NATIONAL DATA CORP, PRER14A, 1995-08-17

NATIONAL DATA CORP
PRER14A, 1995-08-17
BUSINESS SERVICES, NEC

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<PAGE>

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12

NATIONAL DATA CORPORATION
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(Name of Registrant as Specified in Its Charter)

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

Payment of Filing Fee (Check the appropriate box):

[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction applies:

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2) Aggregate number of securities to which transaction applies:

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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11
(Set forth the amount on which the filing fee is calculated and state how
it was determined):

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4) Proposed maximum aggregate value of transaction:

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5) Total fee paid:

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[X] Fee paid previously with preliminary materials.

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

1) Amount Previously Paid:

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2) Form, Schedule or Registration Statement No.:

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3) Filing Party:

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4) Date Filed:

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<PAGE>

[LOGO APPEARS HERE] PRELIMINARY
NATIONAL DATA PLAZA
ATLANTA, GEORGIA 30329-2010

TO THE STOCKHOLDERS:

The Annual Meeting of Stockholders (the "Annual Meeting") of National Data
Corporation, a Delaware corporation (the "Company"), will be held at the
Company's offices at National Data Plaza, Atlanta, Georgia, on October 26, 1995,
at 11:00 A.M., Atlanta time, for the following purposes:

1. To elect two directors in Class III to serve until the annual meeting
of stockholders in 1998, or until their successors are duly elected and
qualified;

2. To vote on a proposal to amend the National Data Corporation 1987 Stock
Option Plan to increase the number of shares that may be issued
thereunder from 3,787,500 to 5,287,500 and to limit total grants of
options thereunder to any individual to not more than 1,500,000 shares.

3. To vote on a proposal to amend the National Data Corporation 1983
Restricted Stock Plan to increase the number of shares that may be
issued thereunder from 487,500 to 750,000 and to add a performance-
based award feature to the plan.

4. To vote on a proposal to adopt the National Data Corporation 1995 Non-
Employee Director Compensation Plan which provides that one-half of the
annual retainer payable to the Company's non-employee directors will be
paid in shares of Common Stock of the Company in lieu of cash.

5. To vote on a proposal to amend the National Data Corporation 1984 Non-
Employee Director Stock Option Plan to provide for a new series of five
additional grants of stock options to purchase 5,000 shares per grant
to non-employee directors, to extend exercise rights to the expiration
date of the option and to establish a five year vesting schedule.

6. To vote on a proposal to approve the National Data Corporation 1995
Performance-Based Executive Officer Bonus Plan which provides for
performance-based awards to the executive officers of the Company.

7. To vote on a proposal to amend the Certificate of Incorporation of the
Company to increase the number of shares of Common Stock of the Company
authorized for issuance from 30,000,000 to 60,000,000.

8. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.

Only stockholders of record at the close of business on August 28, 1995 are
entitled to notice of, and to vote at, the Annual Meeting. The transfer books
will not be closed. A complete list of stockholders entitled to vote at the
Annual Meeting will be available for inspection by stockholders at the offices
of the Company during the ten days prior to the Annual Meeting.

By Order of the Board of Directors

[facsimile signature]

E. MICHAEL INGRAM, Secretary

Dated: August [___], 1995

WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING IN PERSON, PLEASE
VOTE, SIGN, DATE, AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED
BUSINESS REPLY ENVELOPE. IF YOU DO ATTEND THE MEETING, YOU MAY, IF YOU WISH,
WITHDRAW YOUR PROXY AND VOTE IN PERSON.
<PAGE>

PRELIMINARY
NATIONAL DATA CORPORATION
NATIONAL DATA PLAZA
ATLANTA, GEORGIA 30329-2010

August [___], 1995

PROXY STATEMENT
FOR COMMON STOCK
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 26, 1995

INTRODUCTION

This Proxy Statement is furnished to holders of the $.125 par value per
share Common Stock ("Common Stock") of National Data Corporation, a Delaware
corporation (the "Company" or "NDC"), in connection with the solicitation of
proxies by the Company's Board of Directors from holders of the outstanding
shares of Common Stock for use at the Annual Meeting of Stockholders to be held
at 11:00 A.M. local time at the Company's offices at National Data Plaza,
Atlanta, Georgia, on Thursday, October 26, 1995, and at any adjournments thereof
(the "Annual Meeting").

The Annual Meeting will be held for the following purposes: (1) to elect
two directors to serve until the 1998 Annual Meeting of Stockholders and until
their successors are elected and qualified; (2) to adopt an amendment to the
National Data Corporation 1987 Stock Option Plan (the "1987 Plan") to increase
the number of shares that may be issued thereunder from 3,787,500 to 5,287,500
and to limit total grants of options thereunder to any individual to not more
than 1,500,000 shares; (3) to adopt an amendment to the National Data
Corporation 1983 Restricted Stock Plan (the "1983 Plan") to increase the number
of shares that may be issued thereunder from 487,500 to 750,000 and to add a
performance-based award feature to the plan; (4) to adopt the National Data
Corporation 1995 Non-Employee Director Compensation Plan (the "1995 Director
Plan") which provides that one-half of the annual retainer payable to the
Company's non-employee directors will be paid in shares of Common Stock in lieu
of cash; (5) to adopt an amendment to the National Data Corporation 1984 Non-
Employee Director Stock Option Plan (the "Director Option Plan") to provide for
a new series of five additional grants of stock options to purchase 5,000 shares
per grant to non-employee directors and to extend exercise rights to the
expiration date of the option; (6) to adopt the National Data Corporation 1995
Performance-Based Executive Officer Bonus Plan (the "Executive Bonus Plan")
which provides for performance-based awards to the executive officers of the
Company; (7) to adopt an amendment to the Company's Certificate of Incorporation
(the "Certificate") to increase the number of shares of Common Stock authorized
for issuance from 30,000,000 to 60,000,000; and (8) to transact such other
business as may properly come before the Annual Meeting or any adjournments
thereof.

The Company's mailing address and the location of its principal offices are
National Data Plaza, Atlanta, Georgia 30329-2010. This Proxy Statement and the
accompanying Proxy are first being mailed to stockholders of the Company on or
about August [___], 1995.

STOCKHOLDERS ENTITLED TO VOTE

Only stockholders of record of the Company at the close of business on
August 28, 1995 (the "Record Date") will be entitled to notice of, and to vote
at, the Annual Meeting. On the Record Date, there were [__________] shares of
the Common Stock issued and outstanding held by approximately [__________]
stockholders of record. The Company's stock transfer books will not be closed
and shares may be transferred subsequent to the Record Date. However, all votes
must be cast in the names of stockholders of record on the Record Date.
Pursuant to the Certificate of the Company, holders of Common Stock are entitled
to one vote per share.

1
<PAGE>

The Company effected a three-for-two stock split of the Common Stock in the
form of a stock dividend on March 20, 1995. All numbers of shares and prices
per share relating to the Common Stock set forth in this Proxy Statement have
been restated to reflect such stock split.

QUORUM AND VOTING REQUIREMENTS

The holders of Common Stock are entitled to one vote per share of Common
Stock. Pursuant to the Company's Bylaws, the holders of a majority of the shares
of Common Stock issued and outstanding and entitled to vote at the Annual
Meeting, present in person or represented by proxy, shall constitute a quorum.
For the purpose of determining the presence of a quorum, abstentions and broker
nonvotes will be counted as present.

Proposal 1, the election of two directors, will require the affirmative vote
of the holders of a majority of the shares of Common Stock represented and
entitled to vote at the Annual Meeting at which a quorum is present. With
respect to Proposal 1, the election of directors, stockholders may (i) vote
"for" the nominees, (ii) "withhold authority" to vote for the nominees or (iii)
withhold authority to vote for any individual nominee or nominees but vote for
all other nominees. Because Proposal 1 will require the affirmative vote of the
holders of a majority of the shares of Common Stock represented and entitled to
vote at the Annual Meeting at which a quorum is present, an abstention and a
broker nonvote (which occur when shares held by brokers or nominees for
beneficial owners are voted on some matters but not on others) will have the
same effect as a vote to "withhold authority" although they would be counted as
present for purposes of determining the existence of a quorum.

With respect to Proposals 2 through 6, stockholders may (i) vote "for ,"
(ii) vote "against," or (iii) "abstain" from voting on the proposal. Proposals
2 through 6 will require the affirmative vote of the holders of a majority of
the shares of Common Stock represented and entitled to vote at the Annual
Meeting at which a quorum is present, and, therefore, an abstention and a broker
nonvote will have the same effect as a vote "against." With respect to Proposal
7, stockholders may (i) vote "for," (ii) vote "against," or (iii) "abstain" from
voting on the proposal. Proposal 7 will require the affirmative vote of a
majority of the outstanding shares of Common Stock entitled to vote thereon,
and, therefore, an abstention and a broker nonvote will have the same effect as
a vote "against."

PROXIES

If the enclosed Proxy is executed, returned in time and not revoked, the
shares represented thereby will be voted in accordance with the instructions
indicated in such Proxy. IF NO INSTRUCTIONS ARE INDICATED, PROXIES WILL BE
VOTED FOR (1) THE ELECTION OF ALL DIRECTOR NOMINEES; (2) THE AMENDMENT OF THE
1987 PLAN; (3) THE AMENDMENT OF THE 1983 PLAN; (4) THE ADOPTION OF THE 1995
DIRECTOR PLAN; (5) THE AMENDMENT OF THE DIRECTOR OPTION PLAN; (6) THE ADOPTION
OF THE EXECUTIVE BONUS PLAN; (7) THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION; AND (8) IN THE BEST JUDGMENT OF SUCH PROXIES AS TO ANY OTHER
MATTERS WHICH MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS
THEREOF.

A stockholder who has given a Proxy may revoke it at any time prior to its
exercise at the Annual Meeting by either (i) giving written notice of revocation
to the Secretary of the Company, (ii) properly submitting to the Company a duly
executed Proxy bearing a later date, or (iii) appearing at the Annual Meeting
and voting in person. All written notices of revocation of Proxies should be
addressed as follows: National Data Corporation, National Data Plaza, Atlanta,
Georgia 30329-2010, Attention: E. Michael Ingram, Secretary.

