<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
NATIONAL DATA CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
NATIONAL DATA CORPORATION
[LOGO]
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 23, 1997,
at 11:00 A.M., Atlanta time, for the following purposes:
1. To elect two directors in Class II to serve until the annual
meeting of stockholders in 2000, or until their successors are
duly elected and qualified;
2. To adopt the Company's 1997 Stock Option Plan; and
3. 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 26, 1997
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
E. MICHAEL INGRAM, Secretary
Dated: August 29, 1997
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> 3
NATIONAL DATA CORPORATION
NATIONAL DATA PLAZA
ATLANTA, GEORGIA 30329-2010
August 29, 1997
PROXY STATEMENT
FOR COMMON STOCK
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 23, 1997
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 23, 1997, and at any adjournments thereof
(the "Annual Meeting").
The Annual Meeting will be held for the following purposes: (1) to
elect two directors in Class II to serve until the 2000 Annual Meeting of
Stockholders and until their successors are elected and qualified; (2) to adopt
the Company's 1997 Stock Option Plan; and (3) 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 29, 1997.
STOCKHOLDERS ENTITLED TO VOTE
Only stockholders of record of the Company at the close of business on
August 26, 1997 (the "Record Date") will be entitled to notice of, and to vote
at, the Annual Meeting. On the Record Date, there were 26,630,733 shares of
the Common Stock issued and outstanding held by approximately 3,501
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.
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 in Class II, 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, 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 but vote for the remaining
nominee. Because Proposal 1 will require the affirmative vote
<PAGE> 4
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 will have the same effect as a vote to "withhold authority," while a
broker nonvote (which occurs when shares held by brokers or nominees for
beneficial owners are voted on some matters but not on others) will have no
effect on the outcome of the election of directors.
Proposal 2, the approval of the 1997 Stock Option Plan, 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 2, stockholders may (i) vote "for," (ii) vote
"against," or (iii) "abstain" from voting on the 1997 Stock Option Plan. Because
Proposal 2 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 will have the same effect as a vote
"against," while a broker nonvote will have no effect on the outcome of the
approval of the 1997 Stock Option Plan.
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 APPROVAL OF THE COMPANY'S
1997 STOCK OPTION PLAN; AND (3) IN THE BEST JUDGMENT OF THE HOLDERS 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> 5
1. ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of six members
and is divided into three classes, with the term of office of each class ending
in successive years. The terms of directors of Class II expire with this Annual
Meeting. The terms of office of directors in Class I and Class III expire at the
1999 and 1998 annual meetings of stockholders, respectively. The stockholders
are being asked to vote on the election to Class II of Edward L. Barlow and Neil
Williams.
Each Class II director will be elected to hold office until the 2000
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 II 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.
NOMINEES FOR DIRECTOR
<TABLE>
<CAPTION>
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 II
TERM EXPIRING ANNUAL MEETING 2000
<S> <C> <C>
Edward L. Barlow January 1969 Director of the Company
(62) General Partner, Whitcom Partners (an investment
partnership), New York.
Neil Williams April 1977 Director of the Company
(61) Partner (Managing Partner from 1989-1996), Alston &
Bird LLP (Attorneys and Counsel for the Company), Atlanta;
Director of Printpack, Inc. and The Duke Endowment.
</TABLE>
- 3 -
<PAGE> 6
MEMBERS OF THE BOARD OF DIRECTORS
CONTINUING IN OFFICE
<TABLE>
<CAPTION>
MONTH AND POSITIONS WITH THE COMPANY, PRINCIPAL
YEAR FIRST OCCUPATIONS DURING AT LEAST THE PAST
NAME AND AGE BECAME A DIRECTOR FIVE YEARS, AND OTHER DIRECTORSHIPS
- ------------ ----------------- -----------------------------------
<S> <C> <C>
CLASS I
TERM EXPIRING ANNUAL MEETING 1999
Robert A. Yellowlees April 1985 Chairman of the Board (since June 1992), and President,
(58) Chief Executive Officer and Chief Operating Officer
(since May 1992) and Director of the Company
Director of John H. Harland Co. and Protective Life
Corporation.
James B. Edwards January 1989 Director of the Company
(70) President, The Medical University of South Carolina
(since November 1982); Director of The Harry Frank
Guggenheim Foundation, Phillips Petroleum Company,
IMO Industries, Inc., Waste Management, Inc., Norfolk-
Southern Corporation Advisory Board, GS Industries, Inc.
and the Gaylord and Dorothy Donnelley Foundation.
CLASS III
TERM EXPIRING ANNUAL MEETING 1998
Don W. Sands September 1989 Director of the Company
(71) Member of the Board of Directors, Georgia World
Congress Center, Atlanta (1985-1997); Chief Executive
Officer Emeritus 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
Company, Inc.
J. Veronica Biggins October 1995 Director of the Company
(50) Partner, Heidrick & Struggles (since 1995); Assistant to
the President of the United States (1994-1995); Executive
Vice President, NationsBank of Georgia (1973-1994);
Director, of Kaiser Foundation Health Plan of Georgia,
Inc., Avnet, Inc., Cameron Ashley, Inc. and Morrison
Fresh Cooking, Inc.
</TABLE>
OTHER INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
Meetings and Compensation. During the fiscal year ended May 31, 1997, the
Company's Board of Directors held 12 meetings. All directors, except Dr.
Edwards, attended 75% or more of the combined total of the Board of Directors
meetings and meetings of the committees on which they served. 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
$24,000, part of which may be paid under the terms of the 1995 Non-Employee
Director Compensation Plan described below, 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.
- 4 -
<PAGE> 7
The Company maintains the 1995 Non-Employee Director Compensation
Plan (the "1995 Director Plan"), which entitles each of the Company's
non-employee directors to receive on June 1 of each year, in lieu of 50% of
the annual cash retainer described above, that number of shares of Common
Stock, rounded up to the next whole share, with a fair market value equal to 50%
of such annual retainer. 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. For purposes of the
1995 Director Plan, the annual retainer of non-employee directors is defined to
exclude 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. As of June 1, 1997, each of Messrs. Barlow, Edwards,
Sands and Williams and Ms. Biggins was issued 274 shares of Common Stock based
on the fair market value of the Common Stock on that date of $43.875 per share
and the current annual retainer for the non-employee directors of $24,000.
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) 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, 1997, Messrs. Sands,
Edwards, Barlow, and Williams had 8, 8-8/12, 28-8/12, and 20-5/12 years of
service as directors for purposes of the retirement plan. In the event of a
change in control of the Company, each eligible 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 1984 Non-Employee Director Stock Option
Plan (the "Director Option Plan"). The Director Option Plan initially provided
for the grant of stock options to non-employee directors for up to a total of
157,500 shares of Common Stock, with each such director automatically entitled
to receive an option to purchase 4,500 shares of Common Stock for each
completed year of service as a director after his or her election by the
stockholders, up to five such options. As amended in 1989, the Director Option
Plan provided for the grant of stock options to non-employee directors for up
to a total of 345,000 shares of Common Stock, with each such director
automatically entitled to receive an option to purchase 7,500 shares of Common
Stock for each completed year of service as a director after his or her
election by the stockholders, up to five such options. The Director Option Plan
was further amended in 1995 to provide that non-employee directors shall
receive up to five options each to purchase 5,000 shares, one for each
subsequent year of service as a director. Until 1995, options granted under the
Director Option Plan were 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. Since 1995, options granted under the Director Option Plan have
been 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 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 $45.562 per share as of July 14, 1997. During the
fiscal year ended May 31, 1997, options were granted under the Director Option
Plan to each Messrs. Barlow, Edwards, Sands and Williams and Ms. Biggins for
5,000 shares each of Common Stock at an exercise price per share of $41.00.
- 5 -
<PAGE> 8
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, 1997, 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) and Edwards and Ms. Biggins. This Committee reviews and determines
levels of compensation and performance criteria for the Company's executive
officers and administers the Company's 1982 Incentive Stock Option Plan, 1983
Restricted Stock Plan (the "1983 Plan") and the 1987 Stock Option Plan (the
"1987 Plan"). During the last fiscal year, the Compensation Committee held 4
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, 1997.
