(Logo)
NATIONAL
COMPUTER SYSTEMS
11000 Prairie Lakes Drive
Eden Prairie, Minnesota 55344
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 25, 1995 at 3:30 P.M.
TO THE STOCKHOLDERS OF NATIONAL COMPUTER SYSTEMS, INC.:
The annual meeting of stockholders of National Computer Systems, Inc. (NCS), a
Minnesota corporation, will be held Thursday, May 25, 1995 at 3:30 P.M., Central
Daylight Savings Time, at the Lutheran Brotherhood Building (Auditorium-First
Floor), 625 4th Avenue South, Minneapolis, Minnesota for the following purposes:
1. To elect a Board of Directors for the ensuing year.
2. To approve the 1995 Employee Stock Option Plan as adopted by the Board of
Directors.
3. To approve the Oswald Stock Option Plan as adopted by the Board of
Directors.
4. To approve appointment of Ernst & Young LLP as auditors for the year ending
January 31, 1996.
5. To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on March 27, 1995, will be
entitled to cast one vote on each proposal for each share held of record at that
time. A copy of the NCS annual report is included in this mailing, first made on
approximately the date shown below.
DATED: April 19, 1995
BY ORDER OF THE BOARD OF DIRECTORS
J. W. Fenton, Jr., Secretary
STOCKHOLDERS UNABLE TO ATTEND THIS MEETING ARE URGED TO
SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN
THE ENVELOPE PROVIDED.
<PAGE>
NATIONAL COMPUTER SYSTEMS, INC.
11000 Prairie Lakes Drive
Eden Prairie, Minnesota 55344
PROXY STATEMENT
The annual meeting of the stockholders of National Computer Systems, Inc. (NCS
or the Company) will be held on Thursday, May 25, 1995, at 3:30 P.M., at the
Lutheran Brotherhood Building, 625 4th Avenue South, Minneapolis, Minnesota for
the purposes set forth in the accompanying notice. The only matters the Board of
Directors knows will be presented are those stated in items 1 through 4 of the
notice. Should any other matter properly come before the meeting, it is the
intention of the named proxies to vote on such matters in accordance with their
best judgment.
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors has fixed the close of business on March 27, 1995, as the
record date for the determination of the stockholders entitled to notice of and
to vote at the meeting. The voting securities of NCS outstanding and entitled to
vote on that date were 15,336,399 shares of Common Stock. Each share is entitled
to cast one vote on each proposal before the meeting.
The enclosed proxy is solicited on behalf of the Board of Directors for use at
the annual meeting. If the proxy is properly executed and returned, the shares
represented will be voted at the meeting and at all adjournments. Where specific
direction is given by the stockholder, the shares will be voted in accordance
with that direction. If no direction is given, the proxy will be voted to elect
the nine persons named below as directors and for the other proposals set forth
in the accompanying notice. The proxy may be revoked at any time prior to its
exercise by filing written notice with the Secretary of NCS.
Shares voted as abstentions on any matter (or a "withhold vote for" as to
directors) will be counted as shares that are present and entitled to vote for
purposes of determining the presence of a quorum at the annual meeting and as
unvoted, although present and entitled to vote, for purposes of determining the
approval of each matter as to which the stockholder has abstained. If a broker
submits a proxy which indicates that the broker does not have discretionary
authority as to certain shares to vote on one or more matters, those shares will
be counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum at the annual meeting, but will not be
considered as present and entitled to vote with respect to such matters.
ELECTION OF DIRECTORS
At the meeting, the nine persons listed below will be nominated for election as
directors until the next annual meeting of stockholders and until their
successors have been elected. Mr. Gullotti was elected as a director by the
Board of Directors since the last annual meeting of stockholders. Each nominee
is presently available for election. Should any nominee become unable to serve,
the persons voting the enclosed proxy may, in their discretion, vote for a
substitute.
Shown below is certain information about the nominees, as of February 28, 1995.
Each nominee has sole investment and voting power of all shares of Common Stock
shown (the only NCS equity securities owned by the nominees), except as
otherwise noted. The election of each director requires the affirmative vote of
a majority of the shares present and entitled to vote at the meeting.
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation Shares
and Director Beneficially Percent of
Name Age Business Experience Since Owned Outstanding
- - --------- --- --------------------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
David P. Campbell+ 61 Smith Richardson Senior Fellow, Center for 1969 13,076 (1) *
Creative Leadership (educational/research
programs in creativity and leadership) for
more than five years and consultant to NCS
for more than five years prior to January, 1995.
David C. Cox++ 57 President & Chief Executive Officer of Cowles 1983 12,200 (1) *
Media Company (diversified communications) for
more than five years.
