Advantages and Disadvantages.  The discussion of the advantages and disadvantages of Proposal 1g in this Proxy Statement applies to this proposed amendment of our Bylaws. You should carefully review the discussion of Proposal 1g, as well as the overview of material amendments contained in the Introduction to Proposal 1 and 2 of this Proxy Statement, before making a decision whether to vote in favor of Proposal 2a.

 

The Board of Directors recommends that you vote “FOR” the approval of Proposal 2a.

 

Proposal 2b: Eliminate the shareholders’ ability to fix the number of directors

 

Effect.  The Amended and Restated Bylaws eliminate the existing requirement that the size of our Board of Directors be fixed by shareholders holding at least 80% of the issued and outstanding shares of common stock in order to conform to the proposed amendment to the Amended and Restated Articles of Incorporation providing that the size of our Board of Directors would be determined from time to time solely by our Board of Directors. In addition, the related provision requiring that any amendment to this 80% requirement be approved by at least 80% of the issued and outstanding shares of common stock would also be eliminated.

 

Advantages, Disadvantages and Potential Anti-Takeover Effect.  The discussion of the advantages, disadvantages and potential anti-takeover effects of Proposal 1c in this Proxy Statement applies to this proposed amendment of our Bylaws. You should carefully review the discussion of Proposal 1c, as well as the overview of material amendments contained in the Introduction to Proposal 1 and 2 of this Proxy Statement, before making a decision whether to vote in favor of Proposal 2b.

 

The Board of Directors recommends that you vote “FOR” the approval of Proposal 2b.

Proposal 2c: Eliminate the supermajority voting requirement to declassify the Board of Directors

 

Effect.  The Amended and Restated Bylaws eliminate the existing requirement that shareholders holding at least 80% of the issued and outstanding shares of common stock must vote to declassify the Board of Directors. As a result, any future amendment to the Amended and Restated Articles of Incorporation to declassify the Board of Directors will require only a majority shareholder vote, although such an amendment would first require approval by the Board of Directors.

 

Advantages.  This change removes the “veto” power that would otherwise apply to a significant shareholder or a group of significant shareholders with respect to a shareholder vote on an amendment to the Articles of Incorporation to declassify the Board of Directors. This lower shareholder approval threshold can increase a shareholder’s ability to effectively participate in corporate governance.

 

Disadvantages.  The Board of Directors does not believe this change has any disadvantages.

 

The Board of Directors recommends that you vote “FOR” the approval of Proposal 2c.

 

Proposal 2d: Provide that directors may be removed only for cause and decrease the required shareholder vote for removal of directors

 

Effect.  The Amended and Restated Bylaws provide for removal of directors by shareholders only for cause and require the affirmative vote of shareholders holding 662/3% of the outstanding shares of common stock of the corporation (and provide that a director who is appointed by a different voting group of shareholders may be removed only by that voting group) rather than the current Bylaws which allow removal with or without cause and require an 80% shareholder vote for removal. In addition, the related provision requiring that any amendment to this 80% requirement be approved by at least 80% of the issued and outstanding shares of common stock would also be eliminated.

 

Advantages, Disadvantages and Potential Anti-Takeover Effect.  The discussion of the advantages, disadvantages and potential anti-takeover effects of Proposal 1d in this Proxy Statement applies to this proposed amendment of our Bylaws. You should carefully review the discussion of Proposal 1d, as well as the overview of material amendments contained in the Introduction to Proposal 1 and 2 of this Proxy Statement, before making a decision whether to vote in favor of Proposal 2d.

 

The Board of Directors recommends that you vote “FOR” the approval of Proposal 2d.

 

Proposal 2e: Eliminate supermajority voting requirements for shareholder approval of mergers and similar transactions

 

Effect.  Our existing Bylaws require the approval of shareholders holding at least 80% of the issued and outstanding shares of our common stock for (1) the approval of any merger or consolidation of our company with or into any other corporation and (2) the sale, lease, exchange or other disposition of all or substantially all of our assets. Under our Amended and Restated Bylaws, this supermajority voting requirement would be eliminated and the required shareholder vote would be determined under applicable Georgia law. In addition, the related provision requiring that any amendment to this 80% requirement be approved by at least 80% of the issued and outstanding shares of common stock would also be eliminated.

 

Advantages and Disadvantages.  The discussion of the advantages and disadvantages of Proposal 1e in this Proxy Statement applies to this proposed amendment of our Bylaws. You should carefully review the discussion of Proposal 1e, as well as the overview of material amendments contained in the Introduction to Proposal 1 and 2 of this Proxy Statement, before making a decision whether to vote in favor of Proposal 2e.

 

The Board of Directors recommends that you vote “FOR” the approval of Proposal 2e.

 

PROPOSAL 3: APPROVAL OF THE TOTAL SYSTEM SERVICES, INC.
2008 OMNIBUS PLAN

 

Upon the recommendation of the Compensation Committee of TSYS, on October 24, 2007, the Board of Directors adopted the Total System Services, Inc. 2008 Omnibus Plan (the “TSYS 2008 Plan”), subject to shareholder approval and further subject to completion of the spin-off. The purpose of the TSYS 2008 Plan is to advance the interests of TSYS and its shareholders through awards that give employees and directors a personal stake in TSYS’ growth, development and financial success. Awards under the TSYS 2008 Plan are designed to motivate employees and directors to devote their best interests to the business of TSYS. Awards will also help TSYS attract and retain the services of employees and directors who are in a position to make significant contributions to TSYS’ success after the spin-off. Compensation paid pursuant to the TSYS 2008 Plan is intended, to the extent reasonable, to qualify for tax deductibility under Section 162(m) (“Section 162(m)”) and Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder, as they may be amended from time to time.

 

The following is a brief description of the principal features of the TSYS 2008 Plan. It does not purport to be complete and is qualified in its entirety by the full text of the TSYS 2008 Plan, which is attached hereto as Appendix D.

 

Eligibility and Participation

 

Any employee of TSYS and its subsidiaries and any non-employee director of TSYS is eligible to participate in the TSYS 2008 Plan. Incentive stock options, however, may be granted only to employees. The Compensation Committee of the Board of Directors of TSYS (the “Committee”) has discretion to select participants from year to year.

 

Shares Subject to the Plan

 

The aggregate number of shares of TSYS common stock which may be granted to participants pursuant to awards granted under the TSYS 2008 Plan may not exceed seventeen million (17,000,000) shares. All of the shares are available for grant in the form of incentive stock options. No more than 850,000 shares may be made subject to awards (other than stock options or stock appreciation rights or awards that are not settled in shares) where service-based vesting is any more rapid than annual pro rata vesting over a three-year period or where performance-based vesting is for a performance period of less than twelve months.

 

Shares covered by an award shall only be counted as used to the extent they are actually issued. Any shares related to awards which terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such shares, are settled in cash in lieu of shares, or are exchanged with the Committee’s permission, prior to the issuance of shares, for awards not involving shares, shall be available again for grant under the TSYS 2008 Plan. However, the full number of stock appreciation rights granted that are to be settled by the issuance of shares shall be counted against the number of shares available for award under the TSYS 2008 Plan, regardless of the number of shares actually issued upon settlement of such stock appreciation rights. Further, any shares withheld to satisfy tax withholding obligations on awards issued under the TSYS 2008 Plan, shares tendered to pay the exercise price of awards under the TSYS 2008 Plan, and shares repurchased on the open market with the proceeds of a stock option exercise will no longer be eligible to be returned as available shares under the TSYS 2008 Plan. Any shares related to awards which terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such shares, are settled in cash in lieu of shares, or are exchanged with the Committee’s permission, prior to the issuance of shares, for awards not involving shares, shall be available again for grant under the TSYS 2008 Plan. The shares available for issuance under the TSYS 2008 Plan may be authorized and unissued Shares or treasury Shares.