- 6 -
<PAGE> 9
COMMON STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information as of July 14, 1997, 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 July 14, 1997.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME BENEFICIAL OWNERSHIP (1) CLASS (1)
- ---- ------------------------ ---------
<S> <C> <C>
Edward L. Barlow 113,671(2) *
Neil Williams 64,827(3) *
Robert A. Yellowlees 801,478(4) 2.9%
James B. Edwards 39,121(5) *
Don W. Sands 49,921(6) *
J. Veronica Biggins 995 *
Richard S. Cohan 46,993(7) *
Kevin C. Shea 72,951(8) *
Thomas Dunn 24,369(9) *
David K. Hunt 8,000 *
All Directors and Executive Officers
(14 persons) as a Group 1,254,794(10) 4.7%
</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 46,500 shares of Common Stock of which Mr. Barlow has
the right to acquire beneficial ownership.
(3) This amount includes 42,000 shares of Common Stock of which Mr. Williams
has the right to acquire beneficial ownership.
(4) This amount includes 645,000 shares of Common Stock of which Mr.
Yellowlees has the right to acquire beneficial ownership, 40,000 shares
held by The Yellowlees Charitable Trust, of which Mr. Yellowlees is the
Trustee, 12,488 shares of restricted stock over which he currently has
sole voting power only 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 consists of 34,090 shares of Common Stock of which Mr. Cohan
has the right to acquire beneficial ownership and 5,267 shares of
restricted stock over which he currently has sole voting power only.
(8) This amount includes 51,694 shares of Common Stock of which Mr. Shea has
the right to acquire beneficial ownership and 5,667 shares of restricted
stock over which he currently has sole voting power only.
(9) This amount includes 21,825 shares of Common Stock of which Mr. Dunn has
the right to acquire beneficial ownership and 267 shares of restricted
stock over which he currently has sole voting power only.
(10) This amount includes 939,243 shares of Common Stock of which the directors
and executive officers, as a group, have the right to acquire beneficial
ownership and 23,689 shares of restricted stock over which the beneficial
owners have sole voting power only.
- 7 -
<PAGE> 10
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 CLASS
- ------------------- ---- --------- ----------
<S> <C> <C> <C>
T. Rowe Price Associates, Inc. (1) May 9, 1997 2,980,100(2) 11.2%
100 E. Pratt Street
Baltimore, MD 21202
Pilgrim Baxter & February 14, 1997 2,576,800 9.9%
Associates, Ltd. (3)
1255 Drummers Lane, Suite 300
Wayne, PA 19087-1590
AIM Management Group Inc. (4) February 12, 1997 1,672,200 6.4%
11 Greenway Plaza, Suite 1919
Houston, TX 77046-1173
</TABLE>
- ------------------
(1) This information is contained in a Schedule 13G dated May 9, 1997 filed
by T. Rowe Price Associates, Inc. ("Price Associates") with the
Securities and Exchange Commission (the "Commission"), a copy of which
was received by the Company. Such Schedule 13G states that Price
Associates has sole voting power with respect to 353,000 shares and
sole dispositive power with respect to 2,980,100.
(2) These securities are owned by various individual and institutional
investors which Price Associates serves as investment adviser with
power to direct investments and/or sole power to vote the securities.
For purposes of the reporting requirements of the Securities Exchange
Act of 1934, Price Associates is deemed to be a beneficial owner of
such securities; however, Price Associates expressly disclaims that it
is, in fact, the beneficial owner of such securities.
(3) This information is contained in a Schedule 13G dated February 14, 1997
filed by Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter"), Harold
J. Baxter, Gary L. Pilgrim and PBHG Growth Fund with the Commission, a
copy of which was received by the Company. Such Schedule 13G states
that Pilgrim Baxter, Harold J. Baxter and Gary L. Pilgrim have shared
voting power with respect to 2,576,800 shares and sole dispositive
power with respect to 2,576,800 shares. The Schedule 13G also indicates
that PBHG Growth Fund has shared voting power and sole dispositive
power with respect to 1,733,300 shares representing 6.7% of the
outstanding shares.
(4) This information is contained in a Schedule 13G dated February 12, 1997
filed by AIM Management Group, Inc. on behalf of itself and certain
subsidiaries ("AIM") with the Commission, a copy of which was received
by the Company. Such Schedule 13G states that AIM has shared voting
power with respect to 1,672,200 shares and sole dispositive power with
respect to 1,672,200 shares.
- 8 -
<PAGE> 11
REPORT OF THE 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
made by the Compensation Committee and then presented to 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 Committee has adopted certain principles which are
applied 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
and certain other key employees 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. 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
- 9 -
<PAGE> 12
by key employees in the acquisition and holding of Common
Stock. The number of stock options granted to an individual
is based upon the individual's potential to contribute to
future growth of the Company. The frequency and size of
individual grant amounts vary with changes in the
individual's potential to contribute to future growth of the
Company. The number of options required to achieve target
grant values based on the prevailing fair market value of the
Common Stock serves in part to determine the number of shares
granted annually.
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 a grantee, 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.
A bonus deferral program was approved by the Board of Directors
effective in fiscal year 1997 which allows certain executives to defer a
portion of their cash bonus in the form of a restricted stock grant. This
program is consistent with the Company's objectives to increase executives'
stock ownership and at risk compensation. Mr. Yellowlees and three other
executives made a deferral election for fiscal year 1997 under this plan. Since
participating executives are deferring earned cash in the form of stock at risk
of forfeiture over three years, the amount deferred is increased by 35%.
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 target 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 0.8 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. As of May 31, 1997, all participating
senior executives are at stock ownership levels well in excess of plan targets.
In 1997, the Board amended the plan by extending ownership targets over an
additional three years and increasing ownership multiples to a range of 0.8 to 5
times annual salary amounts.
Chief Executive Officer's Compensation
Mr. Yellowlees' fiscal year 1997 compensation derived primarily from
commitments under Mr. Yellowlees' employment agreement (see "Employment
Agreements -- Robert A. Yellowlees" below) entered into prior to fiscal year
1997 and the renewal agreement effective May 18, 1995. The decisions affecting
compensation made after that date relate to Mr. Yellowlees' specific annual
performance goals, results evaluation, and resulting fiscal year 1997 incentive
bonus payment.
- 10 -
<PAGE> 13
Mr. Yellowlees' target annual bonus was set in his employment
agreement, based upon quantitative and qualitative performance factors.
Starting in fiscal year 1996, the stockholders approved a new Performance-Based
Executive Officer Bonus Plan which provides for performance-based awards for
achieving business objectives. Mr. Yellowlees agreed to have a portion of his
bonus at risk under this plan to preserve deductibility by the Company under
Code Section 162(m). The three performance factors included in this plan for
fiscal year 1997 were revenue, up 54%; EBIT, up 84%; and operating margin, up
15.4%. The balance of his fiscal year 1997 bonus was determined by other
factors including earnings per share, up 37%, the successful execution of
merger and acquisition strategies, strengthening the management team and
raising capital to meet growth requirements.
Effective June 1, 1996, Mr. Yellowlees received a base compensation
increase of 7.1%.
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, restricted stock and stock options are provided to Mr. Yellowlees,
which include a significant element of risk that is based upon the Company's
performance.
As an incentive to sustained growth in stockholder value, the
Compensation Committee awarded Mr. Yellowlees a non-qualified stock option
effective May 18, 1995, at the outset of the three-year period of his renewal
employment 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. This option grant is for fiscal years
1996, 1997 and 1998. The Compensation Committee believes that it is in the
continuing best interests of the Company's stockholders to ensure that Mr.
Yellowlees remains highly incented to sustain the long term growth of the
Company.