2
<PAGE>

1. ELECTION OF DIRECTORS

The Board of Directors of the Company is divided into three classes, with
the term of office of each class ending in successive years. The terms of
directors of Class III expire with this Annual Meeting. The directors in Class
I and Class II expire at the 1996 and 1997 annual meetings of stockholders,
respectively. The stockholders are being asked to vote on the election to Class
III of Mr. Don W. Sands and Ms. J. Veronica Biggins.

Each Class III director will be elected to hold office until the 1998 annual
meeting of stockholders and thereafter until a successor has been duly elected
and qualified. The persons named in the enclosed proxy intend to vote the
shares represented thereby in favor of the election to the Board of the Class
III nominees whose names appear below, unless authority to vote for the nominees
is withheld or such proxy has previously been revoked. It is anticipated that
management stockholders of the Company will grant authority to vote for the
election of the nominees. In the event that the nominees are unable to serve
(which is not anticipated), the persons designated as proxies will cast votes
for such other persons as they may select.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES FOR ELECTION AS
DIRECTORS. IF A CHOICE IS SPECIFIED ON THE PROXY BY THE STOCKHOLDER, THE SHARES
WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES WILL BE
VOTED "FOR" THE NOMINEES. THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF
THE SHARES OF COMMON STOCK REPRESENTED AND ENTITLED TO VOTE AT THE ANNUAL
MEETING AT WHICH A QUORUM IS PRESENT IS REQUIRED FOR THE ELECTION OF THE
NOMINEES.

CERTAIN INFORMATION CONCERNING NOMINEES AND DIRECTORS

The following table sets forth the names of the nominees and the directors
continuing in office, their ages, the month and year in which they first became
directors of the Company, their positions with the Company, their principal
occupations and employers for at least the past five years, and any other
directorships held by them in companies that are subject to the reporting
requirements of the Securities Exchange Act of 1934 or any company registered as
an investment company under the Investment Company Act of 1940. For information
concerning membership on committees of the Board, see "Other Information About
the Board and its Committees" below.

NOMINEE FOR DIRECTOR

MONTH AND POSITIONS WITH THE COMPANY, PRINCIPAL
YEAR FIRST OCCUPATIONS DURING AT LEAST THE PAST FIVE
NAME AND AGE BECAME A DIRECTOR YEARS, AND OTHER DIRECTORSHIPS
------------ ----------------- ------------------------------

CLASS III
FOR THREE-YEAR TERM EXPIRING ANNUAL MEETING 1998
<S> <C> <C>
Don W. Sands September 1989 Director of the Company
(69) Member of the Board of Directors, Georgia World Congress Center, Atlanta (since
1985); Chief Executive Officer Emeritus and Counselor to the Board of Directors
of Gold Kist, Inc. (a diversified agricultural cooperative association), Atlanta
(since November 1991); President, Chief Executive Officer, and Chairman of the
Management Executive Committee of Gold Kist Inc. (1988-1991); Director of Golden
Poultry Co.

J. Veronica Biggins Consultant, Heidrick & Struggles (since 1995);
(69) Assistant to the President of the United States (1994-1995); Executive Vice
President, NationsBank of Georgia (1973-1994); Director, Kaiser Foundation;
Director, Health Plan of Georgia, Inc.
</TABLE>

3
<PAGE>

MEMBERS OF THE BOARD OF DIRECTORS
CONTINUING IN OFFICE

CLASS I
TERM EXPIRING ANNUAL MEETING 1996
<S> <C> <C>
Robert A. Yellowlees April 1985 Chairman of the Board (since June
(56) 1992), and President, Chief Executive
Officer and Chief Operating Officer
(since May 1992) and Director (since 1987)
of the Company
Chairman, Spectrum Research Group, Inc.
(consultants on the management of
technology), Atlanta; Director of
John H. Harland Co.

James B. Edwards January 1989 Director of the Company
(68) President, The Medical University of
South Carolina (since November 1982)
Director of the Harry Frank
Guggenheim Foundation, Phillips
Petroleum Company, The William
Benton Foundation, Encyclopedia
Britannica, Inc., SCANA Corporation,
IMO Industries, Inc., WMX
Technologies, Inc. and
Norfolk-Southern Corporation
Advisory Board.

CLASS II
TERM EXPIRING ANNUAL MEETING 1997

Edward L. Barlow January 1969 Director of the Company
(60) General Partner, Whitcom Partners
(an investment partnership), New York.

Neil Williams April 1977 Director of the Company
(59) Managing Partner, Alston & Bird
(Attorneys and Counsel for the
Company), Atlanta.

</TABLE>
OTHER INFORMATION ABOUT THE BOARD AND ITS COMMITTEES

Meetings and Compensation. During the fiscal year ended May 31, 1995, the
--------------------------
Company's Board of Directors held 12 meetings. During the last fiscal year, the
Company's policy regarding the compensation of directors was to pay directors
who are not also employees of the Company an annual retainer of $2,000 per month
plus $1,000 per meeting attended. Each member of the Audit and Compensation
Committees received $1,000 per Audit or Compensation Committee meeting attended
in addition to his other compensation as a director. As of June 1, 1995, the
Board of Directors adopted the 1995 Director Plan which, subject to approval of
the stockholders at the Annual Meeting, provides for the payment of one-half of
the annual retainer of the Company's non-employee directors in shares of Common
Stock in lieu of cash. See "Proposal 5 - Approval of 1995 Non-Employee Director
Compensation Plan" below.

Non-employee directors who were initially elected to the Board of Directors
prior to January 1, 1995, are also eligible for certain retirement benefits.
Each such non-employee director with five or more years of service to the
Company as a director is entitled to receive a retirement benefit on the later
of (a)

4
<PAGE>

the first day of the month on or after his seventieth birthday, or (b)
his retirement date. The retirement benefit will generally continue annually
thereafter for the lesser of (i) the number of years equal to the number of
years the individual served as a director or (ii) ten years. In the case of
non-employee directors with greater than ten years service as a director on the
effective date of the retirement plan (December 18, 1991), however, the
retirement benefit will continue for fifteen years. Retirement benefits may be
paid to a retired director prior to his attaining age 70 if the retired director
is at least age 60, with not less than ten years of service as a director. The
retirement benefit will be calculated from a base amount equal to the annual
retainer for non-employee directors in effect on the date of a director's
retirement. The retired director would receive as the retirement benefit 50% of
the base amount plus 10% for each year of service up to 100% of the base amount
for ten years' service. As of August 1, 1995, Messrs. Sands, Edwards, Barlow,
and Williams had 6, 6-8/12, 26-8/12, and 18-5/12 years of service as directors
for purposes of the retirement plan. In the event of a change in control of the
Company, each non-employee director will be deemed to have completed 10 years of
service as a director and will be paid the retirement benefit if his service as
a director of the Company is terminated, with his benefit commencing upon his
termination as a director.

The Company also maintains the Director Option Plan which most recently
provided that each eligible director was to receive up to five options to
purchase 7,500 shares, one for each year of service as a director, and all of
the non-employee directors received such option grants. The proposed amendment
of the Director Option Plan to be considered at the Annual Meeting provides for
a new series of five additional grants of options to purchase 5,000 shares per
grant and a new five year vesting schedule. Options previously granted under
the Directors Plan are exercisable immediately at a price equal to the fair
market value (as defined in the Directors Plan) of Common Stock at the date of
the grant. See "Proposal 4 - Amendment of 1984 Non-Employee Director Stock
Option Plan" for information regarding grants of stock options under the
Director Option Plan during the last fiscal year and the proposed amendment of
the Director Option Plan.

Committees. The Company's Board of Directors has an Audit Committee and a
-----------
Compensation Committee. The Company does not have a nominating committee. The
full Board of Directors performs the function which would be performed by a
nominating committee. Certain information regarding the functions of the
Board's Committees and their present membership is provided below.

Audit Committee. The Company's Board of Directors has an Audit Committee
----------------
composed of Messrs. Barlow (Chairman), Sands and Williams. The Audit Committee
annually reviews and recommends to the Board the firm to be engaged as
independent auditors for the next fiscal year, reviews with the independent
auditors the plan and results of the auditing engagement, reviews the scope and
results of the Company's procedures for internal auditing, and inquires as to
the adequacy of the Company's internal accounting controls. During the fiscal
year ended May 31, 1995, the Audit Committee held two meetings, each of which
was separate from regular Board meetings.

Compensation Committee Interlocks and Insider Participation. The Board of
------------------------------------------------------------
Directors also has a Compensation Committee composed of Messrs. Sands
(Chairman), Edwards and Barlow. This Committee reviews and recommends to the
Board levels of compensation and performance criteria for the Company's
executive officers and administers the Company's 1982 Incentive Stock Option
Plan, the 1983 Plan and the 1987 Plan. During the fiscal year ended May 31,
1995, the Compensation and Stock Option Committees of the Board were
consolidated into the Compensation Committee. During the last fiscal year, the
Compensation Committee held three meetings, all of which were separate from
regular Board meetings. None of the members of the Compensation Committee
served as an officer or an employee of the Company during the fiscal year ended
May 31, 1995.

