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The following is an excerpt from a DEF 14A SEC Filing, filed by CARREKER CORP on 5/6/2005.
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CARREKER CORP - DEF 14A - 20050506 - PROPOSAL_1

PROPOSAL ONE

 

The Company’s Amended and Restated Certificate of Incorporation provides for classified directors with staggered terms. The Company currently has authorized ten directors. The directors are divided into three classes and their terms expire as follows: Class I, which currently consists of Messrs. John D. Carreker, Jr., James R. Erwin and Donald L. House, will expire at the annual meeting of stockholders to be held on June 14, 2005; Class II, which currently consists of Messrs. J. Coley Clark, Richard R. Lee, Jr., and Gregory B. Tomlinson, will expire at the annual meeting of stockholders to be held in 2006; and Class III, which currently consists of Messrs. James D. Carreker, Keith W. Hughes, David K. Sias and Ronald G. Steinhart, will expire at the annual meeting of stockholders to be held in 2007. At each annual meeting of stockholders, the successors to directors whose terms will then expire will be elected to serve from the time of their election and qualification until the third annual meeting following election and until their successors have been duly elected and qualified, or until their earlier resignation or removal. Vacancies on the Board of Directors or newly created directorships will be filled by a vote of the majority of the directors then in office and any director so chosen will hold office until the next election of the class for which such director was chosen.

 

Three directors will be elected at the meeting as Class I directors for terms expiring at the annual meeting of stockholders to be held in 2008. The directors will continue to serve until their respective successors are duly elected and qualified. Each of the Board of Directors’ nominees currently serves as a director of the Company.

 

The Board has adopted the general policy that a director who will have served nine or more years consecutively as a director at the end of their current term will not be eligible for nomination for continued service. Exceptions to this policy may be made by the Board, and this policy generally will not apply to directors who are executives of the Company.

 

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The Governance and Nominating Committee annually assesses independence, attendance, performance and composition of the Board of Directors and its Committees. The Board of Directors has stated its intention to maintain a diverse and independent membership and continues to work toward this goal. The Board of Directors has adopted certain independence standards for directors which are in addition to those provided by the applicable rules of The NASDAQ Stock Market (“NASDAQ”). Based on the applicable NASDAQ rules and also the Company’s director independence standards, the Board of Directors has affirmatively determined that each of the nominees, other than Mr. John D. Carreker, Jr., is independent.

 

Shares represented by proxies returned duly executed will be voted, unless otherwise specified, in favor of the three nominees for the Board of Directors named below. If any nominee named below should be unable to serve, the persons named in the enclosed Proxy will vote the shares covered thereby for such substitute nominee (or nominees) as the Board of Directors may select.

 

NOMINEES FOR DIRECTORS (THREE YEAR TERMS)

 

JOHN D. CARREKER, JR ., age 62, has served as Chairman of the Board and Chief Executive Officer of the Company since the Company’s formation in 1978. John D. Carreker, Jr. and James D. Carreker are brothers. John D. Carreker III is the son of John D. Carreker, Jr.

 

JAMES R. ERWIN , age 61, has served as a director of the Company since May 2001 and Lead Director since June 2002. Mr. Erwin is currently Managing Director and Partner of Erwin Graves & Associates, L.P., a management consulting company. Mr. Erwin has served as Vice Chairman-Texas and Senior Client Executive-Southwest of Bank of America, N.A., from October 1998 to May 2000, was Vice Chairman for Texas and Corporate Finance Executive-West for NationsBank Corp. from January 1994 to October 1998, and was Executive Vice President, Manager of Operations and Technology for NationsBank Corp. from October 1991 to January 1994. Mr. Erwin has served as a director of Trammell Crow Company, a diversified real estate service company, since December 1997. Mr. Erwin served as a director of Texas Capital Bancshares, Inc., a bank holding company, from May 2001 to May 2005.

 

DONALD L. HOUSE , age 63, has served as a director of the Company since March 30, 1998. From January 1993 until December 1997, Mr. House served as Chairman of the Board of Directors of SQL Financials International, Inc. (now known as Clarus Corporation), a developer of electronic commerce application software. Mr. House continues to serve as a director of Clarus Corporation where he is Chairman of its audit committee. Mr. House is a private venture capital investor and business advisor to emerging growth stage high technology companies and serves on the boards of several private companies.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR

THE APPROVAL OF EACH OF THE DIRECTOR NOMINEES.