COMPENSATION COMMITTEE
Don W. Sands, Chairman
James B. Edwards
J. Veronica Biggins
- 11 -
<PAGE> 14
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, 1997 ("1997 fiscal year"),
1996 ("1996 fiscal year") and 1995 ("1995 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 1997 540,786 200,000 858,020 -- 59,250
Chairman and Chief 1996 513,258 495,000 367,383 -- 68,449
Executive Officer, 1995 458,354 690,000 240,001 600,000 67,283
President and Chief
Operating Officer
David K. Hunt(4) 1997 176,537 75,000 -- -- 100,000
President and Chief (partial year)
Executive Officer, 1996 -- -- -- -- --
Global Payment 1995 -- -- -- -- --
Systems LLC
Thomas Dunn 1997 160,375 75,000 5,968 7,600 6,186
General Manager, 1996 132,461 50,000 -- 6,000 --
Payment Systems 1995 119,076 35,400 -- 7,500 7,079
Richard S. Cohan 1997 190,690 65,000 225,343 12,000 --
General Manager, 1996 175,961 100,000 -- 16,700 602
Health Care 1995 149,317 40,300 40,000 22,500 330
Information
Network
Services
Kevin C. Shea 1997 196,542 65,000 234,318 12,000 --
Executive Vice 1996 171,346 95,000 37,750 16,700 2,991
President, Business 1995 159,975 55,000 40,000 22,500 663
Development
</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, 1997, 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. Cohan and Shea expired on June 28, 1995. The value of the
restricted stock held by the Named Executive Officers at May 31, 1997
was $4,331,954, $17,550, $401,456 and $427,781 for Messrs. Yellowlees,
Dunn, Cohan and Shea, respectively. The numbers of shares of
restricted stock held by Messrs. Yellowlees, Dunn, Cohan and Shea at
May 31, 1997 were 98,734, 400, 9,150 and 9,750, respectively. As of
May 31, 1997, Mr. Hunt did not hold any restricted stock.
(2) All option awards granted to the Named Executive Officers were made
under the 1987 Plan.
- 12 -
<PAGE> 15
(3) For the 1997 fiscal year, includes amounts representing (i) Company
contributions to the Company's Employee Savings Plan on behalf of Mr.
Yellowlees ($4,250) and Mr. Dunn ($6,186) and (ii) insurance premiums
of $55,000 paid by the Company for life insurance for the benefit
of Mr. Yellowlees.
(4) The Company hired Mr. Hunt in January 1997.
Option Grants. The following table sets forth information on options
granted to the Named Executive Officers in the 1997 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------
Number of
Securities % of Total
Underlying Options
Options Granted to Exercise
Granted Employees in or Base Expiration Grant Date
Name (#)(1)(2) Fiscal Year Price($/Sh) Date Present Value (3)(4)
---- --------- ------------- ------------ ---------- ----------------------
<S> <C> <C> <C> <C> <C>
Robert A. Yellowlees --- --- --- --- ---
David K. Hunt 55,000(5) 39.7(6) 23.17 January 1, N/M(7)
2007
Thomas Dunn 7,600 3.5 34.375 July 1, 2006 $147,592
Richard S. Cohan 12,000 5.6 34.375 July 1, 2006 233,040
Kevin C. Shea 12,000 5.6 34.375 July 1, 2006 233,040
</TABLE>
- -------------
(1) The total number of shares covered by options granted to employees in
the 1997 fiscal year was 214,050.
(2) These options were granted under the 1987 Plan with the exception of
those granted Mr. Hunt. The option agreements governing the grants
under the 1987 Plan 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 Compensation 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.
(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) These values are based upon the following assumptions: (i) an expected
stock price volatility of 39.3%; (ii) a risk-free rate of return of
6.92%; (iii) a current dividend yield of 0.87%; and (iv) a term of
grant of 10 years.
(5) Represents options to acquire units in Global Payment Systems LLC, a
non-public subsidiary of the Company.
(6) Represents the percentage of options to acquire units in Global Payment
Systems LLC granted to all employees.
(7) Not meaningful since the units are not publicly traded. As an
alternative method, the following is the potential realizable value of
such grant assuming a 5% and 10% annual appreciation in the value of
the units from the date of grant until the expiration of the option
term: 5% - $801,432, 10% - $2,030,336.
- 13 -
<PAGE> 16
Option Exercises and Fiscal Year-End Values. The following table sets
forth information concerning each exercise of options during the 1997 fiscal
year and the number and value of unexercised options held by the Named Executive
Officers as of May 31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR--END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options In-the Money Options
Shares Value at Fiscal Year-End (#) at Fiscal Year-End ($)
Acquired on Realized -------------------------- ------------------------
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------- ------------ --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Yellowlees 4,500 115,313 645,000 502,500 22,632,980 11,543,215
David K. Hunt -- -- -- 55,000(1) -- --
Thomas Dunn 1,875 68,047 21,825 16,525 753,184 316,921
Richard S. Cohan -- -- 34,090 37,735 1,130,308 824,375
Kevin C. Shea -- -- 51,694 37,735 1,754,920 824,375
</TABLE>
- -------------
(1) Represents options to acquire units in Global Payment Systems LLC, a
non-public subsidiary of the Company.
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 65 are 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 a percentage of the approximate social security benefit 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, 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. Under current law the benefit for an employee retiring in
the 1996 plan year at age 65 cannot exceed $120,000 per year. For a plan years
beginning in 1989, federal law limited the amount of compensation taken into
account under the plan to $200,000 per year (as adjusted for inflation). This
amount was decreased to $150,000 beginning in 1994. The following chart does
not reflect these limits.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS
---------------------------------------------------------------------------
HIGHEST YEARS OF CONTINUOUS SERVICE (1)
FIVE-YEAR AVEAGE ---------------------------------------------------------------------------
ANNUAL EARNINGS 15 20 25 30 35
------------ ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
$144,000 $32,351 $ 43,135 $ 53,919 $ 64,703 $ 75,487
192,000 44,231 58,975 73,719 88,463 103,207
240,000 56,111 74,815 93,519 112,223 120,000
288,000 67,991 90,655 113,319 120,000 120,000
336,000 79,871 106,495 120,000 120,000 120,000
384,000 91,751 120,000 120,000 120,000 120,000
432,000 103,631 120,000 120,000 120,000 120,000
(footnote on following page)
</TABLE>
- 14 -
<PAGE> 17
- ---------------
(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, 1997 for each of the Named Executive Officers was as follows: Mr.
Yellowlees (5-1/12 years) $782,112; Mr. Hunt (5/12 years) $251,537;
Mr. Dunn (8-10/12 years) $165,384; Mr. Cohan (17 years) $211,193 and
Mr. Shea (10-3/12 years) $209,561. 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. Federal regulations, however, cap the
total compensation that may be considered in providing benefits under
a qualified defined benefit plan.
Employment Agreements.
Robert A. Yellowlees. During fiscal year 1997, Mr. Yellowlees was
employed pursuant to an agreement which became effective as of May 18, 1995
(the "1995 Agreement"). The 1995 Agreement provided 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 with
renewal provisions on mutual agreement by May 17, 1997. The 1995 Agreement
also provided that during its term the Company would use its best efforts
to cause him to be nominated and elected as a director of the Company.
The 1995 Agreement provided for a minimum annual base salary of
$470,000, 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 is 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 also is entitled to participate in all other benefit
plans maintained by the Company for executive officers. 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 disability
insurance coverage.
Upon termination of the 1995 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 1995 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) all 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 1995 Agreement, Mr.
Yellowlees' average annual compensation is currently $965,800. Also, upon
termination of the 1995 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 1995 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.
Under the 1995 Agreement, the Company granted Mr. Yellowlees a
non-qualified stock option effective May 18, 1995, at the outset of the
three-year period of the 1995 Agreement, in lieu of three
- 15 -
<PAGE> 18
separate grants. The grant contained 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) the non-renewal of his employment
agreement for an additional three-year term upon the expiration of the 1995
Agreement.
In May 1997, effective June 1, 1997, the Company terminated the 1995
Agreement, without affecting the stock options granted under the 1995
Agreement, and entered into a new employment agreement with Mr. Yellowlees (the
"1997 Agreement"). The 1997 Agreement is essentially identical to the 1995
Agreement, except as follows. The 1997 Agreement provides for a minimum annual
base salary of $540,000. There were no grants of stock options or restricted
stock specifically made in the 1997 Agreement, however, Mr. Yellowlees is
eligible for grants under these as well as all other employee benefits plans.