5
<PAGE>

COMMON STOCK OWNERSHIP OF MANAGEMENT

The following table sets forth information as of August 1, 1995, with
respect to the beneficial ownership of Common Stock by the nominees to the
Board, directors of the Company, by each of the executive officers named in the
Summary Compensation Table, and by the 14 persons, as a group, who were
directors and/or executive officers of the Company on August 1, 1995.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME BENEFICIAL OWNERSHIP(1) CLASS(1)
---- ----------------------- --------
<S> <C> <C>
Edward L. Barlow 113,072(2) *
Neil Williams 75,066(3) *
Robert A. Yellowlees 613,174(4) 2.7%
James B. Edwards 38,522(5) *
Don W. Sands 49,322(6) *
J. Veronica Biggins -- --
J. David Lyons 14,001(7) *
James R. Henderson 31,250(8) *
Jerry W. Braxton 47,017(9) *
Kevin C. Shea 83,782(10) *

All Directors and Executive
Officers (14 persons)
as a Group 1,173,351(11) 5.2%
</TABLE>
--------------
* Less than one percent.
(1) The amounts and percentages of Common Stock beneficially owned are reported
on the basis of regulations of the Securities and Exchange Commission
governing the determination of beneficial ownership of securities. The
beneficial owner has both voting and investment power over the shares,
unless otherwise indicated.
(2) This amount includes 55,500 shares of Common Stock of which Mr. Barlow has
the right to acquire beneficial ownership.
(3) This amount includes 55,500 shares of Common Stock of which Mr. Williams
has the right to acquire beneficial ownership .
(4) This amount includes 384,250 shares of Common Stock of which Mr. Yellowlees
has the right to acquire beneficial ownership, 30,000 shares held by The
Yellowlees Charitable Trust, of which Mr. Yellowlees is the Trustee, and
2,839 shares held by Mr. Yellowlees' wife as to which he disclaims all
beneficial ownership.
(5) This amount includes 37,500 shares of Common Stock of which Mr. Edwards
has the right to acquire beneficial ownership.
(6) This amount includes 37,500 shares of Common Stock of which Mr. Sands has
the right to acquire beneficial ownership.
(7) This amount includes 12,501 shares of Common Stock of which Mr. Lyons has
the right to acquire beneficial ownership and 1,500 shares of restricted
stock over which he currently has sole voting power only.
(8) This amount consists of 25,250 shares of Common Stock of which Mr.
Henderson has the right to acquire beneficial ownership and 3,500 shares of
restricted stock over which he currently has sole voting power only.
(9) This amount includes 35,376 shares of Common Stock of which Mr. Braxton has
the right to acquire beneficial ownership and 3,750 shares of restricted
stock over which he currently has sole voting power only.
(10) This amount includes 69,379 shares of Common Stock of which Mr. Shea has
the right to acquire beneficial ownership and 3,750 shares of restricted
stock over which he currently has sole voting power only.
(11) This amount includes 791,759 shares of Common Stock of which the directors
and executive officers, as a group, have the right to acquire beneficial
ownership and 40,250 shares of restricted stock over which the beneficial
owners have sole voting power only.

6
<PAGE>

COMMON STOCK OWNERSHIP BY CERTAIN OTHER PERSONS

The following table sets forth information as of the date indicated with
respect to the only persons who are known by the Company to be the beneficial
owners of more than 5% of the outstanding shares of Common Stock.

<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER DATE OWNERSHIP(1) CLASS
------------------- ---- ----------------- ----------
<S> <C> <C> <C>
Prudential Insurance Company of February 7, 1995 855,400 6.7%
America(2)
Prudential Plaza
Newark, NJ 07102-3777

Montgomery Asset (3) February 11, 1994 787,482 6.4%
Management, L.P.
600 Montgomery Street
San Francisco, CA 94111
</TABLE>
-------------
(1) Adjusted to give effect to a three-for-two stock split effected on March
20, 1995.

(2) This information is contained in a Schedule 13G dated February 7, 1995
filed by Prudential Insurance Company of America with the Securities and
Exchange Commission, a copy of which was received by the Company. Such
Schedule 13G states that Prudential Insurance Company has sole voting and
shared dispositive power with respect to all such shares.

(3) This information is contained in a Schedule 13G dated February 11, 1994
filed by Montgomery Asset Management, L.P. with the Securities and Exchange
Commission, a copy of which was received by the Company. Such Schedule 13G
states that Montgomery Asset Management has sole voting and dispositive
power with respect to all such shares.

7
<PAGE>

REPORT OF THE COMPENSATION COMMITTEE

As previously noted, the Compensation Committee and Stock Option Committee
have been combined into one Compensation Committee. Decisions on compensation
and stock-based plans are made by the three-member Compensation Committee. All
decisions by the Compensation Committee relating to the compensation of the
Company's executive officers are reviewed by the full Board. Decisions of the
Compensation Committee related to stock-based plans are made solely by that
committee in order for awards or grants under the Company's equity-based plans
to satisfy Rule 16b-3 pursuant to the Securities Exchange Act of 1934, as
amended.

The Company's primary objective in designing and implementing its
compensation programs is to maximize stockholder value over time through
alignment of employee performance with business goals and strategies that serve
stockholders interests. The overall goal of the Compensation Committee is to
develop executive compensation and equity-based programs which are consistent
with and linked to the Company's strategic and annual business objectives.

Compensation Philosophy
-----------------------

The Compensation and Stock Option Committees have adopted certain
principles which they apply in structuring the compensation opportunity for
executive officers. These are:

LONG TERM AND AT-RISK FOCUS. A significant percentage of total
compensation for executive officers should be composed of long term,
at-risk rewards to focus senior management on the long term interests of
stockholders. Equity-based plans should comprise a major part of the
long term, at-risk portion of total compensation to encourage
stockholder value-based management decisions, and to link compensation
to Company performance and stockholder interests.

SHORT TERM AND AT RISK FOCUS. A significant portion of cash
compensation for executives is linked to achievement of annual business
plans or performance objectives. This includes cash bonuses that may be
approved by the Compensation Committee relating to those objectives.
There is real risk in bonuses paid under this plan, recognizing
variability in individual, unit and overall company performance.

COMPETITIVENESS. Base pay and total compensation should be
competitive with other similar companies based upon size, products and
markets. A proxy survey of peer group companies is conducted
periodically. The peer group surveyed includes appropriate companies
contained in the Standard and Poor's Computer Software and Services
Index used in the stockholder return analysis shown later, in addition
to other firms in the Company's business sectors.

Stock Option Awards and Restricted Stock Grants
-----------------------------------------------

Equity-based compensation comprises a significant portion of the Company's
executive officer compensation programs. These plans are administered solely by
the Compensation Committee. There are two Company plans utilized for this
component of executive officer, long term, equity-oriented compensation. These
involve Stock Options and Restricted Stock grants:

STOCK OPTIONS. Options provide executive officers with the
opportunity to achieve an equity interest in the Company. Stock options
are granted at 100% of fair market value on the date of grant and have
10-year terms. Effective with grants after May 31, 1994, stock options
vest two years after the date of grant with respect to 20% of the shares
granted, an additional 25% after three years, an additional 25% after
four years, and the remaining 30% after five years. The objective is to
emphasize a long term focus by key employees in the acquisition and
holding of Common Stock. The number of stock options granted to an
individual is based upon the responsibility level of the individual's

8
<PAGE>

position and the individual's potential to contribute to future growth
of the Company as evidenced by current performance, with an objective of
fostering broad-based equity participation. Annual grant amounts vary
as a result of the Company's prior year and potential future performance
and the number of options required to achieve target grant values based
on the prevailing fair market value of the Common Stock.

RESTRICTED STOCK. Restricted stock grants are designed to be granted
on a selective basis to key employees to further focus them on the
longer term performance of the Company. Grants of restricted shares are
subject to forfeiture if an executive officer, among other conditions,
fails to perform or leaves the Company prior to expiration of the
restricted period. Restricted periods are generally from two to three
years.

Target Stock Ownership
----------------------

The Company's Board of Directors and management believe that significant
stock ownership is a major incentive in building stockholder value and aligning
the interests of executives and stockholders. The Board has therefore adopted
guidelines for minimum stock ownership by senior executives.

To encourage this growth in stockholder wealth, the Company believes that
senior executives who are in a position to make a significant contribution to
the long term success of the Company should have a significant stake in its
ongoing success. Guidelines are based upon a multiple of base salary and range
from .8 to 3 times annual salary amounts. Executives are encouraged to achieve
these guidelines by building stock ownership over a period of approximately five
years beginning with fiscal year 1995.

Chief Executive Officer's Compensation
--------------------------------------

Mr. Yellowlees' fiscal year 1995 compensation derived primarily from
commitments under Mr. Yellowlees' employment agreement (see "Employment
Agreements - Robert A. Yellowlees" below) entered into prior to fiscal year
1995. The only decisions affecting compensation made after that date related to
Mr. Yellowlees' specific annual performance goals, results evaluation, and
resulting fiscal year 1995 incentive bonus payment.

Mr. Yellowlees' target annual bonus was set in his employment agreement,
based upon quantitative and qualitative performance factors. In deciding upon
Mr. Yellowlees' fiscal year 1995 bonus payment, the factors given the greatest
weight were the Company's 32% improvement from year to year in earnings per
share, 17% growth in revenue, 38% improvement in productivity (as reflected by
operating income growth), and 95% increase in market valuation. In addition,
the Compensation Committee recognized the progress made in developing and
refining strategies and the progress made in implementing those strategies in
the healthcare and payment systems business areas.

Effective June 1, 1994, Mr. Yellowlees received a base compensation
increase of 8.2%. This increase was based upon the Compensation Committee's
evaluation of Mr. Yellowlees' performance regarding results for fiscal year
1994. During a six month period from March through September 1994, Mr.
Yellowlees waived 10% of his base compensation in recognition of the need to set
a leadership example in the continuing effort to reduce expenses.

The Compensation Committee's general approach in setting Mr. Yellowlees
target annual compensation is to seek to be competitive with other companies in
the Company's industry, but to have a large percentage of his target
compensation based upon current year performance as well as actions to provide
sustained long term growth in stockholder value. To accomplish this a mix of
cash and stock options are provided to Mr. Yellowlees, which include a
significant element of risk that is based upon the Company's performance. In
accordance with this general approach, and in recognition of Mr. Yellowlees'
performance results in fiscal year 1994 the Stock Option Committee awarded Mr.
Yellowlees 22,500 shares of restricted stock and granted him options to purchase
150,000 shares of Common Stock.

9
<PAGE>

In May 1994, the Compensation Committee recommended, and the full Board of
Directors initiated action to extend Mr. Yellowlees' employment agreement for a
term of three years from the expiration of his existing agreement. See
"Employment Agreements" below for a full summary of the terms of such renewal.
The decision to renew Mr. Yellowlees' employment agreement was based on several
factors. Included among the considerations were the progress made in developing
a new strategy for the Company focusing on revenue growth and productivity
improvements, as well as the Company's financial and market valuation
performance during the first two years of Mr. Yellowlees' tenure and the outlook
for continuation of these trends. Also considered was the requirement in Mr.
Yellowlees' existing agreement that its renewal be negotiated by the end of the
second year of the current agreement.

