Lender Processing Services, Inc.

 

601 Riverside Avenue

Jacksonville, Florida 32204

 

April 5, 2010

 

Dear Shareholder:

 

On behalf of the Board of Directors, I cordially invite you to attend the annual meeting of shareholders of Lender Processing Services, Inc. The meeting will be held on May 20, 2010 at 10:00 a.m., Eastern Daylight Time, in the Peninsular Auditorium at 601 Riverside Avenue, Jacksonville, Florida 32204. The formal Notice of Annual Meeting and Proxy Statement for this meeting are attached to this letter.

 

The Notice of Annual Meeting and Proxy Statement contain more information about the annual meeting, including:

 

 

Whether or not you plan to attend the annual meeting, please vote by one of these outlined methods to ensure that your shares are represented and voted in accordance with your wishes. This will help us avoid the expense of sending follow-up letters to ensure that a quorum is represented at the annual meeting, and will assure that your vote is counted if you are unable to attend.

 

On behalf of the Board of Directors, I thank you for your cooperation.

 

Sincerely,

 

Jeffrey S. Carbiener

President and Chief Executive Officer

Lender Processing Services, Inc.

 

601 Riverside Avenue

Jacksonville, Florida 32204

 

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

 

To the Shareholders of Lender Processing Services, Inc.:

 

Notice is hereby given that the 2010 Annual Meeting of Shareholders of Lender Processing Services, Inc. will be held on May 20, 2010 at 10:00 a.m., Eastern Daylight Time, in the Peninsular Auditorium at 601 Riverside Avenue, Jacksonville, Florida 32204 for the following purposes:

 

1. to elect three Class II directors to serve until the 2013 annual meeting of shareholders or until their successors are duly elected and qualified or until their earlier death, resignation or removal;

 

2. to ratify the appointment of KPMG LLP as our independent registered public accounting firm for the 2010 fiscal year; and

 

3. to transact such other business as may properly come before the meeting or any adjournment thereof.

 

The Board of Directors set March 22, 2010 as the record date for the meeting. This means that owners of Lender Processing Services, Inc. common stock at the close of business on that date are entitled to:

 

 

All shareholders are cordially invited to attend the meeting in person. However, even if you plan to attend the annual meeting in person, please read these proxy materials and cast your vote on the matters that will be presented at the meeting. You may vote your shares through the Internet, by telephone, or by mailing the enclosed proxy card. Instructions for our registered shareholders are described under the question “How do I vote?” on page 2 of the proxy statement.

 

Sincerely,

 

Todd C. Johnson
Executive Vice President, General
Counsel and Corporate Secretary

 

Jacksonville, Florida

April 5, 2010

 

 

 

TABLE OF CONTENTS

 

Lender Processing Services, Inc.

 

601 Riverside Avenue

Jacksonville, Florida 32204

 

 

PROXY STATEMENT

 

 

The enclosed proxy is solicited by the board of directors of Lender Processing Services, Inc. (the “Company” or “LPS”) for use at the Annual Meeting of Shareholders to be held on May 20, 2010 at 10:00 a.m., Eastern Daylight Time, or at any adjournment thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting of Shareholders. The meeting will be held in the Peninsular Auditorium at 601 Riverside Avenue, Jacksonville, Florida 32204.

 

It is anticipated that such proxy, together with this proxy statement, will be first mailed on or about April 5, 2010 to all shareholders entitled to vote at the meeting.

 

The Company’s principal executive offices are located at 601 Riverside Avenue, Jacksonville, Florida 32204, and its telephone number at that address is (904) 854-5100.

 

Unless stated otherwise or the context otherwise requires, all references in this proxy statement to “us,” “we,” “our,” “LPS” or the “Company,” are to Lender Processing Services, Inc., a Delaware corporation that was incorporated in December 2007 as a wholly-owned subsidiary of FIS, and its subsidiaries; all references to “FIS,” the “former parent,” or the “holding company” are to Fidelity National Information Services, Inc., a Georgia corporation formerly known as Certegy Inc., and its subsidiaries, that owned all of LPS’s shares until July 2, 2008; all references to “former FIS” are to Fidelity National Information Services, Inc., a Delaware corporation, and its subsidiaries, prior to the Certegy merger described below; all references to “old FNF” are to Fidelity National Financial, Inc., a Delaware corporation that owned a majority of FIS’s shares through November 9, 2006; and all references to “FNF” are to Fidelity National Financial, Inc. (formerly known as Fidelity National Title Group, Inc.), formerly a subsidiary of old FNF.

 

Prior to July 2, 2008, the Company was a wholly-owned subsidiary of FIS. In October 2007, the board of directors of FIS approved a plan of restructuring pursuant to which FIS would spin off its lender processing services segment to its shareholders in a tax free distribution. Pursuant to this plan of restructuring, on June 16, 2008, FIS contributed to us all of its interest in the assets, liabilities, businesses and employees related to FIS’s lender processing services operations in exchange for a certain number of shares of our common stock and $1,585.0 million aggregate principal amount of our debt obligations. On July 2, 2008, FIS distributed to its shareholders a dividend of one-half share of our common stock, par value $0.0001 per share, for each issued and outstanding share of FIS common stock held on June 24, 2008, which we refer to as the “spin-off.” Also on July 2, 2008, FIS exchanged 100% of our debt obligations for a like amount of FIS’s existing Tranche B Term Loans issued under its Credit Agreement dated as of January 18, 2007. The spin-off was tax-free to FIS and its shareholders, and the debt-for-debt exchange undertaken in connection with the spin-off was tax-free to FIS.

 

FIS is the result of the February 2006 merger of Certegy Inc. and former FIS, which we refer to as the Certegy merger. Certegy, Inc. survived the merger and was renamed Fidelity National Information Services, Inc. Prior to the Certegy merger, former FIS was a majority-owned subsidiary of old FNF. Old FNF merged into our former parent in November 2006 as part of a reorganization, which included old FNF’s spin-off of Fidelity National Title Group, Inc. Fidelity National Title Group, Inc. was renamed Fidelity National Financial, Inc. following this reorganization, and we refer to it as FNF.

 

Your shares can be voted at the annual meeting only if you vote by proxy or if you are present and vote in person. Even if you expect to attend the annual meeting, please vote by proxy to assure that your shares will be represented.

 

Who is entitled to vote?

 

All record holders of LPS common stock as of the close of business on March 22, 2010 are entitled to vote. On that day, 95,658,862 shares were issued and outstanding and eligible to vote, and there were 8,737 shareholders of record. Each share is entitled to one vote on each matter presented at the annual meeting.

 

What shares are covered by the proxy card?

 

The proxy card covers all shares held by you of record (i.e., shares registered in your name), and any shares held for your benefit in LPS’s 401(k) plan and Employee Stock Purchase Plan.

 

What if I am a beneficial holder rather than an owner of record?

 

If you hold your shares through a broker, bank, or other nominee, you will receive separate instructions from the nominee describing how to vote your shares.

 

How do I vote?

 

There are three ways to vote by proxy, other than by attending the annual meeting and voting in person:

 

 

 

What does it mean to vote by proxy?

 

It means that you give someone else the right to vote your shares in accordance with your instructions. In this case, we are asking you to give your proxy to the Executive Chairman of our board of directors and our President and Chief Executive Officer, who are sometimes referred to as the “proxy holders.” By giving your proxy to the proxy holders, you assure that your vote will be counted even if you are unable to attend the annual meeting. If you give your proxy but do not include specific instructions on how to vote on a particular proposal described in this proxy statement, the proxy holders will vote your shares in accordance with the recommendation of the board for such proposal.

 

On what am I voting?

 

You will be asked to consider two proposals at the annual meeting.

 

 

What happens if other matters are raised at the meeting?

 

Although we are not aware of any matters to be presented at the annual meeting other than those contained in the Notice of Annual Meeting, if other matters are properly raised at the meeting in accordance with the procedures specified in LPS’s certificate of incorporation and bylaws, all proxies given to the proxy holders will be voted in accordance with their best judgment.

What if I submit a proxy and later change my mind?

 

If you have submitted your proxy and later wish to revoke it, you may do so by doing one of the following: giving written notice to the Corporate Secretary; submitting another proxy bearing a later date (in any of the permitted forms); or casting a ballot in person at the annual meeting.

 

Who will count the votes?

 

Broadridge Investor Communications Services will serve as proxy tabulator and count the votes, and the results will be certified by the inspector of election.

 

How many votes must each proposal receive to be adopted?

 

The following votes must be received:

 

 

What constitutes a quorum?

 

A quorum is present if a majority of the outstanding shares of common stock entitled to vote is represented. Broker non-votes and abstentions will be counted for purposes of determining whether a quorum is present.

 

What are broker non-votes?

 

Broker non-votes occur when nominees, such as banks and brokers holding shares on behalf of beneficial owners, do not receive voting instructions from the beneficial holders at least ten days before the meeting. If that happens, the nominees may vote those shares only on matters deemed “routine” by the NYSE, such as ratification of auditors. Nominees cannot vote on non-routine matters if they do not receive voting instructions from beneficial holders, resulting in so-called “broker non-votes.” Beginning this year, the election of directors is considered a non-routine matter. Therefore, with respect to Proposal No. 1 concerning election of directors, broker non-votes will not be included in vote totals and will not affect the outcome of the vote. Please be sure to give specific voting instructions to your broker so that your vote can be counted.

 

What effect does an abstention have?

 

With respect to Proposal No. 1, abstentions or directions to withhold authority will not be included in vote totals and will not affect the outcome of the vote. For purposes of the Delaware law requirement that all proposals other than the election of directors receive the affirmative vote of a majority of the shares present or represented by proxy and entitled to vote, abstentions will have the effect of a vote against the proposals.

 

Who pays the cost of soliciting proxies?

 

We pay the cost of the solicitation of proxies, including preparing and mailing the Notice of Annual Meeting of Shareholders, this proxy statement and the proxy card. Following the mailing of this proxy statement, directors, officers and employees of the Company may solicit proxies by telephone, facsimile transmission or other personal contact. Such persons will receive no additional compensation for such services. Brokerage houses and other nominees, fiduciaries and custodians who are holders of record of shares of common stock will be requested to forward proxy soliciting material to the beneficial owners of such shares and will be reimbursed by the Company for their charges and expenses in connection therewith at customary and reasonable rates. In addition, the Company has retained Georgeson Inc. to assist in the solicitation of proxies for an estimated fee of $9,500, plus reimbursement of expenses.

What if I share a household with another shareholder?