The term of the 1997 Agreement is three years, expiring May 31, 2000, unless
extended by mutual agreement of Mr. Yellowlees and the Company.
Executive Severance Agreements. In addition to Mr. Yellowlees'
employment agreement described above, the Company has entered into compensation
agreements with Mr. 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 amount of the
average annual taxable compensation during the five fiscal years ended May 31,
1997 for Mr. Shea was $209,561.
- 16 -
<PAGE> 19
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, 1992 (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
Research Total Return--Data Summary
NDC
<TABLE>
<CAPTION>
Cumulative Total Return
-----------------------
5/92 5/93 5/94 5/95 5/96 5/97
<S> <C> <C> <C> <C> <C> <C>
NATIONAL DATA CORP NDC 100 133 154 292 538 630
S & P 500 I500 100 112 116 140 180 232
S & P COMPUTERS (SOFTWARE & SERVICES) ICSF 100 134 161 226 316 529
</TABLE>
* $100 invested on 5/31/92 in stock or index - including reinvestment of
dividends. Fiscal year ending May 31.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG NATIONAL DATA CORPORATION, THE S&P 500 INDEX
AND THE S&P COMPUTERS (SOFTWARE & SERVICES) INDEX
Research Company Total Return Worksheet
BEGIN: 05/31/92
FYE: 05/31/97
NATIONAL DATA CORP NDC END: 05/31/97
<TABLE>
<CAPTION>
BEGIN CUM
TYPE NO. OF DIV DIV DIV ENDING TOTAL
OF CLOSE SHARES $ PER $.$$ SHARES NO. OF SHRHLDR
DATE* LINE PRICE** *** SHARE** PAID REINVD SHARES RETURN
----- ---- ------- ------ ------- ---- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
05/31/92 BEGIN 7.667 13.043 13.043 100
08/12/92 DIV 7.083 13.043 0.073 0.96 0.135 13.179 93
11/16/92 DIV 8.250 13.179 0.073 0.97 0.117 13.296 110
02/08/93 DIV 10.500 13.296 0.073 0.98 0.093 13.389 141
05/10/93 DIV 10.500 13.389 0.073 0.98 0.094 13.482 142
05/31/93 YE 9.833 13.482 13.482 133
08/09/93 DIV 11.167 13.482 0.073 0.99 0.089 13.571 152
11/15/93 DIV 11.833 13.571 0.073 1.00 0.084 13.655 162
02/14/94 DIV 12.833 13.655 0.073 1.00 0.078 13.733 176
05/17/94 DIV 11.750 13.733 0.073 1.01 0.086 13.818 162
05/31/94 YE 11.167 13.818 13.818 154
08/16/94 DIV 11.417 13.818 0.073 1.01 0.089 13.907 159
11/08/94 DIV 13.917 13.907 0.073 1.02 0.073 13.980 195
02/13/95 DIV 16.583 13.980 0.073 1.03 0.062 14.042 233
05/16/95 DIV 20.750 14.042 0.075 1.05 0.051 14.093 292
05/31/95 YE 20.750 14.093 14.093 292
08/17/95 DIV 25.750 14.093 0.075 1.06 0.041 14.134 364
11/13/95 DIV 22.000 14.134 0.075 1.06 0.048 14.182 312
02/13/96 DIV 24.000 14.182 0.075 1.06 0.044 14.227 341
05/02/96 DIV 36.750 14.227 0.075 1.07 0.029 14.256 524
05/31/96 YE 37.750 14.256 14.256 538
09/19/96 DIV 44.125 14.256 0.075 1.07 0.024 14.280 630
11/12/96 DIV 40.500 14.280 0.075 1.07 0.026 14.306 579
02/12/97 DIV 37.000 14.306 0.075 1.07 0.029 14.335 530
05/14/97 DIV 40.000 14.335 0.075 1.08 0.027 14.362 574
05/31/97 YE 43.875 14.362 14.362 630
</TABLE>
* Fiscal year-end and ex-dividend dates. ***Begin No. of Shares' based on
$100 investment.
**All Closing Prices and Dividends are adjusted for stock splits.
- 17 -
<PAGE> 20
2. APPROVAL OF THE 1997 STOCK OPTION PLAN
On August 29, 1997, the Board of Directors adopted the National Data
Corporation 1997 Stock Option Plan (the "Plan"). The Company has reserved
1,228,000 shares of its Common Stock for issuance in connection with the
exercise of stock options granted under the Plan, but any Common Stock
distributed pursuant to exercise of an option may consist, in whole or in part,
of authorized and unissued Common Stock, treasury stock, or Common Stock
purchased on the open market. The Plan will be effective as of as of its
adoption by the Board. However, if the stockholders fail to approve the Plan at
the Annual Meeting, any incentive stock options previously granted under the
Plan will be automatically converted to non-qualified stock options.
A summary of the Plan is set forth below. The summary is qualified in
its entirety by reference to the full text of the Plan, which is attached to
this Proxy Statement as Appendix A.
GENERAL
The purpose of the Plan is to promote the success, and enhance the
value, of the Company by linking the personal interests of employees, officers
and directors to those of the stockholders, and by providing such employees,
officers and directors with an incentive for outstanding performance. As of
August 26, 1997, there were approximately 200 persons eligible to participate in
the Plan.
The Plan authorizes the grant to employees, officers and directors of
the Company or its affiliates of options to purchase shares of Common Stock
("Options"), which may be incentive stock options or nonqualified options.
Pursuant to Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), the Company may not deduct compensation in excess of $1
million paid to the Chief Executive Officer and the four next most highly
compensated executive officers of the Company (each a "Covered Employee"). The
Plan is designed to comply with Code Section 162(m) so that the grant of Options
under the Plan may be excluded from the calculation of annual compensation for
purposes of Code Section 162(m) and will be fully deductible by the Company. The
Board has approved the Plan for submission to the stockholders in order to
permit the grant of Options thereunder that will constitute deductible
performance-based compensation for purposes of Code Section 162(m).
Subject to adjustment as provided in the Plan, the aggregate number of
shares of Common Stock reserved and available for Options is 1,228,000. The
maximum number of shares of Common Stock with respect to one or more Options
that may be granted during any one calendar year under the Plan to any one
Covered Employee is 500,000. To the extent that an Option is canceled,
terminates, expires or lapses for any reason, any shares of Common Stock subject
to the Option will again be available for the grant of an Option under the Plan.
ADMINISTRATION
The Plan will be administered by the Compensation Committee of the
Board of Directors of the Company (the "Committee") or, at the discretion of the
Board from time to time, by the Board. During any time that the Board is acting
as administrator of the Plan, it shall have all the powers of the Committee
under the Plan. The Committee has the power, authority and discretion to
designate participants; determine the type or types of Options to be granted to
each participant and the terms and conditions thereof; establish, adopt or
revise any rules and regulations as it may deem necessary or advisable to
administer the Plan; and make all other decisions and determinations that may be
required under, or as the Committee deems necessary or advisable to administer,
the Plan.
- 18 -
<PAGE> 21
OPTIONS
Terms of Options. The Committee is authorized to grant Options, which
may be incentive stock options ("ISOs") or nonqualified stock options
("NQSOs"), to participants. All Options will be evidenced by a written Option
Agreement between the Company and the participant, which will include such
provisions as may be specified by the Committee. The terms of any ISO must meet
the requirements of Section 422 of the Code.
Time and Conditions of Exercise. The Committee may determine the time
or times at which an Option may be exercised in whole or in part, and the
performance or other conditions, if any, that must be satisfied before all or
part of an Option may be exercised. The Committee may waive any exercise
provisions at any time in whole or in part based upon factors as the Committee
may determine so that the Option becomes exercisable at an earlier date.
Payment. The Committee may determine the methods by which the exercise
price of an Option may be paid, the form of payment, including, without
limitation, cash, shares of Common Stock, or other property (including
"cashless exercise" arrangements), and the methods by which shares of Common
Stock shall be delivered or deemed to be delivered by participants; provided,
however, that if shares of Common Stock are used to pay the exercise price of
an Option, such shares must have been held by the participant for at least six
months. The Committee may, but need not, allow a participant to pay the Option
price by directing the Company to withhold from the shares of Common Stock that
would otherwise be issued upon exercise of the Option that number of shares
having a fair market value on the exercise date equal to the Option price, all
as determined pursuant to rules and procedures established by the Committee.
