<PAGE>
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:
[_] 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 Section 240.14a-11(c) or Section 240.14a-12
NATIONAL DATA CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
NATIONAL DATA CORPORATION
- --------------------------------------------------------------------------------
(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)(4) 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.
<PAGE>
[_] 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:
-------------------------------------------------------------------------
-2-
<PAGE>
[LOGO OF NATIONAL DATA CORPORATION APPEARS HERE]
NATIONAL DATA CORPORATION
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 22, 1998,
at 11:00 A.M., Atlanta time, for the following purposes:
1. To elect one director in Class III to serve until the annual meeting of
stockholders in 2001, or until her successor is duly elected and
qualified;
2. To vote on a proposal to amend the 1984 Non-employee Director Stock
Option Plan (the "Director Option Plan") to (a) increase the number of
shares that may be issued thereunder from 345,000 to 545,000 shares;
(b) extend the termination date from September 6, 1999 until September
6, 2004; and (c) provide that any option granted under the Plan may be
assigned or transferred by will, the laws of descent and distribution
or pursuant to a qualified domestic relations order or to certain
permitted transferees approved by the Board of Directors or a Committee
of the Board of Directors administering the Director 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 24, 1998 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 31, 1998
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>
NATIONAL DATA CORPORATION
NATIONAL DATA PLAZA
ATLANTA, GEORGIA 30329-2010
August 31, 1998
PROXY STATEMENT
FOR COMMON STOCK
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 22, 1998
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 22, 1998, and at any adjournments thereof
(the "Annual Meeting").
The Annual Meeting will be held for the following purposes: (1) to elect one
director in Class III to serve until the annual meeting of stockholders in 2000,
or until her successor is duly elected and qualified; (2) to vote on a proposal
to amend the 1984 Non-employee Director Stock Option Plan (the "Director Option
Plan") (a) to increase the number of shares that may be issued thereunder from
345,000 to 545,000 shares; (b) extend the termination date from September 6,
1999 until September 6, 2004; and (c) provide that any option granted under the
Plan may be assigned or transferred by will, the laws of descent and
distribution or pursuant to a qualified domestic relations order or to certain
permitted transferees approved by the Board of Directors or a Committee of the
Board administering the Director Option Plan; and (3) to transact such other
business as may properly come before the Annual Meeting or any adjournment
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 31, 1998.
STOCKHOLDERS ENTITLED TO VOTE
Only stockholders of record of the Company at the close of business on
August 24, 1998 (the "Record Date") will be entitled to notice of, and to vote
at, the Annual Meeting. On the Record Date, there were 33,755,897 shares of the
Common Stock issued and outstanding held by approximately 3,655 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.
<PAGE>
Proposal 1, the election of one director in Class III, 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 nominee
or (ii) "withhold authority" to vote for the nominee. Because Proposal 1 will
require the affirmative vote of the holders of a majority of the shares of
Common Stock represented and entitled to vote at the Annual Meeting at which a
quorum is present, an abstention will have the same effect as a vote to
"withhold authority", while a broker non-vote (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 the director.
Proposal 2, a proposal to amend the Director 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" the
proposed amendments, (ii) vote "against" the proposed amendments, or (iii)
abstain from voting on the proposal. 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 and a broker non-vote (which occurs when shares held by
brokers or nominees for beneficial owners are voted on some matters but not on
others) will have the same effect as a vote against the approval of the
amendments.
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 THE DIRECTOR NOMINEE; (2) THE APPROVAL OF THE
---
AMENDMENTS TO THE 1984 NON-EMPLOYEE DIRECTOR 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>
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 III expire with this Annual
Meeting. The terms of office of directors in Class I and Class II expire at the
1999 and 2000 annual meetings of stockholders, respectively. The stockholders
are being asked to vote on the election to Class III of Ms. J. Veronica Biggins.
Mr. Don W. Sands is retiring from the Board effective at this Annual Meeting of
Stockholders and the Board is being reduced to five members effective with his
retirement.
Ms. Biggins, as the Class III director, will be elected to hold office until
the 2001 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
Ms. Biggins, unless authority to vote for the nominee 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 nominee. In
the event that the nominee is unable to serve (which is not anticipated), the
persons designated as proxies will cast votes for such other person as they may
select.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEE FOR ELECTION AS A
DIRECTOR. 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 NOMINEE. 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
NOMINEE.