 

We have adopted a procedure approved by the Securities and Exchange Commission, or SEC, called “householding.” Under this procedure, shareholders of record who have the same address and last name and do not participate in electronic delivery of proxy materials will receive only one copy of our Annual Report and Proxy Statement unless one or more of these shareholders notifies us that they wish to continue receiving individual copies. This procedure will reduce our printing costs and postage fees. Shareholders who participate in householding will continue to receive separate proxy cards. Also, householding will not in any way affect dividend check mailings. If you are eligible for householding, but you and other shareholders of record with whom you share an address currently receive multiple copies of our Annual Reports and/or Proxy Statements, or if you hold stock in more than one account, and in either case you wish to receive only a single copy of the Annual Report or Proxy Statement for your household, please contact our transfer agent, Computershare Investor Services, LLC (in writing: 2 North LaSalle Street, Chicago, Illinois 60602; or by telephone: (800) 568-3476). If you participate in householding and wish to receive a separate copy of the 2009 Annual Report or this Proxy Statement, or if you do not wish to participate in householding and prefer to receive separate copies of future Annual Reports and/or Proxy Statements, please contact Computershare Investor Services, LLC as indicated above. Beneficial shareholders can request information about householding from their banks, brokers or other holders of record. The Company hereby undertakes to deliver promptly, upon written or oral request, a separate copy of the annual report to shareholders or proxy statement, as applicable, to a Company shareholder at a shared address to which a single copy of the document was delivered.

 

 

The following paragraphs provide information as of the date of this proxy statement about each nominee for director, and each director continuing in office. The information presented includes their ages, years of service on our board, business experience and service on other public companies’ boards of directors, including any such directorships held during the past five years. We have also included information about each nominee’s and each continuing director’s specific experience, qualifications, attributes or skills that led the board to conclude, at the time we filed our proxy statement in light of our business and structure, that such nominee or continuing director should serve on our board.

 

Information About the Nominees for Election

 

The names of the nominees for election as directors of the Company and certain biographical information concerning each of them is set forth below:

 

 

 

 

Jeffrey S. Carbiener.  Jeffrey S. Carbiener has served as our President and Chief Executive Officer since the spin-off and has served as our director since March 2009. He served as Executive Vice President and Chief Financial Officer of FIS from February 2006 until the spin-off, and served as the Executive Vice President and Group Executive, Check Services of Certegy from June 2001 until the time of the Certegy merger in February 2006. Prior to joining Certegy,

Mr. Carbiener served as Senior Vice President, Equifax Check Solutions, a unit of Equifax Inc., from February 1998 until June 2001. In determining that Mr. Carbiener should serve as a director, our board considered Mr. Carbiener’s deep knowledge and understanding of our operations and our industry as our Chief Executive Officer, as well as through his service with our former parent FIS, and with Certegy and Equifax. The board also believes that Mr. Carbiener’s integrity, values, and good judgment make him well-suited to serve on our board.

 

Alvin R. (Pete) Carpenter.  Mr. Carpenter has served as a director of our Company since April 2009. Mr. Carpenter retired from CSX Corporation (“CSX”) in February 2001, where he had served as Vice Chairman from July 1999 until his retirement. From 1962 until February 2001, he held a variety of positions with CSX, including President and Chief Executive Officer of CSX Transportation, Inc. from 1992 to July 1999, and Executive Vice President — Sales and Marketing of CSX Transportation, Inc. from 1989 to 1992. Mr. Carpenter also serves on the boards of directors of PSS World Medical, Inc., Regency Centers Corporation and Stein Mart, Inc., and previously served on the boards of Barnett Bank, Inc., Nations Bank and Florida Rock Industries, Inc. In determining that Mr. Carpenter should serve as a director, our board considered Mr. Carpenter’s extensive experience operating a complex and decentralized business organization. The board also considered Mr. Carpenter’s experience serving on the boards of banking companies, which helps him to understand our customers and industry, and his service other public company boards of directors and their committees, which we believe enhances his ability to more effectively serve on our board of directors and the committees on which he serves.

 

John F. Farrell, Jr.  John F. Farrell, Jr. has served as a director of our Company since March 2009. Mr. Farrell is a private investor and has been since 1997. From 1985 through 1997 he was Chairman and Chief Executive Officer of North American Mortgage Company. Mr. Farrell served on the board of directors of FNF from October 2005 until March 2009, and served on the board of old FNF from 2000 until it was merged into FIS in November 2006. In determining that Mr. Farrell should serve as a director, our board considered his long experience as chief executive of a mortgage company and the knowledge of our industry and customers that he acquired through that service. The board also considered Mr. Farrell’s historical understanding of certain of our businesses which were formerly old FNF businesses, which he acquired as a director of old FNF.

 

Information About Our Directors Continuing in Office

 

Term Expiring in 2011

 

 

 

 

Lee A. Kennedy.  Lee A. Kennedy has served as a director of our Company since May 2008, as Chairman of our Board since March 2009, and as our Executive Chairman since September 2009. Mr. Kennedy also serves as interim Chairman and Chief Executive Officer of Ceridian Corporation, a position he has held since January 2010. Mr. Kennedy served as President and Chief Executive Officer of our former parent FIS from the time of the Certegy merger in February 2006 until October 2009, and as Executive Vice Chairman of FIS from October 2009 until March 2010. Prior to the Certegy merger in February 2006, Mr. Kennedy had served as the Chief Executive Officer of Certegy since March 2001 and as the Chairman of Certegy since February 2002. Prior to that, he served as President, Chief Operating Officer and a director of Equifax Inc., a provider of consumer credit and other business information, from June 1999 until Certegy was spun off from Equifax in June 2001. Mr. Kennedy also serves on the board of directors of Ceridian Corporation, and has served on the boards of directors of FIS and Equifax Inc. in the past five years. In determining that Mr. Kennedy should serve as a director, our board considered the deep

knowledge and understanding of our operations and our industry he gained as President and Chief Executive Officer of our former parent. The board also considered the perspective he would be able to bring to our board by virtue of his longtime service as a leader of a complex business organization.

 

Philip G. Heasley.  Philip G. Heasley has served as a director of our Company since March 2009. Mr. Heasley has served as the President and CEO of ACI Worldwide, Inc., a global provider of electronic payment solutions to financial institutions, since May 2005. From 2003 until May 2005, he served as Chairman and Chief Executive Officer of Paypower LLC. Prior to that, Mr. Heasley served as Chairman and Chief Executive Officer of First USA Bank from 2000 to 2003. Before First USA, Mr. Heasley spent 13 years in executive positions at U.S. Bancorp, including six years as Vice Chairman and two years as President and Chief Operating Officer. Mr. Heasley served on the board of directors of FNF from October 2005 until March 2009, and served on the board of old FNF from 2000 until it was merged into FIS in November 2006. Mr. Heasley also serves as a director of ACI Worldwide, Inc. and Tier Technologies, Inc., and formerly served on the boards of Kinterra, Inc. and Ohio Casualty Corporation. In determining that Mr. Heasley should serve as a director, our board considered his experience as chief executive of a company that provides technology services to financial institutions and his experience as an executive of large financial institutions, and his resulting ability to understand our customer base and the unique issues surrounding those relationships. In addition, the board considered Mr. Heasley’s historical understanding of certain of our businesses which were formerly old FNF businesses, which he acquired as a director of old FNF.

 

Term Expiring 2012

 

 

 

 

David K. Hunt.  David K. Hunt has served as a director of our Company since February 2010. Since December 2005, Mr. Hunt has been a private investor. He previously served as the non-executive Chairman of the Board of OnVantage, Inc., a provider of corporate spend management and supplier marketing technology for global professional meetings and events, from October 2004 until December 2005. Prior to that, he served as the Chairman and Chief Executive Officer of PlanSoft Corporation, an internet-based business-to-business solutions provider in the meeting and convention industry, a position he held from May 1999 to October 2004. Mr. Hunt also serves on the board of directors of FIS. In determining that Mr. Hunt should serve as a director, our board considered his long familiarity with our businesses and industry which he acquired as a director, and a member of the audit committee, of our former parent FIS. The board also considered Mr. Hunt’s board committee experience, which we believe enhances his ability to more effectively serve on the committees of our board.

 

James K. Hunt.  James K. Hunt has served as a director of our Company since May 2008. He served as a director of FIS from April 2006 until the spin-off date. Since May 2007, Mr. Hunt has served as Chief Executive Officer and Chief Investment Officer of THL Credit Group, L.P., a credit affiliate of Thomas H. Lee Partners, L.P. providing capital to public and private companies for growth, recapitalizations, leveraged buyouts and acquisitions. Previously, Mr. Hunt founded and was CEO and Managing Partner of Bison Capital Asset Management, LLC, a private equity firm, since 2001. Prior to founding Bison Capital, Mr. Hunt was the President of SunAmerica Corporate Finance and Executive Vice President of SunAmerica Investments (subsequently, AIG SunAmerica). Mr. Hunt also serves as a director of Primus Guaranty, Ltd., and formerly served on the board of our former parent FIS. In determining that Mr. Hunt should serve as a director, our board considered his experience in managing financial services companies and in capital markets, and his ability to understand the issues facing a company with significant leverage.

 

ELECTION OF DIRECTORS

 

The Certificate of Incorporation of the Company provides that our Board shall consist of not less than one nor more than fourteen directors. Our board determines the number of directors within these limits, and the current number of directors is set at seven. Our directors are divided into three classes, each class as nearly equal in number as possible. The term of office of only one class of directors expires in each year. The directors elected at this annual meeting will hold office for a term of three years or until their successors are elected and qualified.

 

At this annual meeting, the following persons, each of whom is a current director of the Company, have been nominated to stand for election to the Board for a three-year term expiring in 2013:

 

Jeffrey S. Carbiener

Alvin R. (Pete) Carpenter

John F. Farrell, Jr.

 

The Board believes that each of the nominees will stand for election and will serve if elected as a director.

 

THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR” EACH OF THE LISTED NOMINEES.

 

RATIFICATION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

 

General Information About KPMG LLP

 

Although shareholder ratification of the appointment of our independent registered public accounting firm is not required by our bylaws or otherwise, we are submitting the selection of KPMG LLP to our shareholders for ratification as a matter of good corporate governance practice. Even if the selection is ratified, the audit committee in its discretion may select a different independent registered public accounting firm at any time if it determines that such a change would be in the best interests of us and our shareholders. If our shareholders do not ratify the audit committee’s selection, the audit committee will take that fact into consideration, together with such other factors it deems relevant, in determining its next selection of independent registered public accounting firm.