Limitations on Transfer; Beneficiaries. No Option may be pledged,
encumbered, or hypothecated to or in favor of any party other than the Company
or its affiliates, or shall be subject to any lien, obligation, or liability of
the optionee to any other party other than the Company or its affiliates. No
Option shall be assignable or transferable by a participant other than by will
or the laws of descent and distribution; provided, however, that the Committee
may (but need not) permit other transfers where the Committee concludes that
such transferability (i) does not result in accelerated taxation, (ii) does not
cause any Option intended to be an ISO to fail to be described in Code Section
422(b), and (iii) is otherwise appropriate and desirable, taking into account
any state or federal tax or securities laws applicable to transferable options.
A participant may designate a beneficiary to exercise the rights of the
participant and to receive any distribution with respect to any Option upon the
participant's death.
Acceleration Upon Certain Events. In the event of (i) the commencement
of a public tender offer for all or any portion of the Common Stock, (ii) a
proposal to merge, consolidate or otherwise combine into and with another
corporation (in which transaction the Company would not survive) is submitted
to the stockholders of the Company for approval, (iii) a proposal to liquidate
or dissolve the Company is submitted to the stockholders of the Company for
approval, or (iv) the Board approves any transaction or event that would
constitute a change in control of the Company, the Committee may declare all
outstanding Options to be fully exercisable as of such date as the Committee
may declare, which may be on or before the consummation of such tender offer or
other transaction or event. If an Option is accelerated under such
circumstances, the Committee may provide (i) that the Option will expire after
a designated period of time after such acceleration to the extent not then
exercised, (ii) that the Option will be settled in cash rather than Common
Stock, (iii) that the Option will be assumed by another party to the
transaction giving rise to the acceleration or otherwise be equitably converted
in connection with such transaction, or (iv) any combination of the foregoing.
The Committee's determination need not be uniform and may be different for
different participants whether or not such participants are similarly situated.
Acceleration For Any Other Reason. Regardless of whether an event has
occurred as described above, the Committee may at any time determine that all
or a portion of a participant's Options will become fully or partially
exercisable, as of such date as the Committee may declare. The Committee may
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<PAGE> 22
discriminate among participants and among Options granted to a participant in
exercising its discretion pursuant to provision.
Adjustments. In the event a stock dividend is declared upon the Common
Stock, the shares of Common Stock then subject to each Option will be increased
proportionately without any change in the aggregate purchase price therefor. In
the event the Common Stock is changed into or exchanged for a different number
or class of shares of stock or securities of the Company or of another
corporation, whether through reorganization, recapitalization,
reclassification, stock split-up, combination of shares, merger or
consolidation, there will be substituted for each such share of Common Stock
then subject to each Option the number and class of shares into which each
outstanding share of Common Stock will be exchanged, all without any change in
the aggregate purchase price for the shares then subject to each Option. If any
rights or warrants to subscribe for additional shares of Common Stock are given
pro rata to holders of outstanding shares of Common Stock, each participant
shall be entitled to the same rights or warrants on the same basis as holders
of the outstanding shares of Common Stock with respect to such portion of the
participant's Options that may be exercised on or prior to the date of the
expiration of such rights or warrants.
TERMINATION AND AMENDMENT
The Board or the Committee may, at any time and from time to time,
amend, modify or terminate the Plan without stockholder approval; provided,
however, that the Board or Committee may condition any amendment or
modification on the approval of stockholders of the Company if such approval is
necessary or deemed advisable with respect to tax, securities or other
applicable laws, policies or regulations. The Committee may amend, modify or
terminate any outstanding Option without approval of the participant, but such
amendment, modification or termination may not, without the participant's
consent, reduce or diminish the value of such Option determined as if the
Option had been exercised on the date of such amendment or termination. No
termination, amendment, or modification of the Plan may adversely affect any
Option previously granted, without the written consent of the participant.
CERTAIN FEDERAL INCOME TAX EFFECTS
Nonqualified Stock Options. Under present federal income tax
regulations, there will be no federal income tax consequences to either the
Company or the participant upon the grant of an NQSO having an exercise price
per share equal to or greater than the fair market value of the Common Stock on
the date of grant. The participant will realize ordinary income on the
exercise of the NQSO in an amount equal to the excess of the fair market value
of the Common Stock acquired upon the exercise of such Option over the exercise
price, and the Company will receive a corresponding deduction. The gain, if
any, realized upon the subsequent disposition by the participant of the Common
Stock will constitute short- or long-term capital gain, depending on the
participant's holding period.
Incentive Stock Options. Under present federal income tax regulations,
there will be no federal income tax consequences to either the Company or the
participant upon the grant of an ISO or the exercise thereof by the
participant. If the participant holds the shares of Common Stock for the
greater of two years after the date the Option was granted or one year after
the acquisition of such shares of Common Stock (the "required holding period"),
the difference between the aggregate option price and the amount realized upon
disposition of the shares of Common Stock will constitute a capital gain or
loss, and the Company will not be entitled to a federal income tax deduction.
If the shares of Common Stock are disposed of in a sale, exchange or other
"disqualifying disposition" during the required holding period, the participant
will realize taxable ordinary income in an amount equal to the excess of the
fair market value of the Common Stock purchased at the time of exercise over
the aggregate option price, and the Company will be entitled to a federal
income tax deduction equal to such amount.
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<PAGE> 23
ADDITIONAL INFORMATION
The closing price of the Common Stock, as reported by the New York
Stock Exchange on August 25, 1997, was $37.00.
The affirmative vote of the holders of a majority of the shares present
or represented by proxy and entitled to vote at the meeting on this proposal
will constitute approval of the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
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" APPROVAL OF THE PLAN. 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 THE PLAN.
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<PAGE> 24
AUDITORS
Arthur Andersen LLP served as the Company's auditors for the five
fiscal years ended May 31, 1997, and that firm of independent public
accountants is serving as auditors for the Company for the current fiscal year
which began June 1, 1997. 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.
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 1998 Annual Meeting of Stockholders of the Company must be received by
the Company at its principal executive offices on or before April 30, 1998, in
order to be included in the Company's proxy statement and form of proxy
relating to the 1998 Annual Meeting of Stockholders.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 1997 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).
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<PAGE> 25
EXHIBIT A
NATIONAL DATA CORPORATION
1997 STOCK OPTION PLAN
ARTICLE I
PURPOSE
1.1 GENERAL. The purpose of the National Data Corporation 1997 Stock
Option Plan (the "Plan") is to promote the success, and enhance the value, of
National Data Corporation (the "Company") by linking the personal interests of
its employees, officers and directors to those of Company stockholders and by
providing its employees, officers and directors with an incentive for
outstanding performance. The Plan is further intended to provide flexibility to
the Company in its ability to motivate, attract, and retain the services of
employees, officers and directors upon whose judgment, interest, and special
effort the successful conduct of the Company's operation is largely dependent.
Accordingly, the Plan permits the grant of stock options from time to time to
selected employees, officers and directors.
ARTICLE 2
EFFECTIVE DATE
2.1 EFFECTIVE DATE. The Plan shall be effective as of the date upon
which it shall be approved by the Board. However, the Plan shall be submitted
to the stockholders of the Company for approval within 12 months of the Board's
approval thereof. No Incentive Stock Options granted under the Plan may be
exercised prior to approval of the Plan by the stockholders and if the
stockholders fail to approve the Plan within 12 months of the Board's approval
thereof, any Incentive Stock Options previously granted hereunder shall be
automatically converted to Non-Qualified Stock Options without any further act.
In the discretion of the Committee, Options may be granted to Covered Employees
which are intended to constitute qualified performance-based compensation under
Code Section 162(m). Any such Options shall be contingent upon the stockholders
having approved the Plan.