Russell A. Gullotti 52 President & Chief Executive Officer of NCS 1994 1,597 *
since October, 1994 and prior to that held senior
executive positions in sales and marketing,
services and administration with Digital
Equipment Corporation (computer manufacturing and
services) for more than 5 years.
Jean B. Keffeler++ 49 Business and Management Consultant, The 1993 3,500 (2) *
Keffeler Company since March, 1991 and Senior
Executive Officer, West Region, HealthOne
Corporation (health care)from March, 1989 to
March, 1991.
Charles W. Oswald 67 Chairman of the Board of NCS since October, 1970 1,719,140 (3) 11%
1994 and prior to that Chairman & Chief Executive
Officer for more than five years.
Stephen G. Shank + 51 President & Chief Executive Officer of Learning 1985 6,619 (1) *
Ventures, Inc.(education programs and services)
since January, 1992 and Chairman & Chief
Executive Officer of Tonka Corporation
(manufacturer and marketer of toy products) for
more than five years prior to September, 1991.
John E. Steuri++ 55 Chairman & Chief Executive Officer of ALLTEL 1991 11,000 (4) *
Information Services, Inc. (formerly Systematics
Information Services) (information processing
management, outsourcing services and application
software) for more than five years.
Jeffrey E. Stiefler++ 48 President of American Express Company (travel 1993 2,758 (2) *
and financial services) since August, 1993, and
President & Chief Executive Officer of American
Express Financial Advisors, Inc. (financial services)
from September, 1990 to August, 1993.
John W. Vessey+ 72 Management consultant since October, 1985 and 1986 6,400 (1) *
prior to that Chairman, Joint Chiefs of Staff,
U.S. Department of Defense from June, 1982 to
October, 1985.
+ Member of Audit Committee
++ Member of Compensation Committee
<FN>
* Less than 1%.
(1) The shares listed for Dr. Campbell and Messrs. Cox, Shank and Vessey
include 6,000 shares that may be acquired within 60 days upon exercise
of outstanding stock options.
(2) The shares listed for Ms. Keffeler and Mr. Stiefler include 1,000
shares that may be acquired within 60 days upon exercise of outstanding
stock options.
(3) The shares listed for Mr. Oswald include 174 shares allocated to him
pursuant to the NCS Employee Stock Ownership Plan (ESOP) and 12,500
shares that may be acquired within 60 days upon exercise of outstanding
stock options. The shares listed do not include 25,000 shares owned by
Mr. Oswald's wife, as to which Mr. Oswald disclaims beneficial
ownership.
(4) The shares listed for Mr. Steuri include 4,000 shares that may be
acquired within 60 days upon exercise of outstanding stock options.
</FN>
</TABLE>
<PAGE>
Mr. Cox is also a director of ReliaStar Financial Corp. and Tennant Company; Mr.
Gullotti is also a director of GenRad, Inc.; Mr. Oswald is also a director of
ADC Telecommunications, Inc.; Mr. Shank is also a director of Advance Circuits,
Inc. and Polaris Industries, Inc; Mr. Steuri is also a director of ALLTEL
Corporation; Mr. Stiefler is also a director of American Express Company;
and General Vessey is also a director of Martin Marietta Corp.
The Board of Directors held four meetings during the fiscal year ended January
31, 1995 (fiscal 1994). The Audit Committee of the Board of Directors reviews
the audited financial statements with the independent auditors and the Company's
accounting and reporting practices. During the last fiscal year, the Audit
Committee held five meetings. The Compensation Committee of the Board of
Directors reviews the Company's compensation and personnel policies and
programs. During the last fiscal year, the Compensation Committee held four
meetings. There is no nominating committee of the Board of Directors. Each
director attended 75% or more of all Board of Directors and Board Committee
meetings.
Outside directors receive fees of $3,000 per quarter ($3,375 for each Committee
Chairperson) and participation fees of $1,000 for each Board meeting attended. A
fee of $750 is paid for any Committee meeting held on any day other than a
scheduled Board meeting.
During the year ended January 31, 1995, NCS paid Dr. Campbell $27,500 in
consulting fees and $83,650 as royalties relating to tests developed by Dr.
Campbell for which NCS has a long-term exclusive license. Dr. Campbell ceased
being a consultant to NCS effective December 31, 1994.
NCS has a Non-Employee Director Stock Option Plan under which each director who
is not an employee of NCS is automatically granted, on each date that he or she
is elected or reelected as a director of NCS by the stockholders, an option to
acquire 1,000 shares of Common Stock. During fiscal 1994, all non-employee
directors as a group were granted options to purchase 6,000 shares at a per
share option price of $12.50. None of the options granted under the Plan have
been exercised.
PROPOSAL TO APPROVE THE 1995 EMPLOYEE STOCK OPTION PLAN
The Board of Directors recommends stockholder approval of the 1995 Employee
Stock Option Plan (1995 Plan), covering up to 350,000 shares of Common Stock.