 

In choosing our independent registered public accounting firm, our audit committee conducts a comprehensive review of the qualifications of those individuals who will lead and serve on the engagement team, the quality control procedures the firm has established, and any issue raised by the most recent quality control review of the firm. The review also includes matters required to be considered under the SEC rules on “Auditor Independence,” including the nature and extent of non-audit services, to ensure that they will not impair the independence of the accountants.

 

Representatives of KPMG LLP are expected to be present at the annual meeting. These representatives will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

 

Principal Accounting Fees and Services

 

The Audit Committee has engaged KPMG LLP to audit the consolidated financial statements of the Company for the 2010 fiscal year. For services rendered to us during or in connection with our fiscal years ended December 31, 2009 and 2008, we were billed the following fees by KPMG:

 

Audit Fees. Audit fees consisted principally of fees for the audits and other filings related to the Company’s 2009 audit, and audits of the Company’s subsidiaries required for regulatory reporting purposes, including billings for out-of-pocket expenses incurred.

 

Audit-Related Fees. Audit-related fees in 2009 consisted principally of fees for SAS 70 audits, including billings for out-of-pocket expenses incurred.

 

Tax Fees. There were no tax fees in 2009.

 

All Other Fees. We were not billed for any other fees in 2009.

 

Approval of Accountants’ Services

 

In accordance with the requirements of the Sarbanes-Oxley Act of 2002, all audit and audit-related work and all non-audit work performed by KPMG LLP is approved in advance by the audit committee, including the proposed fees for such work. The audit committee has adopted policies and procedures for pre-approving all work performed by KPMG. Specifically, the audit committee has pre-approved the use of KPMG for specific types of services subject to maximum amounts set by the committee. Additionally, specific pre-approval authority is delegated to our audit committee chairman, provided that the estimated fee for the proposed service does not exceed a pre-approved maximum amount set by the committee. Our audit committee chairman must report any pre-approval decisions to the audit committee at its next scheduled meeting. Any other services are required to be pre-approved by the audit committee.

 

THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR” THE RATIFICATION OF KPMG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE 2010 FISCAL YEAR.

 

The number of our common shares beneficially owned by each individual or group is based upon information in documents filed by such person with the SEC, other publicly available information or information available to us. Percentage ownership in the following table is based on 95,658,862 shares of LPS common stock outstanding as of March 22, 2010. Unless otherwise indicated, each of the shareholders has sole voting and investment power with respect to the shares of common stock beneficially owned by that shareholder. The number of shares beneficially owned by each shareholder is determined under rules issued by the SEC.

 

Security Ownership of Certain Beneficial Owners

 

The following table sets forth information regarding beneficial ownership of our common stock by each shareholder who is known by the Company to beneficially own 5% or more of our common stock:

 

 

 

 

 

Security Ownership of Management and Directors

 

The following table sets forth information regarding beneficial ownership of our common stock by:

 

 

The information is not necessarily indicative of beneficial ownership for any other purpose. The mailing address of each director and executive officer shown in the table below is c/o Lender Processing Services, Inc., 601 Riverside Avenue, Jacksonville, Florida 32204.

 

 

 

 

The executive officers of the Company as of the date of this Proxy Statement are set forth in the table below. Certain biographical information with respect to those executive officers who do not also serve as directors follows the table. There are no family relationships among the executive officers, directors or nominees for director.

 

 

Francis K. Chan is our Executive Vice President and Chief Financial Officer. He served as FIS’s Senior Vice President, Chief Accounting Officer and Controller from December 2005 until the spin-off date. Mr. Chan served as Vice President, Accounting and Financial Operations of old FNF from April 2003 until December 2005, and as Controller of old FNF from 1998 until December 2005. Mr. Chan served in various other management roles with old FNF from July 1995 until 1998. Prior to that, Mr. Chan was employed by KPMG LLP.

 

Daniel T. Scheuble is our Executive Vice President and Co-Chief Operating Officer. He served as Executive Vice President of the Mortgage Processing Services division of FIS from April 2006 until the spin-off date. Mr. Scheuble joined former FIS in 2003 as Chief Information Officer of the Mortgage Servicing Division. Before joining former FIS, Mr. Scheuble was Chief Information Officer at GMAC Residential and prior to that, he was the Executive Vice President and Chief Information Officer of Loan Operations for HomeSide Lending.

 

Eric D. Swenson is our Executive Vice President and Co-Chief Operating Officer. He served as Executive Vice President of the Mortgage Information Services division of FIS from April 2006 until the spin-off date. Prior to that time, Mr. Swenson was an Executive Vice President of old FNF and served as the President of the Lender Outsourcing Division of former FIS from January 2004 until April 2006. Mr. Swenson served as President and Chief Operating Officer of Fidelity National Information Solutions, Inc., which was a majority-owned subsidiary of old FNF, from August 2001 to December 2002, and as Executive Vice President of Fidelity National Information Solutions, Inc. from December 2002 through December 2003. Prior to August 2001, Mr. Swenson was an Executive Vice President and Regional Manager with old FNF.

 

Parag Bhansali has served as our Executive Vice President, Corporate Development since March 2009. He previously served as our Senior Vice President, Investor Relations and Strategic Planning from February 2008 until March 2009. Prior to joining LPS in February 2008, Mr. Bhansali had served as Vice President of Finance of Rayonier Inc., a forest products company, since April 2000. Prior to that, Mr. Bhansali was with Covance Inc., a pharmaceutical research and drug development company, where he served in various positions including Vice President, Corporate Development and Strategy and Vice President, Investor Relations.

 

Todd C. Johnson is our Executive Vice President, General Counsel and Corporate Secretary. Until the spin-off date, he served as Assistant General Counsel and Corporate Secretary of FIS since February 2006 and of FNF since October 2005. Mr. Johnson also previously served as Assistant General Counsel and Corporate Secretary of old

FNF from July 2003 until November 2006. Prior to joining old FNF, Mr. Johnson was a partner in the Corporate and Securities practice group of Holland & Knight LLP.

 

Joseph M. Nackashi is our Executive Vice President and Chief Information Officer. From the time of the Certegy merger in February 2006 until the spin-off date, he served as Senior Vice President and Chief Technology Officer of FIS. Prior to that, Mr. Nackashi had served as Senior Vice President and Chief Technology Officer of former FIS and its predecessor, ALLTEL Information Services, Inc., since 2000.

 

Christopher P. Breakiron is our Senior Vice President and Chief Accounting Officer. He served as Vice President of Financial Planning and Analysis of FIS from February 2006 until the spin-off date. Prior to joining FIS, Mr. Breakiron had served as Senior Vice President and Controller, International Card Services of Certegy since 2002.

 

Compensation Discussion and Analysis

 

The following compensation discussion and analysis may contain statements regarding corporate performance targets and goals. These targets and goals are disclosed in the limited context of our compensation programs and should not be understood to be statements of management’s expectations or estimates of results or other guidance. We specifically caution investors not to apply these statements to other contexts.

 

Introduction

 

During 2009, LPS performed very well in a difficult economic environment. Full year 2009 revenues were $2.4 billion, which represented a 29.0% increase over the prior year, and adjusted net earnings rose to $300.3 million in 2009, an increase of 30.1% over 2008. In addition, we had adjusted free cash flow of $349.2 million, which we used to reduce our debt by $262 million, complete $23 million in share repurchases and pay dividends of $38 million.

 

Our named executive officers for 2009 are set forth below. In this compensation discussion and analysis, we discuss the compensation objectives and decisions, and the rationale behind those decisions, relating to the compensation we provided to our named executive officers in 2009, except with respect to William P. Foley, II. Mr. Foley retired as an officer and director of our Company on March 15, 2009. As a result, he was not included in the 2009 compensation review discussed below, and we discuss only the payments he received in connection with his retirement in this compensation discussion and analysis.

 

 

 

 

Objectives of our Compensation Program

 

Our compensation programs are designed to attract and motivate high performing executives with the objective of delivering long-term shareholder value and financial results. Retaining our key employees is also a high priority, as there is significant competition in our industry for talented managers. We think the most effective way of accomplishing these objectives is to link the compensation of our named executive officers to specific annual and long-term strategic goals, thereby aligning the interests of the executives with those of our shareholders. We believe it is important to deliver strong results for our shareholders, and we believe our practice of linking compensation with corporate performance will help us to accomplish that goal.

 

We link a significant portion of each named executive officer’s total annual compensation to performance goals that are intended to deliver measurable results. Executives are generally rewarded only when and if the pre-established performance goals are met or exceeded. We also believe that material stock ownership by executives assists in aligning executives’ interests with those of shareholders and strongly motivates executives to build long-term shareholder value. We structure our stock-based compensation programs to assist in creating this link. Finally, we provide our executives with total compensation that we believe is competitive relative to the compensation paid to similarly situated executives from similarly sized companies, and which is sufficient to motivate, reward and retain those individuals with the leadership abilities and skills necessary for achieving our ultimate objective: the creation of long-term shareholder value.

 

Role of Compensation Committee and Executive Officers in Determining Executive Compensation

 

Our compensation committee is responsible for approving and monitoring the compensation of all our named executive officers. Because Mr. Foley retired as our Executive Chairman in March 2009 and Mr. Kennedy was not appointed Executive Chairman until September 2009, neither of them were involved in the recommendations to our compensation committee with respect to our executives’ 2009 compensation, although we expect Mr. Kennedy to be involved in those discussions in 2010 and future years. Our President and Chief Executive Officer plays an important role in determining executive compensation levels by making recommendations to our compensation committee regarding salary adjustments and incentive awards for his direct reports. These recommendations are based on a review of an executive’s performance and job responsibilities and potential future performance. Our compensation committee may exercise its discretion in modifying any recommended salary adjustments or incentive awards for our executives. Our Executive Chairman and President and Chief Executive Officer do not make recommendations to the compensation committee with respect to their own compensation.

 

Establishing Executive Compensation Levels

 

We operate in a highly competitive industry, and compete with our peers and competitors to attract and retain highly skilled executives within that industry. In order to attract talented executives with the leadership abilities and skills necessary for building long-term shareholder value, motivate our executives to perform at a high level, reward outstanding achievement and retain our key executives over the long-term, our compensation committee sets total compensation at levels it determines to be competitive in our market.

 

When determining the overall compensation of our executive officers, including base salaries and annual and long-term incentive amounts, the compensation committee considers a number of factors it deems important. These factors include financial performance, individual performance, and an executive’s experience, knowledge, skills, level of responsibility and expected impact on our future success. The compensation committee also considers corporate governance principles, tax and other rules and regulations related to executive compensation, and marketplace compensation practices.