ARTICLE 3
DEFINITIONS
3.1 DEFINITIONS. When a word or phrase appears in this Plan with the
initial letter capitalized, and the word or phrase does not commence a
sentence, the word or phrase shall generally be given the meaning ascribed to
it in this Section or in Section 1.1 unless a clearly different meaning is
required by the context. The following words and phrases shall have the
following meanings:
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Committee" means the committee of the Board described in Article
4.
"Company" means National Data Corporation, a Delaware corporation.
"Covered Employee" means a covered employee as defined in Code
Section 162(m)(3).
"Disability" shall mean any illness or other physical or mental
condition of a Participant that renders the Participant incapable of
performing his customary and usual duties for the Company, or any
medically determinable illness or other physical or mental condition
resulting from a bodily injury, disease or mental disorder which, in
the judgment of the Committee, is permanent and continuous in nature.
The Committee may require such medical or other evidence as it deems
necessary to judge the nature and permanency of the Participant's
condition.
<PAGE> 26
"Effective Date" has the meaning assigned such term in Section
2.1.
"Fair Market Value", on any date, means (i) if the Stock is listed
on a securities exchange or is traded over the Nasdaq National Market,
the closing sales price on such exchange or over such system on such
date or, in the absence of reported sales on such date, the closing
sales price on the immediately preceding date on which sales were
reported, or (ii) if the Stock is not listed on a securities exchange
or traded over the Nasdaq National Market, the mean between the bid
and offered prices as quoted by Nasdaq for such date, provided that if
it is determined that the fair market value is not properly reflected
by such Nasdaq quotations, Fair Market Value will be determined by
such other method as the Committee determines in good faith to be
reasonable.
"Incentive Stock Option" means an Option that is intended to meet
the requirements of Section 422 of the Code or any successor provision
thereto.
"Non-Qualified Stock Option" means an Option that is not an
Incentive Stock Option.
"Option" means a right granted to a Participant under Article 7 of
the Plan to purchase Stock at a specified price during specified time
periods. An Option may be either an Incentive Stock Option or a
Non-Qualified Stock Option.
"Option Agreement" means any written agreement, contract, or other
instrument or document evidencing an Option.
"Parent" means a corporation which owns or beneficially owns a
majority of the outstanding voting stock or voting power of the
Company. For Incentive Stock Options, the term shall have the same
meaning as set forth in Code Section 424(e).
"Participant" means a person who, as an employee, officer, or
director of the Company or any Parent or Subsidiary, has been granted
an Option under the Plan.
"Plan" means the National Data Corporation 1997 Stock Option Plan,
as amended from time to time.
"Retirement" means a Participant's termination of employment with
the Company, Parent or Subsidiary after attaining any normal or early
retirement age specified in any pension, profit sharing or other
retirement program sponsored by the Company, or, in the event of the
inapplicability thereof with respect to the person in question, as
determined by the Committee in its reasonable judgment.
"Stock" means the $0.125 par value common stock of the Company and
such other securities of the Company as may be substituted for Stock
pursuant to Article 9.
"Subsidiary" means any corporation, limited liability company,
partnership or other entity of which a majority of the outstanding
voting stock or voting power is beneficially owned directly or
indirectly by the Company. For Incentive Stock Options, the term shall
have the meaning set forth in Code Section 424(f).
"1933 Act" means the Securities Act of 1933, as amended from time
to time.
"1934 Act" means the Securities Exchange Act of 1934, as amended
from time to time.
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<PAGE> 27
ARTICLE 4
ADMINISTRATION
4.1 COMMITTEE. The Plan shall be administered by the Compensation
Committee of the Board or, at the discretion of the Board from time to time, by
the Board. The Committee shall consist of two or more members of the Board who
are (i) "outside directors" as that term is used in Section 162(m) of the Code
and the regulations promulgated thereunder, and (ii) "non-employee directors"
as such term is defined in Rule 16b-3 promulgated under Section 16 of the 1934
Act or any successor provision. During any time that the Board is acting as
administrator of the Plan, it shall have all the powers of the Committee
hereunder, and any reference herein to the Committee (other than in this
Section 4.1) shall include the Board.
4.2 ACTION BY THE COMMITTEE. For purposes of administering the Plan,
the following rules of procedure shall govern the Committee. A majority of the
Committee shall constitute a quorum. The acts of a majority of the members
present at any meeting at which a quorum is present, and acts approved
unanimously in writing by the members of the Committee in lieu of a meeting,
shall be deemed the acts of the Committee. Each member of the Committee is
entitled to, in good faith, rely or act upon any report or other information
furnished to that member by any officer or other employee of the Company or any
Parent or Subsidiary, the Company's independent certified public accountants,
or any executive compensation consultant or other professional retained by the
Company to assist in the administration of the Plan. No member of the Committee
shall be liable for any action or determination made in good faith, and members
of the Committee shall be entitled to indemnification and reimbursement from
time to time for expenses incurred in defense of such good faith action or
determination.
4.3 AUTHORITY OF COMMITTEE. The Committee has the exclusive power,
authority and discretion to:
(a) Designate Participants;
(b) Determine the type or types of Options to be granted to each
Participant;
(c) Determine the number of Options to be granted and the number
of shares of Stock to which an Option will relate;
(d) Determine the terms and conditions of any Option granted under
the Plan, including but not limited to, the exercise price, grant
price, or purchase price, any restrictions or limitations on the
Option, any restrictions on the exercisability of an Option, and
accelerations or waivers thereof, based in each case on such
considerations as the Committee in its sole discretion determines;
(e) Accelerate the vesting of any outstanding Option, based in
each case on such considerations as the Committee in its sole
discretion determines;
(f) Determine whether, to what extent, and under what
circumstances the exercise price of an Option may be paid in cash,
Stock, other Options, or other property, or an Option may be canceled,
forfeited, or surrendered;
(g) Prescribe the form of each Option Agreement, which need not be
identical for each Participant;
(h) Decide all other matters that must be determined in connection
with an Option;
(i) Establish, adopt or revise any rules and regulations as it may
deem necessary or advisable to administer the Plan;
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<PAGE> 28
(j) Make all other decisions and determinations that may be
required under the Plan or as the Committee deems necessary or
advisable to administer the Plan; and
(k) Amend the Plan or any Option Agreement as provided herein.
4.4. DECISIONS BINDING. The Committee's interpretation of the Plan,
any Options granted under the Plan, any Option Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding,
and conclusive on all parties.
ARTICLE 5
SHARES SUBJECT TO THE PLAN
5.1. NUMBER OF SHARES. Subject to adjustment as provided in Section
9.1, the aggregate number of shares of Stock reserved and available for Options
shall be 1,228,000. The maximum number of shares of Stock with respect to one
or more Options that may be granted during any one calendar year under the Plan
to any one Covered Employee shall be 500,000. The adoption of the Plan by
the Board shall constitute a reservation of 1,228,000 shares of Stock for
issuance only upon the exercise of Options granted under the Plan.
5.2. LAPSED OPTIONS. To the extent that an Option is canceled,
terminates, expires or lapses for any reason, any shares of Stock subject to
the Option will again be available for the grant of an Option under the Plan.
5.3. STOCK DISTRIBUTED. Any Stock distributed pursuant to exercise of
an Option may consist, in whole or in part, of authorized and unissued Stock,
treasury Stock or Stock purchased on the open market.
ARTICLE 6
ELIGIBILITY
6.1. GENERAL. Options may be granted only to individuals who are
employees, officers, or directors of the Company or a Parent or Subsidiary.
ARTICLE 7
STOCK OPTIONS
7.1. GENERAL. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock under an
Option shall be determined by the Committee.
(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall determine
the time or times at which an Option may be exercised in whole or in
part. The Committee also shall determine the performance or other
conditions, if any, that must be satisfied before all or part of an
Option may be exercised. The Committee may waive any exercise
provisions at any time in whole or in part based upon factors as the
Committee may determine in its sole discretion so that the Option
becomes exercisable at an earlier date.
(c) PAYMENT. The Committee shall determine the methods by which
the exercise price of an Option may be paid, the form of payment,
including, without limitation, cash, shares of Stock, or other
property (including "cashless exercise" arrangements), and the methods
by which shares of Stock shall be delivered or deemed to be delivered
by Participants; provided, however, that if shares of Stock are used
to pay the exercise price of an Option, such
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<PAGE> 29
shares must have been held by the Participant for at least six months.
