(Logo)
NATIONAL COMPUTER SYSTEMS, INC.
11000 Prairie Lakes Drive
Eden Prairie, Minnesota 55344
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 23, 1996 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 23, 1996, at 3:30 P.M.,
Central Daylight Savings Time, at the Radisson Hotel South (Atrium 3), 7800
Normandale Boulevard, Bloomington, Minnesota for the following purposes:
1. To elect a Board of Directors for the ensuing year.
2. To approve appointment of Ernst & Young LLP as auditors for the year ending
January 31, 1997.
3. To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on March 25, 1996, 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 25, 1996
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 23, 1996, at 3:30 P.M., at the
Radisson Hotel South (Atrium 3), 7800 Normandale Boulevard, Bloomington,
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 and 2 of the notice. The Board of Directors recommends that stockholders vote
in favor of Items 1 and 2. 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 25, 1996, 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 15,403,937 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 eight persons named below as directors and for approval of the appointment
of Ernst & Young LLP as the Company's auditors. 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 eight persons listed below will be nominated for election as
directors until the next annual meeting of stockholders and until their
successors have been elected. Of the current directors, Dr. David P. Campbell
has chosen not to stand for reelection at this annual meeting. 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 29, 1996.
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.
<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 C. Cox++o 58 President & Chief Executive Officer of Cowles 1983 13,200 (1) *
Media Company (diversified communications) for
more than five years.
Russell A. Gullotti 53 Chairman of the Board, President & Chief Executive 1994 56,167 (2) *
Officer of NCS since May, 1995. President & Chief
Executive Officer from October, 1994 to May, 1995
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 five years.
Jean B. Keffeler++ 50 Business and management consultant since 1993 4,500 (3) *
March, 1991 and prior to that held various
executive positions in the corporate and public
sectors.
Charles W. Oswald o 68 Private investor for more than five years. 1970 1,734,216 (4) 11 %
Chairman of the Board of NCS from October,
1994 to May, 1995 and prior to that Chairman &
Chief Executive Officer of NCS for more than five
years.
Stephen G. Shank + 52 President & Chief Executive Officer of Learning 1985 7,619 (1) *
Ventures International, 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++o 56 Chairman & Chief Executive Officer of ALLTEL 1991 12,000 (5) *
Information Services, Inc. (formerly Systematics
Information Services) (information processing
management, outsourcing services and application
software) for more than five years.
Jeffrey E. Stiefler++ 49 Chairman of Pacific Advisors (management 1993 4,803 (3) *
advisory firm) since October, 1995. President
of American Express Company (travel and
financial services) from August, 1993 to September,
1995, President and Chief Executive Officer of
American Express Financial Advisors, Inc.
(financial services) from July, 1992 to August,
1993 and President from September, 1990 to
July, 1992.
John W. Vessey+ 73 Management consultant since October, 1985 and 1986 7,400 (1) *
prior to that Chairman, Joint Chiefs of Staff,
U.S. Department of Defense from June, 1982 to
October, 1985.
</TABLE>
+ Member of Audit Committee
++ Member of Compensation Committee
o Member of Governance/Nominating Committee
* Less than 1%.
[FN]
<FN1>
(1) The shares listed for Messrs. Cox, Shank and Vessey include 7,000
shares that may be acquired within 60 days upon exercise of outstanding
stock options.
<FN2>
(2) The shares listed for Mr. Gullotti include 135 shares allocated to him
pursuant to the Employee Stock Ownership Plan (ESOP), 32,600 shares
issued under the Long-Term Incentive Plan (L-TIP), and 20,000 shares
that may be acquired within 60 days upon exercise of outstanding stock
options.
<FN3>
(3) The shares listed for Ms. Keffeler and Mr. Stiefler include 2,000
shares that may be acquired within 60 days upon exercise of outstanding
stock options.
<FN4>
(4) The shares listed for Mr. Oswald include 89,000 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.
<FN5>
(5) The shares listed for Mr. Steuri include 5,000 shares that may be
acquired within 60 days upon exercise of outstanding stock options.
Mr. Cox is also a director of ReliaStar Financial Corp. and Tennant Company; Mr.
Gullotti is also a director of GenRad, Inc. and MTS Systems Corporation; Mr.
Oswald is also a director of ADC Telecommunications, Inc.; Mr. Shank is also a
director of Polaris Industries, Inc.; and Mr. Steuri is also a director of
ALLTEL Corporation.