 

When considering marketplace compensation practices, our compensation committee considers data on base salary, annual incentive targets, long-term incentive targets and all other forms of executive compensation, and generally focuses on levels of compensation from the 50th to the 75th percentiles of market data. The marketplace research provides a point of reference for the committee, but the compensation committee ultimately makes compensation decisions based on all of the factors described above. For 2009, each element of our executives’ compensation, including base salary, target annual incentive opportunities, long-term incentive awards and benefits, was set to be within a competitive range of the peer group companies described below. The pay

positioning of an individual executive is based upon his individual competencies, skills, experience and performance, as well as internal pay alignment as compared to our other executives.

 

Role of Compensation Consultants

 

To further the objectives of our compensation program, the compensation committee engaged Strategic Compensation Group, LLC, an independent compensation consultant, to conduct an annual review of our compensation programs for the named executive officers, as well as for other key executives and our board of directors. Strategic Compensation Group was selected by our compensation committee, reports directly to the committee, receives compensation only for services provided to the committee and does not provide other services to us. Strategic Compensation Group provided the compensation committee with relevant market data and alternatives to consider when making compensation decisions for our key executives, including the named executive officers.

 

To assist the compensation committee in determining 2009 compensation levels, Strategic Compensation Group gathered marketplace compensation data on total compensation, which consisted of annual salary, annual incentives, long-term incentives and pay mix. Strategic Compensation Group used two different marketplace data sources: (1) marketplace surveys, including a general executive compensation survey prepared by Towers Perrin that contains compensation data for 780 companies and a general survey of the compensation practices of all publicly traded companies within a revenue range of $2 billion to $3 billion, and (2) a peer group of 16 publicly-traded companies. The 16 companies were:

 

 

These companies are in the same general industry as us, and have comparable annual revenues or compete directly with us for revenues and/or key employees. This compensation information provided by Strategic Compensation Group provided a basis for the evaluation of total executive compensation paid to our executive officers, but many other factors were considered by our compensation committee.

 

Allocation of Total Compensation for 2009

 

We compensate our executives through a mix of base salary, annual cash incentives and long-term equity-based incentives. We also maintain standard employee benefit plans for our employees and executive officers and

provide some limited perquisites. These benefits and perquisites are described later. The compensation committee generally allocates our executive officers’ compensation based on the committee’s determination of the appropriate ratio of performance-based compensation to other forms of regularly-paid compensation. In making this determination, the compensation committee considers how other companies allocate compensation based on the marketplace data provided by Strategic Compensation Group, as well as each executive’s level of responsibility, the individual skills, experience and contribution of each executive, and the ability of each executive to impact company-wide performance and create long-term shareholder value.

 

In 2009, our named executive officers’ compensation was allocated among annual salary, target annual cash incentives and long-term equity-based incentives, with a heavy emphasis on the at-risk, performance-based components of annual cash incentives and long-term equity-based incentives.

 

Target performance-based incentive compensation comprised 70% to 90% of total target compensation for our named executive officers in 2009. The compensation committee found this range to be appropriate after consideration of the factors described above. The compensation committee also believes a significant portion of an executive officer’s compensation should be allocated to equity-based compensation in order to effectively align the interests of our executives with the long-term interests of our shareholders. Consequently, for 2009, a majority of our named executive officers’ total compensation was provided in the form of nonqualified stock options and restricted stock.

 

When allocating Mr. Kennedy’s compensation among base salary and annual and long-term incentives, our compensation committee considered that he is not employed exclusively by us. Specifically, because Mr. Kennedy did not dedicate 100% of his time on a day-to-day basis to LPS matters, our compensation committee allocated a smaller portion of his annual compensation to base salary. Rather, because of his unique experience and contributions to our long-term strategy and success, our compensation committee heavily weighted Mr. Kennedy’s compensation toward at-risk, performance-based annual and long-term incentive opportunities.

 

2009 Executive Compensation Components

 

For 2009, the principal components of compensation for our named executive officers consisted of:

 

 

We also provided our executives with certain retirement and other benefits, as well as limited perquisites, although these items are not significant components of our compensation programs.

 

Below is a summary of each element of our 2009 compensation programs.

 

Base Salary

 

Our compensation committee seeks to provide each of our named executive officers with a level of assured cash compensation for services rendered during the year sufficient, together with performance-based incentive awards, to motivate the executive to perform consistently at a high level. However, base salary is a relatively small component of the total compensation package, as the committee’s emphasis is on performance-based, at-risk pay. The compensation committee typically reviews salary levels at least annually as part of its performance review process, as well as in the event of promotions or other changes in executive officers’ positions.

 

In March 2009, our compensation committee reviewed the base salaries of our executive officers and approved increases of $50,000, $25,000 and $6,000 to Messrs. Chan’s, Scheuble’s and Swenson’s base salaries, respectively. The committee did not increase Mr. Carbiener’s base salary in 2009. In determining whether each named executive should receive an increase in his base salary, the committee considered the responsibilities of the position of each executive, his level of experience and his ability to impact company-wide performance.

 

In September 2009, the compensation committee approved a base salary of $250,000 for Mr. Kennedy in connection with him becoming Executive Chairman of our board. In determining Mr. Kennedy’s base salary, the

committee considered Mr. Kennedy’s unique experience and ability to contribute to our long-term strategy and success, as well as the fact that he is not able to dedicate 100% of his time to LPS matters on a day-to-day basis.

 

Annual Performance-Based Cash Incentive

 

Generally, we will award annual cash incentives based upon the achievement of performance goals that are specified in the first quarter of the year. The annual incentives are provided to our executive officers under an annual incentive plan that is designed to allow the annual incentives to qualify as deductible performance-based compensation, as that term is used in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). The annual incentive plan includes a set of performance goals that can be used in setting incentive awards under the plan. We use the annual incentive plan to provide a material portion of the executives’ total compensation in the form of at-risk, performance-based pay.

 

In the first quarter of 2009, annual incentive award targets were established by the compensation committee as described above for our named executive officers other than Mr. Kennedy (who was our non-executive Chairman at that time) as a percentage of the individual’s base salary. The annual incentive targets were set in accordance with their respective employment agreements, which are described below. Mr. Carbiener’s target was 150% of base salary, Mr. Chan’s target was 100% of base salary, and Messrs. Scheuble’s and Swenson’s targets were 125% of their respective base salaries. In setting the targets in our executives’ employment agreements, the committee considered the executive’s position within our organization, level of responsibility and ability to impact company-wide performance and create long-term shareholder value. In connection with Mr. Kennedy becoming Executive Chairman in September 2009, the committee set his target at 100% of base salary after consideration of his position within our organization and his unique experience and ability to impact our long-term strategy and success.

 

Actual payout under the annual incentive plan can range from one-half to two times the target incentive opportunity, depending on achievement of the pre-established goals described below. However, no annual incentive payments may be paid to an executive officer if the minimum performance levels set by the compensation committee are not met. Minimum performance levels were established to challenge executive officers while providing reasonable opportunities for achievement. Maximum performance levels were established to encourage performance beyond the target levels while placing limits on the annual incentive awards to avoid excessive compensation. The ranges of possible payments under our annual incentive plan are set forth in the Grants of Plan-Based Awards table under the column Estimated Possible Payouts Under Non-Equity Incentive Plan Awards.

 

During the first quarter of 2009, our compensation committee also established performance goals for 2009 relating to the incentive targets described above and set a threshold performance level that needed to be achieved before any awards could be paid. These performance goals were specific, objective quantitative measures, and our compensation committee did not retain discretion to increase the amount of the incentive awards, but did retain discretion to reduce such amounts.

 

Annual incentive awards for 2009 for our named executive officers were based on meeting objectives for target revenue (target of $2,058.2 million), weighted at 40% of the annual incentive target; target adjusted net earnings (target of $256.1 million), weighted at 40% of the annual incentive target; and free cash flow (target of $245.0 million), weighted at 20% of the annual incentive target. However, in the event that the Company’s 2009 adjusted net earnings fell short of the adjusted net earnings threshold set by the committee of $248.6 million, the committee had discretion to reduce the executives’ awards under the annual incentive plan to zero regardless of our 2009 revenue and free cash flow results.

 

These three measures are key measures in evaluating the performance of our business. Revenue was selected as a performance goal with the intent of focusing our executives on achieving our revenue growth objectives. The committee believes that revenue is an important measure of financial success that is clearly understood by both our executives and our shareholders. Adjusted net earnings (net earnings adjusted for the impact of certain non-recurring adjustments, if applicable, plus the after-tax purchase price amortization of intangible assets added through acquisitions) and adjusted free cash flow (net cash provided by operating activities less additions to property, equipment and computer software, as well as non-recurring adjustments, if applicable) were selected because they measure our operating strength and management’s ability to operate the Company efficiently.

When approving the 2009 targets, the committee determined that final calculations would be subject to adjustment for federal and state regulatory actions, acquisitions, divestitures, major restructuring charges, significant changes in revenue mix and non-budgeted discontinued operations. Our results relating to the 2009 performance goals exceeded the maximum level with respect to each of the objectives. For 2009, revenue was $2,366.3 million, adjusted net earnings was $300.0 million and free cash flow was $348.9 million (in each case, as adjusted in accordance with the 2009 performance goals). Accordingly, the incentive awards earned by our named executive officers for 2009 were at the maximum levels. The annual incentive amounts earned under the annual incentive plan were approved by our compensation committee and are reported in the Summary Compensation Table under the column Non-Equity Incentive Plan Compensation.

 

In addition, in September 2009, our compensation committee approved a one-time discretionary bonus of $100,000 for Mr. Kennedy. The bonus was paid in recognition of the additional responsibilities he would assume in his role of Executive Chairman, and is reported in the Summary Compensation Table under the Bonus column.

 

In February 2009, our compensation committee approved a discretionary bonus equal to 10% of each executive’s base salary. The bonus was paid in recognition of our outstanding performance in 2008 with respect to free cash flow, which was not included in the performance measures evaluated under the annual incentive plan with respect to 2008 performance, in recognition of the success of the spin-off and to encourage continued success in 2009. The amounts of the discretionary bonuses are reported in the Summary Compensation Table under the Bonus column.