In consideration of this renewal term and as an incentive to sustained
growth in stockholder value, the Compensation Committee awarded Mr. Yellowlees
an additional non-qualified stock option effective May 18, 1995, at the outset
of the three year period of the renewal agreement in lieu of determining a
separate grant in each year. There are three separate components to the grant,
each subsequent annual component having a 12% higher exercise price or premium
over the prior year. See "Compensation and Other Benefits -- Option Grants" and
"Compensation and Other Benefits -- Employment Agreements" below. While this
grant is for future fiscal years 1996, 1997 and 1998, it is reported here and
elsewhere in this proxy statement because it was granted during fiscal year
1995. The Compensation Committee believes that it is in the best interests of
the Company's stockholders to ensure the retention of Mr. Yellowlees for this
renewal term.

COMPENSATION COMMITTEE
Don W. Sands, Chairman
James B. Edwards
Edward L. Barlow

10
<PAGE>

COMPENSATION AND OTHER BENEFITS

The following table presents certain summary information concerning
compensation paid or accrued by the Company for services rendered in all
capacities during the fiscal years ended May 31, 1995 ("1995 fiscal year"), 1994
("1994 fiscal year") and 1993 ("1993 fiscal year"), for (i) the Chief Executive
Officer of the Company; and (ii) each of the four other most highly compensated
executive officers of the Company (determined as of the end of the last fiscal
year) whose total annual salary and bonus exceeded $100,000 (collectively, the
"Named Executive Officers"). Share numbers for all fiscal years shown have been
adjusted to give effect to a three-for-two stock split effected on March 20,
1995.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
---------------------------------
Annual Compensation Awards
----------------------- ---------------------------------
Securities
Underlying
Name and Fiscal Restricted Stock Options All Other
Principal Position Year Salary ($) Bonus ($) Award(s) ($)(1) (#)(2) Compensation ($)(3)
----------------------- ------ ---------- --------- ---------------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Yellowlees 1995 458,354 690,000 240,001 600,000 67,283
Chairman and Chief 1994 427,806 175,000 396,500 174,000 66,488
Executive Officer, 1993 399,557 95,000 1,259,250 207,000 57,131
President and Chief
Operating Officer

Jerry W. Braxton 1995 175,834 70,000 40,000 26,250 6,038
Chief Financial 1994 158,077 20,000 45,750 15,001 5,321
Officer 1993 145,976 40,000 --- 18,000 834

J. David Lyons 1995 185,000 55,000 16,000 22,500 7,846
General Manager, 1994 168,635 55,917(4) --- 37,501 1,440
Payment Services 1993(5) --- --- --- --- ---

James R. Henderson 1995 185,000 41,000 16,000 15,000 1,373
General Manager, 1994 185,000 19,500 45,750 19,500 1,114
Pharmacy and Dental 1993 131,032 45,000 --- 37,500 310
Application Systems

Kevin C. Shea 1995 159,975 55,000 40,000 22,500 663
General Manager, 1994 144,200 19,000 45,750 15,001 488
Integrated Payment 1993 141,741 40,000 --- 28,002 1,027
Systems
</TABLE>
--------------
(1) All awards of restricted shares to the Named Executive Officers have been
made under the 1983 Plan and are valued in the table based upon the closing
market prices of the Common Stock on the grant dates. Grantees have the
right to vote and dividends are payable to the grantees with respect to all
awards of restricted shares reported in this column. As of May 31, 1995,
the shares listed in the table were the only outstanding grants of
restricted shares. The restrictions on 54,501, 54,498, 54,498 and 39,000
shares awarded to Mr. Yellowlees expired on June 1, 1993, June 1, 1994,
June 1, 1995 and May 17, 1995, respectively. The restrictions on 4,500
shares awarded to each of Messrs. Braxton and Shea expired on June 28,
1995, and the restrictions on 2,500 shares awarded to Mr. Henderson expired
on that date. The value of the restricted stock held by the Named
Executive Officers at May 31, 1995 was $1,597,709, $171,188, $31,125,
$124,500, and $171,188 for Messrs. Yellowlees, Braxton, Lyons, Henderson,
and Shea, respectively. The numbers of shares of restricted stock held by
Messrs. Yellowlees, Braxton, Lyons, Henderson, and Shea at May 31, 1995
were 76,998, 8,250, 1,500, 6,000, and 8,250, respectively.
(2) All option awards granted to the Named Executive Officers were made under
the 1987 Plan.
(3) For the 1995 fiscal year, includes for each of the indicated individuals
the following amounts representing (i) Company contributions to the
Company's Employee Savings Plan: Mr. Yellowlees - $4,500, Mr. Braxton -
$5,046 and Mr. Lyons - $4,966 and (ii) insurance premiums paid by the
Company for term life insurance policies for the benefit of the Named
Executive Officer: Mr. Yellowlees - $62,783; Mr. Braxton - $992; Mr. Lyons
- $2,880; Mr. Henderson - $1,373 and Mr. Shea - $663.
(4) Mr. Lyons received $47,917 of his bonus amount as a one-time award made
pursuant to the terms of his initial employment arrangements.
(5) Mr. Lyons became an executive officer in June 1993.

11
<PAGE>

Option Grants. The following table sets forth information on options
--------------
granted to the Named Executive Officers in the 1995 fiscal year.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------
Number of % of Total
Securities Options
Underlying Granted to
Options Employees in Exercise
Granted Fiscal Year or Base Expiration Grant Date
Name (#)(1)(2) ($/Sh) Price Date Present Value (3)
--------------------- --------- ------------ -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>

Robert A. Yellowlees 150,000 13.4% $11.167 6/1/04 $ 639,420(4)
150,000(5) 13.4% 20.125 5/18/05 1,762,500(6)
150,000(5)(7) 13.4% 22.54 5/18/06 1,753,500(8)
150,000(5)(7) 13.4% 25.245 5/18/07 1,743,000(9)
Jerry W. Braxton 26,250 2.4% 11.167 6/1/04 111,897
J. David Lyons 22,500 2.0% 11.167 6/1/04 95,913
James R. Henderson 15,000 1.3% 11.167 6/1/04 63,942
Kevin C. Shea 22,500 2.0% 11.167 6/1/04 95,913
</TABLE>
-----------
(1) The total number of shares covered by options granted to employees in the
1995 fiscal year was 665,325.

(2) These options were granted under the 1987 Plan. Except for Mr. Yellowlees,
the option agreements governing these grants provide that during each of the
four successive twelve-month periods of continued employment commencing on
the date two years after the grant date the option becomes exercisable on a
cumulative basis as to 20%, 45%, 70% and 100%, respectively, of the total
shares covered by such option grant. Pursuant to the 1987 Plan, the Stock
Option Committee of the Company's Board of Directors at any time before the
termination of an option may accelerate the time or times at which such
option may be exercised, in whole or in part. For information regarding the
vesting of Mr. Yellowlees' options, see "Employment Agreements -- Robert A.
Yellowlees" below.

(3) These grant date values, based on the Black-Scholes option pricing model,
are for illustrative purposes only, and are not intended to be a forecast of
what future performance will be.

(4) This value is based upon the following assumptions: (i) an expected stock
price volatility of 48%; (ii) a risk-free rate of return of 6.15%; (iii) a
current dividend yield of 1.45%; and (iv) a term of grant of 10 years.

(5) Granted pursuant to the first renewal to Mr. Yellowlees employment
agreement in lieu of separate grants for each of the three years of the
renewal agreement. See "--Employment Agreements" below.

(6) This value is based upon the following assumptions: (i) an expected stock
price volatility of 48%; (ii) a risk-free rate of return of 7.24%; (iii) a
current dividend yield of 1.46%; and (iv) a term of grant of 10 years.

(7) Granted subject to the approval by the stockholders at the Annual Meeting
of the 1987 Plan Amendments. See Proposal 2 below.

(8) This value is based upon the following assumptions: (i) an expected stock
price volatility of 49%; (ii) a risk-free rate of return of 7.31%; (iii) a
current dividend yield of 1.46%; and (iv) a term of grant of 11 years.

(9) This value is based upon the following assumptions: (i) an expected stock
price volatility of 49%; (ii) a risk-free rate of return of 7.37%; (iii) a
current dividend yield of 1.46%; and (iv) a term of grant of 12 years.

12
<PAGE>

Option Exercises and Fiscal Year-End Values. The following table sets forth
--------------------------------------------
information on the number and value of unexercised options held by the Named
Executive Officers as of May 31, 1995. None of the Named Executive Officers
exercised options during the fiscal year ended May 31, 1995.

FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options In-the-Money Options
at Fiscal Year-End (#) at Fiscal Year-End ($)
-------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert A. Yellowlees 384,250 767,750 $5,070,197 $5,163,947

Jerry W. Braxton 35,376 46,375 441,020 490,926

J. David Lyons 12,501 47,500 132,302 480,206

James R. Henderson 25,250 46,750 361,105 576,895

Kevin C. Shea 63,754 43,750 848,989 475,519
</TABLE>

Retirement Plan. The Company maintains the National Data Corporation
----------------
Employees' Retirement Plan (the "Retirement Plan"), which provides monthly
benefits upon retirement to eligible employees, including officers. Most
employees become participants in the Retirement Plan after meeting certain
minimal eligibility requirements. The benefits provided upon normal retirement
at age 60 are equal to the sum of (i) a basic benefit based solely on the number
of the employee's completed years of continuous service at his normal retirement
date and (ii) a supplemental benefit calculated under a formula based on years
of continuous service and the employee's average earnings during the five years
of highest compensation during the ten years preceding his retirement, reduced
by an amount equal to 75% of the primary social security benefits to which the
employee is entitled. The term "earnings" for purposes of the Retirement Plan
means compensation of any kind paid by the Company to the participating employee
as reported on Internal Revenue Service Form W-2, but excluding the cost of
certain employee benefits (as defined) and excluding amounts which become
taxable to the employee under a stock option or other stock plan. The
Retirement Plan covers all eligible employees retiring after its effective date.
The following table shows estimated annual retirement benefits payable to
participants in the Retirement Plan on a straight life annuity basis upon
retirement in specified years of continuous service and remuneration classes.
The annual benefit amounts have been computed by multiplying the monthly benefit
payable under the Retirement Plan by 12. The amounts shown in the following
table are subject to reduction by an amount equal to a portion of the Social
Security benefits payable to participants. Also, under current law the
retirement benefit for an employee at age 65 cannot exceed $112,221 per year.