 

Awards Under the TSYS 2008 Plan

 

Pursuant to the TSYS 2008 Plan, TSYS may grant the following types of awards subject to the following conditions:

 

Nonqualified and Incentive Stock Options.  All stock options must have a maximum life of no more than ten years from the date of grant. At the time of grant, the Committee will determine the

exercise price for any stock options. In no event, however, may the exercise price be less than 100% of the fair market value of TSYS’ common stock at the time of grant. At the time of exercise, payment in full of the exercise price will be paid in cash, shares of common stock valued at their fair market value on the date of exercise, a combination thereof, or by such other method as the Committee may determine.

 

Stock Appreciation Rights.  Stock appreciation rights offer participants the right to receive payment for the difference (spread) between the exercise price of the stock appreciation right and the market value of TSYS’ common stock at the time of redemption. The Committee may authorize payment of the spread for a stock appreciation right in the form of cash, common stock to be valued at its fair market value on the date of exercise, a combination thereof, or by such other method as the Committee may determine.

 

Restricted Stock and Restricted Stock Units.  The Committee may award common stock to a participant as a portion of the participant’s remuneration. In doing so, the Committee, in its discretion, may impose conditions or restrictions on the award of common stock. The Committee may also award restricted stock units which are similar to restricted stock except that no shares are actually awarded on the date of grant.

 

Performance Units or Performance Shares.  Section 162(m) generally limits to $1,000,000 the amount that a publicly held corporation may deduct for the compensation paid to its Chief Executive Officer and its four most highly compensated officers other than the Chief Executive Officer. “Qualified performance-based compensation,” however, is not subject to the $1,000,000 deduction limit. Accordingly, the TSYS 2008 Plan permits the Committee to establish performance goals consistent with Section 162(m) and authorizes the granting of cash, stock options, stock appreciation rights, common stock, other property, or any combination thereof to employees upon achievement of such established performance goals. In setting the performance goals, the Committee may use such measures as net earnings or net income (before or after taxes); earnings per share; net sales or revenue growth; net operating profit; return measures (including, but not limited to, return on assets, capital, invested capital, equity, sales, or revenue); cash flow (including, but not limited to, operating cash flow, free cash flow, cash generation, cash flow return on equity, and cash flow return on investment); earnings before or after taxes, interest, depreciation, and/or amortization; gross or operating margins; productivity ratios; share price (including, but not limited to, growth measures and total shareholder return); expense targets; margins; operating efficiency; market share; customer satisfaction; unit volume; working capital targets and change in working capital; economic value added (net operating profit after tax minus the sum of capital multiplied by the cost of capital); asset growth; number of cardholder, merchant or other customer accounts processed or converted; and successful negotiation or renewal of contracts with new or existing customers. The performance goals may relate to the individual participant, to TSYS as a whole, or to a subsidiary, division, department, region, function or business unit of TSYS in which the participant is employed. Performance may also be measured relative to the performance of a group of comparator companies or any published or special index that the Committee, in its sole discretion, deems appropriate (including measurement versus various stock market indices). Performance awards may be granted either alone or in addition to other grants made under the TSYS 2008 Plan.

 

Cash-Based Awards.  The Committee may grant cash-based awards to participants as determined by the Committee. Payment of the cash-based awards may be made in either cash or common stock.

 

Other Stock-Based Awards.  The Committee may grant other types of equity-based or equity-related awards. These awards may be paid in either common stock or cash.

 

Award grants under the TSYS 2008 Plan will be made in the discretion of the Committee and, accordingly, are not yet determinable. In addition, benefits under the TSYS 2008 Plan will depend on a number of factors, including the fair market value of our shares on future dates and the exercise decisions made by the participants. Consequently, it is not possible to determine the benefits that might be received by participants under the TSYS 2008 Plan. As of October 19, 2007, the closing price of our common stock on the New York Stock Exchange was $27.77 per share.

Maximum Amount Payable to Any Participant

 

The annual award limits of the TSYS 2008 Plan include the following:

 

Options.  The maximum aggregate number of shares subject to options granted in any one plan year to any one participant is 4,000,000 shares.

 

Stock Appreciation Rights.  The maximum number of shares subject to stock appreciation rights granted in any one plan year to any one participant is 4,000,000 shares.

 

Restricted Stock or Restricted Stock Units.  The maximum aggregate grant with respect to awards of restricted stock or restricted stock units in any one plan year to any one participant is 2,000,000 shares.

 

Performance Units or Performance Shares.  The maximum aggregate award of performance units or performance shares that a participant may receive in any one plan year is 2,000,000 shares if the award is payable in shares, or equal to the value of 100,000 shares if the award is payable in cash or property other than shares, determined as of the earlier of the vesting or the payout date, as applicable.

 

Cash-Based Awards.  The maximum aggregate amount awarded or credited with respect to cash-based awards to any one participant in any one plan year may not exceed $2,000,000.

 

Other Stock-Based Awards.  The maximum aggregate grant with respect to other stock-based awards in any one plan year to any one participant is 2,000,000 shares.

 

In addition, the maximum number of shares that may be issued to nonemployee directors is 2,000,000 shares, and no nonemployee director may be granted an award covering more than 10,000 shares in any year, except that this annual limit on nonemployee director awards is increased to 50,000 shares for any nonemployee director serving as Chairman of the Board of the Board of Directors; provided, however, that in the year in which an individual is first appointed or elected to the Board as a nonemployee director, such individual may be granted an award covering up to an additional 50,000 shares.

 

Adjustments in Connection with Certain Events

 

The Committee, in order to prevent dilution or enlargement of a participant’s rights under the TSYS 2008 Plan, shall substitute or adjust the number and kind of shares that may be issued under the TSYS 2008 Plan or under particular forms of awards, the number and kind of shares subject to outstanding awards, the option price or grant price applicable to outstanding awards, the annual award limits, and other value determinations applicable to outstanding awards in the event of any corporate event or transaction such as a merger, consolidation, reorganization, recapitalization, separation, partial or complete liquidation, stock dividend, stock split, reverse stock split, split up, spin-off, or other distribution of stock or property of TSYS, combination of shares, exchange of shares, dividend in-kind, or other like change in capital structure, number of outstanding shares or distribution (other than normal cash dividends) to shareholders of TSYS, or any similar corporate event or transaction.

 

Duration of the TSYS 2008 Plan

 

The TSYS 2008 Plan will become effective, subject to approval by TSYS’ shareholders, upon the effectiveness of the spin-off. The TSYS 2008 Plan will terminate after 10 years or, if sooner, when all shares reserved under the TSYS 2008 Plan have been issued. At any time, the Board of Directors may terminate the TSYS 2008 Plan. The termination of the TSYS 2008 Plan will not affect outstanding awards in any way.