 

Long-Term Equity Incentive Awards

 

We use our Lender Processing Services, Inc. 2008 Omnibus Incentive Plan, or the omnibus plan, for long-term incentive awards. Our long-term incentive awards are generally made to management-level employees, including our executives, who have an ability to impact our long-term results. All long-term incentive awards made under the omnibus plan are approved by the compensation committee. Generally, the committee will consider annual long-term incentive awards in the second or third quarter of each year, although the committee may make grants with respect to new hires or promotions, in recognition of special achievements or for retention purposes at any time. The compensation committee regularly reviews the dilutive impact of our long-term incentive awards on our shareholders.

 

Awards under the omnibus plan are granted on the date they are approved by the committee, and the exercise price for stock options awarded under the omnibus plan is the closing price of our common stock on the NYSE on the date of grant. The omnibus plan does not permit us to amend the terms of previously granted options to reduce the exercise price per share (except in the case of certain equity restructurings or other changes in our capitalization) or to cancel outstanding options and grant substitute options with a lower exercise price per share. Moreover, the omnibus plan does not permit us to purchase outstanding underwater options from participants for cash. A description of the omnibus plan can be found under the heading “Stock Incentive Plans” following the Grants of Plan-Based Awards table.

 

In 2009, we used a combination of nonqualified stock options and restricted stock to provide long-term incentives to our executive officers. Our compensation committee believes stock options and restricted stock assist in its goal of creating long-term shareholder value by linking the interests of our named executive officers, who are in positions to directly influence shareholder value, with the interests of our shareholders, and should constitute a significant portion of our named executive officers’ total compensation. We also believe these awards aid in retention, because the executive must remain with us until the awards fully vest.

 

In May 2009, our compensation committee approved grants of nonqualified stock options and restricted stock to each of our named executive officers pursuant to the omnibus plan. Our compensation committee considers several factors when determining award levels, and ultimately uses its judgment when making individual grants. The factors the committee considers include the following:

 

 

 

The stock options awarded by the committee in 2009 have an exercise price equal to the fair market value of a share of our common stock on the date of grant, vest proportionately each year over three years based on continued employment with us, and have a seven-year term. The restricted stock awarded in 2009 vests proportionately each year over three years based on the executive’s continued employment with us, and dividends are payable on restricted shares granted in 2009 and prior years in the same manner as they are payable to our other shareholders. Further details concerning the stock option and restricted stock awards made to our named executive officers in 2009, including the number of options and restricted shares awarded and the exercise price of the options, are provided in the Grants of Plan-Based Awards table and the related footnotes.

 

In March 2010, our compensation committee adopted several new policies with respect to our long-term incentive awards. First, the committee approved a policy that our annual stock option and restricted stock awards will utilize a vesting schedule of not less than three years. Second, the committee adopted a policy that dividends on restricted shares granted in the future will be accrued during the restricted period, and will be paid only if and when the restricted shares vest. Finally, our compensation committee also approved a mandatory holding period of six months following vesting for one-half of the shares of our common stock acquired by our named executive officers through a restricted share grant.

 

Retirement and Employee Benefit Plans

 

We provide retirement and other benefits to our employees under a number of compensation and benefit plans. Our named executive officers generally participate in the same compensation and benefit plans as our other executives and employees. All employees in the United States, including our named executive officers, are eligible to participate in our 401(k) plan and our Employee Stock Purchase Plan, or ESPP. In addition, our named executive officers generally participate in the same health and welfare plans as our other employees. Mr. Carbiener also continues to participate in the LPS split dollar plan, and the LPS special plan, which are described below.

 

Executive Life and Supplemental Retirement Benefit Plan and Special Supplemental Executive Retirement Plan

 

Following the spin-off, Mr. Carbiener retained death benefits under the FIS Executive Life and Supplemental Retirement Benefit Plan, which obligations we subsequently assumed solely with respect to Mr. Carbiener. We refer to this plan as the LPS split dollar plan. The purpose of the LPS split dollar plan is to reward executives for their service to the company and to provide an incentive for future service and loyalty. The plan provides benefits through life insurance policies on the lives of participants. However, as a result of amendments made to the plan to comply with applicable law resulting from the Sarbanes-Oxley Act of 2002, the LPS split dollar plan does not provide Mr. Carbiener with a deferred cash accumulation benefit.

 

Prior to the spin-off, to replace the lost cash accumulation benefits, FIS adopted the FIS Special Supplemental Executive Retirement Plan. Following the spin-off, we assumed the obligations under this plan with respect to Mr. Carbiener, which we refer to as the LPS special plan. The LPS special plan provides participants with a benefit opportunity comparable to the deferred cash accumulation benefit opportunity that would have been available had they been able to continue participation in the split dollar plan. Information regarding Mr. Carbiener’s continuing benefits under the LPS special plan, as well as the material terms of the LPS special plan and the LPS split dollar plan, can be found in the Nonqualified Deferred Compensation table and accompanying narrative. Mr. Carbiener is the only participant in both the LPS split dollar plan and the LPS special plan, and we do not maintain any other supplemental plans.

 

401(k) Plan

 

We sponsor a defined contribution savings plan that is intended to be qualified under Section 401(a) of the Internal Revenue Code. The plan contains a cash or deferred arrangement under Section 401(k) of the Internal

Revenue Code, as well as an employee stock ownership plan feature. Participating employees may contribute up to 40% of their eligible compensation, but not more than statutory limits (generally $16,500 in 2009). We contribute an amount equal to 50% of each participant’s voluntary contributions under the plan, up to a maximum of 6% of eligible compensation for each participant.

 

A participant may receive the value of his or her vested account balance upon termination of employment. A participant is always 100% vested in his or her voluntary contributions. Vesting in matching contributions occurs on a pro rata basis over an employee’s first three years of employment with the Company.

 

Deferred Compensation Plans

 

We also provide our named executive officers, as well as other key employees, with the opportunity to defer receipt of their compensation under a non-qualified deferred compensation plan. Mr. Chan is the only named executive officer who has deferred compensation under the plan. A description of the plan and information regarding Mr. Chan’s deferrals under the plan can be found in the Nonqualified Deferred Compensation table and accompanying narrative.

 

Employee Stock Purchase Plan

 

We sponsor an Employee Stock Purchase Plan, or ESPP, which provides a program through which our executives and employees can purchase shares of our common stock through payroll deductions and through matching employer contributions. Participants may elect to contribute between 3% and 15% of their salary into the ESPP through payroll deduction. At the end of each calendar quarter, we make a matching contribution to the account of each participant who has been continuously employed by us or a participating subsidiary for the last four calendar quarters. For most employees, matching contributions are equal to 1/3 of the amount contributed during the quarter that is one year earlier than the quarter in which the matching contribution is made. For certain officers, including our named executive officers, and for employees who have completed at least ten consecutive years of employment with us, the matching contribution is 1/2 of such amount. The matching contributions, together with the employee deferrals, are used to purchase shares of our common stock on the open market. The ESPP was approved by FIS, as our former parent, prior to the spin-off.

 

Health and Welfare Benefits

 

We sponsor various broad-based health and welfare benefit plans for our employees. Certain executives, including the named executive officers, are provided with additional life insurance. The taxable portion of the premiums on this additional life insurance is reflected in the Summary Compensation Table under the column All Other Compensation and the related footnote.

 

Perquisites and Other Benefits

 

We provide few perquisites to our executives.  In general, the perquisites provided are intended to help our executives be more productive and efficient and to protect us and the executive from certain business risks and potential threats. In 2009, certain executive officers received the following perquisites: personal use of corporate airplane and car allowance. We stopped providing car allowances in March 2009. Further detail regarding executive perquisites in 2009 can be found in the Summary Compensation Table under the column All Other Compensation and the related footnote.

 

Our compensation committee recently determined to provide our executives with a financial and tax planning benefit of up to $15,000 per year. The executive may use a provider with which the Company has negotiated rates, or a provider of their own choosing. The committee approved the benefit in order to assist our executives with the difficulties of devoting sufficient time to fulfill their job responsibilities while successfully dealing with their personal financial issues. The compensation committee regularly reviews the perquisites provided to our executive officers and believes they are reasonable and within market practice.

Post-Termination Compensation and Benefits

 

We have entered into employment agreements with each of our named executive officers. These agreements provide us and the executives with certain rights and obligations following a termination of employment, and in some instances, following a change in control. We believe these agreements are necessary to protect our legitimate business interests, as well as to protect the executives in the event of certain termination scenarios. A description of the material terms of Messrs. Kennedy’s, Carbiener’s, Chan’s, Scheuble’s and Swenson’s employment agreements can be found in the narrative following the Grants of Plan-Based Awards table and in the Potential Payments Upon Termination or Change in Control section.

 

In May 2009, our compensation committee adopted a policy stating that we will not enter into future new employment agreements, or materially amended employment agreements, with our named executive officers that include any excise tax gross-up provisions with respect to payments contingent upon a change in control. In December 2009, we entered into amended and restated employment agreements with each of Messrs. Carbiener, Chan, Scheuble and Swenson that, among other things, eliminated the provisions in their respective employment agreements that provided for a tax gross-up. Mr. Kennedy’s employment agreement, which we entered into in March 2010, does not include a tax gross-up provision.

 

William P. Foley, II served as our executive Chairman of the Board until his retirement as an officer and director on March 15, 2009. Prior to his retirement, Mr. Foley received an annual salary of $250,000, and was eligible to participate in the same compensation and benefit plans as our other executives and employees. Because of his retirement, Mr. Foley was not eligible to participate in the annual incentive plan and did not receive a long-term incentive award in 2009.

 

In connection with his retirement, our compensation committee approved a separation payment to Mr. Foley in the amount of $6,000,000, payable in cash as a lump sum upon Mr. Foley’s retirement. The compensation committee also approved the acceleration of vesting of all of the restricted shares of LPS common stock held by Mr. Foley effective as of March 15, 2009. Mr. Foley held 81,148 shares of restricted LPS common stock with a market value of $2,274,578 based on the closing price of our common stock of $28.03 on March 13, 2009 (the last day of trading prior to Mr. Foley’s retirement). Mr. Foley forfeited 508,035 stock options in connection with his retirement, which represented all of his unvested stock options. Mr. Foley’s stock options that were vested prior to his retirement remained exerciseable or expired in accordance with the terms of the omnibus plan and the related award agreements. Based upon the closing price of our common stock on March 13, 2009, Mr. Foley held vested stock options with a market value of $462,828 upon his retirement. As of March 22, 2010, Mr. Foley had no remaining LPS stock options available for exercise.