The Board of Directors held six meetings during the fiscal year ended January
31, 1996 (fiscal 1995). 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 processes and
programs. During the last fiscal year, the Compensation Committee held four
meetings. The Governance/Nominating Committee assesses Board effectiveness,
annually recommends the slate of Board nominees and recommends corporate
governance policies and practices. After its formation in January, 1996, the
Governance/Nominating Committee held one meeting. 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 Committee
Chairpersons) 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, 1996, Dr. Campbell
was paid $116,241 for royalties relating to tests developed by Dr. Campbell for
which NCS has a long-term exclusive license.
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 1995, all non-employee
directors as a group were granted options to purchase 7,000 shares at a per
share option price of $18.00. None of the options granted under the Plan have
been exercised.
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, 1997.
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 23, 1996, 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 below and all directors and executive officers as a group as
of February 29, 1996, is shown below. Except as otherwise indicated, the
stockholders listed in the table below 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> <C>
Charles W. Oswald 1,734,216 11%
3800 West 80th Street
Bloomington, Minnesota 55431
State of Wisconsin Investment Board 796,300 5%
121 East Wilson Street
Madison, Wisconsin 53702
Russell A. Gullotti 56,167 *
Robert C. Bowen 58,610 (1) *
Donald J. Gibson 51,553 (2) *
Richard L. Poss 55,242 (3) *
Jeffrey W. Taylor 29,463 (4) *
All Directors and Executive
Officers as a Group (19 persons) 2,140,347 (5) 14%
</TABLE>
* Less than 1%
[FN]
<FN1>
(1) The shares listed for Mr. Bowen include 27,600 shares issued pursuant
to the L-TIP which are subject to forfeiture, 1,104 shares allocated to
him pursuant to the ESOP and 18,800 shares that may be acquired within
60 days upon exercise of outstanding stock options.
<FN2>
(2) The shares listed for Mr. Gibson include 23,800 shares issued pursuant
to the L-TIP which are subject to forfeiture, 1,053 shares allocated to
him pursuant to the ESOP and 15,800 shares that may be acquired within
60 days upon exercise of outstanding stock options.
<FN3>
(3) The shares listed for Mr. Poss include 22,500 shares issued pursuant to
the L-TIP which are subject to forfeiture, 1,005 shares allocated to
him pursuant to the ESOP and 16,000 shares that may be acquired within
60 days upon exercise of outstanding stock options.
<FN4>
(4) The shares listed for Mr. Taylor include 13,200 shares issued pursuant
to the L-TIP and 1,666 shares issued pursuant to a restricted stock
award, all of which are subject to forfeiture; 831 shares allocated to
him pursuant to the ESOP; and 9,200 shares that may be acquired within
60 days upon exercise of outstanding stock options.
<FN5>
(5) Includes 167,800 shares issued pursuant to the L-TIP and 1,666 shares
issued pursuant to a restricted stock award, all of which are subject
to forfeiture; 7,242 shares allocated pursuant to the ESOP; and 224,700
shares that may be acquired within 60 days upon exercise of outstanding
stock options.
<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 processes and programs. They approve and make recommendations with
regard to those processes 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
revenue and 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 10 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 nationwide, 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 or business unit revenue and earnings
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 and business unit revenue and earnings 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 to
help ensure on-going alignment with stockholder interests.
The Company's stock option plans are administered by the Compensation Committee.
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 60 or 63 month terms and vest at the rate of
20% after 12, 24, 36, 48 and 58 or 60 months. The amounts to be granted to
executive officers are determined 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.
Under the L-TIP award in 1990, the restricted shares 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 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 15%)
of the participant's total compensation over the three-year period ending with
the year in which the performance goal is achieved.
Under the L-TIP award in 1995, the restricted shares will vest if the prescribed
annual compound growth rate of NCS revenue and cumulative total earnings per
share (EPS) are achieved for the three fiscal years ending January 31, 1998.
Provision is made in the 1995 Award whereby participant awards can be modified
in a range of 85-115% based on actual compounded revenue growth rates and up to
250% for overachievement of cumulative EPS results. Payouts in excess of 100% of
the awarded restricted shares will be paid in cash in an amount equivalent to
the number of excess shares at $16.25 per share. An annual cash compensation
element is based on achievement of prescribed minimum EPS amounts in each of the
fiscal years ending January 31, 1996, 1997 and 1998. If the annual prescribed
minimum EPS amount is not achieved, that year's cash payout of 10% of base
salary is lost. For the year ended January 31, 1996, the prescribed EPS goal was
achieved. If the restricted stock goals are achieved, the stock awards are paid
out over a two-year period: 67% as of January 31, 1998 and 33% as of January 31,
1999. Cash awards are paid out following the end of the year of achievement.
The currently outstanding L-TIP 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's annual base salary is $400,000 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 $253,333 ($213,333 under the MIP and $40,000 under
the L-TIP) was accrued for Mr. Gullotti. Mr. Gullotti was granted an option
during the year to purchase 30,000 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.