 

Administration

 

The TSYS 2008 Plan will be administered by the Compensation Committee of the Board of Directors. Members of the Committee are appointed by the Board of Directors from among its members and may be removed by the Board of Directors in its discretion.

 

The Committee has broad discretion to construe, interpret and administer the TSYS 2008 Plan, to select the individuals to be granted Plan awards, to determine the number of shares to be subject to each Plan award, and to determine the terms, conditions and duration of each award. The Committee’s decisions will be conclusive, final and binding upon all parties. No member of the Committee will be liable for any action or determination made with respect to the TSYS 2008 Plan or any award granted under the TSYS 2008 Plan. To the fullest extent permitted by law, TSYS will indemnify the members of the

Committee against reasonable expenses incurred in connection with any action taken against them with respect to the TSYS 2008 Plan or any award granted under the Plan.

 

Amendment of the TSYS 2008 Plan

 

The Committee may amend, modify, suspend or terminate the TSYS 2008 Plan at any time except that no amendment, modification, suspension or termination may adversely affect an existing award under the TSYS 2008 Plan without the affected participant’s consent. In addition, no amendment, modification, suspension or termination shall be made which would reprice, replace or regrant through cancellation, or which would lower the option price of a previously granted option or the grant price of a previously granted stock appreciation right without the approval of shareholders. Moreover, under New York Stock Exchange listing standards the TSYS 2008 Plan cannot be materially amended without the approval of shareholders.

 

Change in Control

 

Unless otherwise determined by the Committee at grant, in the event of a change in control of TSYS, as defined in the TSYS 2008 Plan, the vesting of any outstanding awards granted under the TSYS 2008 Plan will be accelerated and all such awards will be fully exercisable.

 

Federal Tax Consequences of the TSYS 2008 Plan

 

The following discussion of the federal income tax consequences of awards granted under the TSYS 2008 Plan is intended only as a summary of the present federal income tax treatment of awards. These laws are highly technical and are subject to change at any time. This summary does not discuss the tax consequences of a participant’s death, or the provisions of the income tax laws of any municipality, state or foreign country in which a participant may reside.

 

Nonqualified Stock Options.  Nonqualified stock options granted under the TSYS 2008 Plan will not be taxable to a participant at grant but generally will result in taxation at exercise, at which time the participant will recognize ordinary income in an amount equal to the difference between the option’s exercise price and the fair market value of the shares on the exercise date. TSYS will be entitled to deduct a corresponding amount as a business expense in the year the participant recognizes this income.

 

Incentive Stock Options.  An employee will generally not recognize ordinary income on receipt or exercise of an incentive stock option so long as he or she has been an employee of TSYS or its subsidiaries from the date the incentive stock option was granted until three months before the date of exercise; however, the amount by which the fair market value of the shares on the exercise date exceeds the exercise price is an adjustment in computing the employee’s alternative minimum tax in the year of exercise. If the employee holds the shares of common stock received on exercise of the incentive stock option for one year after the date of exercise (and for two years from the date of grant of the incentive stock option), any difference between the amount realized upon the disposition of the shares and the amount paid for the shares will be treated as long-term capital gain (or loss, if applicable) to the employee. If the employee exercises an incentive stock option and satisfies these holding period requirements, TSYS may not deduct any amount in connection with the incentive stock option. If an employee exercises an incentive stock option but engages in a “disqualifying disposition” by selling the shares acquired on exercise before the expiration of the one and two-year holding periods described above, the employee generally will recognize ordinary income (for regular income tax purposes only) in the year of the disqualifying disposition equal to the excess, if any, of the fair market value of the shares on the date of exercise over the exercise price; and any excess of the amount realized on the disposition over the fair market value on the date of exercise will be taxed as long- or short-term capital gain (as applicable). If, however, the fair market value of the shares on the date of disqualifying disposition is less than on the date of exercise, the employee will recognize ordinary income equal only to the difference between the amount realized on the disqualifying disposition and the exercise price. In either event, TSYS will be entitled to deduct an amount equal to the amount constituting ordinary income to the employee in the year of the disqualifying disposition.

 

Stock Appreciation Rights.  To the extent that the requirements of the Internal Revenue Code of 1986 are met, there are no immediate tax consequences to a participant when a stock appreciation right is granted. When a participant exercises the right to the appreciation in fair market value of shares represented by a stock appreciation right, payments made in common stock are normally includable in the

participant’s gross income for regular income tax purposes. TSYS will be entitled to deduct the same amount as a business expense in the same year. The includable amount and corresponding deduction each equal the fair market value of the common stock payable on the date of exercise.

 

Restricted Stock.  The recognition of income from an award of restricted stock for federal income tax purposes depends on the restrictions imposed on the shares. Generally, taxation will be deferred until the first taxable year the shares are no longer subject to substantial risk of forfeiture. At the time the restrictions lapse, the participant will recognize ordinary income equal to the then fair market value of the stock. The participant may, however, make an election to include the value of the shares in gross income in the year of award despite such restrictions. Generally, TSYS will be entitled to deduct the fair market value of the shares transferred to the participant as a business expense in the year the participant includes the compensation in income.

 

Restricted Stock Units.  Generally, a participant will not recognize ordinary income until common stock, cash, or other property become payable under the restricted stock unit, even if the award vests in an earlier year. TSYS will generally be entitled to deduct the amount the participant includes in income as a business expense in the year of payment.

 

Performance Units/ Performance Shares.  As stated above, the performance units and performance shares awarded under the TSYS 2008 Plan are intended to be “qualified performance-based compensation” under Section 162(m) and, therefore, deductible by TSYS when the employee recognizes ordinary income. Employees under the TSYS 2008 Plan incur no income tax liability upon the initial grant of performance units or performance shares. At the end of the performance or measurement period, however, employees realize ordinary income on any amounts received in cash or common stock. Any subsequent appreciation on the common stock is treated as a capital gain.

 

Cash-Based Awards/Other Stock-Based Awards.  Any cash payments or the fair market value of any common stock or other property a participant receives in connection with cash-based awards or other stock-based awards are includable in income in the year received or made available to the participant without substantial limitations or restrictions. Generally, TSYS will be entitled to deduct the amount the participant includes in income as a business expense in the year of payment.

 

Deferred Compensation.  All awards under the TSYS 2008 Plan must satisfy the requirements of Section 409A of the Internal Revenue Code of 1986 to avoid adverse tax consequences to participants.

 

Additional Information

 

In the event the TSYS 2008 Plan is terminated, participants under the TSYS 2008 Plan will retain all rights to their awards in accordance with the terms of the awards.

 

In the event of a termination of service by a participant, the Committee will determine the length of time that the participant has to exercise a stock option or stock appreciation right and the extent to which the participant can retain the rights to restricted stock, restricted stock units, performance units, performance shares, cash-based awards, and other stock-based awards.

 

The Committee may provide for the payment of dividends on shares of common stock granted in connection with awards or dividend equivalents with respect to any shares of common stock subject to an award that have not actually been issued under the award.

 

The Board of Directors recommends that you vote “FOR” the approval of the
Total System Services, Inc. 2008 Omnibus Plan.

EQUITY COMPENSATION PLAN INFORMATION

 

The table below provides information as of December 31, 2006 concerning the shares of TSYS stock that may be issued under existing equity compensation plans of TSYS.