CERTAIN INFORMATION CONCERNING NOMINEE AND DIRECTORS
The following table sets forth the name of the nominee 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. As discussed above, Mr. Don W. Sands, a
member of the Board since September 1989, is retiring from the Board effective
at this Annual Meeting of Stockholders.
-3-
<PAGE>
NOMINEE FOR DIRECTOR
<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
- ------------ ----------------- ------------------------------------
CLASS III
TERM EXPIRING ANNUAL MEETING 2001
<C> <S> <C>
J. Veronica Biggins October 1995 Director of the Company
(51) 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. and Cameron Ashley, Inc.
</TABLE>
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
- ------------ ----------------- -------------------------------------
CLASS I
TERM EXPIRING ANNUAL MEETING 1999
<C> <S> <C>
Robert A. Yellowlees April 1985 Chairman of the Board (since June 1992), and President,
(59) 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
(71) 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.
</TABLE>
<TABLE>
CLASS II
TERM EXPIRING ANNUAL MEETING 2000
<C> <S> <C>
Edward L. Barlow January 1969 Director of the Company
(63) General Partner, Whitcom Partners (an investment
partnership), New York.
Neil Williams April 1977 Director of the Company
(62) Partner (Managing Partner from 1989-1996), Alston & Bird LLP
(Attorneys and Counsel for the Company), Atlanta; Director
of Printpack, Inc. and Trustee of The Duke Endowment.
</TABLE>
-4-
<PAGE>
OTHER INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
Meetings and Compensation. During the fiscal year ended May 31, 1998, the
-------------------------
Company's Board of Directors held 9 meetings. All directors 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.
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, 1998, each of Messrs. Barlow, Edwards, Sands and
Williams and Ms. Biggins was issued 324 shares of Common Stock based on the fair
market value of the Common Stock on that date of $37.0625 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, 1998, Messrs. Sands, Edwards, Barlow,
and Williams had 9, 9-8/12, 29-8/12, and 21-5/12 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 Director Option Plan. The Director Option
Plan currently provides 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 5,000 shares of Common
Stock for each completed year of service as a director after 1995, up to five
such options. 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
proposed amendments to the Director Option Plan that will be considered at the
Annual Meeting provide for an increase in the number of shares that may be
issued from 345,000 to 545,000, extends the termination date from September 6,
1999 until September 6,
-5-
<PAGE>
2004, and provides that any option granted under the Director Option Plan may be
assigned or transferred by will, the laws of descent and distribution, or
pursuant to a qualified domestic relations order or to certain permitted
transferees approved by the Board of Directors. See "Proposal 2 -- Amendment of
1984 Non-Employee Director Stock Option Plan" for information regarding grants
of stock options under the Director Option Plan during the last fiscal year and
the proposed amendments to the Director Option Plan.
Committees. The Company's Board of Directors has an Audit Committee and a
----------
Compensation Committee. The Company does not have a nominating committee. The
full Board of Directors performs the function which would be performed by a
nominating committee. Certain information regarding the functions of the
Board's Committees and their present membership is provided below.
Audit Committee. The Company's Board of Directors has an Audit Committee
---------------
composed of Messrs. Barlow (Chairman), Sands and Williams. The Audit Committee
annually reviews and recommends to the Board the firm to be engaged as
independent auditors for the next fiscal year, reviews with the independent
auditors the plan and results of the auditing engagement, reviews the scope and
results of the Company's procedures for internal auditing, and inquires as to
the adequacy of the Company's internal accounting controls. During the fiscal
year ended May 31, 1998, the Audit Committee held 2 meetings, each of which was
separate from regular Board meetings.
Compensation Committee Interlocks and Insider Participation. The Board of
-----------------------------------------------------------
Directors also has a Compensation Committee composed of Messrs. Sands
(Chairman), Edwards and 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") 1987 Stock Option Plan (the "1987 Plan")
and the 1997 Stock Option Plan. During the last fiscal year, the Compensation
Committee held 7 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, 1998.