The 1995 Plan was adopted by the Board of Directors on March 6, 1995, subject to
stockholder approval. NCS has four other Employee Stock Option Plans which were
approved in 1982, 1984, 1986 and 1990. As of February 28, 1995, there were
209,600 shares reserved and available under these Plans. No options have been
granted under the 1995 Plan. Approval of the 1995 Plan will require the
affirmative vote of a majority of the shares of outstanding Common Stock present
and entitled to vote at the meeting.
In the opinion of the Board of Directors, the 1995 Plan is beneficial to NCS as
it will provide key employees an opportunity to invest in the Common Stock of
NCS with the increased personal interest in the continued success of NCS that
stock ownership can produce.
Persons eligible to receive options under the 1995 Plan are key employees of NCS
or its wholly-owned subsidiaries. The 1995 Plan is administered by the Board of
Directors. No employee may be granted any options under the 1995 Plan for more
than 100,000 shares in the aggregate in any calendar year. No option may be
granted after January 31, 2005.
The option price shall not be less than 100% of the fair market value of NCS
Common Stock on the date of grant of the option. No option granted under the
1995 Plan shall exceed ten years or shall be less than one year. Options are
exercisable only while the optionee is an employee of NCS or one of its
subsidiaries or within three months after termination of employment. The legal
representative of a deceased optionee may exercise the option within one year
after the death of the optionee or until the earlier expiration of the option.
Options are nontransferable except by will or the laws of descent and
distribution. Option shares must be paid for in cash and in full at the time an
option is exercised; provided, however, in lieu of cash an optionee may exercise
an option by tendering to the Company Common Stock owned by the optionee which
has a fair market value equal to the cash exercise price of the shares being
purchased.
Options under the 1995 Plan may be intended to qualify as "incentive stock
options" under the Internal Revenue Code of 1986, as amended. Options that
qualify as incentive stock options will not be taxable to the optionee at the
time of exercise, nor will NCS be entitled to any tax deduction as a result of
the exercise. If the optionee holds the shares for at least one year after
exercise of the incentive stock option, and at least two years from the date the
option was granted, the sale of the shares will be taxed as a long-term capital
gain or loss to the holder and no tax deduction will be allowed to NCS.
<PAGE>
PROPOSAL TO APPROVE THE OSWALD STOCK OPTION PLAN
The Board of Directors recommends stockholder approval of the Oswald Stock
Option Plan (Oswald Plan) which provides for the issuance of 89,000 shares of
Common Stock. The Oswald Plan was adopted by the Board of Directors on August
22, 1994 subject to stockholder approval. Approval of the Oswald Plan will
require the affirmative vote of a majority of the shares of outstanding Common
Stock present and entitled to vote at the meeting.
In the opinion of the Board of Directors, the Oswald Plan is beneficial to NCS
in that it recognizes the key role that Mr. Oswald has performed in the
long-term success of the Company and for the continuing valuable resource that
Mr. Oswald will be to the Company and its officers and directors.
Of the total number of shares granted, 39,000 were issued on the forfeiture of a
like number of option shares which had been granted under the Company's
incentive stock option plans for employees and 50,000 were issued as new option
shares as set forth below:
<TABLE>
<CAPTION>
Employee Incentive Stock New Stock
Option Shares Forfeited Option Shares Issued
Date of Option No. of Date of Option No. of
Expiration Price Shares Expiration Price Shares
- - ---------- --------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
5/23/96 $15.68 15,000 5/23/96 $15.68 15,000
5/21/97 16.50 12,000 5/21/97 16.50 12,000
5/20/98 17.60 12,000 5/20/98 17.60 12,000
------ ------
39,000 39,000
======
8/22/99 13.13 (1) 50,000
------
89,000
=======
<FN>
(1) Fair market value of Common Stock on date of grant of the new options.
</FN>
</TABLE>
The purpose of reissuing the options was to allow the remaining option exercise
periods to extend beyond May 31, 1995, the date when Mr. Oswald will terminate
as an employee of the Company. No other options will be granted under the Oswald
Plan.
The options issued under the Oswald Plan are nontransferable except by will or
the laws of descent and distribution. The legal representative of Mr. Oswald may
exercise the options within one year after his death or until the earlier
expiration of the option. Option shares must be paid for in cash at the time any
option is exercised plus an amount equal to any taxes due in respect to said
purchase; provided, however, in lieu of cash, shares of NCS Common Stock already
owned which have a fair market value equal to the required cash payment may be
delivered. The options are non-incentive stock options, and, accordingly, upon
exercise, Mr. Oswald will recognize ordinary income in the amount by which the
fair market value of the Common Stock at such time exceeds the option price. The
Company will be allowed an income tax deduction in the amount that, and for its
taxable year in which, Mr. Oswald recognizes ordinary income.