 

 

 

 

 

STOCK OWNERSHIP OF DIRECTORS
AND EXECUTIVE OFFICERS

 

TSYS Stock Ownership

 

The following table sets forth ownership of shares of TSYS stock by each director, each executive officer named in the Summary Compensation Table and all directors and executive officers as a group as of September 30, 2007.

 

 

 

*  Less than one percent of the outstanding shares of TSYS stock.

 

 

 

 

Beneficial Ownership of TSYS Stock by CB&T

 

The following table sets forth the number of shares of TSYS stock beneficially owned by CB&T, the only known beneficial owner of more than 5% of the issued and outstanding shares of TSYS stock, as of September 30, 2007.

 

 

 

 

Synovus Stock Ownership

 

The following table sets forth ownership of shares of Synovus stock by TSYS’ directors, each executive officer named in the Summary Compensation Table and all directors and executive officers as a group as of September 30, 2007.

 

 

 

*  Less than one percent of the outstanding shares of Synovus stock.

 

 

 

 

Interlocking Directorates of TSYS, Synovus and CB&T

 

Four of the eighteen members of TSYS’ Board of Directors also serve as members of the Boards of Directors of Synovus and CB&T. They are Richard E. Anthony, Richard Y. Bradley, H. Lynn Page and James D. Yancey. James H. Blanchard, Gardiner W. Garrard, Jr., Alfred W. Jones III and Mason H. Lampton serve as directors of Synovus. John T. Turner serves as a director of CB&T.

 

 

DIRECTOR COMPENSATION

 

DIRECTOR COMPENSATION TABLE

 

The following table summarizes the compensation paid by TSYS to directors for the year ended December 31, 2006.

 

 

 

 

Director Compensation Program

 

The Corporate Governance and Nominating Committee of TSYS is responsible for the oversight and administration of the TSYS director compensation program. The Committee’s charter reflects these responsibilities and does not allow the Committee to delegate its authority to any person other than the members of the Corporate Governance and Nominating Committee. Under its charter, the Committee has authority to retain outside advisors to assist the Committee in performance of its duties. In November 2004, the Corporate Governance and Nominating Committee retained Mercer Human Resource Consulting (“Mercer”) to review the competitiveness of the TSYS director compensation program. Mercer was directed to develop peer groups of 15 to 20 companies against which to benchmark director compensation at TSYS and to review and compare director pay practices at TSYS to industry peer companies and to those of general industry companies, analyzing cash compensation, long-term incentive compensation and total compensation. The Corporate Governance and Nominating Committee also asked Mercer to overview recent director pay trends, including shifts in pay mix, equity compensation trends and changes related to increased responsibilities and liability. Mercer’s recommendations for director compensation were then presented to the Committee. In January 2005, Mercer recommended certain changes to the director compensation program at TSYS; the Corporate Governance and Nominating Committee discussed and considered these recommendations and recommended to the Board that it approve the current compensation structure. The decisions made by the Committee are the responsibility of the Committee and may reflect factors and considerations other than the information and recommendations provided by Mercer. The Committee has decided to review and evaluate director compensation every two years.

 

Cash Compensation of Directors.  As reflected in the “Fees Earned or Paid in Cash” column of the Director Compensation Table above, for the fiscal year ended December 31, 2006, directors of TSYS received an annual cash retainer of $35,000, with Compensation Committee and Corporate Governance and Nominating Committee members receiving an additional cash retainer of $5,000 and Audit Committee and Executive Committee members receiving an additional cash retainer of $10,000. In addition, the Chairpersons of the Compensation Committee and Corporate Governance and Nominating Committee received a $5,000 cash retainer, the Chairperson of the Audit Committee received a $10,000 cash retainer and the Lead Director received a $5,000 cash retainer.

 

By paying each director an annual retainer, TSYS compensates each director for his or her role and judgment as an advisor to TSYS, rather than for his or her attendance or effort at individual meetings. In so doing, directors with added responsibility are recognized with higher cash compensation. For example, members of the Audit Committee receive a higher cash retainer based upon the enhanced duties, time commitment and responsibilities of service on that committee. The Corporate Governance and Nominating Committee believes that this additional cash compensation is appropriate.

 

In determining the specific amounts of cash compensation, including fees for service on committees and as chairpersons of those committees, the Corporate Governance and Nominating Committee, with the assistance of Mercer, studied cash compensation at a peer group of 17 companies generally categorized as business service providers and at 350 large industrial, financial and service organizations and set the cash compensation levels at or around the 50th percentile for such peer companies.

 

Directors may elect to defer all or a portion of their cash compensation under the TSYS Directors’ Deferred Compensation Plan. The Directors’ Deferred Compensation Plan does not provide directors with an “above market” rate of return. Instead, the deferred amounts are deposited into one or more investment funds at the election of the director. In so doing, the plan is designed to allow directors to defer the income taxation of a portion of their compensation and to receive an investment return on those deferred amounts. All deferred fees are payable only in cash. Each of Messrs. Harris, Jones and Turner deferred all or a portion of their cash compensation under this plan during 2006.

 

Equity Compensation of Directors.  During 2006, non-management directors also received an annual award of 500 shares of restricted TSYS stock in the form of a grant from the TSYS 2002 Long-Term Incentive Plan, 100% of which vests after three years. The Board granted these restricted stock awards to directors on February 1, 2006, the first day of the month following the Corporate Governance and Nominating Committee meeting to approve director compensation for the fiscal year. These restricted stock awards are designed to create equity ownership and to focus directors on the long-term performance of TSYS.

Before restricted stock awards were first granted to directors in 2005, TSYS’ directors were not compensated with equity ownership in the company, other than contributions under the Director Stock Purchase Plan. With the assistance of Mercer’s market analysis, the Corporate Governance and Nominating Committee determined in 2005 that a competitive director compensation program needed to include a more appropriate level of equity compensation in order to align TSYS with best practices and to remain competitive with the compensation programs at peer companies. First, the Committee determined that restricted stock awards were more appropriate than the use of stock options based upon the market shift in equity pay mix at other similarly situated companies. Second, the Committee determined that a grant of 500 shares of restricted TSYS stock was appropriate by analyzing the market on equity compensation and then determining the right mix based upon a market value approach to the number of shares awarded. In so doing, the grants of restricted stock provide TSYS directors with a more balanced pay mix between cash and equity, consistent with the market trend toward equal weighting of cash and equity.

 

TSYS’ Director Stock Purchase Plan is a non-qualified, contributory stock purchase plan pursuant to which qualifying TSYS directors can purchase, with the assistance of contributions from TSYS, presently issued and outstanding shares of TSYS stock. Under the terms of the Director Stock Purchase Plan, qualifying directors can elect to contribute up to $5,000 per calendar quarter to make purchases of TSYS stock, and TSYS contributes an additional amount equal to 50% of the directors’ cash contributions. Participants in the Director Stock Purchase Plan are fully vested in, and may request the issuance to them of, all shares of TSYS stock purchased for their benefit under the Plan. TSYS’ contributions under this Plan are included in the “All Other Compensation” column of the Director Compensation Table above.

 

TSYS’ contributions under the Director Stock Purchase Plan further provide directors the opportunity to buy and maintain an equity interest in TSYS and to share in the capital appreciation of TSYS. Together, the restricted stock awards and TSYS’ contributions under the Director Stock Purchase Plan provide an appropriate, competitive amount of compensation to directors in the form of equity, putting the equity component of compensation, as well as total compensation, at or near the median for peer group companies at the time the compensation structure was approved in 2005.