Effective upon Mr. Sands' retirement at this Annual Meeting, Mr. Barlow will
join the Compensation Committee.
Certain Transactions. Mr. Williams is a partner of Alston & Bird LLP.
--------------------
Alston & Bird LLP rendered legal services to the Company during the last fiscal
year and is expected to continue to render legal services to the Company in the
future.
-6-
<PAGE>
COMMON STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information as of August 12, 1998, with
respect to the beneficial ownership of Common Stock by the nominees to the
Board, directors of the Company, by each of the persons named in the Summary
Compensation Table, and by the 15 persons, as a group, who were directors and/or
executive officers of the Company on August 12, 1998.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME BENEFICIAL OWNERSHIP (1) CLASS (1)
- ---- ------------------------ ----------
<S> <C> <C>
Edward L. Barlow 114,995(2) *
Neil Williams 61,651(3) *
Robert A. Yellowlees 931,553(4) 2.76%
James B. Edwards 40,445(5) *
Don W. Sands 52,245(6) *
J. Veronica Biggins 2,619(7) *
Steven L. Arnold - *
Kevin C. Shea 81,971(8) *
Thomas Dunn 31,151(9) *
David K. Hunt 10,110 *
All Directors and Executive Officers
(15 persons) as a Group 1,383,308(10) 4.10%
</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 31,000 shares of Common Stock of which Mr. Barlow has
the right to acquire beneficial ownership.
(3) This amount includes 38,500 shares of Common Stock of which Mr. Williams
has the right to acquire beneficial ownership.
(4) This amount includes 131,552 shares of Common Stock of the Company owned by
Mr. Yellowlees, 729,285 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, 22,877
shares of restricted stock over which he currently has sole voting power
only and 7,839 shares held by Mr. Yellowlees' wife as to which he disclaims
all beneficial ownership.
(5) This amount includes 38,500 shares of Common Stock of which Mr. Edwards has
the right to acquire beneficial ownership.
(6) This amount includes 38,500 shares of Common Stock of which Mr. Sands has
the right to acquire beneficial ownership.
(7) This amount includes 1,000 shares of Common Stock of which Ms. Biggins has
the right to acquire beneficial ownership.
(8) This amount includes 36,299 shares of Common Stock of which Mr. Shea has
the right to acquire beneficial ownership and 6,070 shares of restricted
stock over which he currently has sole voting power only.
(9) This amount includes 26,720 shares of Common Stock of which Mr. Dunn has
the right to acquire beneficial ownership and 814 shares of restricted
stock over which he currently has sole voting power only.
(10) This amount includes 954,834 shares of Common Stock of which the directors
and executive officers, as a group, have the right to acquire beneficial
ownership and 36,761 shares of restricted stock over which the beneficial
owners have sole voting power only.
-7-
<PAGE>
COMMON STOCK OWNERSHIP BY CERTAIN OTHER PERSONS
The following table sets forth information as of the date indicated with
respect to the only persons who are known by the Company to be the beneficial
owners of more than 5% of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL OWNER DATE OF BENEFICIAL OWNERSHIP CLASS
- ------------------- ---- ----------------------- ----------
<S> <C> <C> <C>
T. Rowe Price Associates, Inc.(1) July 10, 1998 3,394,400(2) 10.1%
100 E. Pratt Street
Baltimore, MD 21202
Wagner Asset Management, Ltd. February 5, 1998 1,714,900 5.1%
and Wagner Asset Management L.P.(3)
227 West Monroe Street
Chicago, Illinois 60606
AMVESCAP PLC(4) February 9, 1998 2,239,501 6.6%
11 Devonshire Square
London EC2M 4YR
England
</TABLE>
____________________
(1) This information is contained in a Schedule 13G dated July 10, 1998 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 601,101 shares and sole dispositive power with
respect to 3,394,400.
(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 5, 1998
filed by Wagner Asset Management Ltd. ("WAM") and Wagner Asset Management
L.P. ("WAM L.P.") with the Commission, a copy of which was received by the
Company. Such Schedule 13G states that WAM and WAM L.P. have shared voting
and dispositive power with respect to all shares.