Without limiting the power and discretion conferred on the Committee
pursuant to the preceding sentence, the Committee may, in the exercise
of its discretion, but need not, allow a Participant to pay the Option
price by directing the Company to withhold from the shares of Stock
that would otherwise be issued upon exercise of the Option that number
of shares having a Fair Market Value on the exercise date equal to the
Option price, all as determined pursuant to rules and procedures
established by the Committee.
(d) EVIDENCE OF GRANT. All Options shall be evidenced by a written
Option Agreement between the Company and the Participant. The Option
Agreement shall include such provisions, not inconsistent with the
Plan, as may be specified by the Committee.
7.2. INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options
granted under the Plan must comply with the following additional rules:
(a) EXERCISE PRICE. The exercise price per share of Stock shall be
set by the Committee, provided that the exercise price for any
Incentive Stock Option shall not be less than the Fair Market Value as
of the date of the grant.
(b) EXERCISE. In no event may any Incentive Stock Option be
exercisable for more than ten years from the date of its grant.
(c) LAPSE OF OPTION. An Incentive Stock Option shall lapse under
the earliest of the following circumstances; provided, however, that
the Committee may, prior to the lapse of the Incentive Stock Option
under the circumstances described in paragraphs (3), (4) and (5)
below, provide in writing that the Option will extend until a later
date, but if an Incentive Stock Option is exercised after the dates
specified in paragraphs (3), (4) and (5) above, it will automatically
become a Non-Qualified Stock Option:
(1) The Incentive Stock Option shall lapse as of the
option expiration date set forth in the Option Agreement.
(2) The Incentive Stock Option shall lapse ten years
after it is granted, unless an earlier time is set in the
Option Agreement.
(3) If the Participant terminates employment for any
reason other than as provided in paragraph (4) or (5) below,
the Incentive Stock Option shall lapse, unless it is
previously exercised, three months after the Participant's
termination of employment; provided, however, that if the
Participant's employment is terminated by the Company for
cause or by the Participant without the consent of the
Company, the Incentive Stock Option shall (to the extent not
previously exercised) lapse immediately.
(4) If the Participant terminates employment by
reason of his Disability, the Incentive Stock Option shall
lapse, unless it is previously exercised, one year after the
Participant's termination of employment.
(5) If the Participant dies while employed, or
during the three-month period described in paragraph (3) or
during the one-year period described in paragraph (4) and
before the Incentive Stock Option otherwise lapses, the
Incentive Stock Option shall lapse one year after the
Participant's death. Upon the Participant's death, any
exercisable Incentive Stock Options may be exercised by the
Participant's beneficiary, determined in accordance with
Section 8.5.
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<PAGE> 30
Unless the exercisability of the Incentive Stock Option is
accelerated as provided in Article 8, if a Participant exercises an
Incentive Stock Option after termination of employment, the Incentive
Stock Option may be exercised only with respect to the shares that
were otherwise vested on the Participant's termination of employment.
(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market Value
(determined as of the time an Incentive Stock Option is granted) of
all shares of Stock with respect to which Incentive Stock Options are
first exercisable by a Participant in any calendar year may not exceed
$100,000.00.
(e) TEN PERCENT OWNERS. No Incentive Stock Option shall be granted
to any individual who, at the date of grant, owns stock possessing
more than ten percent of the total combined voting power of all
classes of stock of the Company or any Parent or Subsidiary unless the
exercise price per share of such Incentive Stock Option is at least
110% of the Fair Market Value per share of Stock at the date of
grant and the Incentive Stock Option expires no later than five years
after the date of grant.
(f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Incentive Stock
Option may be granted pursuant to the Plan after the day immediately
prior to the tenth anniversary of the Effective Date.
(g) RIGHT TO EXERCISE. During a Participant's lifetime, an
Incentive Stock Option may be exercised only by the Participant or, in
the case of the Participant's Disability, by the Participant's
guardian or legal representative.
(h) DIRECTORS. The Committee may not grant an Incentive Stock
Option to a non-employee director. The Committee may grant an
Incentive Stock Option to a director who is also an employee of the
Company or Parent or Subsidiary but only in that individual's position
as an employee and not as a director.
ARTICLE 8
PROVISIONS GENERALLY APPLICABLE
8.1. SUBSTITUTE OPTIONS. Options granted under the Plan may, in the
discretion of the Committee, be granted in substitution for any other Option
granted under the Plan. If an Option is granted in substitution for another
Option, the Committee may require the surrender of such other Option in
consideration of the grant of the new Option.
8.2. EXCHANGE PROVISIONS. The Committee may at any time offer to
exchange or buy out any previously granted Option for a payment in cash, Stock,
another Option (subject to Section 9.1) or other property, based on the terms
and conditions the Committee determines and communicates to the Participant at
the time the offer is made.
8.3. TERM OF OPTION. The term of each Option shall be for the period
as determined by the Committee, provided that in no event shall the term of any
Incentive Stock Option exceed a period of ten years from the date of its grant
(or, if Section 7.2(e) applies, five years from the date of its grant).
8.4. LIMITS ON TRANSFER. No right or interest of a Participant in any
unexercised Option may be pledged, encumbered, or hypothecated to or in favor
of any party other than the Company or a Parent or Subsidiary, or shall be
subject to any lien, obligation, or liability of such Participant to any other
party other than the Company or a Parent or Subsidiary. No unexercised Option
shall be assignable or transferable by a Participant other than by will or the
laws of descent and distribution; provided, however, that the Committee may
(but need not) permit other transfers where the Committee concludes that such
transferability (i) does not result in accelerated taxation, (ii) does not
cause any Option intended to be an incentive stock option to fail to be
described in Code Section 422(b), and (iii) is otherwise
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<PAGE> 31
appropriate and desirable, taking into account any state or federal tax or
securities laws applicable to transferable options.
8.5 BENEFICIARIES. Notwithstanding Section 8.4, a Participant may, in
the manner determined by the Committee, designate a beneficiary to exercise the
rights of the Participant and to receive any distribution with respect to any
Option upon the Participant's death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights under the Plan is subject
to all terms and conditions of the Plan and any Option Agreement applicable to
the Participant, except to the extent the Plan and Option Agreement otherwise
provide, and to any additional restrictions deemed necessary or appropriate by
the Committee. If no beneficiary has been designated or survives the
Participant, payment shall be made to the Participant's estate. Subject to the
foregoing, a beneficiary designation may be changed or revoked by a Participant
at any time provided the change or revocation is filed with the Committee.
8.6. STOCK CERTIFICATES. All Stock certificates delivered under the
Plan are subject to any stop-transfer orders and other restrictions as the
Committee deems necessary or advisable to comply with federal or state
securities laws, rules and regulations and the rules of any national securities
exchange or automated quotation system on which the Stock is listed, quoted, or
traded. The Committee may place legends on any Stock certificate to reference
restrictions applicable to the Stock.
8.7. ACCELERATION UPON CERTAIN EVENTS. In the event of (i) the
commencement of a public tender offer for all or any portion of the Stock, (ii)
a proposal to merge, consolidate or otherwise combine with another corporation
is submitted to the stockholders of the Company for approval, (iii) a proposal
to liquidate or dissolve the Company is submitted to the stockholders of the
Company for approval, or (iv) the Board approves any transaction or event that
would constitute a change in control of the Company of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of the 1934
Act, the Committee may in its sole discretion declare all outstanding Options
to be fully exercisable, in each case, as of such date as the Committee may, in
its sole discretion, declare, which may be on or before the consummation of
such tender offer or other transaction or event. To the extent that this
provision causes Incentive Stock Options to exceed the dollar limitation set
forth in Section 7.2(d), the excess Options shall be deemed to be Non-Qualified
Stock Options.