 

The restricted stock awards to directors and TSYS’ contributions under the Director Stock Purchase Plan also assist and facilitate directors’ fulfillment of their stock ownership requirements. TSYS’ Corporate Governance Guidelines require all directors to accumulate over time shares of TSYS stock equal in value to at least three times the value of their annual retainer. Directors have five years to attain this level of total stock ownership but must attain a share ownership threshold of one times the amount of the director’s annual retainer within three years. These stock ownership guidelines are designed to align the interests of TSYS’ directors to that of TSYS’ shareholders and the long-term performance of TSYS.

 

Consulting Agreement

 

Effective June 30, 2005, TSYS and Richard W. Ussery, the former Chairman of the Board of TSYS, entered into a one-year Consulting Agreement in conjunction with Mr. Ussery’s retirement as an employee of TSYS. Under the Agreement, Mr. Ussery received monthly payments of $26,526 and was also provided with 20 hours of personal use of corporate aircraft. TSYS also provided Mr. Ussery with office space and administrative assistance during 2006 valued at approximately $10,202 and $69,482, respectively, subsequent to his retirement. The Agreement expired on June 30, 2006. TSYS continued to provide Mr. Ussery with office space and administrative assistance throughout the remainder of 2006, however.

 

 

EXECUTIVE COMPENSATION

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Introduction

 

The following Compensation Discussion and Analysis (“CD&A”) describes our compensation program for the executive officers named in the Summary Compensation Table on page 38 (“named executive officers”). Specifically, the CD&A addresses:

 

 

Compensation Philosophy and Overview

 

TSYS has established a compensation program for our executives that is competitive, performance-oriented and designed to support our strategic goals. The goals and objectives of our compensation program are described below.

 

TSYS’ executive compensation program is designed to compete in the markets in which we seek executive talent. We believe that we must maintain a compensation program that allows us to recruit top level executive talent and that will prevent our executives from being recruited from us. Our compensation program is also designed to be performance-oriented. A guiding principle in developing our compensation program has been “average pay for average performance — above-average pay for above-average performance.” As a result, a significant portion of the total compensation of each executive is at risk based on short and long-term performance. Because of our emphasis on performance, we also believe that compensation generally should be earned by executives while they are actively employed and can contribute to TSYS’ performance.

 

TSYS’ compensation program is also designed to support corporate strategic goals, including growth in earnings and growth in shareholder value. As described in more detail below, earnings growth is the primary driver of our short-term incentive program and growth in shareholder value is the primary driver of our long-term incentive program. TSYS believes that the high degree of performance orientation and the use of goals based upon growth in earnings and growth in shareholder value in our incentive plans aligns the interests of our executives with the interests of our shareholders. In addition, TSYS has adopted stock ownership guidelines in connection with our equity compensation programs, which further align our executives’ interests with the interests of our shareholders.

 

Primary Elements of Compensation

 

There are three primary elements of compensation in TSYS’ executive compensation program: base pay, short-term incentive compensation and long-term incentive compensation. Short-term and long-term incentive compensation are tied directly to performance. Short-term incentive compensation is based upon fundamental operating performance of TSYS measured over a one-year period. For the reasons described below, long-term incentive compensation is based upon Synovus’ total shareholder return measured over a three-year period. TSYS has not established a specific targeted “mix” of compensation between base pay

and short-term and long-term incentives. However, both short-term and long-term incentives are based upon percentages or multiples of base pay. If both short-term and long-term incentives are paid at target, long-term incentives is the largest portion of an executive’s total compensation package. For example, if short-term and long-term incentives are paid at target, long-term incentives would constitute almost fifty percent of an executive’s total compensation package, thereby illustrating our emphasis on performance and growth in shareholder value.

 

Base Pay.  Base pay is seen as the amount paid to an executive for performing his or her job on a daily basis. To ensure that base salaries are competitive, TSYS targets base pay at the median (e.g., the 50th percentile) of the market for similarly situated positions, based upon each executive’s position and job responsibilities. In order to benchmark base pay, TSYS selects a peer group of companies (the “Peer Companies”). The Peer Companies are selected by considering companies that compete in TSYS’ market for business and for talent, companies with similar business operations and focus and companies with similar organization size (revenues approximately one-half to two times those of TSYS). In selecting the Peer Companies, potential companies were reviewed with the same Global Industry Classification Standards codes as TSYS and previously identified peer companies, service companies in the Dow Jones Industrial Goods and Services Index and companies in the Standard and Poors Software and Services Index. For 2006, the Peer Companies were: Acxiom Corp., Affiliated Computer Services, Inc., Alliance Data Systems Corp., BISYS Group, Inc., Ceridian Corp., Checkfree Corp., ChoicePoint Inc., Convergys Corp., eFunds Corp., Equifax Inc., Fair Isaac Corp., Fidelity National Information Services, Inc., Fiserv, Inc., Global Payments Inc., NCO Group, Inc., Paychex, Inc., Sabre Holdings Corp. and Teletech Holdings, Inc.

 

When establishing base salaries, the Committee compares each executive’s current base pay to the market median for that position using proxy information from the Peer Companies as well as external market surveys. For certain positions for which there is no clear market match in the benchmarking data, TSYS uses a blend of two or more positions from the benchmarking data. The Committee also reviews changes in the benchmarking data from the previous year. The Committee then uses this data to establish a competitive base salary for each executive. For example, an executive whose base salary is below the benchmarking target for his or her position may receive a larger percentage increase than an executive whose base salary exceeds the benchmarking target for his or her position.

 

In addition to market comparisons of similar positions at the Peer Companies, individual performance may affect base pay. For example, an executive whose performance is not meeting expectations may receive no increase in base pay or a smaller base pay increase in a given year. On the other hand, an executive with outstanding performance may receive a larger base pay increase or more frequent base pay increases.

 

Base pay is not directly related to TSYS’ performance, except over the long term since revenues are used in benchmarking base pay against the Peer Companies. Comparison of an executive’s base salary to the base salaries of other TSYS executives may also be a factor in establishing base salaries, especially with respect to positions for which there is no clear market match in the base pay benchmarking data. For 2006, all of the base pay increases for the named executive officers were calculated taking into account the market data described above as well as existing base salaries, the 2006 merit budget, internal pay equity, individual performance, experience, time in position and retention needs.

 

Because of the process we use to establish base pay, large increases in base pay generally occur only when an executive is promoted into a new position.

 

Short-Term Incentives.  In addition to base salary, our executive compensation program includes short-term incentive compensation. We have elected to pay short-term incentive compensation in order to (1) provide an incentive for executives to meet our short-term earnings growth goals, and (2) ensure a competitive compensation program given the marketplace prevalence of short-term incentive compensation.

 

Our short-term incentive program is tied directly to our fundamental operating performance measured over a one-year period. Each year, the Committee establishes a target for earnings per share (“EPS”) growth. The target is generally set based upon EPS growth guidance that has been publicly disclosed by TSYS. A target goal of 100% equates to a “market” award, which is a typical short-term incentive award for similar positions at the Peer Companies, expressed as a percentage of base salary.