(4) This information is contained in a Schedule 13G dated February 9, 1998
filed by AMVESCAP PLC on behalf of itself and certain subsidiaries
("AMVESCAP") with the Commission, a copy of which was received by the
Company. Such Schedule 13G states that AMVESCAP has shared voting and
dispositive power with respect to all shares.
-8-
<PAGE>
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:
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.
LONG TERM AND AT-RISK FOCUS. A significant percentage of total
Compensation for key employees 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.
COMPETITIVENESS. 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 by key employees in the acquisition and
holding of Common Stock. The number of stock options
-9-
<PAGE>
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. The number of options required to
achieve target grant values is based on the prevailing fair market
value of the Common Stock.
RESTRICTED STOCK. Restricted stock grants are designed to be
granted on a selective basis to key employees to further focus them on
the longer term performance of the Company. Grants of restricted
shares are subject to forfeiture if a grantee, among other conditions,
fails to perform or leaves the Company prior to expiration of the
restricted period. Restricted periods are generally a minimum of two
to three years.
A bonus deferral program was approved by the Board of Directors effective
in fiscal year 1996 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 two other executive officers made a
deferral election for fiscal year 1998 under this plan. Since participating
executives are deferring earned cash in the form of stock at risk of forfeiture
over three years, the value of restricted stock granted 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 5 times annual salary amounts. Executives are encouraged to achieve
these guidelines by building stock ownership over a period of years. The plan
began in fiscal year 1995 and was amended in 1998 to increase individual target
amounts of Company stock ownership. As of May 31, 1998, all participating
senior executives were at stock ownership levels in excess of plan targets.
Chief Executive Officer's Compensation
--------------------------------------
Mr. Yellowlees' fiscal year 1998 compensation derived primarily from
commitments under Mr. Yellowlees' employment agreement (see "Employment
Agreements -- Robert A. Yellowlees" below) entered into as of June 1, 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 1998 incentive
bonus payment.
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 1998
(excluding non-recurring charges) were revenue, up 24%; EBIT, up 34%; and
operating margin, 14.5%. The balance of his fiscal year 1998 bonus was
determined by other factors including earnings per share, up 20%, the successful
execution of merger and acquisition strategies and strengthening the management
team.
Mr. Yellowlees' base compensation was not changed in fiscal year 1998.
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 and for his
-10-
<PAGE>
compensation plan to be consistent with the Company's business, strategy and
operating results. The Compensation Committee also seeks to have a large
percentage of Mr. Yellowlees' 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 options fully vest in 2001, 2002 and 2003, respectively. 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
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<PAGE>
COMPENSATION AND OTHER BENEFITS
The following table presents certain summary information concerning
compensation paid or accrued by the Company for services rendered in all
capacities during the fiscal years ended May 31, 1998 ("1998 fiscal year"), 1997
("1997 fiscal year") and 1996 ("1996 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 $100,000; and (iii) Richard
S. Cohan, who resigned as an officer of the Company on May 22,1998 (each person
listed in (i), (ii), and (iii) are hereinafter referred to as the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
----------------------------- -------------------------------
Securities
Underlying
Name and Fiscal Restricted Stock Options All Other
Principal Position Year Salary ($) Bonus ($) Award(s) ($)(1) (#)(2) Compensation ($)(3)
- ------------------ ------ --------- --------- ---------------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Yellowlees 1998 539,290 112,500 804,500 --- 91,287
Chairman and Chief 1997 540,786 75,000 768,769 --- 59,250
Executive Officer, 1996 513,258 515,000 376,383 --- 68,449
President and Chief
Operating Officer
David K. Hunt(5) 1998 424,996 115,000 --- (4) ---
President and Chief 1997 176,537 95,000 --- (4) 100,000
Executive Officer, (partial year)
Global Payment 1996 --- --- --- --- ---
Systems LLC
Thomas M. Dunn 1998 180,000 120,000 40,505 20,000 11,786
General Manager, 1997 160,375 45,000 14,150 7,600 6,186
Payment Systems 1996 132,461 50,000 --- 6,000 ---
Steven L. Arnold(6) 1998 154,615 45,000 --- --- 12,128
General Manager, 1997 31,731 12,500 --- 7,500 ---
Health Information (partial year)
Services 1996 --- --- --- --- ---
Kevin C. Shea 1998 225,000 40,000 43,884 24,000 8,615
Executive Vice 1997 196,542 32,750 234,318 12,000 ---
President and Chief 1996 171,346 95,000 37,750 16,700 2,991
Financial Officer
Richard S. Cohan 1998 225,000 45,000 11,475 27,000 5,580
Former General 1997 190,690 56,750 225,343 12,000 ---
Manager, 1996 175,961 85,000 --- 16,700 602
Health Information
Services
</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, 1998,
the shares listed in the table were the only outstanding grants of
restricted shares to the Named Executive Officers. The restrictions on
54,501, 54,498, 54,498, 39,000, 6,000, 3,244 and 22,500 shares awarded to
Mr. Yellowlees expired on June 1, 1993, June 1, 1994, June 1, 1995, May 17,
1995, June 1, 1997, July 11, 1997 and July 20, 1997, respectively. The
restrictions on 4,500
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<PAGE>
shares awarded to each of Messrs. Cohan and Shea expired on June 28, 1995.