 

CONTINUING DIRECTORS

 

JAMES D. CARREKER , age 57, has served as a director of the Company since 1984. Mr. Carreker presently serves as Chairman of the Board of Directors and Chief Executive Officer of The Bombay Company, Inc., a home furnishings retailer. Mr. Carreker served as Chairman of the Board of Directors of Wyndham International, Inc., a hotel management and leasing company, from March 1999 to October 2000. Mr. Carreker served as Chief Executive Officer of Wyndham International, and from January 1998 to June 1999, Mr. Carreker also served as a director of Patriot American Hospitality, Inc. Patriot was a hotel real estate investment trust until it became a wholly owned subsidiary of Wyndham International in June 1999. Mr. Carreker served as President and Chief Executive Officer of Wyndham Hotel Corporation, a national hotel company, from May 1996, and as a director of Wyndham from February 1996, until the merger of Wyndham with Patriot in January 1998. Mr. Carreker also served as President and Chief Executive Officer of Trammell Crow Company, a national real estate company, as well as President of Burdines Department Stores, located in Florida. Since October 2002, Mr. Carreker has served as a director of CBRL Group, a restaurant holding company. His term expires in 2007. John D. Carreker, Jr. and James D. Carreker are brothers.

 

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J. COLEY CLARK , age 59, has served as a director of the Company since September 2004. Mr. Clark is currently President and Chief Executive Officer and a director of BancTec, Inc., a process, capture and archive hardware and software provider to the banking, insurance and telecommunications industries. Beginning in 1996, Mr. Clark served as Senior Vice President and a member of the Global Operations Council of EDS, a global technology service organization. Mr. Clark retired from EDS in 2004 after 32 years with the company. Mr. Clark also serves as a director of FundsXpress, an internet banking provider. His term expires in 2006.

 

KEITH W. HUGHES , age 58, has served as a director of the Company since July 2003. Mr. Hughes is currently a self-employed consultant to domestic and international financial services institutions. He previously served as Vice Chairman of Citigroup Inc., a diversified global financial services holding company, from November 2000 to April 2001. Mr. Hughes was named to that position in 2000 when Citigroup acquired Associates First Capital Corporation, a leading finance company, where he had served as Chairman and Chief Executive Officer since February 1995. Mr. Hughes joined Associates First Capital Corporation in 1981 and held several other executive positions during his tenure there, including President from August 1991 to February 1995. He currently serves as an advisory director to Majesco Software, Inc., an applications management software company and subsidiary of Mastek Ltd. In addition, Mr. Hughes serves as a director of Certegy, Inc., a provider of credit and debit card processing and check risk management services to financial institutions and merchants, as a director of Texas Industries Inc., a major producer of cement, concrete and structural steel, and as a director of Pilgrim’s Pride Corporation, a major producer of poultry. His term expires in 2007.

 

RICHARD R. LEE, JR ., age 58, has served as a director of the Company since 1984. Mr. Lee has served as President of Lee Financial Corporation, a financial advisory firm, since 1975. Mr. Lee is a Chartered Financial Analyst and a Certified Financial Planner. His term expires in 2006.

 

DAVID K. SIAS , age 67, has served as a director of the Company since October 1993 and served as a consultant to the Company from November of that year until July 2001. Mr. Sias has been a partner of eVentures International, LLC, a venture capital group that specializes in start-up firms in the software arena, since 1999. From 1993 until 1997, Mr. Sias was a director and advisor to ADS Associates, a privately held software company. Prior to that time, Mr. Sias was with Bankers Trust Company, New York for over thirty years where he led several of the bank’s major businesses, including its International Division as well as its Global Operating and Information Systems. His term expires in 2007.

 

RONALD G. STEINHART , age 64, has served as a director of the Company since April 2001. Mr. Steinhart served as Chairman and Chief Executive Officer, Commercial Banking Group of Bank One Corporation from December 1996 until his retirement in January 2000. Mr. Steinhart joined Bank One in connection with the merger of Team Bank, which he founded in 1988. Mr. Steinhart serves as a director of United Auto Group, Inc., an automotive retailer, Trustee of Prentiss Properties Trust, a real estate investment trust, and Trustee of MFS/Compass, a group of funds managed by MFS Investment Management. His term expires in 2007.