APPOINTMENT OF INDEPENDENT AUDITORS
Subject to ratification by the stockholders at this annual meeting, the Audit
Committee has recommended to the Board of Directors, and the Board of Directors
has approved, the selection of the certified public accounting firm of Ernst &
Young LLP as the Company's independent auditors for the fiscal year ending
January 31, 1996.
Ernst & Young LLP has regularly audited the Company's consolidated financial
statements since 1972. A representative of Ernst & Young LLP is expected to be
present at the annual meeting of stockholders on May 25, 1995 and will be
offered the opportunity to make a statement if he or she desires to do so and
will be available to respond to appropriate questions.
<PAGE>
OWNERSHIP OF NCS COMMON STOCK BY CERTAIN
BENEFICIAL OWNERS AND EXECUTIVE OFFICERS
Information as to the persons or groups known by NCS to be the beneficial owners
of 5% or more of the outstanding shares of NCS Common Stock (NCS' only voting
security), the executive officers of the Company included in the Summary
Compensation Table and all directors and executive officers as a group as of
February 28, 1995, is shown below. Except as otherwise indicated, the
stockholders listed in the table have sole voting power and investment power
with respect to the Common Stock owned by them.
<TABLE>
<CAPTION>
Shares
Beneficially Percent of
Name and Address Owned Outstanding
- - ---------------- ------------ -----------
<S> <C> <C>
Charles W. Oswald 1,719,140 11%
3800 West 80th Street
Bloomington, Minnesota 55431
State of Wisconsin Investment Board 995,000 6
121 East Wilson Street
Madison, Wisconsin 53702
Russell A. Gullotti 1,597 *
Robert C. Bowen 38,679 (1) *
Donald J. Gibson 38,510 (2) *
Richard L. Poss 41,905 (3) *
Adrienne T. Tietz 22,666 (4) *
All Directors and Executive
Officers as a Group (17 persons) 1,985,155 (5) 13%
<FN>
* Less than 1%
(1) The shares listed for Mr. Bowen include 18,000 shares issued pursuant
to the Long-Term Incentive Plan (L-TIP) which are subject to
forfeiture, 171 shares allocated to him pursuant to the ESOP and 10,200
shares that may be acquired within 60 days upon exercise of outstanding
stock options.
(2) The shares listed for Mr. Gibson include 16,000 shares issued pursuant
to the L-TIP which are subject to forfeiture, 170 shares allocated to
him pursuant to the ESOP and 14,800 shares that may be acquired within
60 days upon exercise of outstanding stock options.
(3) The shares listed for Mr. Poss include 14,500 shares issued pursuant to
the L-TIP which are subject to forfeiture, 168 shares allocated to him
pursuant to the ESOP and 10,200 shares that may be acquired within 60
days upon exercise of outstanding stock options.
(4) The shares listed for Ms. Tietz include 14,500 shares issued pursuant
to the L-TIP which are subject to forfeiture, 166 shares allocated to
her pursuant to the ESOP and 8,000 shares that may be acquired within
60 days upon exercise of outstanding stock options.
(5) Includes 75,400 shares issued pursuant to the L-TIP which are subject
to forfeiture, 1,453 shares allocated pursuant to the ESOP and 101,100
shares that may be acquired within 60 days upon exercise of outstanding
stock options.
</FN>
</TABLE>
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
The Compensation Committee of the Board of Directors (Compensation Committee) is
composed entirely of outside directors who review the Company's compensation and
personnel policies and programs. They approve and make recommendations with
regard to those policies and programs. In addition, the Compensation Committee
determines on an annual basis the compensation to be paid to the Chief Executive
Officer and senior executive officers of the Company.
The Compensation Committee has access to outside consultants and independent
compensation data.
The objectives of the Company's executive compensation program are to:
- - - Support the goal of increasing stockholder value,
- - - Provide compensation that will attract and retain superior talent and
reward performance, and
- - - Align each executive officer's interests with the success of the
Company by making a portion of compensation dependent on business unit
and corporate earnings growth.
The executive compensation program provides an overall level of compensation
opportunity that is competitive with peer companies as well as with a general
group of comparably-sized companies. The peer group consists of companies in the
computer, electronics, software and related services industry, both nationally
and locally. National compensation survey data is obtained from an outside
consultant and industry associations. Data on approximately 125 companies which
are of a size and complexity comparable to the Company is utilized. Local
compensation survey data is obtained from a group of approximately 15 national
and international companies headquartered in the Minneapolis-St. Paul metro area
that are selected by the Company. The general comparative group consists of
companies of comparable size included in nation-wide, general industrial survey
data obtained from three major management consulting firms. Actual total
compensation levels may be greater or less than average competitive levels in
surveyed companies based on annual and long-term Company performance as well as
individual performance. The Compensation Committee uses its discretion to set
executive compensation where, in its judgment, external, internal or an
individual's circumstances warrant it.