The restrictions on 333 and 3,750 shares awarded to Mr. Shea expired on
July 11, 1997 and July 20, 1997, respectively. The restrictions on 1,500
and 133 shares awarded to Mr. Dunn expired on June 28, 1995 and July 11,
1997, respectively. The value of the restricted stock held by the Named
Executive Officers at May 31, 1998 was $857,887, $30,525 and $227,625 for
Messrs. Yellowlees, Dunn and Shea, respectively. The numbers of shares of
restricted stock held by Messrs. Yellowlees, Dunn and Shea at May 31, 1997
were 22,877, 814 and 6,070, respectively. As of May 31, 1998, Mr. Hunt did
not hold any restricted stock.
(2) All option awards granted to the Named Executive Officers were made under
the 1987 Plan.
(3) For the 1998 fiscal year, includes amounts representing (i) Company
contributions to the Company's Employee Savings Plan on behalf of Mr.
Yellowlees ($4,500), Mr. Dunn ($4,318) and Mr. Shea ($807), (ii) insurance
premiums of $56,375 paid by the Company for life insurance for the benefit
of Mr. Yellowlees and (iii) financial planning expenses paid by the Company
for Mr. Yellowlees ($23,212), Mr. Dunn ($850), Mr. Arnold ($500), Mr. Shea
($2,000) and Mr. Cohan ($750).
(4) Mr. Hunt was granted options to acquire 55,000 units and 22,000 units in
Global Payment Systems LLC, a non-public subsidiary of the Company, in
fiscal years 1998 and 1997, respectively.
(5) The Company hired Mr. Hunt in January 1997.
(6) The Company hired Mr. Arnold in March 1997.
Option Grants. The following table sets forth information on options granted
-------------
to the Named Executive Officers in the 1997 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------
Number of
Securities % of Total
Underlying Options
Options Granted to Exercise
Granted Employees in or Base Expiration Grant Date
Name (#)(1)(2) Fiscal Year Price($/Sh) Date Present Value (3)(4)
---- --------- ------------ ----------- ---------- --------------------
<S> <C> <C> <C> <C> <C>
Robert A. Yellowlees --- --- --- --- ---
David K. Hunt(5) --- --- --- --- ---
Thomas M. Dunn 20,000 5.3% 37.5625 August 15, 2007 $368,353
Kevin C. Shea 24,000 6.4% 37.5625 August 15, 2007 $442,023
Steven L. Arnold --- --- --- --- ---
Richard S. Cohan 27,000 7.2% 37.5625 August 15, 2007 $497,276(6)
</TABLE>
_____________
(1) The total number of shares covered by options granted to employees under
all plans in the 1998 fiscal year was 376,265.
(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.
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<PAGE>
(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 40%; (ii) a risk-free rate of return of 6.3%;
(iii) a current dividend yield of 0.8%; and (iv) a expected life of grant
of 7 years.