<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. The NCS 1995 Employee Stock Option Plan,
approved by stockholders in 1995, complies with Section 162(m) so that
compensation resulting from stock options granted under the 1995 Plan will not
be counted toward the $1,000,000 limit on deductible compensation under Section
162(m). Compensation expense related to options granted under the Company's
existing employee stock option plans will also be deductible under Section
162(m). The Committee has not formulated a policy with respect to qualifying
other executive compensation for deductibility under Section 162(m).
David C. Cox, Chairman John E. Steuri
Jean B. Keffeler Jeffrey E. Stiefler
Members of the Compensation Committee
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for each of the
last three fiscal years awarded to or earned by the Chief Executive Officer of
the Company and the four other most highly compensated executive officers of the
Company.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
__________________________________________ ________________________
Other Restricted Securities All Other
Annual Stock Under- Compensation (3)
Fiscal Compen- Awards lying __________________
Name and Principal Position Year Salary Bonus(1) sation ($) (2) Options ESP(4) ESOP(4)
___________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Russell A. Gullotti, Chairman, 1995 $388,702 $253,333 $2,358 $594,950 30,000 $3,750 $2,733
President and Chief 1994 126,500 62,500 0 0 100,000 1,560 0
Executive Officer
Robert C. Bowen, Senior 1995 206,750 43,380 1,609 175,200 10,000 3,750 3,224
Vice President 1994 200,000 45,850 1,561 0 10,000 3,000 2,749
1993 200,000 25,193 1,315 0 10,000 4,503 2,705
Donald J. Gibson, Senior 1995 170,000 85,620 0 142,350 7,500 3,750 3,189
Vice President 1994 170,000 50,427 0 0 6,000 3,000 2,725
1993 170,000 8,160 0 0 4,000 4,265 2,453
Richard L. Poss, Senior 1995 183,333 109,886 1,111 146,000 9,500 3,750 3,176
Vice President (5) 1994 168,333 74,887 0 0 10,000 3,000 2,702
1993 162,500 15,444 0 0 6,000 3,775 2,182
Jeffrey W. Taylor, Vice 1995 167,500 65,025 0 142,350 8,000 3,750 3,085
President and Chief 1994 146,042 30,682 0 62,500 10,000 3,000 2,620
Financial Officer 1993 130,000 34,375 0 0 3,500 2,894 1,671
</TABLE>
[FN]
<FN1>
(1) Executive officers participate in the Company's MIP and its L-TIP.
Under these plans, cash incentive payments are made, based on NCS'
financial performance, business unit performance and individual
performance criteria and the officer's base salary, following the
fiscal year end. Based on the Company's fiscal 1995 EPS performance,
annual cash awards under the L-TIP of $40,000, $20,900, $17,000,
$20,000 and $17,000 were accrued for Messrs. Gullotti, Bowen, Gibson,
Poss and Taylor, respectively. The remainder of the bonus amount
accrued was under the MIP. Incentive payment amounts are shown in the
fiscal year accrued.
<FN2>
(2) The number and fair market value of aggregate restricted stock holdings
at January 31, 1996, were 32,600 shares ($660,150); 27,600 shares
($558,900); 23,800 ($481,950); 22,500 ($455,625) and 15,700 ($317,925)
for Messrs. Gullotti, Bowen, Gibson, Poss and Taylor, respectively. The
value of the restricted stock awards shown in the table above is
determined by multiplying the fair market value of the Company's Common
Stock on date of award by the number of shares awarded. Under the 1995
L-TIP awards, all shares are forfeited if minimum performance
objectives are not met. Under these awards, maximum overachievement of
performance objectives would result in a cash payment equivalent to
1.875 times the number of shares awarded to each participant at $16.25
per share. Dividends are paid on shares awarded.