EXECUTIVE OFFICER COMPENSATION PROGRAM
The Company's executive officer compensation program is comprised of base
salary; annual cash incentive compensation; long-term incentive compensation in
the form of stock options and performance based cash and restricted stock
awards; and various health and other benefits.
Base Salary
Base salary levels for the Company's executive officers are viewed as one part
of a comprehensive annual cash compensation program and are set relative to the
peer and other comparable companies in the groups described above. Generally, it
is intended that salary levels, when combined with annual performance based
amounts, will result in compensation in the 50-75th percentile of amounts paid
for comparable job functions by the peer and other companies described above. In
determining salaries, the Compensation Committee also takes into account
individual experience, job responsibility, performance and any other issues
relevant to the Company.
Performance Based Compensation
The Management Incentive Plan (MIP) is the Company's annual incentive program
for executive officers and key managers. The purpose of the Plan is to provide
direct financial incentives in the form of annual cash bonuses to executives to
achieve their business units' goals, the Company's annual goals and individual
achievement goals. Threshold, target and maximum goals for Company and business
unit performance are set at the beginning of the year with 70% of individual
bonus amounts based on achieving corporate and business unit operating income
goals and 30% based on achievement of pre-defined personal goals. Generally, it
is intended that achievement of the target goals will result in annual bonuses
which, when combined with base salary, will result in compensation in the
50-75th percentile of amounts paid for comparable job functions by the peer and
other comparable companies described above. The Compensation Committee also
gives consideration to issues which they deem specific to the Company. During
the last fiscal year, bonuses were paid under the MIP based on achievement of
corporate revenue goals, business unit operating goals and personal goals. In
addition to cash bonuses paid under the MIP, the Compensation Committee may
grant discretionary one-time cash bonuses when specific individual performance
exceeds established performance goals.
<PAGE>
Stock Option and Long-Term Incentive Programs
The stock option plans and the Long-Term Incentive Plan (L-TIP) are the
Company's long-term incentive plans for executive officers. The objectives of
the plans are to promote the long-term interests of the Company by enhancing its
ability to attract, motivate and retain its key executives and increase their
identification with the long-term interests of NCS stockholders through cash and
stock ownership incentives based on long-term financial performance. The stock
option plans and the L-TIP enable executives to develop and maintain a
significant, long-term stock ownership position in the Company's Common Stock.
The Company's stock option plans are administered by the Board of Directors.
Stock options for executive officers are generally granted annually at option
prices equal to the fair market value of the Company's Common Stock on the date
of grant. The options granted have five-year terms and vest at the rate of 20%
after 12, 24, 36, 48 and 58 months. The amounts to be granted to executive
officers are recommended by the Compensation Committee using relevant survey
data, consideration of the value of Company stock and the total number of shares
and option shares outstanding, competitive employment factors and performance of
the individual.
The L-TIP has two features designed to reward participants for contributing to
the achievement of performance goals over the long term. The cash compensation
feature will result in the payment of cash bonuses to participants when the
performance goal is attained and the restricted stock feature provides for
awards of restricted NCS Common Stock that will vest if the participant is
employed by NCS after 10 years from award date, or earlier if the prescribed
performance goal is achieved. If the goal is achieved, the cash and stock awards
are paid out over a three-year period: 40% as of the end of the year of
achievement and 30% at the end of each of the next two succeeding years. The
performance goal contained in currently outstanding L-TIP awards is the
achievement of a 20% return on equity in any fiscal year. The cash compensation
payout is based on a percentage (not to exceed 30%) of the participant's total
compensation over the three-year period ending with the year in which the
performance goal is achieved. The currently outstanding awards were granted to
eligible executive officers based on survey data, anticipated growth in the
value of the Company stock and competitive employment factors at the time of
award.
Benefits
The Company provides various employee benefit programs to its executive
officers, including medical and life insurance benefits, an employee stock
ownership plan, an employee stock purchase plan and an employee savings plan
with 401(k) features. These benefit programs are generally available to all
employees of the Company.
Chief Executive Officer Compensation
Mr. Gullotti became Chief Executive Officer on October 1, 1994. His annual base
salary is $375,000 which, when added to potential performance based compensation
if established goals are met, was an amount the Compensation Committee
determined was marketplace competitive and resulted in compensation in the 50-75
percentile of similar amounts paid to chief executive officers by the peer and
general comparative group companies described above. During the year, a bonus of
$62,500 (an amount agreed to at the time of hire) was accrued for Mr. Gullotti.
Mr. Gullotti was granted an option during the year to purchase 100,000 shares of
the Company's Common Stock. The Compensation Committee determined the amount of
the option to be granted in the same manner as described above for other
executive officers.
Mr. Oswald was Chief Executive Officer until October 1, 1994. His base salary
throughout fiscal 1994 was $390,000, unchanged from the prior year, and an
amount the Compensation Committee determined based on its review at the
beginning of the fiscal year would, when added to potential performance based
compensation if established goals were met, result in compensation in the
50-75th percentile of similar amounts paid to chief executive officers by the
peer and general comparative group companies described above. During the year, a
bonus of $130,029 was accrued for Mr. Oswald under the MIP because of overall
Company performance and achievement of personal objectives. Mr. Oswald was
granted options during the year to purchase 89,000 shares of the Company's
Common Stock, 39,000 of which were in exchange for forfeited prior options. See
"Proposal To Approve Oswald Stock Option Plan." By agreement with the Company,
Mr. Oswald's participation in the L-TIP terminated January 31, 1995 with no cash
or stock payouts having been made.
<PAGE>
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended, should not
affect the deductibility of compensation paid to the Company's executive
officers for the foreseeable future. However, the 1995 Plan complies with
Section 162(m) so that compensation resulting from stock options granted under
the 1995 Plan will not be counted toward the $1,000,000 limit on deductible
compensation under Section 162(m). See "Proposal To Approve the 1995 Employee
Stock Option Plan." Compensation expense related to options granted under the
Company's existing employee stock option plans will also be deductible under
Section 162(m). The Committee has not formulated a policy with respect to
qualifying other executive compensation for deductibility under Section 162(m).
David C. Cox, Chairman John E. Steuri
Jean B. Keffeler Jeffrey E. Stiefler
Members of the Compensation Committee
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for each of the
last three fiscal years awarded to or earned by the current and previous Chief
Executive Officer of the Company (each of whom served during the fiscal year),
and the four other most highly compensated executive officers of the Company.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
--------------------------------------- Awards (1)
Other ---------- All Other
Annual Securities Compensation
Fiscal Compen- Underlying ----------------------------
Name and Principal Position Year Salary Bonus(2) sation Options ESP(3) ESOP(3) Other
--------------------------- ------- ------ -------- ------ ---------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles W. Oswald, Chairman 1994 $390,000 $130,029 $ 0 89,000 $ 3,000 $ 2,805
of the Board (4) 1993 390,000 0 0 12,000 4,505 2,736
1992 386,250 91,834 0 12,000 4,384 3,442
Russell A. Gullotti, President 1994 $126,500 $ 62,500 $ 0 100,000 $ 1,560 $ 0 $263,130 (5)
and Chief Executive Officer
Robert C. Bowen, Senior Vice 1994 $200,000 $ 45,850 $1,561 10,000 $ 3,000 $ 2,749
President and President, 1993 200,000 25,193 1,315 10,000 4,503 2,705
NCS Education 1992 197,500 44,708 1,332 8,000 3,950 3,406
Donald J. Gibson, Senior Vice 1994 $170,000 $ 50,427 $ 0 6,000 $ 3,000 $ 2,725
President and President, 1993 170,000 8,160 0 4,000 4,265 2,453
NCS Technology 1992 170,000 43,246 0 5,000 3,400 2,638
Richard L. Poss, Vice President, 1994 $168,333 $ 74,887 $ 0 10,000 $ 3,000 $ 2,702
Administration (6) 1993 162,500 15,444 0 6,000 3,775 2,182
1992 156,350 25,635 0 6,000 3,127 3,012
Adrienne T. Tietz, Vice President, 1994 $162,500 $ 26,657 $ 0 6,000 $ 3,000 $ 2,685
Corporate Development 1993 161,250 10,530 0 5,000 3,670 2,117
1992 156,250 22,252 0 4,000 3,125 3,001
<FN>
(1) There were no restricted stock awards made during the three fiscal years
ended January 31, 1995. At January 31, 1995, the number and value of
aggregate restricted stock awards previously granted were 18,000 shares
($283,500); 16,000 shares ($252,000); 14,500 ($228,375); and 14,500
($228,375) for Messrs. Bowen, Gibson, Poss and Ms. Tietz respectively. The
value of the restricted stock awards is determined by multiplying the fair
market value of the Company's Common Stock by the number of shares awarded.
Dividends are paid on shares awarded.
(2) Executive officers participate in the Management Incentive Plan. Under the
Plan, cash incentive payments are made, based on NCS' financial
performance, business unit and individual performance criteria and the
officer's base salary, following the fiscal year end. Incentive payment
amounts are shown in the fiscal year accrued.
(3) Compensation reported represents Company contributions under the NCS 401(k)
Employees Savings Plan (ESP) and the NCS Employee Stock Ownership Plan
(ESOP). The value of the ESOP contribution was calculated based on the
number of shares allocated to the participant valued at the fair market
value of the shares on date of allocation.