(5) In the last fiscal year, Mr. Hunt was granted options to acquire 22,000
units of Global Payment Systems LLC, a non-public subsidiary of the
Company, at an exercise price of $23.17 per unit and with an expiration
date of August 15, 2007. This number of options represented 18.8% of the
total options to acquire units of Global Payment Systems LLC granted to
employees of the Company in the last fiscal year. Since the units are not
publicly traded, no valuation was made using the Black-Scholes option
pricing model. As an alternative method of valuing the units granted to
Mr. Hunt, 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% - $320,573,
10% - $812,394.
(6) Since Mr. Cohan resigned in May, 1998, the options granted in fiscal year
1998 expired 90 days after his resignation without vesting.
Option Exercises and Fiscal Year-End Values. The following table sets
-------------------------------------------
forth information concerning each exercise of options during the 1998 fiscal
year and the number and value of unexercised options held by the Named Executive
Officers as of May 31, 1998.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options
Shares Value at Fiscal Year-End (#) at Fiscal Year-End ($)
Acquired on Realized ------------------------------ ---------------------------
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Yellowlees 20,715 591,927 691,785 435,000 19,311,804 7,429,727
David K. Hunt(1) --- --- --- --- --- ---
Thomas M. Dunn --- --- 21,825 36,525 623,598 226,305
Steven L. Arnold --- --- --- 7,500 --- ---
Kevin C. Shea 27,595 993,022 24,099 61,735 630,882 609,324
Richard S. Cohan --- --- 34,090 64,735 927,898 610,449
</TABLE>
_____________
(1) Mr. Hunt holds options to acquire 77,000 units in Global Payment Systems
LLC, a non-public subsidiary of the Company, none of which are currently
exercisable. Based upon an annual determination by the board of directors
of Global Payment Systems LLC, these options had no value as of May 31,
1998.
Retirement Plan and Supplemental Executive 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
-14-
<PAGE>
its effective date. Under current law the benefit for an employee retiring in
the 1997 plan year at age 65 cannot exceed $120,000 per year under the
Retirement Plan. For plan years beginning in 1997, federal law limits the amount
of compensation taken into account under the Retirement Plan to $160,000 per
year.
Effective June 1, 1997 the Company adopted a Supplemental Executive
Retirement Plan ("SERP"). Certain key executives are eligible to participate in
this plan. As a part of each participant's total compensation package, benefits
payable under the SERP are based upon each participant's highest three
consecutive years of earnings during the participant's last ten years of
employment with the Company. The term earnings for purposes of the SERP 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. Retirement benefits under the SERP are reduced by a portion of the
participant's annual social security benefits and any retirement benefits under
the Company's tax-qualified or non-qualified defined benefit plans.
Participants may begin to receive payments under the SERP upon retirement after
either (i) 5 years service and attaining age 60 or (ii) 10 years of service and
attaining age 55, with a .416667% reduction for each month before age 60. In
the event of a change in control of the Company, participants will be credited
with an additional 3 years of service (not to exceed a total of 35 years
service) and vested 100% in the SERP benefits. Benefits earned under the SERP
are fully vested after five years of service. All of the Named Executive
Officers are participants in the SERP other than Messrs. Arnold and Cohan. Mr.
Cohan participates in the Retirement Plan.
Since substantially all of the Named Executive Officers participate in the
SERP, the following table shows estimated annual retirement benefits payable to
participants in the Retirement Plan and the SERP on a straight life annuity
basis upon retirement in specified years of continuous service and remuneration
classes.