 

GREGORY B. TOMLINSON , age 65, has served as a director of the Company since September 2004. Mr. Tomlinson, a certified public accountant, is a retired (effective 2002) partner of KPMG LLP, an international public accounting firm. During Mr. Tomlinson’s forty-year career with KPMG, he served in various technical and administrative positions, including Risk Management Partner for the Southwest Area, Partner in charge of the Firm’s Information, Communications and Entertainment practice in the Southwest Area, and immediately prior to his retirement, as Asia Pacific Risk Management Partner, resident in Tokyo. His term expires in 2006.

 

CORPORATE GOVERNANCE

 

The Board of Directors has determined that Messrs. Clark, Erwin, House, Hughes, Sias, Steinhart and Tomlinson are “independent” as defined by applicable NASDAQ rules. In addition, the Board of Directors has determined that a majority of its members are “independent” as defined by the Company’s director independence standards. The Board of Directors held a total of nine meetings in the fiscal year ended January 31, 2005.

 

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Average attendance at those meetings was 96% and each director attended at least 75% of the meetings held by the Board of Directors and by committees of the Board on which he served. The Board of Directors’ standing committees are an Audit Committee, a Compensation Committee, and a Governance and Nominating Committee. The charter for each of the Company’s committees can be found on the Company’s website at www.carreker.com .

 

AUDIT COMMITTEE.     The Audit Committee operates pursuant to a written charter adopted by the Board of Directors. The Audit Committee is responsible for (i) recommending to the Board of Directors the selection of the Company’s outside auditors, (ii) pre-approving all audit and permissible non-audit services and fees, (iii) reviewing the audit scope and risk assessment process, (iv) reviewing the independence and performance of the outside auditors, (v) reviewing internal controls of the Company, (vi) overseeing compliance with the Company’s Code of Ethics, and (vii) reviewing and discussing with management and the outside auditors the annual audited financial statements included in the Company’s Form 10-K as well as the interim financial statements. The current members of the Audit Committee are Messrs. House, Sias and Tomlinson. Mr. House serves as Chairman. Each member of the Audit Committee is “independent,” as defined by the applicable rules of the Securities and Exchange Commission (“SEC”), and the Board of Directors has determined that each member of the Audit Committee is “independent” as defined by the applicable NASDAQ rules and under the standards of independence established by the Board of Directors.

 

The Board of Directors has determined that each Audit Committee member is “financially literate” and that the Audit Committee provides adequate and appropriate oversight of the Company’s audit practices. The Board of Directors has determined that Gregory B. Tomlinson is an “audit committee financial expert” as defined under the applicable NASDAQ and SEC rules. The Audit Committee met thirteen times during the fiscal year ended January 31, 2005.

 

COMPENSATION COMMITTEE.     The Compensation Committee is responsible for executive compensation policies, approving compensation payable to executive officers of the Company, and reviewing and granting stock options and awards. The current members of the Compensation Committee are Messrs. Clark, Erwin, Hughes and Steinhart. Mr. Steinhart serves as Chairman. Each member of the Compensation Committee is “independent”, as defined by the applicable NASDAQ rules and under the Company’s director independence standards. The Compensation Committee met five times during the fiscal year ended January 31, 2005.

 

GOVERNANCE AND NOMINATING COMMITTEE.     The Corporate Governance and Nominating Committee has the responsibility for identifying potential candidates for Board membership and for making a recommendation to the Board of Directors of a slate of director candidates to stand for election at the annual meeting of the Company’s stockholders. The Governance and Nominating Committee also has responsibility for maintaining oversight of the Board of Directors’ operations and effectiveness, recommending directors for appointment to committees, and making recommendations to the Board of Directors as to determinations of Director independence. The current members of the Governance and Nominating Committee are Messrs. Erwin, Sias and Steinhart. Mr. Erwin serves as Chairman. Each member of the Governance and Nominating Committee is “independent”, as defined under applicable NASDAQ rules and by the Company’s director independence standards. The Governance and Nominating Committee met four times during the fiscal year ended January 31, 2005.

 

In evaluating prospective nominees, the Governance and Nominating Committee seeks individuals that have the following minimum qualifications, qualities and skills: (i) significant business or public experience that is relevant and beneficial to the Board of Directors and the Company, (ii) willing and able to make a sufficient time commitment to the affairs of the Company in order to effectively perform the duties of a director, including regular attendance at Board of Directors meetings and committee meetings, (iii) committed to the long-term growth and profitability of the Company, (iv) character and integrity, (v) inquiring minds who are willing to speak their minds and challenge and stimulate management and (vi) represent the interests of the Company as a whole and not only the interests of a particular stockholder or group.