HIGHEST ESTIMATED ANNUAL RETIREMENT BENEFITS
-------------------------------------------------------
FIVE-YEAR AVERAGE YEARS OF CONTINUOUS SERVICE (1)
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ANNUAL EARNINGS 15 20 25 30 35
$144,000 $33,120 $ 44,160 $ 55,200 $ 66,240 $ 77,280
192,000 43,620 58,560 73,200 87,840 102,480
240,000 54,720 72,960 91,200 109,440 112,221
288,000 65,520 87,360 109,200 112,221 112,221
336,000 76,320 101,760 112,221 112,221 112,221
384,000 87,120 112,221 112,221 112,221 112,221
432,000 97,920 112,221 112,221 112,221 112,221
</TABLE>
---------------
(1) The average annual earnings for the highest five years over the last 10-year
period and the eligible years of credited service as of May 31, 1995 for
each of the Named Executive Officers was as follows: Mr. Yellowlees (3-1/12
years) $425,968; Mr. Braxton (3-4/12 years) $178,551; Mr. Lyons (1-10/12
year) $189,526; Mr. Henderson (2-8/12 years) $183,677 and Mr. Shea (8-2/12
years) $164,413. The amounts shown in the column "Salary" in the Summary
Compensation Table above are substantially equal to the compensation of the
individuals named in such table for purposes of the Retirement Plan.

13
<PAGE>

Employment Agreements.
----------------------

Robert A. Yellowlees. The Company entered into an employment agreement with
---------------------
Robert A. Yellowlees, effective as of May 18, 1992, providing for his employment
as Chief Executive Officer, President and Chief Operating Officer for a term
continuing through May 17, 1995, subject to earlier termination in certain
events, which agreement was renewed effective May 18, 1995 for an additional
three year term ending May 17, 1998. The agreement provides for subsequent
three year renewal terms upon mutual agreement. The agreement also provides
that Mr. Yellowlees will serve as Chairman of the Board and that during the term
of the agreement the Company will use its best efforts to cause him to be
nominated and elected as a director of the Company.

The agreement initially provided for a minimum annual base salary of $395,000,
subject to yearly review, and additional annual bonus targets equal to Mr.
Yellowlees' base salary for each year for which the bonus is to be paid. The
actual bonus paid for any year may range from none to 150% of the target amount
and will be based upon qualitative and quantitative standards agreed upon by Mr.
Yellowlees and the Company, upon recommendation by the Compensation Committee of
the Board of Directors and approval by the Board. The bonus is paid, at Mr.
Yellowlees' election, in whole or in part in shares of Common Stock. Mr.
Yellowlees is also entitled to participate in all other benefit plans maintained
by the Company for executive officers, and his years of service as a director
while an employee will be included in his years of service for purposes of
determination of eligibility for benefits under and computation of the amount of
benefits payable under the Retirement Plan for Non-Employee Directors described
above. See "Retirement Plan for Non-Employee Directors." In addition, the
Company is required to maintain on behalf of Mr. Yellowlees, or reimburse Mr.
Yellowlees for the premiums paid for, specified life insurance and additional
disability insurance coverage, with the Company's payments not to exceed $55,000
per year.

Pursuant to the agreement, Mr. Yellowlees also was granted an initial option
for 135,000 shares of Common Stock at an option price of $6.17 per share under
the 1987 Plan and was awarded 163,500 shares of Common Stock as restricted stock
under the 1983 Restricted Stock Plan. Of the shares of restricted stock, 54,500
were released from escrow on each of June 1, 1993, June 1, 1994 and June 1,
1995.

Upon termination of the agreement prior to expiration of its term (including
any renewals) (i) as a result of Mr. Yellowlees' physical or mental incapacity,
(ii) by the Company other than as a result of specified misconduct by Mr.
Yellowlees, or (iii) by Mr. Yellowlees following a significant change in his
employment duties or conditions within three years after a change in control of
the Company (as defined in the agreement), (a) the Company will be required to
pay Mr. Yellowlees a severance benefit equal to three times the greater of (A)
his average annual compensation during the preceding three years or (B) his
current year compensation plus a bonus amount equal to 75% of his current year
salary, (b) the Restricted Stock awarded to him will be fully and immediately
vested, (c) all stock options held by Mr. Yellowlees will be fully and
immediately vested, and (d) the Company will pay Mr. Yellowlees 75% of the
target amount of the bonus for the fiscal year in which his employment was
terminated. For purposes of this provision of the agreement, Mr. Yellowlees'
average annual compensation is currently $762,353. Also, upon termination of
the agreement by the Company other than as a result of specified misconduct by
Mr. Yellowlees or by Mr. Yellowlees following a significant change in his
employment duties or conditions within three years after a change in control of
the Company, the Company is required to maintain Mr. Yellowlees' participation
in existing employee benefit plans until the earlier of three years after his
termination of employment or commencement of his full-time employment with a new
employer. The agreement also provides that upon its termination as a result of
Mr. Yellowlees' death, the restricted stock awarded to him and all stock options
granted to him will be fully vested.

The Company, during fiscal year 1994, entered into a first renewal employment
agreement with Mr. Yellowlees, as contemplated in the initial employment
agreement described above. The renewal

14
<PAGE>

agreement became effective as of May 18, 1995, and provides for Mr. Yellowlees'
continued employment as chairman and chief executive officer and president and
chief operating officer of the Company for a second three year term continuing
through May 17, 1998. The renewal agreement provides for subsequent three-year
renewal terms upon mutual agreement. The renewal agreement also provides that
during the term of the renewal agreement the Company will use its best efforts
to cause him to be nominated and elected as a director of the Company.

The renewal agreement is essentially identical to the original employment
agreement, except as follows. The renewal agreement provides for a minimum
annual base salary of $470,000. Under the renewal agreement, the Company
granted Mr. Yellowlees an additional non-qualified stock option effective May
18, 1995, at the outset of the three-year period of the renewal agreement in
lieu of three separate grants. The grant contains a premium grant price feature
that provides added incentive to increase stockholder value. A total of 450,000
shares of Common Stock under the 1987 Plan were allocated to this grant. The
option agreement includes the following provisions:

(A) One-third of the shares subject to the option have an exercise
price equal to $20.125 per share, the closing price of the Common Stock on
the date the grant was approved by the Board. The shares subject to this
grant will vest as follows: 20% on May 17, 1997, an additional 25% on May
17, 1998, an additional 25% on May 17, 1999, and an additional 30% on May
17, 2000.

(B) One-third of the shares subject to the option have an exercise
price equal to $22.54 per share, 112% of the exercise price for the shares
described in (A) above. The shares subject to the grant under this
paragraph will vest as follows: 20% on May 17, 1998, an additional 25% on
May 17, 1999, an additional 25% on May 17, 2000, and an additional 30% on
May 17, 2001.

(C) One-third of the shares subject to the option have an exercise
price equal to $25.245 per share, 124% of the exercise price for the shares
described in (A) above. The shares subject to the grant under this
paragraph will vest as follows: 20% on May 17, 1999, an additional 25% on
May 17, 2000, an additional 25% on May 17, 2001, and an additional 30% on
May 17, 2002.

The option agreement also provides for the immediate and full vesting of the
options in the event of (i) a change in control of the company, (ii) the death
or physical or mental incapacity of Mr. Yellowlees, (iii) the termination of
employment of Mr. Yellowlees or (iv) non-renewal of his employment agreement for
an additional three year term upon the expiration of the renewal agreement on
May 17, 1998.

Executive Severance Agreements. In addition to Mr. Yellowlees' employment
-------------------------------
agreement described above, the Company has entered into compensation agreements
with Messrs. Braxton and Shea and certain other key Company officers. The
agreements provide that in the event that the executive officer is terminated
other than for cause (as defined in the agreements), by reason of death or by
reason of disability (as defined in the agreements), or if the officer resigns
after a significant change in his employment conditions as specified by the
agreements during the three year period following a change in control (as
defined in the agreements) of the Company, the officer would be entitled to
payment of a severance benefit. The severance benefit would be equal to
approximately three times the officer's average annual taxable compensation from
the Company during the five year period immediately preceding the officer's
termination as described above, with such multiple of three reduced by the
number of years, if any, that the officer remained employed by the Company
following such change of control. In addition, the Company would be required to
maintain the officer's participation in existing group life, medical, accident,
and equivalent plans for a period of three years (reduced by the number of years
the officer remained employed by the Company following the change of control) or
until the executive had earlier taken other full time employment. The amounts
of the average annual taxable compensation during the five fiscal years ended
May 31, 1995, for the Named Executive Officers who are parties to such
agreements were approximately the following: Mr. Braxton $177,489 and Mr. Shea
$179,678.

15
<PAGE>

STOCKHOLDER RETURN ANALYSIS.

The following line-graph presentation compares cumulative stockholder
returns of the Company with Standard & Poor's Computer Software and Services
Index and Standard and Poor's 500 Stock Index for the five year period beginning
on May 31, 1990 (assuming the investment of $100 in the Company's Common Stock,
Standard & Poor's Computer Software and Services Index and Standard and Poor's
500 Stock Index and reinvestment of all dividends).