8.8. ACCELERATION FOR ANY OTHER REASON. Regardless of whether an event
has occurred as described in Section 8.7 above, the Committee may in its sole
discretion at any time determine that all or a portion of a Participant's
Options shall become fully or partially exercisable, in each case, as of such
date as the Committee may, in its sole discretion, declare. The Committee may
discriminate among Participants and among Options granted to a Participant in
exercising its discretion pursuant to this Section 8.8.
8.9 EFFECT OF ACCELERATION. If an Option is accelerated under Section
8.7, the Committee may, in its sole discretion, provide (i) that the Option
will expire after a designated period of time after such acceleration to the
extent not then exercised, (ii) that the Option will be settled in cash rather
than Stock, (iii) that the Option will be assumed by another party to the
transaction giving rise to the acceleration or otherwise be equitably converted
in connection with such transaction, or (iv) any combination of the foregoing.
The Committee's determination need not be uniform and may be different for
different Participants whether or not such Participants are similarly situated.
8.10. TERMINATION OF EMPLOYMENT. Whether military, government or other
service or other leave of absence shall constitute a termination of employment
shall be determined in each case by the Committee at its discretion, and any
determination by the Committee shall be final and conclusive. A termination of
employment shall not occur in a circumstance in which a Participant transfers
from the Company to one of its Parents or Subsidiaries, transfers from a Parent
or Subsidiary to the Company, or transfers from one Parent or Subsidiary to
another Parent or Subsidiary.
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ARTICLE 9
CHANGES IN CAPITAL STRUCTURE
9.1. GENERAL. In the event a stock dividend is declared upon the
Stock, the shares of Stock then subject to each Option shall be increased
proportionately without any change in the aggregate purchase price therefor. In
the event the Stock shall be changed into or exchanged for a different number
or class of shares of stock or securities of the Company or of another
corporation, whether through reorganization, recapitalization,
reclassification, stock split-up, combination of shares, merger or
consolidation, there shall be substituted for each such share of Stock then
subject to each Option the number and class of shares into which each
outstanding share of Stock shall be so exchanged, all without any change in the
aggregate purchase price for the shares then subject to each Option. Each such
adjustment an Incentive Stock Option under this Article 9 shall be made in such
a manner that such adjustment will not constitute a "modification" as
defined in Section 425 of the Code.
9.2 RIGHTS OR WARRANTS. If any rights or warrants to subscribe for
additional shares of Stock are given pro rata to holders of outstanding shares
of Stock, each Participant shall be entitled to the same rights or warrants on
the same basis as holders of the outstanding shares of Stock with respect to
such portion of the Participant's Options that may be exercised on or prior to
the date of the expiration of such rights or warrants.
ARTICLE 10
AMENDMENT, MODIFICATION AND TERMINATION
10.1. AMENDMENT, MODIFICATION AND TERMINATION. The Board or the
Committee may, at any time and from time to time, amend, modify or terminate
the Plan without stockholder approval; provided, however, that the Board or
Committee may condition any amendment or modification on the approval of
stockholders of the Company if such approval is necessary or deemed advisable
with respect to tax, securities or other applicable laws, policies or
regulations.
10.2 OPTIONS PREVIOUSLY GRANTED. At any time and from time to time,
the Committee may amend, modify or terminate any outstanding Option without
approval of the Participant; provided, however, that such amendment,
modification or termination shall not, without the Participant's consent,
reduce or diminish the value of such Option determined as if the Option had
been exercised on the date of such amendment or termination. No termination,
amendment, or modification of the Plan shall adversely affect any Option
previously granted under the Plan, without the written consent of the
Participant.
ARTICLE 11
GENERAL PROVISIONS
11.1. NO RIGHTS TO OPTIONS. No Participant or employee, officer or
director shall have any claim to be granted any Option under the Plan, and
neither the Company nor the Committee is obligated to treat Participants and
employees, officers or directors uniformly.
11.2. NO STOCKHOLDER RIGHTS. No Option gives the Participant any of
the rights of a stockholder of the Company unless and until shares of Stock are
in fact issued to such person in connection with such Option.
11.3. WITHHOLDING. The Company or any Parent or Subsidiary shall have
the authority and the right to deduct or withhold, or require a Participant to
remit to the Company, an amount sufficient to satisfy federal, state, and local
taxes (including the Participant's FICA obligation) required by law to be
withheld with respect to any taxable event arising as a result of the Plan.
With respect to withholding required upon any taxable event under the Plan, the
Committee may, at the time the Option is granted or thereafter, require that
any such withholding requirement be satisfied, in whole or in part, by
withholding
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<PAGE> 33
shares of Stock having a Fair Market Value on the date of withholding equal to
the amount to be withheld for tax purposes, all in accordance with such
procedures as the Committee establishes.
11.4. NO RIGHT TO EMPLOYMENT OR DIRECTORSHIP. Nothing in the Plan or
any Option Agreement shall interfere with or limit in any way the right of the
Company or any Parent or Subsidiary to terminate any Participant's employment
or status as a director at any time, nor confer upon any Participant any right
to continue as an employee or director of the Company or any Parent or
Subsidiary.
11.5. RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall
be taken into account in determining any benefits under any pension,
retirement, savings, profit sharing, group insurance, welfare or benefit plan
of the Company or any Parent or Subsidiary unless provided otherwise in such
other plan.
11.6. EXPENSES. The expenses of administering the Plan shall be borne
by the Company and its Parents or Subsidiaries.
11.7. TITLES AND HEADINGS. The titles and headings of the Sections in
the Plan are for convenience of reference only, and in the event of any
conflict, the text of the Plan, rather than such titles or headings, shall
control.
11.8. GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.
11.9. FRACTIONAL SHARES. No fractional shares of Stock shall be issued
and the Committee shall determine, in its discretion, whether cash shall be
given in lieu of fractional shares or whether such fractional shares shall be
eliminated by rounding up.
11.10. GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company
to issue Stock upon exercise of an Option or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Company shall be under no obligation to
register under the 1933 Act, or any state securities act, any of the shares of
Stock issued in connection with the Plan. The shares issued in connection with
the Plan may in certain circumstances be exempt from registration under the
1933 Act, and the Company may restrict the transfer of such shares in such
manner as it deems advisable to ensure the availability of any such exemption.
11.11. GOVERNING LAW. To the extent not governed by federal law, the
Plan and all Option Agreements shall be construed in accordance with and
governed by the laws of the State of Delaware.
11.12. ADDITIONAL PROVISIONS. Each Option Agreement may contain such
other terms and conditions as the Committee may determine; provided that such
other terms and conditions are not inconsistent with the provisions of this
Plan.
The foregoing is hereby acknowledged as being the National Data
Corporation 1997 Stock Option Plan as adopted by the Board of Directors of the
Company on August 29, 1997.
NATIONAL DATA CORPORATION
By:
----------------------------
Its:
----------------------------
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<PAGE> 34
APPENDIX
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 23, 1997, 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 August 29, 1997, 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 and 2.
1. ELECTION OF DIRECTORS. On the proposal to elect the following slate of
directors to serve until the 2000 Annual Meeting of Stockholders of the
Company and until their successors are elected and qualified:
Edward L. Barlow Neil Williams
For / / Withhold Authority / /
To withhold authority for any individual nominee(s), write the name of
the nominee(s) in the space provided:
---------------------------------
2. ADOPTION OF THE 1997 STOCK OPTION PLAN. On the proposal to adopt the
Company's 1997 Stock Option Plan:
For / / Against / / Abstain / /
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 AND 2 AND WITH DISCRETIONARY AUTHORITY ON ALL
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY
ADJOURNMENTS THEREOF.
Please sign exactly as your name appears on your stock certificate and
date. Where shares are held jointly, each stockholder should sign. When signing
as executor, administrator, trustee, or guardian, please give full title as
such. If a corporation, please sign in full corporate name by president or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.
Shares Held:
------------------------------
-------------------------------------------
Signature of Stockholder
-------------------------------------------
Signature of Stockholder (If Held Jointly)
Dated: , 1997
-------------------------------
Month Day
THIS PROXY IS SOLICITED ON BEHALF OF NATIONAL DATA CORPORATION'S
BOARD OF DIRECTORS AND MAY BE REVOKED BY THE STOCKHOLDER PRIOR TO ITS
EXERCISE.