 

Stock Ownership Guidelines

 

We established formal stock ownership guidelines in August 2008 for all corporate officers, including the named executive officers, and members of our board, to encourage such individuals to hold a multiple of their base salary (or annual retainer) in our common stock. The guidelines call for an executive or director to reach the ownership multiple within four years. Shares of restricted stock and unrealized gain on stock options count toward meeting the guidelines. The guidelines, including those applicable to non-employee directors, are as follows:

 

 

As of December 31, 2009, Messrs. Kennedy, Carbiener, Chan, Scheuble and Swenson met the requirements of the stock ownership guidelines. The compensation committee may consider the guidelines and an executive’s satisfaction of such guidelines in determining executive compensation.

 

Executive Compensation Recoupment

 

In the event of a material restatement of our financial results, our board of directors will review the facts and circumstances that led to the restatement and will take such action as it may deem appropriate. The board will consider whether any executive officer received compensation based on the original financial statements because it appeared he or she achieved financial performance targets that, based upon the restatement, were not actually achieved. The board will also consider the accountability of any named executive officer whose acts or omissions were responsible in whole or in part for the events that led to the restatement and whether such actions or omissions constituted misconduct. The actions the board might take against a particular executive officer in such an event, depending on all facts and circumstances as determined during its review, include the pursuit of recoupment of all or part of any bonus or other compensation paid to the executive officer that was based upon achievement of financial results that were subsequently restated, disciplinary actions (up to and including termination), and/or the pursuit of other available remedies. In order to better protect the Company in such circumstances, our compensation committee included in our 2010 annual incentive program the ability to recoup an executive’s bonus upon a finding of fraud, a restatement of results, or in the event of certain errors or omissions.

 

Tax and Accounting Considerations

 

The compensation committee considers the impact of tax and accounting treatment when determining executive compensation.

 

Section 162(m) of the Internal Revenue Code places a limit of $1,000,000 on the amount that can be deducted in any one year for compensation paid to certain executive officers. There is, however, an exception for certain performance-based compensation. The compensation committee takes the deduction limitation under Section 162(m) into account when structuring and approving awards under our annual incentive plan and omnibus plan. Compensation paid under our annual incentive plan and awards granted under the omnibus plan are generally intended to qualify as performance-based compensation. However, in certain situations, the compensation committee may approve compensation that will not meet these requirements.

 

The compensation committee also considers accounting impact when structuring and approving awards. We account for stock-based payments, including stock option grants, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Compensation — Stock Compensation.

 

All non-qualified pension and other benefits have been modified to be in full compliance with the American Jobs Creation Act of 2004, which imposes tax penalties unless the form and timing of distributions are fixed to eliminate executive and company discretion.

 

Compensation Committee Report

 

The compensation committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management, and the compensation committee recommended to the board that the Compensation Discussion and Analysis be included in this Proxy Statement.

 

THE COMPENSATION COMMITTEE

 

David K. Hunt, Chairman
Alvin R. (Pete) Carpenter
Philip G. Heasley
James K. Hunt

 

Executive Compensation

 

The following table sets forth information concerning the 2009, 2008 and 2007 cash and non-cash compensation awarded to or earned by our named executive officers. The 2008 and 2007 compensation for Mr. Kennedy is not shown because he was a non-employee director prior to September 15, 2009. The information in this table includes compensation earned by the individuals for services to LPS, or to FIS while LPS was still an operating segment of FIS. The amounts we report for 2008 and 2007 reflect all of the compensation paid by FIS, whether or not allocable to services provided to us, except with respect to Mr. Foley’s 2008 compensation. Because Mr. Foley continued to serve as an executive officer of FIS following the spin-off, the 2008 amounts we report for him reflect only (i) the portion of Mr. Foley’s salary paid by FIS prior to the spin-off that was allocated to services performed on behalf of LPS, (ii) compensation earned by Mr. Foley with respect to services provided to LPS following the spin-off, and (iii) the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 with respect to (a) Mr. Foley’s FIS options and restricted stock granted in 2008 that were converted to LPS options and restricted stock in the spin-off, and (b) his LPS options and restricted stock that were granted in 2008 following the spin-off. The amounts of compensation shown below do not necessarily reflect the compensation such person will receive in the future, which could be higher or lower.

 

Summary Compensation Table

 

 

 

 

 

Grants of Plan-Based Awards

 

The following table sets forth information concerning long-term incentive awards granted to the named executive officers by LPS during the fiscal year ended December 31, 2009, and (iii) non-equity incentive plan awards granted to the named executive officers by LPS during the fiscal year ended December 31, 2009. Because Mr. Foley retired as an officer and a director of the Company on March 15, 2009, he did not receive any long-term incentive plan or non-equity incentive plan awards in 2009 and is not included in the table.

 

 

 

 

Employment Agreements

 

In December 2009, we entered into amended and restated employment agreements with certain of our senior executives, including Messrs. Carbiener, Chan, Scheuble and Swenson. The primary purposes of the new agreements were (i) to extend the term of the agreement to December 31, 2012; (ii) to eliminate the provisions in the agreements which provided for a tax gross-up in the event that the total payments and benefits made under the agreements or under other plans or arrangements between the Company and the executive were subject to the federal excise tax on parachute payments; (iii) to eliminate the requirement that the executive be employed on the annual bonus payment date in order to receive an earned and accrued bonus payment with respect to performance in the preceding year under the Company’s annual incentive plan; and (iv) to eliminate an exception to the non-competition provisions of the agreements which allowed the executive to work for certain former affiliates of the Company.

Otherwise, the amended and restated agreements are substantially similar to the employment agreements entered into between the executives and us in August 2008. The agreements provide for automatic annual extensions following the initial three-year term unless either party provides timely notice that the term should not be extended. Each named executive officer’s employment agreement provides that he is entitled to supplemental disability insurance sufficient to provide at least 2/3 of his pre-disability base salary, and that the executive and his eligible dependents are entitled to medical and other insurance coverage we provide to our other top executives as a group. The agreements further provide that the executive is eligible to receive equity grants under our equity incentive plans, as determined by our compensation committee.

 

In March 2010, Mr. Kennedy entered into an employment agreement with us that is substantially similar to the agreements described above.

 

Lee A. Kennedy

 

Mr. Kennedy’s employment agreement provides that he will serve as the Company’s Executive Chairman of the Board of Directors, and will receive a minimum annual base salary of $250,000. The agreement further provides that Mr. Kennedy’s annual cash bonus target under our annual incentive plan will be 100% of his base salary, with higher or lower amounts payable depending on performance relative to targeted results.

 

Jeffrey S. Carbiener

 

Mr. Carbiener’s employment agreement provides that he will serve as the Company’s President and Chief Executive Officer, and will receive a minimum annual base salary of $850,000. The agreement further provides that Mr. Carbiener’s annual cash bonus target under our annual incentive plan will be 150% of his base salary, with higher or lower amounts payable depending on performance relative to targeted results.

 

Francis K. Chan

 

Mr. Chan’s employment agreement provides that he will serve as the Company’s Executive Vice President and Chief Financial Officer, and will receive a minimum annual base salary of $350,000. Under his employment agreement, Mr. Chan’s annual cash bonus target under our annual incentive plan will be 100% of his base salary, with higher or lower amounts payable depending on performance relative to targeted results.

 

Daniel T. Scheuble

 

Mr. Scheuble’s employment agreement provides that he will serve as Executive Vice President and Co-Chief Operating Officer of the Company, and that Mr. Scheuble will receive a minimum annual base salary of $490,000. Under his employment agreement, Mr. Scheuble’s annual cash bonus target under our annual incentive plan will be 125% of his base salary, with higher or lower amounts payable depending on performance relative to targeted results.

 

Eric D. Swenson

 

Mr. Swenson’s employment agreement provides that he will serve as Executive Vice President and Co-Chief Operating Officer of the Company, and that Mr. Swenson will receive a minimum annual base salary of $540,000. Under his employment agreement, Mr. Swenson’s annual cash bonus target under our annual incentive plan will be 125% of his base salary, with higher or lower amounts payable depending on performance relative to targeted results.

 

Each named executive officer’s employment agreement contains provisions related to the payment of benefits upon certain termination events. The details of these provisions are set forth in the “Potential Payments Upon Termination or Change in Control” section.

Stock Incentive Plans

 

Omnibus Plan

 

We used the Lender Processing Services, Inc. 2008 Omnibus Incentive Plan, or omnibus plan, for long-term incentive compensation of our executive officers in 2009. The omnibus plan is administered by our compensation committee and permits the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units and other cash or stock-based awards. Eligible participants include all employees, directors and consultants of the Company and our subsidiaries, as determined by the committee. The committee has the full power to select employees, directors and consultants who will participate in the plan; determine the size and types of awards; determine the terms and conditions of awards; construe and interpret the omnibus plan and any award agreement or other instrument entered into under the omnibus plan; establish, amend and waive rules and regulations for the administration of the omnibus plan; and, subject to certain limitations, amend the terms and conditions of outstanding awards. The omnibus plan was approved by our former parent FIS prior to the spin-off.

 

Each award granted under the omnibus plan is subject to an award agreement, which sets forth the participant’s rights with respect to the award. The stock options awarded in May 2009 have an exercise price equal to the fair market value of a share of our common stock on the date of grant, vest proportionately each year over three years based on continued employment with us, and have a seven-year term. The restricted stock granted in May 2009 vests proportionately each year over three years based on the executive’s continued employment with us. Dividends are payable on shares of restricted stock granted in 2009 and prior years in the same manner as they are payable to our other shareholders. The award agreement also sets forth the participant’s rights with respect to the award following termination of employment or service. In addition, the omnibus plan provides that all outstanding awards will immediately vest upon the occurrence of a change in control, unless the participant’s award agreement provides otherwise. Further details are set forth under “Potential Payments Upon Termination or Change in Control.”

 

In connection with his retirement, our compensation committee approved the acceleration of vesting of all of the restricted shares of LPS common stock held by Mr. Foley effective as of March 15, 2009. Mr. Foley held 81,148 shares of restricted LPS common stock with a market value of $2,274,578 based on the closing price of our common stock of $28.03 on March 13, 2009 (the last day of trading prior to Mr. Foley’s retirement). All of Mr. Foley’s unvested stock options were forfeited upon his retirement. Mr. Foley’s stock options that were vested prior to his retirement remained exerciseable or expired in accordance with the terms of the omnibus plan and the related award agreements. As of December 31, 2009, Mr. Foley held vested stock options with a market value of $1,215,516 based upon the closing price of our common stock of $40.66 on that date. As of March 22, 2010, Mr. Foley had no remaining LPS stock options available for exercise.