Actual short-term incentive targets for 2006 were set taking into account median market data at the Peer Companies, as well as existing incentive targets, internal pay equity, individual performance and retention needs. The target short-term incentive percentage for Messrs. Tomlinson and Woods is 100% of base salary and the target short-term incentive percentage for TSYS’ other named executive officers is 85% of base salary.

 

The amount of a short-term incentive award can range from zero to 200% of a target grant in accordance with a schedule approved by the Committee each year. For 2006, the Committee approved the following schedule:

 

 

Although the target EPS growth goal set by the Committee is generally based upon the initial EPS guidance which has been publicly disclosed by TSYS calculated in accordance with accounting principles generally accepted in the United States (“GAAP”), from time to time the target percentages are based on non-GAAP EPS growth percentages for purposes of determining short-term incentive compensation because of unusual events that could occur during the year. These events include changes in accounting and regulatory standards, changes in tax rates and laws, charges for corporate or workforce restructurings, acquisitions and divestitures and expenses or income associated with the conversion or deconversion of a major TSYS customer. In 2006, the target EPS growth goal under the short-term incentive payout schedule was made more difficult by the amount of the net financial impact of the deconversion of Bank of America’s consumer credit card portfolio from TSYS.

 

As is common practice in the market, short-term incentives are paid in a lump-sum cash payment as soon as practicable in the year following the performance year, usually no later than February 15. Under the short-term incentive plan, the Committee has the right to exercise downward discretion and reduce the amount that would otherwise be awarded under the above schedule. For example, the short-term incentive awards can be reduced to reflect individual or business unit performance, to exclude unanticipated, non-recurring gains, or for affordability (reduced in order to fund another expense, such as other incentive compensation or retirement plans).

 

The short-term incentive awards for 2006 are set forth in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. The 2006 short-term incentive awards were paid at 130% of target based upon the bonus payout schedule approved by the Committee (TSYS had a 28% increase in EPS for 2006).

 

Long-Term Incentives.  Our executive compensation program also includes long-term incentive compensation, which is paid in equity of TSYS and Synovus. It is important to understand the relationship of TSYS and Synovus in order to appreciate our rationale and process for determining long-term incentive awards, which relationship is described in the following paragraph.

Synovus owns 80.8% of the outstanding shares of TSYS stock. Although TSYS stock is publicly traded on the NYSE, only the 19% of TSYS stock that is not owned by Synovus is available for trading. Consequently, there is limited float in TSYS stock, which negatively impacts its liquidity. For this reason, we have concluded that TSYS’ shareholder return is not the most appropriate measure of growth under TSYS’ long-term incentive compensation program. The shareholder return of Synovus is directly affected by TSYS’ shareholder return because of Synovus’ 80.8% ownership of TSYS. By recommending that TSYS executives be granted Synovus stock, and by linking the grant of equity awards to how well Synovus has performed, we have ensured that the interests of TSYS executives are directly linked to the interests of Synovus shareholders. We believe this connection to Synovus shareholders is important because of the substantial impact that TSYS’ performance has on the market capitalization of Synovus. As a result, Synovus’ total shareholder return is used as the basis for TSYS’ long-term incentive compensation program and this has proven to be an effective approach.

 

We have elected to pay long-term incentive compensation in order to: (1) provide an incentive for our executives to provide exceptional shareholder return to shareholders by tying a significant portion of their compensation opportunity to growth in shareholder value, (2) align the interests of executives with shareholders by awarding executives equity in TSYS and Synovus, and (3) ensure a competitive compensation program given the market prevalence of long-term incentive compensation.

 

TSYS’ long-term incentive plan awards equity to executives based upon performance, as measured by total shareholder return (“TSR”) of Synovus, over a three-year period. We use a three-year period to measure performance for purposes of our long-term incentive awards in order to reduce the impact of unusual events that may occur in a given year.

 

Under TSYS’ long-term incentive program, TSR is measured in two ways: (1) absolute TSR of Synovus, and (2) TSR compared to the competitors of Synovus. TSR for each measurement period is calculated by dividing Synovus’ stock price appreciation and dividends paid by the beginning stock price. We use both measures of shareholder return because we believe shareholders are interested both in how Synovus’ shareholder return compares to the competitors of Synovus, as well as their actual return on their investment. The competitors of Synovus, for purposes of long-term incentives, are the banks in the Keefe, Bruyette and Woods 50 Index (“KBW 50”). The KBW 50, which is a published banking index, was selected for awarding long-term incentives to ensure that the companies are chosen by an independent third party and to provide consistency from year to year in the assessment of long-term performance for incentive purposes.

 

The amount of long-term incentives awarded to executives each year is based upon a performance grid approved by the Committee. The performance grid has been in place substantially in its current form for over a decade. This grid is reproduced below showing the absolute TSR of Synovus over the three preceding calendar years as the horizontal measurement and the percentile performance of Synovus against the KBW 50 over the three preceding calendar years as the vertical measurement.

 

PAYOUT AS A PERCENT OF TARGET

 

 

 

The award percentages in the performance grid are multiplied by the amount of a target long-term incentive award, which is expressed as a percentage of base salary at the time the award is made. Actual

long-term incentive targets are established taking into account market median data at the Peer Companies, as well as existing incentive targets, internal pay equity, individual performance and retention needs. The target long-term incentive percentage for Messrs. Tomlinson and Woods is 200% of base salary and the target long-term incentive percentage for TSYS’ other named executive officers is 150% of base salary.

 

TSYS believes that there are advantages and disadvantages to every form of equity award. As a result, awards payable under the performance grid are generally paid 50% in TSYS restricted stock and 50% in Synovus stock options, but the Committee has the discretion to vary the form of the award as needed for accounting, tax or other reasons. The 50%/50% “split” in equity awarded is based upon the estimated overall value of the award as of the date of grant (a stock option is estimated to be equal to one-third the value of a restricted stock award). Although TSYS prefers for all awards to be made in equity of TSYS, there are not enough shares of TSYS available for such awards because of TSYS’ 81% ownership by Synovus. As a result, restricted stock awards are made in TSYS stock, while stock option awards are made in Synovus stock. The Compensation Committee of Synovus grants Synovus stock options to TSYS executives based upon the recommendation of the TSYS Committee.

 

In the event that Synovus’ TSR falls within the bottom left-hand corner of the payout grid (i.e., Synovus’ Specialized TSR is less than 4% and is also less than the 30th percentile compared to the KBW 50) for a particular year, executives will be awarded 50% of a target long-term incentive award, awarded solely in Synovus stock options, issued at fair market value (i.e., closing price) on the date of the award. The Committee believes that executives should receive a stock option grant even if Synovus’ TSR falls within this category because the Peer Companies would make such a grant and the stock price must appreciate from that point in order for the executive to benefit from the grant.

 

Because the Synovus and TSYS Compensation Committees may take action to approve equity awards on or near the date that Synovus’ and TSYS’ earnings are released, respectively, the Committees have established the last business day of the month in which earnings are released as the grant date for equity awards to ensure that the annual earnings releases have had time to be absorbed by the market before equity awards are granted and stock option exercise prices are established. TSYS released its annual earnings on January 17, 2006, and the TSYS Compensation Committee granted TSYS restricted stock awards to the named executive officers on January 31, 2006. Synovus released its annual earnings on January 18, 2006. The Synovus Compensation Committee met on January 18, 2006 to approve Synovus stock option grants to the named executive officers effective January 31, 2006. As a result, the grant date for long-term incentive awards (Synovus stock options and TSYS restricted stock awards) was January 31, 2006. The closing price of Synovus stock on January 31, 2006 was used as the exercise price for stock options and to determine the FAS 123(R) accounting expense and was also used for disclosure in the compensation tables in this Proxy Statement.