ESTIMATED ANNUAL RETIREMENT BENEFITS
YEARS OF CONTINUOUS SERVICE (1)
<TABLE>
<CAPTION>
THREE-YEAR
AVERAGE
EARNINGS 10 15 20 25 30 35
- ---------- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
$200,000 48,000 72,000 83,000 94,000 105,000 116,000
250,000 60,000 90,000 103,750 117,500 131,250 145,000
300,000 72,000 108,000 124,500 141,000 157,500 174,000
350,000 84,000 126,000 145,250 164,500 183,750 203,000
400,000 96,000 144,000 166,000 188,000 210,000 232,000
450,000 108,000 162,000 186,750 211,500 236,250 261,000
500,000 120,000 180,000 207,500 235,000 262,500 290,000
550,000 132,000 198,000 228,250 258,500 288,750 319,000
600,000 144,000 216,000 249,000 282,000 315,000 348,000
650,000 156,000 234,000 269,750 305,500 341,250 377,000
700,000 168,000 252,000 290,500 329,000 367,500 406,000
750,000 180,000 270,000 311,250 352,500 393,750 435,000
800,000 192,000 288,000 332,000 376,000 420,000 464,000
850,000 204,000 306,000 352,750 399,500 446,250 493,000
900,000 216,000 324,000 373,500 423,000 472,500 522,000
950,000 228,000 342,000 394,250 446,500 498,750 551,000
</TABLE>
_______________
(1) The average annual earnings for the highest three years over the last 10-
year period and the eligible years of credited service as of May 31, 1998 for
each of the Named Executive Officers participating in the SERP was as
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<PAGE>
follows: Mr. Yellowlees (13-2/12) $939,342; Mr. Hunt (1-5/12 years) $496,727;
Mr. Dunn (9-10/12 years) $185,054 and Mr. Shea (11-3/12 years) $232,718. 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, 1998 for Mr. Cohan was
$217,855 and 18 years, respectively. Assuming retirement at age 65 and his
current compensation, Mr. Cohan, who resigned in May, 1998, would have 18 years
of service and would be eligible for a projected benefit of approximately
$62,000 under the Retirement Plan. The amounts shown in the columns "Salary" and
"Bonus" in the Summary Compensation Table above are substantially equal to the
compensation of the individuals named in such table for purposes of the SERP and
the Retirement Plan. Federal regulations, however, cap the total compensation
that may be considered in providing benefits under the Retirement Plan.
Employment Agreements.
Robert A. Yellowlees. During fiscal year 1998, Mr. Yellowlees was employed
--------------------
pursuant to an agreement which became effective as of June 1, 1997 (the
"Agreement"). The Agreement provides for Mr. Yellowlees' continued employment
as chairman and chief executive officer and president and chief operating
officer of the Company for a term expiring May 31, 2000, unless extended by
mutual agreement. The Agreement also provides that during its term the Company
will use its best efforts to cause Mr. Yellowlees to continue to be nominated
and elected as a director of the Company.
The Agreement provides for a minimum annual base salary of $540,000,
subject to yearly review, and additional annual bonus opportunity 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 opportunity
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 may be
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 Agreement prior to expiration of its term
(including any renewals) (i) as a result of Mr. Yellowlees' physical or mental
incapacity, (ii) by the Company other than as a result of specified misconduct
by Mr. Yellowlees, or (iii) by Mr. Yellowlees following a significant change in
his employment duties or conditions within three years after a change in control
of the Company (as defined in the Agreement), (a) the Company will be required
to pay Mr. Yellowlees a severance benefit equal to three times the greater of
(A) his average annual compensation during the preceding three years or (B) his
current year compensation plus a bonus amount equal to 75% of his current year
salary, (b) 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 Agreement, Mr. Yellowlees'
average annual compensation is currently $928,139. Also, upon termination of the
Agreement by the Company other than as a result of specified misconduct by Mr.
Yellowlees or by Mr. Yellowlees following a significant change in his employment
duties or conditions within three years after a change in control of the
Company, the Company is required to maintain Mr. Yellowlees' participation in
existing employee benefit plans until the earlier of three years after his
termination of employment or commencement of his full-time employment with a new
employer. The Agreement also provides that upon its termination as a result of
Mr. Yellowlees' death, all restricted stock awarded to him and all stock options
granted to him will be fully vested.
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
-16-
<PAGE>
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, 1998 for Mr. Shea was $211,857.
-17-
<PAGE>
STOCKHOLDER RETURN ANALYSIS
The following line-graph presentation compares cumulative stockholder
returns of the Company with Standard & Poor's Computer Software and Services
Index and Standard and Poor's 500 Stock Index for the five-year period beginning
on May 31, 1993 (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).
CUMULATIVE TOTAL RETURN
----------------------------------
5/93 5/94 5/95 5/96 5/97 5/98
NATIONAL DATA CORPORATION 100 116 221 406 475 410
S & P 500 100 104 125 161 208 272
S & P COMPUTERS (SOFTWARE & SERVICES) 100 120 169 236 394 512
-18-
<PAGE>
2. AMENDMENT TO THE 1984 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Company's Director Option Plan was approved by the stockholders of the
Company at the 1984 annual meeting of stockholders.