<FN3>
(3) Mr. Gullotti joined the Company as President and Chief Executive
Officer on October 1, 1994. In 1994, Mr. Gullotti was paid $225,000
cash as compensation for lost benefits from his prior employer and
$38,130 for reimbursement of relocation expenses. In 1995, he was paid
$33,386 for reimbursement of relocation expenses. 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 his employment with the Company is involuntarily terminated for
other than cause, he will receive a severance package equal to two
years base salary.
<FN4>
(4) 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.
<FN5>
(5) Of the 1994 bonus amount, $30,000 was a one-time cash payment.
STOCK OPTIONS
The following tables summarize option grants and exercises during fiscal 1995 to
or by the executive officers named in the Summary Compensation Table above, and
the value of the options held by such persons at the end of fiscal 1995.
<TABLE>
<CAPTION>
Option Grants in Fiscal 1995
Individual Grants
______________________________________________________ Potential Realizable Value
at Assumed Annual Rates
# of % of Total of Stock Price
Securities Options Exercise Appreciation for
Underlying Granted to or Base Option Term (2)
Options Employees in Price Expiration __________________________________
Name Granted(1) Fiscal 1995 ($/Sh) Date 0% 5% 10%
<S> <C> <C> <C> <C> <C> <C> <C>
Russell A. Gullotti 30,000 13 % $18.00 8/25/00 0 $157,720 $350,821
Robert C. Bowen 10,000 4 18.00 8/25/00 0 52,573 116,940
Donald J. Gibson 7,500 3 18.00 8/25/00 0 39,430 87,705
Richard L. Poss 9,500 4 18.00 8/25/00 0 49,945 111,093
Jeffrey W. Taylor 8,000 4 18.00 8/25/00 0 42,059 93,552
</TABLE>
[FN]
<FN1>
(1) Options vest at the rate of 20% after 12, 24, 36, 48 and 60 months.
<FN2>
(2) 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.
<PAGE>
<TABLE>
<CAPTION>
Aggregated Option Exercises in Fiscal 1995 and
Value of Options at End of Fiscal 1995
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 1995 Fiscal 1995
Exercise (1) Exercisable/Unexercisable Exercisable/Unexercisable (1)
__________ ________ _________________________ ____________________________
<S> <C> <C> <C> <C> <C> <C>
Russell A. Gullotti 0 $ 0 20,000 /110,000 $142,400 /637,100
Robert C. Bowen 1,000 7,500 16,800 / 29,200 93,700 /138,800
Donald J. Gibson 6,000 51,000 13,800 / 18,700 79,850 / 86,775
Richard L. Poss 1,800 16,875 14,400 / 25,100 83,000 /120,875
Jeffrey W. Taylor 1,200 9,600 8,400 / 20,100 50,100 /100,025
</TABLE>
[FN]
<FN1>
(1) Value based on market value of the Company's Common Stock at date of
exercise or end of fiscal 1995, minus the exercise price.
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, 1991 and reinvestment of all dividends).
<TABLE>
<CAPTION>
Performance Graph
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. 1/31/91 100 100 100
FYE 1/31/92 137.8 122.7 176.5
FYE 1/31/93 140.8 135.6 186.2
FYE 1/31/94 111.7 152.7 198.9
FYE 1/31/95 150.7 153.6 223.6
FYE 1/31/96 197.4 213.4 346.8
</TABLE>
[FN]
__________________________
<FN1>
(1) Total return calculations for the S&P 500 Index were performed by CRSP.
<FN2>
(2) The Index for NASDAQ Computer and Data Processing Stocks (SIC 737) is
maintained by CRSP.
<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, 1996, 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 1997 Annual
Meeting of Stockholders must be received at the Company's executive offices no
later than December 27, 1996.
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, 1996, 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 25, 1996
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 Radisson Hotel South (Atrium 3), 7800
Normandale Boulevard, Bloomington, Minnesota, on May 23, 1996, 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 and 2.
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
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the circle next to the nominee's name below.)
0 David C. Cox 0 Charles W. Oswald 0 Jeffrey E. Stiefler
0 Russell A. Gullotti 0 Stephen G. Shank 0 John W. Vessey
0 Jean B. Keffeler 0 John E. Steuri
2. APPOINTMENT OF AUDITORS - Ernst & Young LLP:
0 FOR 0 AGAINST 0 ABSTAIN
3. 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_______________________________, 1996
_______________________________
(Signature)
_______________________________
(Signature, if held jointly)
PLEASE NOTE THE ABOVE SIGNATURE BOX
RETURN IN ENVELOPE PROVIDED