 

In 2006, long-term incentive equity awards were granted to TSYS’ named executive officers pursuant to the above grid based upon the 2003-2005 performance period. For this performance period, Synovus’ Specialized TSR was 14.73% and Synovus’ TSR was in the 49th percentile of the KBW 50. Under the grid, this resulted in a long-term incentive award equal to 140% of target. The equity awards made to TSYS’ named executive officers in 2006 are set forth in the “All Other Stock Awards” and “All Other Option Awards” columns in the Grant of Plan-Based Awards Table. The “split” in long-term incentive awards for all of the named executive officers was 50% Synovus stock options and 50% TSYS restricted stock awards.

 

In addition to the annual long-term incentive awards awarded pursuant to the performance grid described above, the Committee has granted other long-term incentive awards in certain circumstances. For example, the Committee made TSYS restricted stock award grants to Messrs. Tomlinson and Woods in 2005 to reflect their promotion to Chairman and Chief Executive Officer and President and Chief Operating Officer, respectively, and to serve as a vehicle for retaining their services in their new roles. Although the grants to Messrs. Tomlinson and Woods were awarded primarily for retention, the Committee approved performance-based grants to link their awards to a threshold level of performance. The awards to Messrs. Tomlinson and Woods vest over a seven year period. With respect to these awards, the Committee establishes performance measures each year during the seven year period and, if the performance measure is attained for a particular year, 20% of the award vests. The performance measure established for 2006 was 75% of the EPS target established under TSYS’ short-term incentive plan.

Because this measure was exceeded for 2006, 20% of the awards to Messrs. Tomlinson and Woods vested in 2006.

 

The Committee also recommended that “challenge grant” stock options in Synovus stock be granted to each of the named executive officers. The Synovus Compensation Committee granted such options on May 10, 2001. The challenge grants were significant in size, with Mr. Tomlinson receiving 500,000 stock options and each of the other named executive officers receiving a grant of 400,000 stock options. The challenge grants were designed to provide these executives with an incentive for exceptional growth in shareholder return, as well as to retain the services of the executives who received the grants for a significant period of time. The challenge grants vest in equal installments if the fair market value of Synovus stock exceeds $40, $45 and $50 per share. The challenge grants also vest on May 10, 2008 if the stock price targets are not attained prior to such date, provided the executives remain in the continuous employment of TSYS through such date.

 

Benchmarking

 

As described above, TSYS benchmarks base salaries and “market” short-term and long-term incentive target awards with the Peer Companies. TSYS also benchmarks total compensation (base salary, short-term incentives and long-term incentives) of its executives. TSYS uses the Peer Companies for benchmarking total compensation, as well as external market surveys. TSYS uses a three-year look back of the total compensation benchmark data to reduce the impact of short-term fluctuations in the data which may occur from year to year. When reviewing the total compensation benchmarking data, TSYS focuses on total compensation opportunities, not necessarily the amount of compensation actually paid, which varies depending upon TSYS’ performance results due to the program’s performance orientation. For example, over the past five years, TSYS’ long-term incentive awards have been below target for three of the five years, at target for one year and above-target for one year. Although these awards result in total compensation amounts for TSYS’ executives that could be considered below market, the Committee believes the amount of compensation paid to its executives is appropriate given Synovus’ shareholder return during this five-year period.

 

Perquisites

 

Perquisites are a very small part of our executive compensation program. Perquisites are not tied to performance of TSYS. Perquisites are offered to align our compensation program with competitive practices because similar positions at the Peer Companies offer similar perquisites. The perquisites offered by TSYS are set forth in footnotes (5) and (6) of the Summary Compensation Table. Considered both individually and in the aggregate, we believe that the perquisites we offer to our named executive officers are reasonable and appropriate.

 

Employment Agreements

 

TSYS does not generally use employment agreements with respect to its executives, except in unusual circumstances such as acquisitions. None of the named executive officers have employment agreements.

 

Retirement Plans

 

Our compensation program also includes retirement plans designed to provide income following an executive’s retirement. We have chosen to use defined contribution retirement plans because we believe that defined benefit plans are difficult to understand, difficult to communicate, and contributions to defined benefit plans often depend upon factors that are beyond TSYS’ control, such as the earnings performance of the assets in such plans compared to actuarial assumptions inherent in such plans. TSYS offers three qualified defined contribution retirement plans to its employees: a money purchase pension plan, a profit sharing plan and a 401(k) savings plan.

 

The money purchase pension plan has a fixed 7% of compensation employer contribution every year. The profit sharing plan and any employer contribution to the 401(k) savings plan are tied directly to TSYS’ performance. There are opportunities under both the profit sharing plan and the 401(k) savings plan for employer contributions of up to 7% of compensation based upon the achievement of EPS growth goals. For 2006, TSYS’ named executive officers received a contribution of 7% of compensation under the

profit sharing plan and 3% of compensation under the 401(k) savings plan based upon TSYS’ performance. The retirement plan contributions for 2006 are included in the “All Other Compensation” column in the Summary Compensation Table.

 

In addition to these plans, the Synovus/TSYS Deferred Compensation Plan (“Deferred Plan”) replaces benefits lost under the qualified plans due to legal limits imposed by the IRS. The Deferred Plan does not provide “above market” interest. Instead, participants in the Deferred Plan can choose to invest their accounts among mutual funds that are generally the same as the mutual funds that are offered in the 401(k) savings plan. The executives’ Deferred Plan accounts are held in a rabbi trust, which is subject to claims by TSYS’ creditors. The employer contribution to the Deferred Plan for 2006 for named executive officers is set forth in the “All Other Compensation” column in the Summary Compensation Table and the earnings on the Deferred Plan accounts during 2006 for named executive officers is set forth in the “Aggregate Earnings in Last FY” column in the Nonqualified Deferred Compensation Table and in the “All Other Compensation” column in the Summary Compensation Table.

 

Post-Termination Compensation Philosophy

 

TSYS’ compensation program is designed to reflect TSYS’ philosophy that compensation generally should be earned while actively employed. Although retirement benefits are paid following an executive’s retirement, the benefits are earned while employed and are substantially related to performance as described above. TSYS has entered into limited post-termination arrangements when appropriate, such as the change of control agreements which are described in the “Potential Payouts Upon Termination or Change of Control” section.