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. During the fiscal year ended May 31, 1998, options were granted under
the Director Option Plan to Messrs. Barlow, Edwards, Sands and Williams and Ms.
Biggins for 5,000 shares each of Common Stock at an exercise price per share of
$36.9375.
On July 15, 1998 the Board of Directors approved several amendments to the
Director Option Plan (the "Director Option Plan Amendments") and directed that
the amendments be submitted to the stockholders for approval at the Annual
Meeting. It is anticipated that management stockholders of the Company will
grant authority to vote for approval of the Director Option Plan Amendments.
The Director Option Plan currently provides that a maximum of 345,000
shares of Common Stock shall be reserved and made available for award thereunder
and that the Director Option Plan shall terminate on September 6, 1999. Of the
345,000 shares currently authorized, all shares have been awarded to directors
as of August 1, 1998. The Director Option Plan Amendments would make an
additional 200,000 shares available for award under the Director Option Plan by
increasing the maximum number of shares of Common Stock as to which awards may
be granted under the Director Option Plan (except by operation of the adjustment
provisions of the 1984 Plan) from 345,000 to 545,000 shares, and extend the
termination date of the Director Option Plan from September 6, 1999 until
September 6, 2004. The Director Option Plan Amendments would provide a
sufficient supply of shares so that there would be sufficient shares available
to satisfy the grants currently provided for in the Director Option Plan and for
additional grants in the future. Based on current trends and usage, it is
estimated that the additional shares, if approved, would meet the Company's
needs for an additional 8 years. The extension of the termination date of the
Director Option Plan would allow for future grants beyond 1999, including the
grants currently provided for in the Director Option Plan.
The Director Option Plan currently provides that no option shall be
assignable or transferable by the grantee of the option except by will or by the
laws of descent and distribution and that all options may only be exercisable by
the grantee. The Director Option Plan Amendments would amend the Director
Option Plan to provide that the options would be assignable or transferable by
the grantee by will, the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined in Title I of the Employee
Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 and
to any of the following permitted transferees, upon such reasonable terms and
conditions as the Board of Directors or a committee of the Board administering
the Director Option Plan may establish: (a) one or more of the following family
members of the grantee: any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law,
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<PAGE>
including adoptive relations, (b) a trust, partnership or other entity
established and existing for the sole benefit of, or under the sole control of,
one or more of the above family members of the grantee, or (c) any
other transferee specifically approved by the Board of Directors or a committee
of the Board administering the Director Option Plan after taking into account
any state or federal tax, securities or other laws applicable to transferable
options.
The purpose of this amendment is to provide option holders greater
flexibility in estate and other personal financial planning. This amendment is
also consistent with the changes to the rules and regulations under Section
16(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and the
proposed changes to Form S-8 under the Securities Act of 1933, as amended.
ADDITIONAL INFORMATION
The closing price of the Common Stock, as reported by the New York Stock
Exchange on August 24, 1998, was $36.0625.
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
AMENDMENTS TO 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 AMENDMENTS TO 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 AMENDMENTS TO THE PLAN.
AUDITORS
Arthur Andersen LLP served as the Company's auditors for the five fiscal
years ended May 31, 1998, and that firm of independent public accountants is
serving as auditors for the Company for the current fiscal year which began June
1, 1998. 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.
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<PAGE>
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
1999 Annual Meeting of Stockholders of the Company must be received by the
Company at its principal executive offices on or before May 1, 1999, in order to
be included in the Company's proxy statement and form of proxy relating to the
1999 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 1998 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>
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 22, 1998, 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 31, 1998,
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 director to
serve until the 2000 Annual Meeting of Stockholders of the Company and until
her successor is elected and qualified:
J. Veronica Biggins
For [_] Withhold Authority [_]
2. AMENDMENT TO THE 1984 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN. On the
proposal to amend the Company's 1984 Non-Employee Director Stock Option Plan
as described in the Proxy Statement.
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.
<PAGE>
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: , 1998
------------------------
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.