The following table sets forth information concerning unexercised stock options and unvested restricted stock outstanding as of December 31, 2009 for each named executive officer:

 

Outstanding Equity Awards at Fiscal Year-End

 

 

 

 

 

The following table sets forth information concerning each exercise of FIS and LPS stock options, SARs and similar instruments, and each vesting of FIS and LPS stock, including restricted stock, restricted stock units and similar instruments, during the fiscal year ended December 31, 2009 for each of the named executive officers on an aggregated basis:

 

Option Exercises and Stock Vested

 

 

 

 

The following table sets forth information with respect to each defined contribution or other plan that provides for the deferral of compensation on a basis that is not tax-qualified:

 

Nonqualified Deferred Compensation

 

 

 

 

The LPS Special Plan and LPS Split Dollar Plan

 

The LPS special plan provides participants with a benefit opportunity comparable to the deferred cash accumulation benefit that would have been available had they been able to continue participation in the LPS split dollar plan. Participants’ interests under the LPS special plan are based on the excess of the cash surrender value of a life insurance policy on the executive over the total premium payments paid. A participant’s interest fluctuates based on the performance of investments in which the participant’s interest is deemed invested. The LPS special

plan provides that following a change in control, the participants may select investments; however, their right to select investments is forfeited if they violate the plan’s non-competition provisions within one year after termination of employment. To date, investment decisions regarding Mr. Carbiener’s participant interests have been made by a third party investment advisor. The table below shows the investments available for selection, as well as the rates of return for those investments for 2009.

 

If a participant terminates employment for good reason, or if the participant’s job is eliminated, payments under the LPS split dollar plan must begin fifteen years after the participant’s commencement date under the plan or after the participant turns sixty years old, whichever is later. The spin-off was treated as an elimination of Mr. Carbiener’s job for purposes of the split dollar plan. Participants can also elect to get payments earlier if both (1) seven years have passed since the participant’s commencement date under the LPS split dollar plan and (2) the participant retires or turns sixty years old. For this purpose, the term “retire” means the participant’s termination of employment after (1) turning age sixty-five, (2) turning age fifty-five and having five years of vesting service or (3) turning age fifty and having the participant’s age plus years of benefit service equal at least seventy-five.

 

A participant can elect to get the payments in either a single lump sum or in installments over a period of between two and ten years. If the participant elects installment payments, we will credit the undistributed principal amount with 5% simple annual interest. If a participant elects to receive a lump sum distribution, we can make the distribution either in cash or by transferring an interest in the policy. If the benefit is less than $10,000, or the participant violates the plan’s non-competition provisions within a one-year period after termination of employment, then the administrator can force a lump sum distribution. Unless a participant violates the plan’s non-competition provisions within one-year after termination of employment, we will pay an additional gross up based on the administrator’s estimate of the tax savings realized by it by being able to deduct the payments from its federal, state and local taxes. Participants’ benefits derive solely from the terms of the LPS special plan and are unsecured. Participants do not have rights under the insurance policies.

 

In connection with the Certegy merger, a rabbi trust was funded with sufficient monies to pay all future required insurance premiums under the LPS split dollar plan and to pay all of the participant interests as defined in the LPS special plan, including with respect to Mr. Carbiener.

 

Non-Qualified Deferred Compensation Plan

 

Under our non-qualified deferred compensation plan, participants can defer up to 75% of their base salary and commissions and 100% of their annual incentives, quarterly incentives and directors fees. Deferral elections are made in December for amounts to be earned in the following year. Deferrals and related earnings are not subject to vesting conditions.

 

Participants’ accounts are bookkeeping entries only and participants’ benefits are unsecured. Participant’s accounts are credited or debited daily based on the performance of hypothetical investments selected by the participant, which may be changed on any business day. The funds from which participants may select hypothetical investments, and the 2009 rates of return on these investments, are listed in the following table:

 

 

Upon retirement, which generally means separation of employment after attaining age sixty, an individual may elect either a lump-sum withdrawal or installment payments over 5, 10 or 15 years. Similar payment elections are available for pre-retirement survivor benefits. In the event of a termination prior to retirement, distributions are paid over a 5-year period. Account balances less than the limit under section 402(g) of the Internal Revenue Code, which was $16,500 in 2009, will be distributed in a lump-sum. Participants can elect to receive in-service distributions in a plan year that is at least three plan years after the amounts are actually deferred, and these amounts will be paid within sixty days from the close of the plan year in which they were elected to be paid. The participant may also

petition us to suspend elected deferrals, and to receive partial or full payout under the plan, in the event of an unforeseeable financial emergency, provided that the participant does not have other resources to meet the hardship.

 

Plan participation continues until termination of employment. Participants will receive their account balance in a lump-sum distribution if employment is terminated within two years after a change in control.

 

In 2004, Section 409A of the Internal Revenue Code was passed. Section 409A changed the tax laws applicable to nonqualified deferred compensation plans, generally placing more restrictions on the timing of deferrals and distributions. The deferred compensation plan contains amounts deferred before and after the passage of Section 409A. For amounts subject to Section 409A, which in general terms includes amounts deferred after December 31, 2004, a modification to a participant’s payment elections may be made upon the following events:

 

 

Deferral amounts that were vested on or before December 31, 2004 are generally not subject to Section 409A and are governed by more liberal distribution provisions that were in effect prior to the passage of Section 409A. For example, a participant may withdraw these grandfathered amounts at any time, subject to a withdrawal penalty of ten percent, or may annually change the payment elections for these grandfathered amounts.

 

Potential Payments Upon Termination or Change in Control

 

In this section, we discuss the nature and estimated value of payments and benefits we would provide to our named executive officers in the event of termination of employment or a change in control. The amounts described in this section reflect amounts that would have been payable under our plans and the named executive officers’ employment agreements if their employment had terminated on December 31, 2009. The types of termination situations include a voluntary termination by the executive, with and without good reason, a termination by us either for cause or not for cause, termination after a change in control, and termination in the event of disability or death. We also describe the estimated payments and benefits that would be provided upon a change in control without a termination of employment. The actual payments and benefits that would be provided upon a termination of employment would be based on the named executive officers’ compensation and benefit levels at the time of the termination of employment and the value of accelerated vesting of stock-based awards is dependent on the value of the underlying stock. For a description of the separation payment made to Mr. Foley and the treatment of Mr. Foley’s equity awards in connection with his retirement as an officer and director of the Company on March 15, 2009, see “Compensation Discussion and Analysis — Post-Termination Compensation and Benefits.”

 

For each type of employment termination, the named executive officers would be entitled to benefits that are available generally to our domestic salaried employees, such as distributions under our 401(k) savings plan, certain disability benefits and accrued vacation. We have not described or provided an estimate of the value of any payments or benefits under plans or arrangements that do not discriminate in scope, terms or operation in favor of a named executive officer and that are generally available to all salaried employees. In addition to these generally available plans and arrangements, Mr. Carbiener also has benefits under the LPS split dollar plan and the LPS special plan. These plans, and Mr. Carbiener’s benefits under them, are discussed in the Compensation Discussion & Analysis section and the Nonqualified Deferred Compensation table and accompanying narrative.

 

Potential Payments under Employment Agreements

 

As discussed previously, as of December 31, 2009, we had entered into employment agreements with Messrs. Carbiener, Chan, Scheuble and Swenson. In addition, on March 26, 2010, we entered into an employment agreement with Mr. Kennedy. These agreements contain provisions for the payment of severance benefits following

certain termination events. Following is a summary of the payments and benefits our named executive officers would receive in connection with various employment termination scenarios.

 

Under the employment agreements, if the executive’s employment is terminated other than due to death and the termination is by LPS for any reason other than for cause or due to disability, or by the executive for good reason, then the executive is entitled to receive:

 

 

If any of Messrs. Kennedy’s, Carbiener’s, Chan’s, Scheuble’s or Swenson’s employment terminates due to death or disability, we will pay him, or his estate:

 

 

In addition, each executive’s employment agreement provides for supplemental disability insurance sufficient to provide at least 2/3 of the executive’s pre-disability base salary. For purposes of the agreements, an executive will be deemed to have a “disability” if he is entitled to receive long-term disability benefits under our long-term disability plan.

 

Under the employment agreements, “cause” means:

 

 

For purposes of the employment agreements, “good reason” means:

 

 

(a) a material adverse change in the executive’s status, authority or responsibility,

 

 

(d) a material diminution in the budget over which the executive has managing authority, or

 

(e) a material change in the executive’s geographic location.

 

To qualify as a “good reason” termination, the executive must provide notice of the termination within 90 days of the date he first knows the event has occurred. We have 30 days to cure the event.

 

Under the agreements, “change in control” means:

 

 

The agreements provide us and our shareholders with important protections and rights, including the following:

 

 

Our named executive officers’ employment agreements do not provide for tax gross-ups. Furthermore, in May 2009, our compensation committee adopted a policy stating that we will not enter into new employment agreements or materially amended employment agreements with our named executive officers that include any excise tax gross-up provisions with respect to payments contingent upon a change in control.

 

Potential Payments under the Omnibus Plan

 

In addition to the post-termination rights and obligations set forth in the employment agreements of our named executive officers, our omnibus plan provides for the potential acceleration of vesting and/or payment of equity awards in connection with a change in control. Under the omnibus plan, except as otherwise provided in a participant’s award agreement, upon the occurrence of a change in control, any and all outstanding options and stock appreciation rights will become immediately exercisable, any restriction imposed on restricted stock, restricted stock units and other awards will lapse, and any and all performance shares, performance units and

other awards with performance conditions will be deemed earned at the target level, or, if no target level is specified, the maximum level.

 

For purposes of the omnibus plan, the term “change in control” means the occurrence of any of the following events:

 

 

In connection with the spin-off, with the exception of Mr. Kennedy, our named executive officers’ FIS stock options and shares of restricted stock were converted into stock options to purchase shares of our common stock and restricted shares of our common stock. The exercise prices of the option awards and the number of shares subject to each option and restricted stock award were adjusted to reflect the differences in price between FIS’s and our common stock. Because Mr. Kennedy continued to serve as an executive of FIS following the spin-off, his FIS stock options and restricted stock awards were not converted.

 

The replacement awards to our executives were made under the omnibus plan, but retained the terms and conditions set forth in the plans and agreements under which they were originally granted to the extent those terms conflict with the terms of the omnibus plan. The replacement awards that were unvested as of December 31, 2009 were originally granted under the Certegy Inc. Stock Incentive Plan, or the Certegy plan. The Certegy plan also provided for the potential acceleration of vesting and, if applicable, payment of equity awards in connection with a change in control. Under the Certegy plan, a participant’s award agreement may specify that upon the occurrence of a change in control, outstanding stock options will become immediately exercisable and any restriction imposed on restricted stock or restricted stock units will lapse. The stock option award agreements held by our named executive officers provide for accelerated vesting upon a change in control.

 

For purposes of the Certegy plan, the term “change in control” means the occurrence of any of the following events:

 

 

 

Potential Death Benefits

 

In addition to the death benefits provided under the employment agreements, Mr. Carbiener’s designated beneficiaries would be entitled to death benefits of $3,000,000 under the split dollar plan.

 

Estimated Payments and Benefits upon Termination of Employment

 

Our estimate of the cash severance amounts that would be provided to the named executive officers assumes that their employment terminated December 31, 2009. In general, any cash severance payments would be paid in a lump sum within 30 days from the termination date. However, to the extent required by Section 409A of the Internal Revenue Code, the payments would be deferred for six months following termination. If the payments are deferred, the amounts that would otherwise have been paid during the six month period would be paid in a lump sum after the six month period has expired.

 

For a termination of employment by us not for cause or a termination by the executive for good reason, the following payments would be made under the named executive officers’ employment agreements: Mr. Carbiener $10,200,000; Mr. Chan $2,400,000; Mr. Scheuble $5,407,500; and Mr. Swenson $5,733,000. Each of Messrs. Carbiener, Chan, Scheuble and Swenson would also be entitled to continuation of health and life insurance benefits provided by LPS for three years. The estimated value of these benefits is approximately $12,500 per executive. Upon a termination of these executives’ employment due to death or disability, the following payments would have been made: Mr. Carbiener $2,550,000 Mr. Chan $1,200,000; Mr. Scheuble $1,545,000; and Mr. Swenson $1,638,000. The amount shown for Mr. Carbiener excludes $3,000,000 for death benefits provided under the FIS split dollar plan.

 

Because he did not have an employment agreement with us as of December 31, 2009, Mr. Kennedy would not have been entitled to any payments if his employment had terminated on December 31, 2009. If Mr. Kennedy’s employment agreement had been in effect as of December 31, 2009, he would have received a payment of $2,250,000 if his employment had been terminated by us not for cause or by him for good reason, and a payment of $750,000 if his employment had terminated due to death or disability. Mr. Kennedy also would have been entitled to continuation of the health and life insurance benefits described above.

 

For a description of the separation payment made to Mr. Foley on March 15, 2009 in connection with his retirement as an officer and director of the Company, see “Compensation Discussion and Analysis — Post-Termination Compensation and Benefits.”

 

Estimated Equity Values

 

As disclosed in the Outstanding Equity Awards at Fiscal Year-End table, each of our named executive officers other than Mr. Foley had outstanding unvested stock options and restricted stock awards as of December 31, 2009. Under the terms of the omnibus plan and the Certegy plan, these stock options and restricted stock awards would vest upon a change in control. Furthermore, under the employment agreements of Messrs. Carbiener, Chan, Scheuble and Swenson in effect as of December 31, 2009, and under Mr. Kennedy’s employment agreement in effect as of March 26, 2010, these stock options and restricted stock awards would vest upon any termination of employment by us not for cause or a termination by the executive for good reason. In any other termination event, all unvested stock options and restricted stock awards would expire at the employment termination date.

The following estimates are based on a stock price of $40.66 per share, which was the closing price of our common stock on December 31, 2009. The stock option amounts reflect the excess of this share price over the exercise price of the unvested stock options that would vest. The restricted stock amounts were determined by multiplying the number of shares that would vest by $40.66.

 

The estimated value of the stock options held by the named executive officers that would have vested upon a change in control occurring on December 31, 2009 would be as follows: Mr. Kennedy $1,816,499; Mr. Carbiener $7,002,218; Mr. Chan $1,360,555; Mr. Scheuble $2,512,710; and Mr. Swenson $2,512,710. The estimated value of restricted stock awards held by the named executive officers that would have vested upon a change in control occurring on December 31, 2009 would be as follows: Mr. Kennedy $1,695,522; Mr. Carbiener $6,689,180; Mr. Chan $1,393,459; Mr. Scheuble $2,557,514; and Mr. Swenson $2,562,190. Pursuant to Messrs. Carbiener’s, Chan’s, Scheuble’s and Swenson’s employment agreements, and under Mr. Kennedy’s employment agreement if it had been in effect as of December 31, 2009, these same amounts would have vested upon a termination of each of those executive’s employment by us not for cause or a termination by one of those executives for good reason. Because Mr. Kennedy did not have an employment agreement as of December 31, 2009, he would have forfeited all of his unvested restricted shares and unvested stock options if his employment had terminated on that date.

 

For a description of the treatment of Mr. Foley’s stock option and restricted stock awards in connection with his retirement as an officer and director of the Company on March 15, 2009, see “Compensation Discussion and Analysis — Post-Termination Compensation and Benefits.”

 

Compensation Committee Interlocks and Insider Participation

 

The compensation committee is currently composed of David K. Hunt (Chair), Alvin R. (Pete) Carpenter, Philip G. Heasley and James K. Hunt. During 2009, Marshall Haines, who resigned from our board of directors on December 21, 2009, served as Chairman of our compensation committee. Mr. Carpenter joined our compensation committee on December 21, 2009, and Mr. David Hunt joined our compensation committee and was appointed Chairman of the committee on February 4, 2010. During 2009, no member of the compensation committee was a former or current officer or employee of LPS or any of its subsidiaries. In addition, during 2009, none of our executive officers served (i) as a member of the compensation committee or board of directors of another entity, one of whose executive officers served on our compensation committee, or (ii) as a member of the compensation committee of another entity, one of whose executive officers served on our board.

 

Compensation Risk

 

With the help of its compensation consultant, the compensation committee reviewed our compensation policies and practices for all employees, including our named executive officers, and determined that our compensation programs are not reasonably likely to have a material adverse effect on our company. With respect to our compensation policies for our executive officers, we believe that our allocation of overall compensation among base salary and annual and long-term incentive amounts encourages our executives to deliver strong results for our shareholders without taking excessive risk. Our compensation committee sets our executives’ base salaries at levels that provide our executives with assured cash compensation that is appropriate to their job duties and level of responsibility and that, when taken together with the executives’ at-risk, performance-based awards, motivate them to perform at a high level. With respect to executives’ incentive opportunities under our annual incentive plan, we believe that our use of measurable corporate financial performance goals and multiple performance levels associated with minimum, target and maximum achievable payouts, together with the compensation committee’s discretion to reduce awards, serve to mitigate against excessive risk-taking. We also believe that our balanced use of stock options and restricted stock and use of multi-year vesting schedules in our long-term incentive awards encourages our executives to deliver incremental value to our shareholders while mitigating risk.

Director Compensation

 

Directors who are our salaried employees receive no additional compensation for services as a director or as a member of a committee of our board. Our compensation committee set compensation levels for our directors in September 2009. All of our non-employee directors receive an annual retainer of $60,000, payable quarterly, plus $2,000 for each board meeting and $1,500 for each committee meeting such director attends. The chairman and each member of our audit committee will receive an additional annual retainer (payable in quarterly installments) of $25,000 and $15,000, respectively, for their service on our audit committee. The chairman and each member of our compensation committee and our corporate governance and nominating committee will receive an additional annual retainer (payable in quarterly installments) of $15,000 and $8,000, respectively, for their service on such committees. New directors who join our board will also receive an equity award with a value of approximately $150,000, based upon the grant date fair value of such award under FASB ASC Topic 718. We reimburse our non-employee directors for all reasonable out-of-pocket expenses incurred in connection with attending board and committee meetings and for reasonable fees and expenses associated with attending director education programs. Our directors are also eligible to participate in our deferred compensation plan to the extent they elect to defer any board or committee fees. David K. Hunt and James K. Hunt currently participate in the deferred compensation plan.

 

On March 15, 2009, William P. Foley, II, Daniel D. (Ron) Lane and Cary H. Thompson retired from our board of directors. Mr. Foley’s termination payments are described above under “Compensation Discussion and Analysis — Post-Termination Compensation and Benefits.” In connection with their retirement, the compensation committee approved separation payments to each of Messrs. Thompson and Lane in the amount of $400,000. The compensation committee also approved the acceleration of vesting of all of the restricted shares of LPS common stock held by Messrs. Lane and Thompson, effective as of March 15, 2009. Messrs. Lane and Thompson each held 2,550 shares of restricted LPS common stock with a value of $71,477 (based on the closing price of $28.03 for our common stock on March 13, 2009, the last day of trading prior to Messrs. Lane’s and Thompson’s retirement). All vested stock options held by Messrs. Lane and Thompson remained available for exercise or were terminated in accordance with the terms of the omnibus plan and the related award agreements. As a result of their retirement, Messrs. Lane and Thompson each forfeited 25,350 options, which represented all of the unvested option awards they held at the time of their retirement.

 

On May 14, 2009, the compensation committee approved grants of 9,300 stock options and 2,600 shares of restricted stock to each of Marshall Haines and James K. Hunt, our continuing non-employee directors. Messrs. Farrell and Heasley, who joined our board in March 2009, and Mr. Carpenter, who joined our board in April 2009, each received a new director grant of 18,600 options and 5,200 shares of restricted stock on May 14, 2009. David K. Hunt, who joined our board of directors in February 2010, received an award of 6,900 options and 1,925 shares of restricted stock on February 12, 2010. All options were granted under our omnibus plan, have a seven-year term, have an exercise price equal to the fair market value of a share of our common stock on the date of grant, and vest proportionately each year over three years from the date of grant based upon continued service on our board of directors. The restricted stock was also granted under our omnibus plan and vests proportionately over three years from the date of grant based upon continued service on our board of directors.

 

On December 21, 2009, Marshall Haines resigned from our board of directors in order to pursue a strategic business opportunity. Upon his resignation, all of Mr. Haines’s outstanding equity awards remained available for exercise or were terminated in accordance with the terms of the omnibus plan and the related award agreements. Mr. Haines forfeited 19,542 stock options and 4,300 shares of restricted stock, which represented all of his unvested equity awards at the time of his resignation.

The following table sets forth information concerning the compensation of our non-employee directors other than David K. Hunt for the fiscal year ending December 31, 2009. Mr. David Hunt is not included in the table below because he did not join our board until February 2010. In addition, Lee A. Kennedy is not included in the table because he became our Executive Chairman of the Board on September 15, 2009. All retainers and fees paid to Mr. Kennedy received for service as a non-employee director in 2009 are included under “Executive Compensation — Summary Compensation Table — All Other Compensation” and the related footnote.