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG NATIONAL DATA CORPORATION, THE S&P 500 INDEX
AND THE S&P COMPUTER SOFTWARE & SERVICES INDEX

[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG NDC, S&P 500 INDEX AND S&P COMPUTER SOFTWARE & SERVICES INDEX

<TABLE>
<CAPTION>
S&P Computer
Measurement period National S&P 500 Software & Svcs.
(Fiscal year Covered) Data Corp. Index Index
-------------------- ---------- ------- --------------
<S> <C> <C> <C>
Measurement PT -
05/31/90 $100 $100 $100

FYE 5/31/91 $ 89 $112 $ 92

FYE 5/31/92 $ 81 $123 $109

FYE 5/31/93 $108 $137 $146

FYE 5/31/94 $126 $143 $175

FYE 5/31/95 $238 $172 $245
</TABLE>

16
<PAGE>

2. AMENDMENT OF 1987 STOCK OPTION PLAN

The Company's 1987 Stock Option Plan (the "1987 Plan") was approved by the
stockholders of the Company at the 1987 annual meeting of stockholders. The
1987 Plan was amended at the 1991 annual meeting of stockholders to increase the
number of shares of Common Stock available from 2,475,000 to 3,187,500 shares,
and was also amended at the 1992 annual meeting of stockholders to increase the
number of shares of Common Stock available from 3,187,500 to 3,787,500 shares.
On July 19, 1995, the Board of Directors approved amendments to the 1987 Plan
(the "1987 Plan Amendments") and directed that such amendments be submitted to
the stockholders for approval at the Annual Meeting. It is anticipated that
management stockholders of the Company will grant authority to vote for approval
of the 1987 Plan Amendments.

The 1987 Plan currently provides that a maximum of 3,787,500 shares of
Common Stock shall be reserved and made available for sale thereunder. As of
August 1, 1995, there were 99,308 shares available for grant under the 1987
Plan. In addition, the Compensation Committee as of that date had granted an
option to purchase 300,000 shares of Common Stock pursuant to the 1987 Plan,
which grant was expressly conditioned on approval of the 1987 Plan Amendments at
the Annual Meeting.

The 1987 Plan Amendments would make an additional 1,500,000 shares available
for award under the 1987 Plan by increasing the maximum number of shares of
Common Stock as to which options may be granted under the 1987 Plan (except by
operation of the adjustment provisions of the 1987 Plan) from 3,787,500 to
5,287,500 shares. The 1987 Plan Amendments are intended to provide additional
shares of Common Stock so that the Compensation Committee may continue to make
grants of stock options at a competitive level to key employees as a performance
incentive to the achievement of stockholder goals. It is estimated that the
recommended number of shares, if approved, would meet the Company's needs for
three to four years based on current trends.

The 1987 Plan Amendments would also provide that options with respect to no
more than a total of 1,500,000 shares of Common Stock may be granted to any
individual pursuant to the 1987 Plan. Such limitation on the number of options
that may be granted to any individual is being submitted for stockholder
approval in order to preserve the deductibility by the Company of the value of
nonqualified stock options granted to certain employees under Section 162(m) of
the Internal Revenue Code (the "Code").

Under the 1987 Plan, key employees are eligible for the grant of options to
purchase shares of Common Stock. Currently, approximately 180 key employees are
eligible for the grant of awards. Options granted under the 1987 Plan may
qualify as incentive stock options under Section 422 of the Code or nonqualified
stock options. Any key employee of the Company who, in the opinion of the
Compensation Committee, has proven the potential for contributing significantly
to the effective management and supervision of the Company or its subsidiaries
is eligible for grants under the 1987 Plan. The Compensation Committee
determines the grant value and the number of shares of Common Stock subject to
each grant and prescribes the other terms and conditions of each grant.

The exercise price for incentive stock options granted under the 1987 Plan
is 100% of the fair market value on the date the option is granted. The
exercise price for nonqualified stock options granted under the 1987 Plan shall
be determined by the Compensation Committee and may be equal to or less or more
than the fair market value of the shares of Common Stock subject to the
nonqualified stock option on the date of grant of such option. Options will
expire and become exercisable at such time and in such installments as the
Compensation Committee shall determine. The exercise price of an option is
payable in cash or other form of legal consideration accepted by the
Compensation Committee. The fair market value of the Common Stock underlying
options outstanding under the 1987 Plan was $[_________] per share as of August
[___], 1995.

17
<PAGE>

The following table presents information regarding options granted under the
1987 Plan to certain individuals and groups during fiscal 1995.

<TABLE>
<CAPTION>
EXERCISE PRICE PER
NUMBER OF SHARE AT
NAME POSITION OPTION TIME OF GRANT
---- -------- ---------- -------------
<S> <C> <C> <C>
Robert A. Yellowlees Chairman and 150,000 $ 11.167
Chief Executive 150,000(2) 20.125
Officer, President and 150,000(2) 22.54
Chief Operating Officer 150,000(2) 25.245

Jerry W. Braxton Chief Financial Officer 26,250 11.167

J. David Lyons General Manager, 22,500 11.167
Payment Services

James R. Henderson General Manager, 15,000 11.167
Pharmacy
and Dental Application
Systems

Kevin C. Shea General Manager, 22,500 11.167
Integrated
Payment Systems
All Current Executive 297,000 11.167
Officers
All Employees 368,325 11.70 (1)
Total 665,325 11.70 (1)
</TABLE>
_______________

(1) Reflects the average exercise price per share pursuant to such options.
(2) Granted pursuant to the first renewal to Mr. Yellowlees employment agreement
in lieu of separate grants for each of the three years of the renewal
agreement. See "Compensation and Other Benefits -- Employment Agreements."

Under the Code, the optionee of an incentive stock option will not realize
taxable income on the grant or the exercise of the incentive stock option and
the Company will not receive an income tax deduction at either such time. If
the optionee does not sell the shares of Common Stock acquired upon exercise of
an incentive stock option within either (i) two years after the grant of the
incentive stock option or (ii) one year after the date of the exercise of the
incentive stock option, the gain upon a subsequent sale of the shares will be
taxed as long-term gain. The difference between the exercise price and the fair
market value of the shares received upon exercise, however, can affect an
optionee's alternative minimum tax.

If the optionee, within either of the above periods, disposes of the shares
of the Common Stock acquired upon exercise of the incentive stock option, the
optionee will realize as ordinary income an amount equal to the lesser of (i)
the gain realized by the optionee upon such disposition, or (ii) the difference
between the exercise price and the fair market value of the shares on the date
of exercise. In such event, the Company will be entitled to a corresponding
income tax deduction equal to the amount recognized as ordinary income by the
optionee. The gain in excess of such amount realized by the optionee as
ordinary income would be taxed as a long-term or short-term capital gain
depending upon the holding period requirements for long-term or short-term
capital gain treatment. If an optionee exercises an incentive stock option
following his or her termination of employment, the incentive stock option must
be exercised within three months following such termination (12 months if
termination is due to death or disability) to receive incentive stock option tax
treatment. Exercise of an incentive stock option after these dates will result
in such options being taxed as nonqualified stock options.

The aggregate fair market value of the shares (determined at the time the
incentive stock option is granted) subject to incentive stock options granted to
a key employee under all stock option plans of the

18
<PAGE>

Company and the Company's subsidiaries (if any), and that become exercisable
for the first time by such key employee during any calendar year may not exceed
$100,000. Any incentive stock options granted to any employee who, immediately
after the grant of such option, would own more than 10% of the total combined
voting power of all classes of the Company's stock must have an exercise price
of not less than 110% of the fair market value of the Common Stock on the date
of grant and a term of no more than five years.

Under present law, the optionee of a nonqualified stock option realizes no
taxable income upon the grant of such option, but upon the exercise of such
option the optionee will realize ordinary income equal to the difference between
the market value of the stock received at the time of exercise and the amount
paid for the stock. Under present law, the Company is permitted to consider the
income realized by the optionee at the time of exercise of a nonqualified stock
option as a tax deductible expense. Since June 1, 1994, all options granted
under 1987 Plan have been nonqualified stock options.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE 1987 PLAN AMENDMENTS. IF
A CHOICE IS SPECIFIED ON THE PROXY BY THE STOCKHOLDER, THE SHARES WILL BE VOTED
AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED "FOR" THE
PROPOSAL. THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES OF
COMMON STOCK REPRESENTED AND ENTITLED TO VOTE AT THE ANNUAL MEETING AT WHICH A
QUORUM IS PRESENT IS REQUIRED FOR THE APPROVAL OF PROPOSAL 2.

3. AMENDMENT OF 1983 RESTRICTED STOCK PLAN

The Company's 1983 Restricted Stock Plan (the "1983 Plan") was approved by
the stockholders of the Company at the 1983 annual meeting of stockholders. The
1983 Plan was amended at the 1991 annual meeting of stockholders to increase the
number of shares of Common Stock available from 150,000 to 262,500 shares and to
provide that the 1983 Plan will terminate on July 11, 2003. At the 1992 annual
meeting of stockholders, the 1983 Plan was further amended to increase the
number of shares of Common Stock available from 262,500 to 487,500 shares. On
July 19, 1995, the Board of Directors approved amendments to the 1983 Plan (the
"1983 Plan Amendments") and directed that such amendments be submitted to the
stockholders for approval at the Annual Meeting. It is anticipated that
management stockholders of the Company will grant authority to vote for approval
of the 1983 Plan Amendments.

The 1983 Plan currently provides that a maximum of 487,500 shares of Common
Stock shall be reserved and made available for award thereunder and that the
1983 Plan shall terminate on July 11, 2003. Of the 487,500 reserve shares,
442,502 shares have been awarded to employees, of which 123,498 shares had been
released from escrow as of August 1, 1995.

The 1983 Plan Amendments would make an additional 262,500 shares available
for award under the 1983 Plan by increasing the maximum number of shares of
Common Stock as to which awards may be granted under the 1983 Plan (except by
operation of the adjustment provisions of the 1983 Plan) from 487,500 to 750,000
shares. The 1983 Plan Amendments would provide a sufficient supply of shares so
that the Compensation Committee could continue to make grants to key employees
on a highly selective basis. Restricted stock grants serve as both a meaningful
performance incentive and a strong aid in the retention of key employees. Based
on current trends and usage, it is estimated that the additional shares, if
approved, would meet the Company's needs for an additional three to four years.

The 1983 Plan Amendments also would add a provision to the 1983 Plan which
would allow the Compensation Committee to establish certain performance goals
with respect to grants of restricted stock under the 1983 Plan. The 1983 Plan,
as amended, would provide that for each grant of restricted stock an overall
performance goal may be set: a "performance goal" shall mean the criteria and
objectives, determined by the Compensation Committee, which must be met during
the applicable performance period for the restricted period to expire with
respect to restricted stock awarded under the 1983 Plan. Performance goals
shall include one or a combination of the following: shareholder value;
earnings per share; earnings before interest, taxes, depreciation and
amortization; net income; profit contribution; target gross revenue; and return
on equity. The performance goal may be stated as dollar amount, as a

19
<PAGE>

percent increase, as a target percent, or as an amount or percent of change over
time. Further, under the 1983 Plan, as amended, the exact terms of each grant of
restricted stock, including the performance goals, would be within the
discretion of the Compensation Committee, but in no instance could the value of
the restricted shares released upon the attainment of a performance goal level
exceed $5,000,000. Such amendments relating to performance goals under the 1983
Plan are being submitted for stockholder approval in order to preserve the
deductibility by the Company of performance-based compensation to certain
employees under Code Section 162(m).

