<PAGE> 1
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 RESEARCH 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)(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.
[ ] 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 RESEARCH CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 28, 1998
To the Shareholders of
National Research Corporation:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of National
Research Corporation will be held on Tuesday, April 28, 1998, at 11:00 A.M.,
local time, at The Cornhusker Hotel, 333 South 13th Street, Lincoln, Nebraska
68508, for the following purposes:
1. To elect one director to hold office until the 2001 annual meeting
of shareholders and until his successor is duly elected and qualified.
2. To consider and act upon such other business as may properly come
before the meeting or any adjournment or postponement thereof.
The close of business on March 10, 1998 has been fixed as the record date
for the determination of shareholders entitled to notice of, and to vote at, the
meeting and any adjournment or postponement thereof.
A proxy for the meeting and a proxy statement are enclosed herewith.
By Order of the Board of Directors
NATIONAL RESEARCH CORPORATION
Patrick E. Beans
Secretary
Lincoln, Nebraska
March 31, 1998
YOUR VOTE IS IMPORTANT NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE. TO
ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE DATE THE ENCLOSED PROXY, WHICH
IS SOLICITED BY THE BOARD OF DIRECTORS, SIGN EXACTLY AS YOUR NAME APPEARS
THEREON AND RETURN IMMEDIATELY.
<PAGE> 3
NATIONAL RESEARCH CORPORATION
1033 "O" STREET
LINCOLN, NEBRASKA 68508
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 28, 1998
This proxy statement is being furnished to shareholders by the Board of
Directors (the "Board") of National Research Corporation (the "Company")
beginning on or about March 31, 1998 in connection with a solicitation of
proxies by the Board for use at the annual meeting of shareholders to be held on
Tuesday, April 28, 1998, at 11:00 A.M., local time, at The Cornhusker Hotel, 333
South 13th Street, Lincoln, Nebraska 68508 and all adjournments or postponements
thereof (the "Annual Meeting") for the purposes set forth in the attached Notice
of Annual Meeting of Shareholders.
Execution of a proxy given in response to this solicitation will not affect
a shareholder's right to attend the Annual Meeting and to vote in person.
Presence at the Annual Meeting of a shareholder who has signed a proxy does not
in itself revoke a proxy. Any shareholder giving a proxy may revoke it at any
time before it is exercised by giving notice thereof to the Company in writing
or in open meeting.
A proxy, in the enclosed form, which is properly executed, duly returned to
the Company and not revoked will be voted in accordance with the instructions
contained therein. The shares represented by executed but unmarked proxies will
be voted FOR the one person nominated for election as a director referred to
herein and on such other business or matters which may properly come before the
Annual Meeting in accordance with the best judgment of the persons named as
proxies in the enclosed form of proxy. Other than the election of directors, the
Board has no knowledge of any matters to be presented for action by the
shareholders at the Annual Meeting.
Only holders of record of the Company's common stock, $.001 par value per
share (the "Common Stock"), at the close of business on March 10, 1998 are
entitled to vote at the Annual Meeting. On that date, the Company had
outstanding and entitled to vote 7,305,000 shares of Common Stock, each of which
is entitled to one vote per share.
ELECTION OF DIRECTORS
The Company's By-Laws provide that the directors shall be divided into
three classes, with staggered terms of three years each. At the Annual Meeting,
the shareholders will elect one director to hold office until the 2001 annual
meeting of shareholders and until his successor is duly elected and qualified.
Unless shareholders otherwise specify, the shares represented by the proxies
received will be voted in favor of the election as a director of the one person
named as a nominee herein. The Board has no reason to believe that the listed
nominee will be unable or unwilling to serve as a director if elected. However,
in the event that the nominee should be unable to serve or for good cause will
not serve, the shares represented by proxies received will be voted for another
nominee selected by the Board. The director will be elected by a plurality of
the votes cast at the Annual Meeting (assuming a quorum is present).
Consequently, any shares not voted at the Annual Meeting, whether due to
abstentions, broker non-votes or otherwise, will have no impact on the election
of directors. Votes will be tabulated by inspectors of election appointed by the
Board.
<PAGE> 4
The following sets forth certain information, as of March 10, 1998, about
the Board's nominee for election at the Annual Meeting and each director of the
Company whose term will continue after the Annual Meeting.
NOMINEE FOR ELECTION AT THE ANNUAL MEETING
Term expiring at the 2001 Annual Meeting
PATRICK E. BEANS, 40, has served as Vice President, Treasurer and Chief
Financial Officer of the Company since August 1997, as a director since October
1997 and as the principal financial officer since he joined the Company in
August 1994. From June 1993 until joining the Company, Mr. Beans was the finance
director for the Central Interstate Low-Level Radioactive Waste Commission, a
five-state compact developing a low-level radioactive waste disposal plan. From
1979 to 1988 and from June 1992 to June 1993, he practiced as a certified public
accountant.
THE BOARD RECOMMENDS THE FOREGOING NOMINEE FOR ELECTION AS A DIRECTOR AND URGES
EACH SHAREHOLDER TO VOTE "FOR" SUCH NOMINEE. SHARES OF COMMON STOCK REPRESENTED
BY EXECUTED BUT UNMARKED PROXIES WILL BE VOTED "FOR" SUCH NOMINEE.
DIRECTORS CONTINUING IN OFFICE
Term expiring at the 1999 Annual Meeting
PAUL C. SCHORR, III, 61, has served as a director of the Company since
February 1998. Mr. Schorr has been the President and Chief Executive Officer of
ComCor Holding Inc., an electrical contractor specializing in construction
consulting services, since 1987. Mr. Schorr is a director of Aliant
Communications Inc., Austins Steaks & Saloon, Inc. and Ameritas Life Insurance
Corp.
Terms expiring at the 2000 Annual Meeting
MICHAEL D. HAYS, 43, has served as President and Chief Executive Officer
and as a director since he founded the Company in 1981. Prior thereto, Mr. Hays
served for seven years as a Vice President and a director of SRI Research
Center, Inc. (n/k/a the Gallup Organization).
JOHN N. NUNNELLY, 45, has served as a director of the Company since
December 1997. Mr. Nunnelly has been the Senior Vice President and General
Manager for both the Amherst Product Group and Managed Care Group of HBO &
Company, a leader in the healthcare information industry, since 1988, and has
also served HBO & Company in various other positions such as Regional Vice
President, Service and Sales, Vice President of Research and Development, Vice
President of Business Development and most recently, National Vice President of
Sales.
2
<PAGE> 5
BOARD OF DIRECTORS
GENERAL
The Board has standing Audit and Compensation Committees. The Audit
Committee is responsible for recommending to the Board the appointment of
independent auditors, reviewing and approving the scope of the annual audit
activities of the auditors, approving the audit fee payable to the auditors and
reviewing audit results. John N. Nunnelly (Chairman) and Paul C. Schorr, III are
members of the Audit Committee. The Audit Committee held no meetings in 1997.
The Compensation Committee reviews and recommends to the Board the
compensation structure for the Company's directors, officers and other
managerial personnel, including salary rates, participation in incentive
compensation and benefit plans, fringe benefits, non-cash perquisites and other
forms of compensation, and administers the National Research Corporation 1997
Equity Incentive Plan (the "Equity Incentive Plan") and the National Research
Corporation Director Stock Plan (the "Director Plan"). Paul C. Schorr, III
(Chairman) and John N. Nunnelly are members of the Compensation Committee. The
Compensation Committee held no meetings in 1997.
The Board has no standing nominating committee. The Board selects the
director nominees to stand for election at the Company's annual meetings of
shareholders and to fill vacancies occurring on the Board. The Board will
consider nominees recommended by shareholders, but has no established procedures
which shareholders must follow to make a recommendation. The Company's By-Laws
also provide for shareholder nominations of candidates for election as
directors. These provisions require such nominations to be made pursuant to
timely notice (as specified in the By-Laws) in writing to the Secretary of the
Company. The shareholder's notice must contain information relating to the
nominee which is required to be disclosed by the Company's By-Laws and the
Securities Exchange Act of 1934.
The Board held three meetings in 1997. Each director attended all of the
meetings of the Board and all of the meetings held by all committees of the
Board on which such director served during the year.
DIRECTOR COMPENSATION
Directors who are executive officers of the Company receive no compensation
for service as members of either the Board or committees thereof. Directors who
are not executive officers of the Company receive an annual retainer of $10,000
and a fee of $500 for each committee meeting attended. Additionally, directors
are reimbursed for out-of-pocket expenses associated with attending meetings of
the Board and committees thereof.
Pursuant to the Director Plan, each director who is not an employee of the
Company will receive an annual grant of an option to purchase 1,000 shares of
Common Stock on the date of each annual meeting of shareholders. The options
will have an exercise price equal to the fair market value of the Common Stock
on the date of grant and will vest one year after the grant date.
3
<PAGE> 6
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of March 10, 1998 by: (i) each director and
nominee; (ii) each of the executive officers named in the Summary Compensation
Table set forth below; (iii) all of the directors, nominees and executive
officers (including the executive officers named in the Summary Compensation
Table) as a group; and (iv) each person or other entity known by the Company to
own beneficially more than 5% of the Common Stock. Except as otherwise indicated
in the footnotes, each of the holders listed below has sole voting and
investment power over the shares beneficially owned.
<TABLE>
<CAPTION>
SHARES OF PERCENT OF
COMMON STOCK COMMON STOCK
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED
------------------------ ------------------ ------------------
<S> <C> <C>
Michael D. Hays(1).......................................... 4,847,910 66.4%
Jona S. Raasch.............................................. 66,090 *
Patrick E. Beans............................................ 28,200(2) *
Paul C. Schorr, III......................................... 2,000(3) *
Sharon Flaherty............................................. 0 *
John N. Nunnelly............................................ 0 *
All directors, nominees and executive officers as a group (6
persons).................................................. 4,944,200 67.7%
Geocapital, LLC(4).......................................... 557,000 7.6%
</TABLE>
- -------------------------
* Denotes less than 1%.
(1) The address of Michael D. Hays is 1033 "O" Street, Lincoln, Nebraska 68508.
(2) Includes 200 shares held by Mr. Beans as custodian for his minor children.
(3) Includes 1,000 shares owned by The Schorr Family Company, Inc., which Mr.
Schorr manages, and 1,000 shares owned by Mr. Schorr's wife.
(4) The information is based on a report on Schedule 13G, dated February 13,
1998, filed by Geocapital, LLC ("Geocapital") with the Securities and
Exchange Commission. Geocapital reported sole investment power but no voting
power with respect to these shares. The address of Geocapital is 767 Fifth
Avenue, New York, New York 10153-4590.
4
<PAGE> 7
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION INFORMATION
The following table sets forth certain information concerning the
compensation earned in each of the last two fiscal years by the Company's Chief
Executive Officer and each of the Company's four other most highly compensated
executive officers whose total cash compensation exceeded $100,000 in the fiscal
year ended December 31, 1997. The persons named in the table are sometimes
referred to herein as the "named executive officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------- -------------------------
AWARDS PAYOUTS
---------- ------------
SECURITIES LONG-TERM
UNDERLYING INCENTIVE
NAME AND OTHER ANNUAL STOCK COMPENSATION ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) OPTIONS(#) PAYOUTS($) COMPENSATION($)
------------------ ---- --------- -------- ------------------ ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael D. Hays 1997 140,000 70,000 - - - 1,523(2)
President and Chief 1996 140,000 70,000 - - - 1,523
Executive Officer
Jona S. Raasch 1997 72,472 954,737(3) - - - 906(4)
Vice President and Chief 1996 72,472 117,290 - - - 1,167
Operations Officer
Patrick E. Beans 1997 72,472 954,737(3) - - - 906(4)
Vice President, Treasurer 1996 72,472 117,290 - - - 1,167
and Chief Financial Officer
Sharon Flaherty 1997 136,230 142,284 63,932 6,666 - 2,713(6)
Vice President-Sales, 1996 5,833 - 2,443 - - -
Marketing and Client
Services(5)
</TABLE>
- -------------------------
(1) Certain personal benefits provided by the Company to the named executive
officers are not included in the table. The aggregate amount of such
personal benefits for each named executive officer in each year reflected in
the table did not exceed the lesser of $50,000 or 10% of the sum of such
officer's salary and bonus in each respective year, except for Ms. Flaherty
who in 1997 and 1996 received benefits of $63,932 and $2,443, respectively,
for relocation and moving expenses paid by the Company.
(2) Premiums for disability insurance paid by the Company for the benefit of Mr.
Hays.
(3) Includes an $870,000 special cash bonus awarded in 1997 in connection with
the initial public offering of the Common Stock and prior to termination of
the Company's S Corporation status to allow the purchase of shares of Common
Stock.
(4) Additional wages paid by the Company when professional development programs
were attended. This benefit was terminated at the end of January 1997, but
some wages for 1996 programs were paid in the first quarter of 1997.
(5) Ms. Flaherty's employment with the Company began in December 1996.
(6) Premiums for disability and life insurance paid by the Company for the
benefit of Ms. Flaherty.
5
<PAGE> 8
STOCK OPTIONS
The Company has in effect the Equity Incentive Plan pursuant to which
options to purchase Common Stock may be granted to employees of the Company,
including officers and employee-directors. The following table presents certain
information as to grants of stock options made during 1997 to Sharon Flaherty.
No other named executive officer was granted options in 1997.
OPTION GRANTS IN 1997 FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(2)
---------------------------------------------------------- ---------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS AT 0% AT 5% AT 10%
UNDERLYING GRANTED TO EXERCISE OR ANNUAL ANNUAL ANNUAL
OPTIONS GRANTED EMPLOYEES IN BASE PRICE EXPIRATION GROWTH GROWTH GROWTH
NAME (#)(1) FISCAL YEAR ($/SHARE) DATE RATE RATE RATE
---- --------------- ------------- ----------- ---------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sharon Flaherty............ 6,666 3.9% $15.00 10/9/02 0 $62,883 $159,358
</TABLE>
- -------------------------
(1) The options reflected in the table (which are nonstatutory options for
purposes of the Internal Revenue Code) were granted on October 9, 1997, and
become exercisable in 33 1/3% increments on October 9, 1998, 1999 and 2000.
(2) This presentation is intended to disclose the potential value which would
accrue to the optionee if the option were exercised the day before it would
expire and if the per share value had appreciated at the compounded annual
rate indicated in each column. The assumed rates of appreciation of 5% and
10% are prescribed by the rules of the Securities and Exchange Commission
regarding disclosure of executive compensation. The assumed annual rates of
appreciation are not intended to forecast possible future appreciation, if
any, with respect to the price of the Common Stock.
The following table sets forth information regarding the exercise of stock
options by the named executive officers during 1997 and the year-end value of
unexercised options held by such persons. Mr. Hays, Ms. Raasch and Mr. Beans did
not hold any options to acquire Common Stock as of December 31, 1997 and are
accordingly not reflected in the table.
AGGREGATED OPTION EXERCISES IN 1997
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
SHARES YEAR-END(#) AT FISCAL YEAR-END($)(1)
ACQUIRED ON VALUE ---------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sharon Flaherty.............. -- -- 0 6,666 -- (2)
</TABLE>
- -------------------------
(1) The dollar values are calculated by determining the difference between the
fair market value of the underlying Common Stock and the exercise price of
the options at exercise or fiscal year-end, respectively.
(2) Not applicable. The fair market value of the underlying Common Stock at
fiscal year-end was less than the exercise price of the options.
6
<PAGE> 9
AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
On July 15, 1994, the Company set forth the terms and conditions of Patrick
E. Beans' employment with the Company in an employment memorandum. Pursuant to
this memorandum, Mr. Beans is entitled to an annual base salary of $70,000 and
is entitled to participate in the Company's incentive plan, the National
Research Corporation 401(k) Savings Plan and a stock option pool or similar
benefit plan (currently the Equity Incentive Plan). Under this memorandum, the
Company agreed to employ Mr. Beans as its Chief Financial Officer.
In December 1996, the Company entered into an Employment Agreement with
Sharon Flaherty pursuant to which the Company agreed to employ Ms. Flaherty
until the earlier of November 30, 1999 or her death, disability or termination,
whether for cause or voluntarily, with the term of employment automatically
renewed for successive one-year periods thereafter unless terminated by either
party. Under the Employment Agreement, Ms. Flaherty has direct responsibility
for the Company's sales, marketing and client services. The Employment Agreement
provides for (i) an annual base salary of $140,000; (ii) an annual incentive
based on increases in the rate of revenue growth, revenue level and
profitability of the Company; and (iii) participation in a long-term incentive
plan (currently the Equity Incentive Plan) on the same terms as the Company's
other senior officers. If Ms. Flaherty's employment is terminated by the Company
for any reason other than cause, Ms. Flaherty is entitled to receive severance
pay of $200,000 over the remaining initial term or over a twelve-month period
during any extended term. The Employment Agreement also contains a covenant not
to compete for the remaining initial term or for a period of twelve months
following termination during any extended term.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for all
aspects of the Company's compensation package offered to its corporate officers,
including the named executive officers. However, the Company did not have an
active Compensation Committee until John N. Nunnelly and Paul C. Schorr, III
were elected as directors. As a result, Michael D. Hays and Patrick E. Beans,
both executive officers of the Company, were responsible for fixing the
compensation paid to the executive officers of the Company in 1997. Therefore,
the following report was prepared by the Board of Directors.
The Company's executive compensation program is designed to promote a
strong, direct relationship between Company and individual performance and
compensation. The Company has developed an overall compensation strategy and
specific compensation plans that are intended to be an effective tool for
fostering the creation of shareholder value and the execution of the Company's
business plan. The overall objectives of this strategy are to make executive
compensation generally competitive, with a substantial portion of such
compensation contingent upon Company and individual performance and to encourage
equity ownership by the Company's executive officers so that their interests are
closely aligned with the interests of shareholders.
During 1996, the Company retained a nationally-recognized compensation
consultant to advise it with respect to compensation issues. The first step in
the overall review of executive compensation was an analysis of the duties and
responsibilities of each Company executive. Subsequently, the Company's
consultant compared the compensation for each Company executive with general
market data for individuals with comparable job responsibilities. The Company's
consultant summarized its conclusions on Company executive compensation in a
report finalized in late 1997. The results of this study will provide the
framework for determining compensation for executives of the Company in 1998 and
beyond.
7
<PAGE> 10
The Company's executive compensation program is designed to base
compensation on the Company's quarterly, annual and long-term performance goals
by rewarding above-average corporate performance and recognizing individual
initiative and achievement. The key elements of the Company's executive
compensation program consist of base salary, annual bonus and stock options. A
general description of the elements of the Company's compensation program,
including the bases for the compensation awarded to the Company's Chief
Executive Officer for 1997, are discussed below.
Base Salary. Base salaries are initially determined by evaluating the
responsibilities of the position, the experience and contributions of the
individual and the salaries for comparable positions in the competitive
marketplace. Base salary levels for the Company's executive officers are
generally positioned at the midpoint of the range for comparable positions in
companies of similar size offering similar services. While the Company believes
it offers competitive base salaries, the Company attempts to keep executive base
salary increases as low as possible in order to limit the Company's exposure if
performance targets are not met. The base salaries paid to two named executive
officers, Mr. Beans and Ms. Flaherty, are also based on their employment
agreements with the Company. See above under "-- Agreements with Named Executive
Officers."
Annual Bonus. The Company's executive officers are eligible for annual
cash bonus awards under the Company's incentive compensation program. Under this
program, Company and individual performance objectives are established at the
beginning of each year. Company performance objectives are based on the Company
obtaining certain levels of net profits. Individual performance objectives are
oriented to long-term objectives of the Company, with stated goals and
activities to achieve those objectives specified for each individual. Ms.
Flaherty is entitled to receive an annual incentive bonus calculated under her
employment agreement with the Company (see above under "-- Agreements with Named
Executive Officers"). The bonus amounts are generally paid in 20% increments
over a five-year period from the date of the award of the bonus.
Stock Options. The Equity Incentive Plan is designed to encourage and
create ownership of Common Stock by key executives, thereby promoting a close
identity of interests between the Company's management and its shareholders. The
Equity Incentive Plan is designed to motivate and reward executives for
long-term strategic management and the enhancement of shareholder value. The
Board of Directors has determined that stock option grants to the Company's
employees, including key executive officers, are consistent with the Company's
best interest and the Company's overall compensation program.
Ms. Flaherty was the only named executive officer granted stock options
during 1997. Such stock options were granted in connection with the Company's
initial public offering, at which time all of the Company's other associates
were granted stock options. The Board of Directors intends to replace the
portion of the annual bonus that is currently paid on a deferred basis with
stock options in future years.
Stock options are granted with an exercise price equal to the market value
of the Common Stock on the date of grant. Stock options granted in 1997 to Ms.
Flaherty vest and become exercisable in equal increments over a three-year
period. Vesting schedules are designed to encourage the creation of shareholder
value over the long-term since the full benefit of the compensation package
cannot be realized unless stock price appreciation occurs over a number of years
and the executive remains in the Company's employ.
Chief Executive Officer Compensation. During 1997, the Company's Chief
Executive Officer, Michael D. Hays, was paid a salary of $140,000. In addition,
Mr. Hays was awarded a bonus of $70,000 in 1997, all of which was paid in the
first quarter of 1998. In evaluating Mr. Hays' performance during 1997, the
Board of
8
<PAGE> 11
Directors considered the Company's overall financial performance, which exceeded
that of prior years, and the successful completion of the Company's initial
public offering.
Section 162 (m) Limitation. The Company anticipates that all 1998
compensation to executives will be fully deductible under Section 162(m) of the
Internal Revenue Code. Therefore, the Company determined that a policy with
respect to qualifying compensation paid to executive officers for deductibility
is not necessary.
NATIONAL RESEARCH CORPORATION
BOARD OF DIRECTORS
Michael D. Hays
John N. Nunnelly
Patrick E. Beans
Paul C. Schorr, III
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are John N. Nunnelly and
Paul C. Schorr, III. The Company did not have an active Compensation Committee
until Messrs. Nunnelly and Schorr were elected as directors. As a result,
Michael D. Hays and Patrick E. Beans, both executive officers of the Company,
were responsible for fixing the compensation paid to the executive officers of
the Company in 1997.
9
<PAGE> 12
PERFORMANCE INFORMATION
The following graph compares on a cumulative basis changes since October
10, 1997 (the date on which the Common Stock was first publicly traded) in (a)
the total shareholder return on the Common Stock with (b) the total return on
the Nasdaq Stock Market (U.S.) Index and (c) the total return on the Russell
2000 Index. Such changes have been measured by dividing (a) the sum of (i) the
amount of dividends for the measurement period, assuming dividend reinvestment,
and (ii) the difference between the price per share at the end of and the
beginning of the measurement period, by (b) the price per share at the beginning
of the measurement period. The graph assumes $100 was invested on October 10,
1997 in Common Stock, the Nasdaq Stock Market (U.S.) Index and the Russell 2000
Index.
The Russell 2000 Index is an index of companies with market capitalizations
similar to the Company. The Company has selected this index because, at this
time, the Company does not believe it can reasonably identify a peer group for
comparison. The Company believes that an index of companies with similar market
capitalizations provides a reasonable basis for comparing total shareholder
returns.
<TABLE>
<CAPTION>
NASDAQ
NATIONAL MARKET
Measurement Period RESEARCH (U.S.) RUSSELL
(Fiscal Year Covered) CORPORATION INDEX 2000 INDEX
<S> <C> <C> <C>
October 10, 1997 100 100 100
October 31, 1997 135.00 94.80 95.61
November 30, 1997 130.42 95.27 94.99
December 31, 1997 44.17 93.78 96.65
</TABLE>
CERTAIN TRANSACTIONS
Prior to joining the Company in 1996, Sharon Flaherty, Vice
President-Sales, Marketing and Client Services, served as President of Kaiser
Foundation Health Plan of Texas and as a Vice President of Kaiser Foundation
Health Plan, Inc., the parent of Kaiser Permanente-Northern California Region.
Kaiser Permanente-Northern California Region began its relationship with the
Company in 1994 and accounted for 31% of the Company's total revenues in 1997.
10
<PAGE> 13
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers to file reports concerning their ownership of
Company equity securities with the Securities and Exchange Commission and the
Company. Based solely upon information provided to the Company by individual
directors and executive officers, the Company believes that during the fiscal
year ended December 31, 1997 all of its directors and executive officers
complied with the Section 16(a) filing requirements.
MISCELLANEOUS
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP acted as the independent auditors for the Company in
1997 and it is anticipated that such firm will be similarly appointed to act in
1998. Representatives of KPMG Peat Marwick LLP are expected to be present at the
Annual Meeting with the opportunity to make a statement if they so desire. Such
representatives are also expected to be available to respond to appropriate
questions.
SHAREHOLDER PROPOSALS
Proposals which shareholders of the Company intend to present at and have
included in the Company's proxy statement for the 1999 annual meeting must be
received by the Company by the close of business on December 1, 1999. In
addition, a shareholder who otherwise intends to present business at the 1998
annual meeting (including, nominating persons for election as directors) must
comply with the requirements set forth in the Company's By-Laws. Among other
things, to bring business before an annual meeting, a shareholder must give
written notice thereof to the Secretary of the Company in advance of the meeting
in compliance with the terms and within the time periods specified in the
By-Laws.
OTHER MATTERS
The cost of soliciting proxies will be borne by the Company. In addition to
soliciting proxies by mail, proxies may be solicited personally and by telephone
by certain officers and regular employees of the Company. The Company will
reimburse brokers and other nominees for their reasonable expenses in
communicating with the persons for whom they hold Common Stock.
By Order of the Board of Directors
NATIONAL RESEARCH CORPORATION
Patrick E. Beans
Secretary
March 31, 1998
11
<PAGE> 14
NATIONAL RESEARCH CORPORATION
1998 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Michael D. Hays and Patrick E. Beans, and each
of them, as Proxies with the power of substitution (to act jointly or if only
one acts then by that one) and hereby authorizes them to represent and to vote
as designated below all of the shares of Common Stock of National Research
Corporation held of record by the undersigned on March 10, 1998, at the annual
meeting of shareholders to be held on April 28, 1998, or any adjournment or
postponement thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE ELECTION OF THE BOARD'S NOMINEE.
* PLEASE DETACH BELOW, SIGN, DATE AND RETURN USING THE ENVELOPE PROVIDED *
<PAGE> 15
NATIONAL RESEARCH CORPORATION
<TABLE>
<S> <C>
1. ELECTION OF DIRECTOR: 1 - PATRICK E. BEANS [ ] FOR the nominee [ ] WITHHOLD
Term expiring at the listed to the left AUTHORITY
2001 Annual Meeting (except as to vote for the
specified below). nominee listed
to the left.
--------------------------------------------------
(Instructions: To withhold authority to vote for any indicated nominee,
write the number(s) of the nominee(s) in the box provided to the right.) --------------------------------------------------
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Address Change? Date______________________, 1998 NO. OF SHARES
MARK BOX [ ] --------------------------------------------------
Indicate changes below:
[ ] Please check this box
if you plan to attend
the Annual Meeting. --------------------------------------------------
Number of persons
attending: _____
SIGNATURE(S) IN BOX
Please sign exactly as name appears hereon. When
shares are held by joint tenants, both should sign.
When signing as attorney, 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.
</TABLE>