 

TSYS chose to enter into change of control arrangements with its executives: (1) to ensure the retention of executives and an orderly transition during a change of control, (2) to ensure that executives would be financially protected in the event of a change of control so they continue to act in the best interests of TSYS while continuing to manage TSYS during a change of control, and (3) to ensure a competitive compensation package because such arrangements are common in the market and it was determined that such agreements were important in recruiting executive talent. During 2004 and the beginning of 2005, the Committee reviewed the change of control arrangements and determined that certain provisions were not in line with the Committee’s philosophy or market practice. As a result, the change of control agreements for the named executive officers were amended at the beginning of 2005 to: (1) toughen the definition of a “change of control” from a merger in which the former shareholders of Synovus or TSYS own less than two-thirds (2/3) of the surviving company to a merger in which less than sixty percent (60%) of the surviving company is owned by the former shareholders, (2) implement a “double trigger” (as described below) in order for benefits to be paid under the agreements, thereby eliminating the ability of an executive to trigger benefits by voluntarily resigning during the 13th month following a change of control, (3) extend the time during which an executive can receive benefits under the agreement upon an involuntary termination without cause or a voluntary termination for good reason from one year to two years, and (4) provide that a gross-up for excise taxes only occurs if the total change of control payments exceed 110% of the applicable IRS cap. A “double trigger” means that two events must occur in order for benefits to be paid: (1) a change of control, and (2) a termination of employment (actual or constructive) within two years following the change of control. The Committee specifically chose a “double trigger” form of agreement because the Committee believed that “double trigger” agreements provided executives with sufficient financial protection in the event of a change of control and because “double trigger” agreements were the prevalent market practice.

 

Stock Ownership Guidelines

 

To align the interests of its executives with shareholders, TSYS has implemented stock ownership guidelines for its executives. Under the guidelines, executives are required to maintain either five, four or three times the amount of their base salary in TSYS stock. TSYS’ Chief Executive Officer is required to maintain five times his base salary, the President four times his base salary and the other executive officers three times their base salaries. The guidelines are recalculated at the beginning of each calendar year. The guideline was initially adopted January 1, 2004 and executives had a five-year grace period to fully achieve the guideline with an interim three-year goal. Until the guideline is achieved, executives are required to retain all net shares received upon the exercise of stock options, excluding shares used to pay

the option’s exercise price and any taxes due upon exercise. In the event of a severe financial hardship, the guidelines permit the development of an alternative ownership plan by the Chairman of the Board of Directors and Chairman of the Compensation Committee. All executives are currently in compliance with the guideline.

 

Tally Sheets

 

The Committee has reviewed tally sheets for each of TSYS’ named executive officers. The tally sheets add up all forms of compensation for each officer and also provide estimates of the amounts payable to each executive upon the occurrence of potential future events, such as a change of control, retirement, voluntary or involuntary termination, death and disability. The tally sheets are used to provide the Committee with total compensation amounts for each executive so that the Committee can determine whether the amounts are reasonable or excessive. Although the tally sheets are not used to benchmark total compensation with specific companies, the Committee considers total compensation paid to executives at other companies in considering the reasonableness of our executives’ total compensation. After reviewing the tally sheets, the Committee determined that the total compensation amounts are fair, reasonable and competitive.

 

Other Policies

 

Restatements.  TSYS does not have a formal policy regarding the recovery of awards or payouts in the event the financial statements upon which TSYS’ performance measurements are based are restated or otherwise adjusted in a manner that could reduce the size of an award. TSYS believes that the decision of whether a recovery is appropriate would depend upon the facts and circumstances surrounding the restatement or adjustment.

 

Tax Considerations.  We have structured most forms of compensation paid to our executives to be tax deductible. For example, Internal Revenue Code Section 162(m) limits the deductibility of compensation paid by a publicly-traded corporation to its Chief Executive Officer and four other highest paid executives for amounts in excess of $1 million, unless certain conditions are met. The base salaries of all of our named executive officers are tax-deductible because they are less than $1 million. In addition, the short-term and long-term incentive plans have been approved by shareholders and awards under these plans are designed to qualify as “performance-based” compensation to ensure deductibility under Code Section 162(m). We reserve the right to provide compensation which is not tax-deductible, however, if we believe the benefits of doing so outweigh the loss of a tax deduction. The only form of executive compensation not currently tax-deductible by TSYS is the personal use of corporate aircraft. We believe that a small amount of personal use each year is an appropriate perquisite for our executives, despite the loss of a tax deduction.

 

In general, TSYS does not “gross-up” its officers for taxes that are due with respect to their compensation. An example of an exception to this rule is for excise taxes that may be due with respect to the change of control agreements, as described above.

 

Accounting Considerations.  We account for all compensation paid in accordance with GAAP. The accounting treatment has generally not affected the form of compensation paid to named executive officers.

 

Board Fees.  Our executives who serve on the Board of Directors of TSYS are paid the same cash director fees as those paid to non-executive directors and are also entitled to participate in TSYS’ Director Stock Purchase Plan, which is described under “Equity Compensation of Directors.” However, directors who are also executives do not receive the equity compensation that is granted to non-executive directors of TSYS. Although paying cash director fees to “inside” executives who serve on Boards of Directors is not the prevalent market practice, it has been the historical practice at TSYS for many years and constitutes a small portion of affected executive’s total compensation amount. These amounts are included in the “All Other Compensation” column of the Summary Compensation Table.

 

Conclusion

 

For the reasons described above, we believe that each element of compensation offered in our executive compensation program, and the total compensation delivered to each named executive officer, is fair, reasonable and competitive.

Significant Events After December 31, 2006

 

Synovus stock options and TSYS restricted stock awards were granted to TSYS’ named executive officers effective January 31, 2007 in accordance with the performance grid discussed under “Long-Term Incentives” above. The awards, which were made based upon Synovus’ TSR for the 2004-2006 performance period, were made at 50% of target. Messrs. Tomlinson, Lipham, Woods, Pruett and Tye were each granted Synovus stock option awards of 30,630, 11,715, 21,516, 13,952 and 13,212 shares, respectively, at an exercise price of $31.93, the closing price of Synovus stock on January 31, 2007. In addition, Messrs. Tomlinson, Lipham, Woods, Pruett and Tye were each granted TSYS restricted stock awards of 10,550, 4,035, 7,411, 4,806 and 4,551 shares, respectively, effective January 31, 2007. The stock options and restricted stock awards vest over a three year period, in equal annual installments of one-third each, on January 31, 2008, January 31, 2009 and January 31, 2010. The awards will be described in detail in TSYS’ Proxy Statement for the 2008 Annual Meeting of Shareholders.

 

Compensation Committee Interlocks and Insider Participation

 

Messrs. Lampton, Clough and Driver served on the Compensation Committee during 2006. None of these individuals is or has been an officer or employee of TSYS.

 

 

SUMMARY COMPENSATION TABLE

 

The table below summarizes the compensation for each of the named executive officers for the fiscal year ended December 31, 2006.

 

The named executive officers were not entitled to receive payments which would be characterized as “Bonus” payments for the fiscal year ended December 31, 2006. The short-term incentive amounts paid to the named executives are set forth in the “Non-Equity Incentive Plan Compensation” column. TSYS’ methodology and rationale for short-term incentive compensation are described in the Compensation Discussion and Analysis above.

 

The named executive officers did not receive any compensation that is reportable under the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column because, as described in the Compensation Discussion and Analysis, TSYS has no defined benefit pension plans and does not pay above-market interest on deferred compensation. The 2006 retirement plan contributions and earnings for the named executive officers are set forth in the “All Other Compensation” column.

 

 

 

GRANTS OF PLAN-BASED AWARDS

for the Year Ended December 31, 2006

 

The table below sets forth the short-term incentive compensation (payable in cash) and long-term incentive compensation (payable in the form of TSYS restricted stock awards and Synovus stock options) awarded to the named executive officers for 2006.

 

 

 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
December 31, 2006