(4) Mr. Oswald served as Chief Executive Officer until October 1, 1994. NCS has
an agreement with Mr. Oswald whereby, should he die while employed by NCS,
his beneficiaries would receive $250,000 payable in equal $25,000
installments over 10 years.
(5) Mr. Gullotti joined the Company as President and Chief Executive Officer on
October 1, 1994. On that date, Mr. Gullotti was paid $225,000 cash as
compensation for lost benefits from his prior employer; however, if he
should leave the Company prior to October 1, 1995, $100,000 of the amount
must be immediately repaid to the Company. The Company provided Mr.
Gullotti a supplemental executive retirement plan (SERP) which, on
retirement at age 65, would provide an annual benefit of $75,000. Reduced
amounts would be paid on retirement between ages 55 and 65. Benefits
payable under the SERP are unfunded and will be paid only from the general
assets of the Company. NCS has agreed with Mr. Gullotti that if he is
involuntarily terminated for other than cause he will receive a severance
package equal to two years base salary. Also included is a cash payment of
$38,130 for reimbursement of relocation expenses.
(6) Of the 1994 bonus amount, $30,000 was a one-time cash payment.
</FN>
</TABLE>
STOCK OPTIONS
The following tables summarize option grants and exercises during fiscal 1994 to
or by the executive officers named in the Summary Compensation Table above, and
the value of the options held by such persons at the end of fiscal 1994.
<TABLE>
Option Grants in Fiscal 1994
<CAPTION> Potential Realizable Value
at Assumed Annual Rates
# of % of Total of Stock Price
Securities Options Exercise Appreciation for
Underlying Granted to or Base Option Term (3)
Options Employees in Price Expiration -------------------------------
Name Granted Fiscal 1994 ($/Sh) Date 0% 5% 10%
- - ------------------- --------- ----------- ------ ------- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Charles W. Oswald 15,000 (1) 4 $ 15.68 5/23/96 0 $ 17,970 $ 37,496
12,000 (1) 3 16.50 5/21/97 0 23,173 49,635
12,000 (1) 3 17.60 5/20/98 0 32,420 71,333
50,000 (1) 14 13.13 8/22/99 0 181,379 400,800
Russell A. Gullotti 100,000 (2) 28 13.13 8/22/99 0 362,758 801,600
Robert C. Bowen 10,000 (2) 3 12.50 5/26/99 0 34,535 76,314
Donald J. Gibson 6,000 (2) 2 12.50 5/26/99 0 20,721 45,788
Richard L. Poss 10,000 (2) 3 12.50 5/26/99 0 34,535 76,314
Adrienne T. Tietz 6,000 (2) 2 12.50 5/26/99 0 20,721 45,788
<FN>
(1) See "Proposal To Approve Oswald Stock Option Plan." Each grant is 100%
exercisable upon stockholder approval.
(2) Options vest at the rate of 20% after 12, 24, 36, 48 and 58 months.
(3) The dollar amounts under these columns are the result of calculations at 0%
and at the 5% and 10% rates set by the Securities and Exchange Commission
and therefore are not intended to forecast possible future appreciation,
if any, of the price of the Company's Common Stock.
</FN>
</TABLE>
<PAGE>
<TABLE>
Aggregated Option Exercises in Fiscal 1994 and
Value of Options at End of Fiscal 1994
<CAPTION>
Number of Value of
Number of Securities Underlying Unexercised In-
Shares Unexercised Options the-Money Options
Acquired Value at End of at End of
on Realized Fiscal 1994 Fiscal 1994
Exercise (1) Exercisable/Unexercisable Exercisable/Unexercisable(1)
--------- -------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Charles W. Oswald 0 $ 0 10,000/ 91,500 $ 66,700/$148,725
Russell A. Gullotti 0 0 0/100,000 0/ 262,000
Robert C. Bowen 14,000 63,500 9,200/ 27,800 8,400/ 49,600
Donald J. Gibson 0 0 13,600/ 17,400 46,500/ 36,750
Richard L. Poss 0 0 9,600/ 22,200 18,000/ 44,500
Adrienne T. Tietz 10,500 49,500 7,400/ 15,400 15,600/ 29,400
<FN>
(1) Value based on market value of the Company's Common Stock at date of
exercise or end of fiscal 1994, minus the exercise price.
</FN>
</TABLE>
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total stockholder return on the Common
Stock of the Company for the last five fiscal years with the cumulative total
return of the S&P 500 Index and the Center for Research in Security Prices
(CRSP), University of Chicago, Index for NASDAQ Computer and Data Processing
Stocks (assuming the investment of $100 in the Company's Common Stock and each
Index on January 31, 1990 and reinvestment of all dividends).