 

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The Governance and Nominating Committee will consider nominees proposed by stockholders. Director candidates recommended by stockholders are evaluated by the Governance and Nominating Committee based on the same criteria applied by the Governance and Nominating Committee to director candidates identified by that Committee. Any stockholder who wishes to recommend a director candidate for consideration by the Governance and Nominating Committee may do so by submitting the candidate’s name and qualifications in writing to the following address: 4055 Valley View Lane, Suite 1000, Dallas, Texas 75244, Attention: Corporate Secretary. The submission must be received at such address not less than 120 calendar days before the date that the Company’s proxy statement was released to stockholders in connection with the previous year’s annual meeting. However, if the Company did not hold an annual meeting during the previous year, or if the date of this year’s meeting has been changed by more than 30 days from the date of the previous year’s meeting, then the deadline is a reasonable time before the Company begins to print and mail its proxy materials. For the 2006 annual meeting, this date would be January 6, 2006.

 

To date, the Governance and Nominating Committee has not received a candidate recommendation from any stockholder (or group of stockholders) that beneficially owns more than five percent of the Common Stock.

 

CORPORATE GOVERNANCE GUIDELINES AND CODE OF ETHICS.     Based upon the recommendation of the Governance and Nominating Committee, the Board of Directors has adopted Corporate Governance Guidelines and a Code of Ethics. The Code of Ethics applies to all directors and employees, including the Company’s principal executive, financial and accounting officers. The Guidelines and Code of Ethics are available on the Company’s website, www.carreker.com . The Company intends to post amendments to or waivers from the Code as required by applicable rules on its website or in a report on Form 8-K.

 

The Company’s employees are required to report any conduct that they believe could in any way be construed as a fraudulent or illegal act or otherwise in violation of the Code. The Audit Committee has established procedures to receive, retain and address complaints regarding accounting, internal accounting controls or auditing matters and to allow for the confidential and anonymous submission by employees of related concerns.

 

DIRECTOR COMPENSATION.     Employee directors do not receive compensation for their services as directors. Non-employee directors receive an annual retainer of $12,000, payable quarterly, a fee of $2,000 per board meeting attended, and a fee of $650 per committee meeting attended. The chairman of the Audit Committee receives an additional annual retainer of $6,000; the chairman of the Compensation Committee receives $2,000; the chairman of the Governance and Nominating Committee receives $2,000; and the Lead Director receives $6,000, all payable in quarterly installments. Under the Company’s 1994 Long Term Incentive Plan, non-employee directors will be awarded options to purchase Common Stock on the first day of each board compensation year (August 1), exercisable at the fair market value of the Common Stock on such date. The number of options awarded is determined pursuant to an option pricing formula, so that the fair value of the option award will equal $60,000.

 

STOCKHOLDER COMMUNICATIONS WITH THE BOARD .    Stockholders and others who wish to communicate with the Board of Directors as a whole, or to individual directors, may do so by writing to them at: Carreker Corporation, 4055 Valley View Lane, Dallas, Texas 75244. All communications (except advertisements, solicitations for periodicals or other subscriptions, and similar communications) sent to this address and addressed to the Board of Directors will be forwarded to each member of the Board of Directors or to an individual director, if so addressed.

 

It is a policy of the Board of Directors to encourage directors to attend each annual meeting of stockholders. Such attendance allows for direct interaction between stockholders and members of the Board of Directors. Eight of nine directors attended the Company’s 2004 annual meeting of stockholders.

 

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BENEFICIAL OWNERSHIP OF COMMON STOCK

 

The following table sets forth information as of April 26, 2005, regarding the beneficial ownership of the Company’s Common Stock by each person or group known by management of the Company to own more than five percent of the outstanding shares of Common Stock of the Company, by each of the Company’s executive officers named in the Summary Compensation Table below, by each of the Company’s directors, and by all of its directors and executive officers as a group.

 

The information for the five percent owners is derived from Schedule 13Gs filed with the SEC or through discussions with the owner. Except as otherwise noted, the address for each owner is 4055 Valley View Lane, Suite 1000, Dallas, Texas 75244.