Under the 1983 Plan, key employees are eligible for the grant of awards of
restricted Common Stock. Currently, approximately 180 key employees are
eligible for the grant of awards. Any key employee of the Company who, in the
opinion of the Compensation Committee, has proven the potential for contributing
significantly to the effective management and supervision of the business of the
Company or its subsidiaries is eligible for awards under the 1983 Plan. The
Compensation Committee determines the employees to whom restricted stock should
be awarded, the number of shares of restricted stock subject to each award and
prescribes the other terms and conditions of each award. Shares subject to an
award granted under the 1983 Plan are held in escrow and released to the grantee
only upon the grantee's satisfaction of conditions prescribed by the
Compensation Committee.

The fair market value of the Common Stock awarded as restricted stock under
the 1983 Plan was $[_________] per share as of August [___], 1995.

The following table presents information regarding shares granted as
restricted stock under the 1983 Plan to certain individuals and groups during
fiscal 1995.

<TABLE>
<CAPTION>
NUMBER OF SHARES OF
RESTRICTED STOCK
NAME POSITION GRANTED
---- -------- -------
<S> <C> <C>
Robert A. Yellowlees Chairman of the Board and President, Chief 22,500
Executive Officer and Chief Operating
Officer

David Lyons General Manager, Payment Services 1,500

James R. Henderson General Manager, Pharmacy and Dental 1,500
Application Systems

Jerry W. Braxton Chief Financial Officer 3,750

Kevin C. Shea General Manager, Integrated Payment Systems 3,750

All Current Executive 38,250
Officers as a Group

All Other Employees -0-

Total 38,250
</TABLE>

Unless an election is made as described in the following paragraph, a key
employee to whom restricted stock is awarded will not realize taxable income,
and the Company will not receive an income tax deduction, upon the award of
restricted stock under the 1983 Plan because such stock is considered to be
subject to a substantial risk of forfeiture for tax purposes. At the time
shares of restricted stock are released from escrow, however, the key employee
to whom such shares were awarded will realize ordinary income and the Company is
entitled to an income tax deduction. The extent of the key employee's income
and the measure of the Company's income tax deduction will be in an amount equal
to the fair market

20
<PAGE>

value of the shares of restricted stock at the time of
release from escrow. If a key employee disposes of shares of restricted stock
subsequent to release from escrow, the gain realized from such disposition
generally will be eligible for capital gains treatment (short or long-term
depending on the employee's holding period), and the employee's basis in such
shares will be in the amount of the fair market value of such shares at the time
of release from escrow. If cash dividends are paid with respect to shares of
restricted stock while such shares are held in escrow, such dividends will be
treated as ordinary income to the key employee to whom such shares were awarded
and the Company will receive a corresponding income tax deduction. The delivery
of the shares from escrow and the payment of any cash dividends will be subject
to applicable federal income tax withholding requirements.

Notwithstanding the foregoing, a key employee may elect to be taxed at the
time of an award of Common Stock under the 1983 Plan even though such Common
Stock is considered to be subject to a substantial risk of forfeiture. If such
an election is made, the employee's compensation and the Company's deduction are
measured by the fair market value of the shares of Common Stock on the date of
the award, an amount which may be more or less than the compensation recognized
absent such an election. Were an employee subsequently to forfeit restricted
stock as to which such an election was made, the employee may not be entitled to
any deduction or loss.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS GRANT AUTHORITY TO
VOTE "FOR" APPROVAL OF THE 1983 PLAN AMENDMENTS. IF A CHOICE IS SPECIFIED ON
THE PROXY BY THE STOCKHOLDER, THE SHARES WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE SHARES WILL BE VOTED "FOR" THE PROPOSAL. THE
AFFIRMATIVE VOTE OF THE HOLDERS OF THE MAJORITY OF THE SHARES OF COMMON STOCK
REPRESENTED AND ENTITLED TO VOTE AT THE ANNUAL MEETING AT WHICH QUORUM IS
PRESENT IS REQUIRED FOR THE APPROVAL OF PROPOSAL 3.

4. APPROVAL OF 1995 NON-EMPLOYEE DIRECTOR COMPENSATION PLAN

On May 23, 1995, the Board of Directors adopted a resolution approving the
1995 Non-Employee Director Compensation Plan (the "1995 Director Plan"). The
1995 Director Plan is subject to stockholder approval, and is presented to the
holders of the Common Stock at the Annual Meeting for consideration and
approval. Stockholder approval of the 1995 Director Plan is sought to qualify
the 1995 Director Plan under Rule 16b-3 of the Securities Exchange Act of 1934,
as amended, (the "1934 Act"), and thereby render certain transactions under the
1995 Director Plan exempt from certain provisions of the 1934 Act.

The 1995 Director Plan is intended to advance the interests of the Company
by encouraging ownership of the Company's Common Stock by non-employee directors
of the Company, thereby giving such directors an increased incentive to devote
their efforts to the success of the Company. The following is a summary of the
provisions of the 1995 Director Plan, which summary is qualified in its entirety
by reference to the 1995 Director Plan. A copy of the 1995 Director Plan may be
obtained from the Secretary of the Company.

The non-employee directors are entitled automatically to receive on June 1
of each year, in lieu of their cash retainer, that number of shares of Common
Stock, rounded up to the next whole share, with a fair market value equal to 50%
of the total annual retainer paid to non-employee directors. Fair market value
is defined in the 1995 Director Plan to be the closing sales price of the Common
Stock on the New York Stock Exchange on June 1 of each year, or the first
trading day thereafter. The annual retainer of non-employee directors is
defined to include the monthly compensation paid ($2,000 per month for fiscal
1995) and excludes any fees paid for attending meetings of the Board of
Directors or committees thereof, and also excludes reimbursement for travel or
other out-of-pocket expenses. The 1995 Director Plan provides that up to 25,000
shares of Common Stock be available to be issued to directors who are not
employees of the Company for payment of one-half of their annual retainer as
provided for by the 1995 Director Plan.

21
<PAGE>

As of June 1, 1995, each of Messrs. Sands, Edwards, Barlow and Williams was
issued 572 shares of Common Stock based on the fair market value of the Common
Stock on that date of $21.00 per share and the current annual retainer for the
non-employee directors of $24,000.

Under present law, the non-employee directors must treat the fair market
value of the Common Stock as income received on the date of grant and the
Company is permitted to consider the amount of income as a tax deductible
expense.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS GRANT AUTHORITY TO
VOTE "FOR" APPROVAL OF THE 1995 DIRECTOR PLAN. IF A CHOICE IS SPECIFIED ON THE
PROXY BY THE STOCKHOLDER, THE SHARES WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE SHARES WILL BE VOTED "FOR" THE PROPOSAL. THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES OF COMMON STOCK
REPRESENTED AND ENTITLED TO VOTE AT THE ANNUAL MEETING AT WHICH A QUORUM IS
PRESENT IS REQUIRED FOR THE APPROVAL OF PROPOSAL 5.

5. AMENDMENT OF 1984 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

The Company's 1984 Non-Employee Director Stock Option Plan (the "Director
Option Plan") was approved by the stockholders at the 1984 annual meeting of
stockholders and amended by the stockholders at the 1989 annual meeting of
stockholders. The Director Option Plan initially provided that stock options
could be granted thereunder to directors who were not employees of the Company
for up to a total of 157,500 shares of Common Stock, and each such director was
entitled automatically to receive an option to purchase 4,500 shares for each
completed year of service as a director after his election by the stockholders,
up to five such options. As amended in 1989, the Director Option Plan provided
that non-employee directors may be granted options for up to a total of 345,000
shares under the Director Option Plan; that each eligible director may receive
up to five options to purchase 7,500 shares, one for each year of service as a
director, following approval by the stockholders in 1989 of the amendments to
the Director Option Plan; and that each newly elected director be granted an
option to acquire 7,500 shares after the first annual meeting of stockholders
following such director's election.

On July 19, 1995, the Board of Directors approved amendments to the Director
Option Plan (the "Director Option Plan Amendments") to provide that non-employee
directors shall receive up to five additional options each to purchase 5,000
shares, one for each year of service as a director, following approval by the
stockholders at the Annual Meeting. The Director Option Plan Amendments also
provide that any option granted under the Director Option Plan would not
terminate 120 days after the retirement of the director, but instead would
remain exercisable for the remaining term of the option.

Currently, options granted under the Director Option Plan are exercisable
immediately at a price equal to the fair market value (as defined in the
Director Option Plan) of Common Stock at the date of grant. Pursuant to the
Director Option Plan Amendments, options granted under the Director Option Plan
will be granted at a price equal to the fair market value (as defined in the
Director Option Plan) of Common Stock at the date of grant and will vest 20% two
years after the date of grant, an additional 25% after three years, an
additional 25% after four years, and the remaining 30% after five years. The
fair market value of the Common Stock subject to options outstanding under the
Director Option Plan was $[_________] per share as of August [___], 1995.

The only option granted under the Director Option Plan during fiscal 1995
was to Ira C. Herbert for 7,500 shares of Common Stock at an exercise price per
share of $13.92. Mr. Herbert died on March 4, 1995.

Under present law, the optionee of a nonqualified stock option realizes no
taxable income upon the grant of such option, but upon the exercise of such
option the optionee will realize taxable income equal to the difference between
the market value of the stock received at the time of exercise and the amount
paid for the stock. Under present law, the Company is permitted to consider the
income realized by the optionee at the time of exercise of an unqualified stock
option as a tax deductible expense.