<TABLE>
Performance Graph
<CAPTION>
Index for
NASDAQ Computer and
Measurement Period S&P 500 Data Processing
(Fiscal Year Covered) NCS Index (1) Stocks (2)
- - --------------------- --- --------- ---------------
<S> <C> <C> <C>
Measurement Pt. 1/31/90 100 100 100
FYE 1/31/91 170 109 135
FYE 1/31/92 234 133 238
FYE 1/31/93 239 147 251
FYE 1/31/94 190 165 268
FYE 1/31/95 256 166 302
- - -------------------------
<FN>
(1) Total return calculations for the S&P 500 Index were performed by CRSP.
(2) The Index for NASDAQ Computer and Data Processing Stocks (SIC 737) is
maintained by CRSP.
</FN>
</TABLE>
<PAGE>
SECTION 16(a) REPORTING
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers, and persons who own more than ten percent of the
Company's Common Stock to file with the Securities and Exchange Commission (the
"SEC") initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors and
greater than ten-percent shareholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) reports they file. To the Company's
knowledge, based solely on review of the copies of such reports furnished to the
Company during the fiscal year ended January 31, 1995, officers, directors and
greater than ten-percent beneficial owners complied with all applicable Section
16(a) filing requirements.
STOCKHOLDER PROPOSALS
Any proposal by a stockholder intended to be presented at the 1996 Annual
Meeting of Stockholders must be received at the Company's executive offices no
later than December 20, 1995.
GENERAL
On written request, NCS will furnish without charge to each person whose proxy
is being solicited a copy of NCS' Annual Report on Form 10-K for the fiscal year
ended January 31, 1995, as filed with the SEC, including the financial
statements and schedules thereto. NCS will furnish to any such person any
exhibit described in the list accompanying the Form 10-K on payment, in advance,
of reasonable fees related to the furnishing of such exhibit. Requests for
copies of such reports and/or exhibits should be directed to Mr. J. W. Fenton,
Jr., Secretary/Treasurer, NCS, 11000 Prairie Lakes Drive, P.O. Box 9365,
Minneapolis, Minnesota 55440.
The cost of solicitation has been or will be paid by NCS. In addition,
arrangements may be made with brokerage houses and other custodians, nominees
and fiduciaries to send proxies and proxy material to their principals, and NCS
will reimburse them for their expense in so doing.
Dated: April 19, 1995
BY ORDER OF THE BOARD OF DIRECTORS
J. W. Fenton, Jr., Secretary
<PAGE>
SAMPLE PROXY CARD:
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
(Logo)
National Computer Systems, Inc.
11000 Prairie Lakes Drive, P.O. Box 9365, Mpls., MN 55440
The undersigned hereby appoints Russell A. Gullotti and J. W. Fenton, Jr., and
each of them, proxies with full power of substitution to represent and vote all
the shares of Common Stock which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders of National Computer
Systems, Inc. (NCS), to be held at the Lutheran Brotherhood Building, 625 4th
Avenue South, Minneapolis, Minnesota, on May 25, 1995, at 3:30 P.M., and at any
adjournments thereof, upon any and all matters which may properly be brought
before said meeting or adjournment. This proxy, when properly executed, will be
voted in the manner directed herein by the undersigned stockholder. If no
direction is made, this proxy will be voted FOR items 1 through 4.
1. ELECTION OF DIRECTORS
O FOR all nominees listed below O WITHHOLD AUTHORITY
(Except as marked to the contrary below) to vote for all nominees
listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee,
mark the circle next to the nominee's name below.)
O David P. Campbell O Jean B. Keffeler O John E. Steuri
O David C. Cox O Charles W. Oswald O Jeffrey W. Stiefler
O Russell A. Gullotti 0 Stephen G. Shank 0 John W. Vesey
2. PROPOSAL TO APPROVE 1995 EMPLOYEE STOCK OPTION PLAN
O FOR O AGAINST O ABSTAIN
3. PROPOSAL TO APPROVE OSWALD STOCK OPTION PLAN
O FOR O AGAINST O ABSTAIN
4. APPOINTMENT OF AUDITORS - Ernst & Young:
O FOR O AGAINST O ABSTAIN
5. On any other matters which may properly come before the meeting, the named
proxies are authorized to vote on such matters in accordance with their best
judgment.
Stockholder and shares of record covered by this proxy are shown on reverse
side.
<PAGE>
PLEASE DATE AND SIGN exactly as name appears to the left indicating, where
proper, official position or representative capacity. For joint accounts, each
joint owner should sign.
DATED_________________________________, 1995
_________________________________
(Signature)
_________________________________
(Signature, if held jointly)
PLEASE NOTE THE ABOVE SIGNATURE BOX
RETURN IN ENVELOPE PROVIDED