 

     Shares of Common Stock
Beneficially Owned and
Percentage of
Outstanding Shares
as of April 26, 2005


 

Name


   Number

   Percent

 

5% Beneficial Owners

           

J. & W. Seligman & Co. Incorporated (1)

100 Park Avenue

New York, NY 10017

   2,710,710    10.88 %

BlackRock Capital Management (2)

1 Financial Center

Boston, MA 02111

   1,599,990    6.42 %

Directors and Officers

           

John D. Carreker, Jr. (3)

   2,806,549    11.21 %

David K. Sias (4)

   283,966    1.14 %

Robert M. Olson, Jr. (5)

   232,649    * %

Richard R. Lee, Jr. (6)

   177,405    * %

John D. Carreker III (7)

   159,742    * %

James D. Carreker (8)

   112,947    * %

Michael J. Inman (9)

   105,790    * %

Blake A. Williams (10)

   92,950    * %

Donald L. House (11)

   88,421    * %

James R. Erwin (12)

   45,593    * %

Ronald G. Steinhart (13)

   43,593    * %

Keith W. Hughes (14)

   28,638    * %

J. Coley Clark (15)

   4,412    * %

Gregory B. Tomlinson (16)

   4,412    * %

Michael D. Hansen

   9,920    * %

Directors and executive officers as a group (18 persons) (17)

   4,289,153    17.15  

    * Less than 1%

 

 (1) J. & W. Seligman & Co. Incorporated is an investment advisor in accordance with Rule 13d-1 (b) (1) (ii) (E). As of December 31, 2004, J. & W. Seligman & Co. Incorporated held 2,710,710 shares of the Company’s Common Stock. William C. Morris, as the owner of a majority of the outstanding voting securities of J. & W. Seligman & Co. Incorporated, may be deemed to beneficially own the reported shares.

 

 (2)

On January 31, 2005, BlackRock, Inc. announced the acquisition of SSRM Holdings, Inc., which is the holding company of State Street Research & Management Co. State Street Research & Management Company is an investment advisor registered under Section 203 of the Investment Advisors Act of 1940. At

 

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December 31, 2004, shares in the amount of 1,599,990 were in fact owned by various clients of State Street Research & Management Company and State Street Research & Management Company disclaims any beneficial interest in the shares.

 

 (3) Includes 315,079 shares held in a family limited partnership for which Mr. Carreker is the general partner and 137,500 shares subject to stock options that are exercisable by Mr. Carreker within sixty days.

 

 (4) Includes 6,000 shares held by Patricia L. Sias, the wife of Mr. Sias, as to which Mr. Sias disclaims beneficial ownership, and 43,293 shares subject to stock options that are exercisable by Mr. Sias within sixty days.

 

 (5) Includes 197,841 shares subject to stock options that are exercisable by Mr. Olson within sixty days.

 

 (6) Includes 5,000 shares held by Lee Financial Corporation and 10,235 shares currently held in trust, as to which Mr. Lee disclaims beneficial ownership, and 49,792 shares subject to stock options that are exercisable by Mr. Lee within sixty days. Of the shares owned by Mr. Lee, 83,000 have been pledged as security for a loan.

 

 (7) Includes 105,000 shares subject to stock options that are exercisable by Mr. Carreker within sixty days.

 

 (8) Includes 6,576 shares held by children of Mr. Carreker, as to which Mr. Carreker disclaims beneficial ownership, and 48,125 shares subject to stock options that are exercisable by Mr. Carreker within sixty days.

 

 (9) Includes 75,800 shares subject to stock options that are exercisable by Mr. Inman within sixty days.

 

(10) Includes 63,950 shares subject to stock options that are exercisable by Mr. Williams within sixty days.

 

(11) Includes 88,421 shares subject to stock options that are exercisable by Mr. House within sixty days.

 

(12) Includes 35,593 shares subject to stock options that are exercisable by Mr. Erwin within sixty days.

 

(13) Includes 35,593 shares subject to stock options that are exercisable by Mr. Steinhart within sixty days.

 

(14) Includes 23,638 shares subject to stock options that are exercisable by Mr. Hughes within sixty days.

 

(15) Includes 4,412 shares subject to stock options that are exercisable by Mr. Clark within sixty days.

 

(16) Includes 4,412 shares subject to stock options that are exercisable by Mr. Tomlinson within sixty days.

 

(17) Includes 991,223 shares subject to stock options that are exercisable by the directors and executive officers as a group within sixty days.

 

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