22
<PAGE>

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS GRANT AUTHORITY TO
VOTE "FOR" APPROVAL OF THE DIRECTOR OPTION PLAN AMENDMENTS. IF A CHOICE IS
SPECIFIED ON THE PROXY BY THE STOCKHOLDER, THE SHARES WILL BE VOTED AS
SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED "FOR" THE
PROPOSAL. THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES OF
COMMON STOCK REPRESENTED AND ENTITLED TO VOTE AT THE ANNUAL MEETING AT WHICH A
QUORUM IS PRESENT IS REQUIRED FOR THE APPROVAL OF PROPOSAL 4.

6. APPROVAL OF 1995 PERFORMANCE-BASED EXECUTIVE OFFICER BONUS PLAN

On July 19, 1995, the Board of Directors adopted a resolution approving the
1995 Performance-Based Executive Officer Bonus Plan (the "Executive Bonus
Plan"). The Executive Bonus Plan is subject to stockholder approval, and is
presented to the holders of the Common Stock at the Annual Meeting for
consideration and approval in order to preserve the deductibility by the Company
of performance-based compensation to certain employees under Code Section
162(m).

The Executive Bonus Plan is designed to provide a performance incentive for
the Company's executive officers based on the attainment of strategic business
objectives which would be established to demonstrate a clear link between the
executive's compensation and increasing stockholder value.

Under the Executive Bonus Plan, the Compensation Committee would establish
a performance goal for each participating executive officer for each fiscal
year. The performance goal would be the objective which must be met during the
fiscal year in order for the applicable executive officer to receive payment of
an award under the Executive Bonus Plan. The performance goal shall be based on
one or more of the following: net income; earnings per share; earnings before
interest, taxes and depreciation; operating income and/or margin percentage of
revenue; profit contribution; return on equity; return on invested capital; or
gross revenue. Further, the performance goal may be stated in terms of a dollar
amount, a percentage increase, a target percentage or as an amount or percent of
change over time. Each performance goal in addition would be subdivided into
levels representing (i) the minimum level of achievement below which no award
would be made; (ii) the target level at which 100% of the annual award would be
payable; and (iii) if the performance goal is exceeded, the maximum level at
which the maximum award would be payable. Additional intermediate levels may be
determined. All awards under the Executive Bonus Plan will be taxed as ordinary
income to the recipient.

The Compensation Committee would have discretion under the Executive Bonus
Plan to set the annual award amount for each participating executive officer.
However, the maximum award payable shall not exceed $500,000.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS GRANT AUTHORITY TO
VOTE "FOR" APPROVAL OF THE EXECUTIVE BONUS PLAN. IF A CHOICE IS SPECIFIED ON A
PROXY BY THE STOCKHOLDER, THE SHARES WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE SHARES WILL BE VOTED "FOR" THE PROPOSAL. THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES OF COMMON STOCK
REPRESENTED AND ENTITLED TO VOTE AT THE ANNUAL MEETING AT WHICH A QUORUM IS
PRESENT IS REQUIRED FOR THE APPROVAL OF PROPOSAL 6.

7. AMENDMENT OF CERTIFICATE OF INCORPORATION

On July 19, 1995, the Board of Directors adopted a resolution approving an
amendment to the Company's Certificate of Incorporation to increase the number
of authorized shares of Common Stock from 30,000,000 to 60,000,000. The
amendment is subject to stockholder approval, and is presented to the holders of
the Common Stock at the Annual Meeting for consideration and approval. If
approved by the stockholders, the proposed amendment will become effective upon
the filing of an amendment to the Company's Certificate of Incorporation with
the Secretary of State of Delaware, which will occur as soon as reasonably
practicable.

23
<PAGE>

As of August [____], 1995, the Company had [_____________] shares of Common
Stock issued and outstanding, and the Board of Directors of the Company has
recommended the amendment to the Certificate in order to provide the Company
with a sufficient number of authorized shares of Common Stock for the Company's
general corporate needs. The Board of Directors believes that the availability
of additional shares will provide the Company with the flexibility to issue
Common Stock for possible future financings, stock dividends or distributions,
acquisitions, stock option plans or other proper corporate purposes which may be
identified in the future by the Board of Directors, without the possible expense
and delay of a special stockholders' meeting. The issuance of additional shares
of Common Stock may have a dilutive effect on earnings per share and, for
persons who do not purchase additional shares to maintain their pro rata
interest in the Company, on such stockholders' percentage voting power.

The authorized shares of Common Stock in excess of those issued will be
available for issuance at such times and for such corporate purposes as the
Board of Directors may deem advisable, without further action by the Company's
stockholders, except as may be required by applicable law or by the rules of the
New York Stock Exchange or other stock exchange or national securities
association trading system on which the securities may be listed or traded.
Upon issuance, such shares will have the same rights as the outstanding shares
of Common Stock. Holders of Common Stock have no preemptive rights.

The Company has no arrangements, agreements, understandings or plans at the
present time for the issuance or use of the additional shares of Common Stock
proposed to be authorized. The Board of Directors does not intend to issue any
Common Stock except on terms which the Board deems to be in the best interests
of the Company and its then existing stockholders. Any future issuance of
Common Stock will be subject to the rights of holders of outstanding shares of
any preferred stock which the Company may issue in the future.

Although the Company has no present intention to issue shares of Common
Stock in the future in order to make acquisition of control of the Company more
difficult, future issuances of Common Stock could have that effect. For
example, the acquisition of shares of the Common Stock by an entity in order to
acquire control of the Company might be discouraged through the public or
private issuance of additional shares of Common Stock, since such issuance would
dilute the stock ownership of the acquiring entity. Common Stock also could be
issued to existing stockholders as a dividend or privately placed with
purchasers who might side with the Board of Directors in opposing a takeover
bid, thus discouraging such a bid. The Board of Directors also is authorized to
issue preferred stock in one or more series and to fix the rights, preferences
and privileges thereof without any further vote or action by the stockholders.
The issuance of preferred stock also may have the effect of delaying, deferring
or preventing a change in control of the Company.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS GRANT AUTHORITY TO
VOTE "FOR" APPROVAL OF THE PROPOSED AMENDMENT TO THE CERTIFICATE OF
INCORPORATION. IF A CHOICE IS SPECIFIED ON THE PROXY BY THE STOCKHOLDER, THE
SHARES WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES WILL
BE VOTED "FOR" THE PROPOSAL. THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY
OF THE OUTSTANDING SHARES OF COMMON STOCK IS REQUIRED FOR THE APPROVAL OF
PROPOSAL 7.

AUDITORS

Arthur Andersen LLP served as the Company's auditors for the four fiscal
years ended May 31, 1995, and that firm of independent public accountants is
serving as auditors for the Company for the current fiscal year which began June
1, 1995. Representatives of Arthur Andersen LLP are expected to be present at
the Annual Meeting and will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.

24
<PAGE>

SOLICITATION OF PROXIES

The cost of soliciting proxies will be borne by the Company. In addition to
solicitation of stockholders of record by mail, telephone, or personal contact,
arrangements will be made with brokerage houses to furnish proxy materials to
their principals, and the Company may reimburse them for mailing expenses.
Custodians and fiduciaries will be supplied with proxy materials to forward to
beneficial owners of Common Stock. The Company has also engaged Georgeson & Co.
to solicit proxies on behalf of the Company, and it is estimated that Georgeson
& Co.'s fees for its services will not exceed $10,000.

OTHER MATTERS

Management does not know of any matters to be brought before the Annual
Meeting other than those referred to above. If any other matters properly come
before the meeting, the persons designated as proxies will vote on such matters
in accordance with their best judgment.

Whether or not you expect to be present at the meeting in person, please
vote, sign, date, and return promptly the enclosed proxy in the enclosed
envelope. No postage is necessary if the proxy is mailed in the United States.

STOCKHOLDER PROPOSALS

Proposals of stockholders intended to be presented for consideration at the
1996 Annual Meeting of Stockholders of the Company must be received by the
Company at its principal executive offices on or before [April __], 1996, in
order to be included in the Company's proxy statement and form of proxy relating
to the 1996 Annual Meeting of Stockholders.

SECTION 16(A) REPORTING

Based solely on a review of the copies of reporting forms furnished to the
Company, or written representations that no annual forms (Form 5) were required,
the Company believes that, during the 1995 fiscal year, all of its officers,
directors and 10% stockholders complied with the reporting requirements of the
Securities and Exchange Commission regarding their ownership and changes in
ownership of Common Stock (as required pursuant to Section 16(a) of the
Securities Exchange Act of 1934).

25
<PAGE>

PROXY
NATIONAL DATA CORPORATION
ATLANTA, GEORGIA
ANNUAL MEETING OF STOCKHOLDERS

The undersigned stockholder of National Data Corporation (the "Company"),
Atlanta, Georgia, hereby constitutes and appoints Robert A. Yellowlees or E.
Michael Ingram or either one of them, each with full power of substitution, to
vote the number of shares of Common Stock which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders to
be held at the Company's offices at National Data Plaza, Atlanta, Georgia
30329-2010, on Thursday, October 26, 1995, at 11:00 A.M., or at any adjournments
thereof (the "Annual Meeting"), upon the proposals described in the Notice of
Annual Meeting of Stockholders and Proxy Statement, both dated ________, the
receipt of which is acknowledged, in the manner specified below. The proxies,
in their discretion, are further authorized to vote for the election of a person
to the Board of Directors if any nominee named herein becomes unable to serve or
for good cause will not serve, are further authorized to vote on matters which
the Board of Directors does not know a reasonable time before making the proxy
solicitation will be presented at the Annual Meeting, and are further authorized
to vote on other matters which may properly come before the Annual Meeting and
any adjournments thereof. The Board of Directors recommends a vote FOR
Proposals 1, 2, 3, 4, 5, 6 and 7.

1. ELECTION OF DIRECTORS. On the proposal to elect the following slate of
directors to serve until the 1998 Annual Meeting of Stockholders of the
Company and until their successors are elected and qualified:

Don W. Sands J. Veronica Biggins

For [ ] Withhold Authority [ ]

To withhold authority for any individual nominee(s), write the name of the
nominee(s) in the space provided:

--------------------------------------------------------------------------

2. AMENDMENT OF 1987 PLAN. On the proposal to amend the Company's 1987 Stock
Option Plan: