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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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 (S) 240.14a-11(c) or (S) 240.14a-12
NATIONAL DATA CORPORATION
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
[LOGO]
NATIONAL DATA CORPORATION
NATIONAL DATA PLAZA
ATLANTA, GEORGIA 30329-2010
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------------------------------
To the Stockholders:
The 2001 Annual Meeting of Stockholders (the "Annual Meeting") of National
Data Corporation (the "Company") will be held at the Company's offices at
National Data Plaza, Atlanta, Georgia, 30329-2010 on October 25, 2001, at 11:00
A.M., EDT, for the following purposes:
1. To elect three directors in Class III to serve until the annual
meeting of stockholders in 2004;
2. To vote upon a proposal to amend the Certificate of Incorporation of
the Company to change the name of the Company to "NDCHealth
Corporation;" and
3. To transact any other business that may properly come before the
meeting or any adjournments thereof.
Only stockholders of record at the close of business on August 28, 2001 are
entitled to vote. You may vote your shares by completing and returning the
enclosed proxy card or you may vote via the Internet or by telephone.
Instructions for voting via the Internet or by telephone are in the enclosed
Proxy Statement.
YOUR VOTE IS IMPORTANT
Submitting your proxy does not affect your right to vote in person if you
attend the meeting. Instead, it benefits the Company by reducing the expenses
of additional proxy solicitation. Therefore, you are urged to submit your proxy
as soon as possible, regardless of whether or not you expect to attend the
Annual Meeting. You may revoke your proxy at any time before its exercise by
delivering written notice to the Company's Secretary, Patricia A. Wilson, at the
above address, by submitting a later dated proxy, or by appearing at the Annual
Meeting to vote in person.
When you submit your proxy, you authorize Robert A. Yellowlees or Patricia
A. Wilson or either one of them, each with full power of substitution, to vote
your shares at the meeting in accordance with your instructions, and to vote on
any adjournments or postponements of the Annual Meeting.
By Order of the Board of Directors
/s/ Patricia A. Wilson
-----------------------------
PATRICIA A. WILSON, Secretary
Dated: August 31, 2001
August 31, 2001
NATIONAL DATA CORPORATION
NATIONAL DATA PLAZA
ATLANTA, GEORGIA 30329-2010
PROXY STATEMENT
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Introduction
This Proxy Statement is being furnished to solicit proxies on behalf of the
Company's Board of Directors for use at the Annual Meeting, and at any
adjournments or postponements thereof. The Annual Meeting will take place at
the Company's offices at National Data Plaza, Atlanta, Georgia 30329-2010 on
October 25, 2001, at 11:00 A.M., EDT for the following purposes:
1. To elect three directors in Class III to serve until the annual
meeting of stockholders in 2004;
2. To vote upon a proposal to amend the Certificate of Incorporation of
the Company to change the name of the Company to "NDCHealth
Corporation;" and
3. To transact any other business that may properly come before the
Annual Meeting, or any adjournments thereof.
This Proxy Statement and the accompanying materials are being mailed to
stockholders on or about September 3, 2001.
Quorum and Voting
Voting Stock. Pursuant to the Company's Certificate of Incorporation, only
the common stock, $.125 par value per share (the "Common Stock"), may be voted
at the meeting.
Record Date. Only those holders of Common Stock of record at the close of
business on August 28, 2001 are entitled to vote at the Annual Meeting. On that
date, there were 33,986,869 shares of Common Stock issued and outstanding, held
by approximately 3,549 stockholders of record. These holders are entitled to one
vote per share of Common Stock.
Quorum. In order for any business to be conducted, the holders of a
majority of the shares entitled to vote at the Annual Meeting must be present (a
"Quorum"), either in person or represented by proxy. For the purpose of
determining the presence of a Quorum, abstentions and broker non-votes (which
occur when shares held by brokers or nominees for beneficial owners are voted on
some matters but not on others) will be counted as present.
Voting Options. Proposal 1, the election of three directors 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 nominees, or (ii) "withhold authority" to vote for any of the nominees.
Because Proposal 1 will require the affirmative vote of the holders of a
majority of the shares of Common Stock represented and entitled to vote at the
Annual Meeting at which a quorum is present, an abstention will have the same
effect as a vote to "withhold authority," while a broker non-vote will have no
effect on the outcome of the election of the directors.
With respect to Proposal 2, the approval of an amendment to the Certificate
of Incorporation of the Company to change the name of the Company to "NDCHealth
Corporation," stockholders may (i) vote "for," (ii) vote "against," or (iii)
"abstain" from voting on the proposal. Because Proposal 2 will require the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock, an abstention and a broker non-vote will have the same effect as a
vote "against."
Internet and Telephone Voting. Again this year, stockholders of record can
simplify their voting and reduce the Company's costs by voting their shares via
telephone or the Internet. The telephone and Internet voting procedures are
designed to authenticate stockholders' identities, allow stockholders to vote
their shares and confirm that their instructions have been properly recorded. If
your shares are held in the name of a bank or broker, the availability of
telephone and Internet voting will depend on the voting processes of the
applicable bank or broker; therefore, it is recommended that you follow the
voting instructions on the form you receive. If you do not choose to vote by
telephone or the Internet, please date, sign and return the proxy card.
Default Voting. When a proxy is timely executed and not revoked, the
shares represented by the proxy will be voted in accordance with the
instructions indicated in the proxy. IF NO INSTRUCTIONS ARE INDICATED, HOWEVER,
PROXIES WILL BE VOTED (1) FOR THE ELECTION OF THE DIRECTOR NOMINEES, (2) FOR THE
PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO CHANGE THE NAME OF THE
COMPANY; AND (3) IN THE BEST JUDGMENT OF THE PROXIES AS TO ANY OTHER MATTERS
WHICH MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT THEREOF.
Revocation of a Proxy. A stockholder who has given a proxy may revoke it
at any time prior to its exercise at the Annual Meeting by (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
should be addressed as follows: National Data Corporation, National Data Plaza,
Atlanta, Georgia 30329-2010, Attention: Patricia A. Wilson, Secretary.
Adjourned Meeting. If a Quorum is not present, the meeting may be
adjourned or postponed by those stockholders who are represented. The Annual
Meeting may be rescheduled at the time of the adjournment with no further notice
of the rescheduled time, unless the adjournment delays the Annual Meeting by
more than thirty days from its intended date or if, after the adjournment a new
record date is fixed for the adjourned meeting, in which case timely notice of
the adjourned meeting will be provided to the stockholders entitled to vote at
that meeting. An adjournment will have no effect on the business to be
conducted.
-2-
1. ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of eight members
and is divided into three classes, with the term of office of each class ending
in successive years. The terms of office of directors in Class I and Class II
expire at the 2002 and 2003 annual meetings of stockholders, respectively. The
terms of the directors in Class III expire with this Annual Meeting. Class III
currently consists of three members, Ms. J. Veronica Biggins, Ms. Terri A. Dial
and Mr. Kurt M. Landgraf. Since last year's annual meeting, four new members
have been appointed to the Board of Directors -- Mr. Walter M. Hoff, who was
appointed as a Class II director on December 19, 2000; Ms. Dial, who was
appointed as a Class III director on June 26, 2001; Mr. Landgraf, who was
appointed as a Class III director on July 10, 2001; and Mr. James R. Lientz,
Jr., who was appointed as a Class II director on July 16, 2001.
The stockholders are being asked to vote on the election to Class III of
Ms. Biggins, Ms. Dial and Mr. Landgraf. Proxies cannot be voted for a greater
number of persons than the number of nominees named. The Class III directors
will be elected to hold office until the 2004 Annual Meeting of Stockholders or
until a successor has been duly elected and qualified. In the event that a
nominee is unable to serve (which is not anticipated), the persons designated as
proxies will cast votes for such other person(s) as they may select.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES FOR
ELECTION AS CLASS III DIRECTORS. IF A CHOICE IS SPECIFIED ON THE PROXY BY THE
STOCKHOLDER, THE SHARES WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS
MADE, THE SHARES WILL BE VOTED "FOR" THE NOMINEES. THE AFFIRMATIVE VOTE OF THE
HOLDERS OF A MAJORITY OF THE SHARES OF COMMON STOCK REPRESENTED AND ENTITLED TO
VOTE AT THE ANNUAL MEETING AT WHICH A QUORUM IS PRESENT IS REQUIRED FOR THE
ELECTION OF THE NOMINEES.
-3-
Certain Information Concerning the Nominees and Other Directors
The following table sets forth the names of the nominees for Class III
directorships 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, as
amended (the "Exchange Act") or any company registered as an investment company
under the Investment Company Act of 1940. For information concerning membership
on committees of the Board, see "Other Information About the Board and its
Committees" below.
NOMINEES FOR CLASS III DIRECTOR
Term Expiring at 2004 Annual Meeting
Month and Year Positions with the Company,
First Principal Occupations During at Least
Name and Age Became a Director the Past Five Years, and Other Directorships
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J. Veronica Biggins October 1995 Director of the Company
(54) Senior 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. and Avnet, Inc.
Terri A. Dial June 2001 Director of the Company
(51) Retired Chairman of the Board and Chief
Executive Officer, Wells Fargo Bank and
Group Executive Vice President, member of
the management committee of Wells Fargo &
Co. (1998-2001); Vice Chairman, Consumer
and Banking Business, member of office of
Chairman, Wells Fargo & Co. (1996-1998);
Director of Blue Shield of California, Onyx
Software and the Community Colleges
Foundation.
Kurt M. Landgraf July 2001 Director of the Company
(54) President and Chief Executive Officer,
Educational Testing Service (since 2000);
Executive Vice President and Chief
Operating Officer, E.I. DuPont de Nemours &
Company (1998-2000); Chairman, DuPont
Europe (1997-2000) and The DuPont
Pharmaceutical Company (1997-2000);
Executive Vice President, DuPont U.S.
(1997-1998); Chief Financial Officer, E.I.
DuPont de Nemours & Company (1996-1997);
Director of IKON Office Solutions.
-4-
MEMBERS OF THE BOARD OF DIRECTORS
CONTINUING IN OFFICE
Class I
Term Expiring at 2002 Annual Meeting
Month and Year Positions with the Company,
First Principal Occupations During at Least
Name and Age Became a Director the Past Five Years, and Other Directorships
- -------------------------- ----------------------- -----------------------------------------------------
Robert A. Yellowlees April 1985 Chairman of the Board (since June 1992), Chief
(62) Executive Officer (May 1992-March 2001); Chairman of
the Board, Global Payments Inc.; Director of
Protective Life Corporation.
James F. McDonald June 2000 Director of the Company
(60) Chairman of the Board of Scientific-Atlanta, Inc.
(since November 2000); President and Chief Executive
Officer, Scientific-Atlanta, Inc. (since July 1993);
Director of Scientific-Atlanta, Inc., Burlington
Resources, Inc. and Mirant Corporation.
Class II
Term Expiring at 2003 Annual Meeting
Month and Year Positions with the Company,
First Principal Occupations During at Least
Name and Age Became a Director the Past Five Years, and Other Directorships
- ----------------------- -------------------------- ------------------------------------------------------
Neil Williams April 1977 Director of the Company
(65) General Counsel and a Global Partner, AMVESCAP PLC,
Atlanta (since September 1999); Partner, Alston &
Bird LLP, Atlanta (prior to October, 1999; Managing
Partner from 1989-1996); Director of Printpack, Inc.
and National Service Industries, Inc. and Trustee of
The Duke Endowment.
Walter M. Hoff December 2000 Director of the Company
(49) President and Chief Executive Officer of the Company
(since April 2001); Chief Executive Officer,
Health Information Services division of the Company
(August 1998-March 2001); Executive Vice President,
First Data Corporation (1992-1998); Director of
Metris Companies, Inc.
James R. Lientz, Jr. July 2001 Director of the Company
(58) Retired President, Bank of America, MidSouth Banking
Division (September 1996-December 2000); Director of
Georgia Power Company and The Georgia Banking
Company; Advisory Director of Blue Cross Blue Shield
of Georgia and Webstone Technologies.
-5-
Other Information About the Board and its Committees
Meetings and Compensation. During the fiscal year ended May 31, 2001, the
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Company's Board of Directors held eight regularly scheduled meetings and took
action by unanimous written consent on three other occasions. All incumbent
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
$30,000, part of which was paid in shares of Common Stock of the Company under
the terms of the 1995 Non-Employee Director Compensation Plan described below,
plus $1,000 per meeting attended. A non-employee director who serves as
chairman of the board receives an annual retainer of $60,000, part of which is
paid in shares of the Company's Common Stock, plus $1,000 per meeting attended.
Each member of the Audit and Compensation Committees received $1,000 per Audit
or Compensation Committee meeting attended (plus an additional $500 per meeting
for the Chairman of each such committee) in addition to his or her other
compensation as a director.
1995 Non-Employee Director Compensation Plan. 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
1st 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, 2001, each of Ms. Biggins, Mr. McDonald and Mr. Williams was issued 506
shares of Common Stock and Mr. Yellowlees was issued 1,013 shares of Common
Stock, in each case based on the fair market value of the Common Stock on that
date of $29.66 per share.
Non-Employee Director Retirement Benefits. 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. There are
currently three former directors who receive benefits under the retirement plan.
As of August 1, 2001, the only remaining non-employee director eligible for
retirement benefits was Mr. Williams, who had 24 5/12 years of service as a
director for purposes of the retirement plan.
1984 Non-Employee Director Stock Option Plan. The Company also
maintains the 1984 Non-Employee Director Stock Option Plan (the "Director Option
Plan"). The Director Option Plan provided for the annual grant to all non-
employee directors of options to purchase 5,000 shares of Common Stock for a
completed year of service as a director. 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 as to 20% of the shares 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, 2001,
options were granted under the Director Option Plan to Mr. Williams, Ms. Biggins
and Mr. McDonald for 5,000 shares each of Common Stock at an exercise price per
share of $37.4375 (as adjusted for the spin-off, these grants are for 8,104
shares at an exercise price of
-6-
$23.10). With these grants, the 545,000 shares reserved for issuance under the
Director Option Plan have been substantially depleted, and no further options
will be granted under the Director Option Plan.
Committees. The Company's Board of Directors has an Audit Committee and a
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Compensation Committee. The Company does not have 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 currently composed of Mr. Williams (Chairman), Ms. Biggins and Mr.
Landgraf, all of whom are independent within the meaning of the listing
standards of the New York Stock Exchange. Pursuant to its charter, which is
attached as Appendix A hereto, 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. The Audit Committee also reviews with
financial management and the independent auditors the interim financial
statements prior to the filing of the Company's quarterly reports on Form 10-Q.
During the fiscal year ended May 31, 2001, the Audit Committee held four
meetings, each of which was separate from regular Board meetings. See "Report
of the Audit Committee."
Compensation Committee. The Board of Directors also has a Compensation
Committee currently composed of Ms. Biggins (Chairman), Mr. McDonald, Ms. Dial
and Mr. Lientz. This Committee reviews and determines levels of compensation
and performance criteria for the Company's executive officers and administers
the Company's various stock option, incentive and benefit plans for employees.
During the last fiscal year, the Compensation Committee held four meetings, all
of which were separate from regular Board meetings.
-7-
Common Stock Ownership of Management
The following table sets forth information as of July 31, 2001, 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 14 persons, as a group, who were directors and/or
executive officers of the Company on July 31, 2001.
Amount and Nature of Percent of
Name Beneficial Ownership (1) Class (1)
- ---- ----------------------- ----------
J. Veronica Biggins 24,393(2) *
Terri A. Dial 149 *
Walter M. Hoff 148,481(3) *
Randolph L.M. Hutto 6,406(4) *
Kurt M. Landgraf -- *
James R. Lientz, Jr. -- *
James F. McDonald 1,140 *
Charles W. Miller 33,326(5) *
Glenn N. Rosenkoetter 34,304(6) *
E. Christine Rumsey 12,897(7) *
Neil Williams 71,244(8) *
Robert A. Yellowlees 1,923,180(9) 5.66%
All Directors and Executive Officers as a Group 2,271,718(10) 6.69%
(14 individuals)
__________________________
* Less than one percent. On July 31, 2001, there were 33,951,813 outstanding
shares of Common Stock.
(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. Shares underlying stock options that are
exercisable within 60 days are deemed to be outstanding for the purpose of
computing the outstanding shares owned by that particular person and by the
group but are not deemed outstanding for other purposes.
(2) This amount includes 21,068 shares of Common Stock of which Ms. Biggins has
the right to acquire beneficial ownership.
(3) This amount includes 53,899 shares of Common Stock of which Mr. Hoff has
the right to acquire beneficial ownership and 54,268 shares of restricted
stock over which Mr. Hoff currently has sole voting power only.
(4) This amount includes 6,105 shares of restricted stock over which Mr. Hutto
currently has sole voting power only.
(5) This amount includes 32,890 shares of restricted stock over which Mr.
Miller currently has sole voting power only.
(6) This amount includes 31,295 shares of restricted stock over which Mr.
Rosenkoetter currently has sole voting power only.
(7) This amount includes 11,300 shares of restricted stock over which Ms.
Rumsey currently has sole voting power only.
(8) This amount includes 45,380 shares of Common Stock of which Mr. Williams
has the right to acquire beneficial ownership.
(9) This amount includes 40,000 shares held by The Yellowlees Charitable Trust,
of which Mr. Yellowlees is the Trustee, 8,022 shares held by Mr.
Yellowlees' wife as to which he disclaims all beneficial ownership, 819,342
shares held by MRY Partners, L.P. ("MRY Partners"), a family limited
partnership of which Mr. Yellowlees serves as the sole general partner and
705,200 shares of which MRY Partners has the right to acquire beneficial
ownership.
(10) This amount includes 831,096 shares of Common Stock of which the directors
and executive officers, as a group, have the right to acquire beneficial
ownership and 145,488 shares of restricted stock over which the beneficial
owners have sole voting power only.
-8-
Common Stock Ownership by Certain Other Persons
The following table sets forth certain information as to the Common Stock of
the Company beneficially owned as July 31, 2001 by each person who is known to
the Company to own, directly or indirectly, more than 5% of the outstanding
shares of Common Stock, and reflects information presented in each such person's
Schedule 13D or Schedule 13G (and amendments, if any, thereto) as filed with the
Securities and Exchange Commission (the "Commission") and provided to the
Company.
Amount and Nature
Name and Address of Beneficial Percent of
of Beneficial Owner Ownership Class (1)
- ------------------ ----------------- ----------
Liberty Wanger Asset Management, L.P. (2) 2,930,000 8.63%
WAM Acquisition GP, Inc.
Liberty Acorn Trust
227 West Monroe Street, Suite 3000
Chicago, IL 60606
Massachusetts Financial Services Company (3) 2,278,970 6.71%
500 Boylston Street
Boston, MA 02116
Mellon Financial Corporation (4) 1,951,138 5.75%
Mellon Bank N.A.
One Mellon Center
Pittsburgh, PA 15258
____________________
(1) Percent of Class is with respect to shares of Common Stock outstanding on
July 31, 2001 (33,951,813 shares).
(2) Based on Amendment No. 4 to the Schedule 13G dated February 14, 2001 filed
by Liberty Wanger Asset Management, L.P., WAM Acquisition GP, Inc. and
Liberty Acorn Trust. These entities have shared voting and shared
dispositive power with respect to all shares.
(3) Based on Amendment No. 2 to the Schedule 13G dated February 12, 2001 filed
by Massachusetts Financial Services Company ("MFS"). MFS has sole voting
power with respect to 1,994,064 shares and sole dispositive power with
respect to 2,278,970 shares.
(4) Based on the Schedule 13G filed by Mellon Financial Corporation ("MFC") and
Mellon Bank, N.A. on January 19, 2001. All of the securities are
beneficially owned by MFC and direct or indirect subsidiaries in their
various fiduciary capacities.
-9-
Report of the Compensation Committee
Decisions on compensation and stock-based plans are made by the
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 qualify for deduction under Section 162(m) of the Internal Revenue Code and
to meet the conditions for exemption under Rule 16b-3(d) under the Exchange Act.
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 that are consistent
with and linked to the Company's strategic and annual business objectives.
Compensation Philosophy
-----------------------
The Compensation Committee has adopted certain principles which are applied
in structuring the compensation opportunity for executive officers. These are:
Long-Term and At-Risk Focus. A significant percentage of total
compensation for executive officers should be composed of long-term,
at-risk rewards to focus senior management on the long-term interests
of stockholders. Equity-based plans should comprise a major part of
the long-term, at-risk portion of total compensation to encourage
stockholder value-based management decisions, and to link compensation
to Company performance and stockholder interests.
Short Term and At-Risk Focus. A significant portion of cash
compensation for executives is linked to achievement of annual
business plans or performance objectives. This includes cash bonuses
that may be approved by the Compensation Committee relating to those
objectives. There is real risk in bonuses paid under this plan,
recognizing variability in individual, unit and overall Company
performance.
Competitiveness. Base pay and total compensation should be
competitive with other similar companies based upon size, products and
markets. A proxy survey of peer group companies is conducted
periodically. The peer group surveyed includes appropriate companies
contained in the Standard and Poor's Computer Software and Services
Index used in the stockholder return analysis shown later, in addition
to other firms in the Company's business sectors. The Compensation
Committee also received comparative data from an outside consultant on
levels and components of compensation of executives of comparable
companies.
Stock Option Awards and Restricted Stock Grants
-----------------------------------------------
Equity-based compensation comprises a significant portion of the Company's
key employee compensation programs. The Compensation Committee uses stock
options and restricted stock awards to provide long-term, equity-based
compensation for the Company's executive officers.
Stock Options. Options provide 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 option shares, 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
-10-
Common Stock. The number of stock options granted to an individual is
based upon the individual's perceived potential to contribute to the
future growth of the Company. The frequency and size of individual
grant amounts vary.
Restricted Stock. Restricted stock grants are granted on a
selective basis to key employees in order to encourage focus on the
longer term performance of the Company. Grants of restricted stock
are subject to forfeiture if a grantee, among other conditions, leaves
the Company prior to expiration of the restricted period. Currently,
restricted periods are generally four years from the date of grant.
Bonus Deferral Program. 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. Since participating executives are deferring
earned cash in the form of stock at risk of forfeiture over three
years, the amount deferred is increased by 35%. Mr. Miller elected to
participate in this plan for the 2001 fiscal year.
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 were encouraged to
achieve these guidelines by building stock ownership over a period of years.
Chief Executive Officers' Compensation
--------------------------------------
Mr. Yellowlees' fiscal year 2001 compensation derived primarily from
commitments under his employment agreement, which was last amended as of June 1,
1997. Mr. Yellowlees' employment as President and Chief Executive Officer of
the Company terminated effective March 31, 2001; his final day of employment for
administrative purposes was May 7, 2001. See "Employment, Severance and Change
in Control Arrangements -- Robert A. Yellowlees" below.
Mr. Yellowlees' annual bonus opportunity 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 Section
162(m) of the Internal Revenue Code. Mr. Yellowlees received no bonus for
fiscal year 2001 because he terminated employment before the year was over;
however, he received a severance payment pursuant to his employment agreement as
described below.
Mr. Hoff assumed the duties of President and Chief Executive Officer of the
Company effective April 1, 2001. Mr. Hoff's fiscal year 2001 compensation
derived primarily from commitments under his Employment Agreement effective as
of December 1, 1999, which establishes the terms and conditions of his
employment, including a minimum base salary, minimum bonus opportunity, and
payments or benefits he is entitled to received upon termination. See
"Employment, Severance and Change in Control Arrangements -- Other Executive
Employment Agreements" herein.
-11-
Mr. Hoff's annual bonus opportunity is dependent upon the achievement of
agreed-upon financial and nonfinancial objectives based upon current year
performance as well as actions to provide sustained long-term growth in
stockholder value. The performance factors included in his bonus plan for
fiscal year 2001 and 2002 include goals for revenue growth, operating income
growth, earnings per share growth and increases in stockholder value.
COMPENSATION COMMITTEE
J. Veronica Biggins, Chairman
James F. McDonald
-12-
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, 2001 ("2001 fiscal year"), May
31, 2000 ("2000 fiscal year"), and May 31, 1999 ("1999 fiscal year"), for (i)
the two individuals who served as Chief Executive Officer of the Company for
different periods during the 2001 fiscal year; 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
$100,000. The persons listed above are hereinafter referred to as the "Named
Executive Officers."
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards
--------------------------- ------------------------------
Restricted Securities
Stock Underlying All Other
Name and Fiscal Award(s) Options Compensation
Principal Position Year Salary ($) Bonus ($) ($)(2) (#)(3) ($)(4)
- ------------------ ------ --------- ----------- --------- ----------- ------------
Robert A. Yellowlees 2001 544,038(5) --- 168,747 150,000 1,979,763
Chairman of the Board; President 2000 565,846 125,000 1,037,400 --- 67,617
and Chief Executive Officer 1999 540,990 115,000 1,262,550 105,200 79,671
(6/1/2000--3/31/2001)
Walter M. Hoff 2001 400,000 325,000 500,000 283,515 8,523
President and Chief Executive 2000 400,000 200,000(7) 139,857(7) --- 8,308
Officer 1999 346,158(6) 100,000 800,700 119,779(1) ---
(4/1/2001 to present)
Charles W. Miller 2001 310,000 210,000(7) 70,875(7) --- ---
Executive Vice President -- 2000 113,269(8) 85,000 803,000 94,008(1) ---
Operations
Glenn N. Rosenkoetter 2001 310,000 160,000 750,006 129,641(1) ---
Executive Vice President -- 2000 35,769(9) --- --- --- ---
Sales and Marketing
Randolph L.M. Hutto 2001 155,769(10) 110,000 199,939 86,609(1) ---
Executive Vice President --
Finance and Business Development
E. Christine Rumsey 2001 241,346 85,000 250,013 --- ---
Vice President -- Human Resources 2000 162,692(11) 50,000 --- 68,074(1) ---
- ---------------
(1) Such awards are intended to be awards for more than one year.
(2) Awards of restricted shares to the Named Executive Officers prior to fiscal
2001 were made under the 1983 Plan, and awards of restricted shares to the
Named Executive Officers during fiscal 2001 were made under the 2000 Long-
Term Incentive Plan. The awards 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. 3,984
shares granted to Mr. Yellowlees on August 25, 1998 vested as to one-half
of such shares on May 31, 1999 and 2000; 25,000 shares granted to Mr.
Yellowlees on August 25, 1998 vested as to 8,334 and 16,666 shares on May
31, 1999 and 2000; 4,215 shares granted to Mr. Yellowlees on November 30,
1998 vested as to 1,405 and 2,810 shares on May 31, 1999 and 2000; 26,200
shares granted to Mr. Yellowlees on September 30, 1999 were scheduled to
vest as to one-third of such shares on the first three anniversaries of the
date of grant; 13,700
-13-
shares granted to Mr. Yellowlees on September 30, 1999 were scheduled to
vest as to one-half of such shares on August 1, 2000 and May 31, 2001; and
7,627 shares granted to Mr. Yellowlees on June 1, 2000 were scheduled to
vest as to one-third of such shares on the first three anniversaries of the
date of grant. All of Mr. Yellowlees' unvested shares of restricted stock
vested in full upon his termination of employment. The 6,102 shares awarded
to Mr. Hoff on June 1, 2000 were scheduled to vest as to one-third of such
shares on the first three anniversaries of the date of grant. The aggregate
holdings and aggregate market value of restricted stock held on May 31,
2001 by the individuals listed in this table are: Mr. Hoff, 56,302 shares
with a value of $1,652,463; Mr. Miller, 22,000 shares with a value of
$645,700; Mr. Rosenkoetter, 31,295 shares with a value of $918,508; Mr.
Hutto, 6,105 shares with a value of $179,181; and Ms. Rumsey, 11,300 shares
with a value of $331,655.
(3) All option awards granted to the Named Executive Officers during fiscal
year 2001 were made under the 2000 Long-Term Incentive Plan.
(4) For the 2001 fiscal year, includes amounts representing (i) Company
contributions to the Company's 401(k) Plan on behalf of Mr. Yellowlees
($6,800), and Mr. Hoff ($8,523); (ii) insurance premiums paid by the
Company for life insurance for the benefit of Mr. Yellowlees ($39,983);
(iii) financial planning expenses paid by the Company for Mr. Yellowlees
($6,192); and (iv) severance payments and benefits to Mr. Yellowlees in
connection with his retirement as an executive officer ($1,926,788), which
represents one-half of the total severance payments and benefits payable to
Mr. Yellowlees over a three-year period. At the time of the spin-off, the
Company received from Global Payments Inc. an additional $1,926,787 which
will also be paid to Mr. Yellowlees over the three-year period. See
"Employment, Severance and Change in Control Arrangements -- Robert A.
Yellowlees" for further information regarding his severance benefits.
(5) Compensation is for a partial year as Mr. Yellowlees' employment as
President and Chief Executive Officer of the Company terminated on March
31, 2001. This figure includes accrued and unused vacation time under the
Company's standard plan, which extended his final termination date to May
7, 2001.
(6) Compensation is for a partial year as Mr. Hoff joined the Company in
August, 1998.
(7) Mr. Hoff's bonus for 2000 was $200,000, of which he received $100,000 in
cash and deferred $100,000 in the form of restricted stock. Mr. Miller's
bonus for 2001 was $210,000, of which he received $157,500 in cash and
deferred $52,500 in the form of restricted stock. See "Report of the
Compensation Committee -- Bonus Deferral Program."
(8) Compensation is for a partial year as Mr. Miller joined the Company in
January, 2000.
(9) Compensation is for a partial year as Mr. Rosenkoetter joined the Company
in May, 2000.
(10) Compensation is for a partial year as Mr. Hutto joined the Company in
November, 2000.
(11) Compensation is for a partial year as Ms. Rumsey joined the Company in
September, 1999.
-14-
Option Grants. The following table sets forth information concerning
-------------
stock options granted to the Named Executive Officers during the 2001 fiscal
year.
Option Grants in Last Fiscal Year
Individual Grants
-----------------
Number of
Securities % of Total Grant Date
Underlying Options Options Granted Exercise Present
Granted to Employees in Price Expiration Value ($)
Name (#)(1)(2) FY 2001 ($/Sh) (2) Date (3)
- ---- ------------------ ----------------- ---------- ------------ ------------
Robert A. Yellowlees 150,000 9.24% $19.75 5/7/06 2,009,700
Walter M. Hoff 146,515 9.03% 13.66 6/1/10 2,246,925
Walter M. Hoff 137,000 8.44% 21.95 4/2/11 1,555,416
Charles W. Miller -- -- -- -- --
Glenn N. Rosenkoetter 73,261 4.51% 13.66 6/1/10 1,123,516
Glenn N. Rosenkoetter 56,380 3.47% 17.74 8/29/10 789,590
Randolph L.M. Hutto 86,609 5.34% 20.21 11/30/10 1,156,828
E. Christine Rumsey -- -- -- -- --
- ---------------
(1) These grants were made pursuant to the 2000 Long-Term Incentive Plan. The
options have a ten-year term, an exercise price equal to the fair market
value of the Common Stock at the date of grant and, except as provided
below, vest as to 20% of the shares two years after the date of grant, an
additional 25% after three years, an additional 25% after four years, and
the remaining 30% after five years. Mr. Yellowlees' options became fully
vested as a result of termination of his employment as an executive officer
effective on May 7, 2001 and will remain exercisable until the earlier of
their normal expiration date or May 7, 2006.
(2) As adjusted in connection with the spin-off of Global Payments Inc. on
January 31, 2001.
(3) The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option pricing model. The assumptions used for
these grants included risk-free interest rates ranging from 4.87% to 5.00%,
expected dividend yields of 0.9%, an expected volatility of 47%, and
expected lives of 7 years.
-15-
Option Exercises and Fiscal Year-End Values. The following table sets
-------------------------------------------
forth information concerning each exercise of options during the 2001 fiscal
year and the number and value of unexercised options held by the Named Executive
Officers as of May 31, 2001.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Shares Underlying Unexercised Options In-the-Money Options
Acquired on Value at Fiscal Year-End (#) at Fiscal Year-End ($)
Exercise Realized ------------------------------ -----------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- -------------- -------------- ------------------------------ -----------------------------
Robert A. Yellowlees 765,495(1) $13,963,521(1) 705,200 -0- $9,330,944 $ --
Walter M. Hoff -- -- 23,955 379,339 102,527 3,722,747
Charles W. Miller -- -- -- 94,008 -- 624,075
Glenn N. Rosenkoetter -- -- -- 129,641 -- 1,804,037
Randolph L. M. Hutto -- -- -- 86,609 -- 791,606
E. Christine Rumsey -- -- -- 68,074 -- 994,561
______________________
(1) These options were transferred by Mr. Yellowlees for estate planning
reasons to MRY Partners, L.P., a family limited partnership. The
partnership exercised the options in April and May 2001 and holds the
stock.
Retirement Plan. The Company provides a variety of retirement benefits for
---------------
its employees. The National Data Corporation Employees' Retirement Plan (the
"Retirement Plan") provides monthly benefits upon retirement to eligible
employees, including officers. During fiscal year 1998, the Company made an
evaluation of its current retirement plan offerings and decided to provide its
employees with a greater emphasis on its deferred compensation 401(k) plan by
substantially increasing the Company's match of participants' contributions. At
the same time, the Company closed the Retirement Plan to new participants
beginning June 1, 1998. Thus, an employee who was not a participant by that
date could not become a participant in the plan. Prior to July 31, 1998, the
Retirement Plan covered eligible employees of the Company and its affiliates.
Eligible employees became participants in the Retirement Plan on the first June
1 or December 1 after meeting the minimum age and service requirements. The
benefits provided under the Retirement Plan upon normal retirement at age 65 are
calculated under a formula based on the participant's earnings and years of
continuous service preceding his retirement, but not counting any years of
service that accrue after July 31, 1998, 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 that become taxable to the employee under a stock option or other stock
plan. A participant must be credited with five years of service to earn a
vested benefit under the Retirement Plan. Years of service after July 31, 1998
count for vesting purposes. Participants continue to be credited with pension-
eligible earnings for periods after July 31, 1998. Under current law the
benefit for an employee retiring in the 2001 calendar year at normal retirement
age cannot exceed $140,000 per year under the Retirement Plan. For plan years
beginning in 2001, federal law limits the amount of earnings taken into account
under the Retirement Plan to $170,000 per year.
Supplemental Executive Retirement Plan. Effective June 1, 1997, the
--------------------------------------
Company adopted a pilot Supplemental Executive Retirement Plan ("SERP").
Certain executives participating in the pilot program remain eligible to
participate in this plan as a part of the 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
-16-
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. Because Mr. Yellowlees is the only Named
Executive Officer who was employed by the Company when the pilot SERP was
adopted, he is the only Named Executive Officer currently participating 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
---------------------------
Three-Year Average
Earnings(1) 10 15 20 25 30 35
- ------------------- ------- ------- ------- --------- --------- ---------
$ 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
1,000,000 240,000 360,000 415,000 470,000 525,000 580,000
1,250,000 300,000 450,000 518,750 587,500 656,250 725,000
1,500,000 360,000 540,000 622,500 705,000 787,500 870,000
1,750,000 420,000 630,000 726,250 822,500 918,750 1,015,000
2,000,000 480,000 720,000 830,000 940,000 1,050,000 1,160,000
2,250,000 540,000 810,000 933,750 1,057,500 1,181,250 1,305,000
- ---------------
(1) The average annual earnings for the highest three consecutive years over
the last 10-year period and the eligible years of credited service as of
May 31, 2001 for Mr. Yellowlees, the only Named Executive Officer
participating in the SERP, was $1,777,417 and 16 1/2 years. For purposes
of the Retirement Plan and the SERP, "annual earnings" means compensation
of any kind paid by the Company to Mr. Yellowlees, excluding the cost of
certain employee benefits and excluding amounts which become taxable to him
under a stock option or other plan. Such amounts are reflected in the
salary, bonus and restricted stock columns of the Summary Compensation
Table above. Federal regulations cap the total compensation that may be
considered in providing benefits under the Retirement Plan.
-17-
Employment, Severance and Change in Control Arrangements
--------------------------------------------------------
Robert A. Yellowlees. During fiscal year 2001, Mr. Yellowlees was employed
pursuant to an employment agreement (the "Agreement") which initially became
effective in May 1992 and was subsequently extended. The Agreement provided for
Mr. Yellowlees' continued employment as Chairman, President and Chief Executive
Officer of the Company for a term expiring May 31, 2001, unless extended by
mutual agreement.
The Agreement provided for a minimum annual base salary of $540,000,
subject to yearly review, and additional annual bonus opportunity, which could
range from 0% to 150% of base salary 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 could be paid, at Mr. Yellowlees' election, in whole or in part in
shares of Common Stock. Under the Agreement, Mr. Yellowlees was entitled to
participate in all other benefit plans maintained by the Company for executive
officers, and the Company maintained on behalf of Mr. Yellowlees, or reimbursed
him for the premiums paid for, specified life insurance and disability insurance
coverage which were provided by his previous employer.
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 would 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 would be fully and immediately
vested, (c) all stock options held by Mr. Yellowlees would be fully and
immediately vested, and (d) the Company would pay Mr. Yellowlees 75% of the
target amount of the bonus for the fiscal year in which his employment was
terminated. 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 would be
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 provided that upon its termination as a result of Mr. Yellowlees' death,
the restricted stock awarded to him and all stock options granted to him would
be fully vested.
On January 31, 2001, the Company completed the spin-off of Global Payments
Inc., its electronic commerce line of business. Prior to the spin-off, Mr.
Yellowlees served as President and Chief Executive Officer of the Company, which
included both the e-commerce and the healthcare information lines of business of
the Company. After the separation of these businesses, Walter Hoff became
President and Chief Executive Officer of the Company (NDCHealth), Paul Garcia
became President and Chief Executive Officer of Global Payments Inc., and Mr.
Yellowlees continued to serve as Chairman of the Board of each of these
companies. Accordingly, Mr. Yellowlees' previous executive positions were
eliminated. Mr. Yellowlees agreed to continue to serve both companies as a non-
executive director and Chairman of the Board to assure continuity and a smooth
transition. He completed his executive duties with respect to Global Payments
Inc. on January 31, 2001 and with respect to NDCHealth on March 31, 2001.
Allowing for unused vacation, his last day of employment by the Company for
administrative purposes was May 7, 2001.
Since Mr. Yellowlees' position was eliminated in conjunction with the spin-
off, the provisions of the Agreement with respect to the severance benefits
described above became effective, with certain mutually agreed modifications.
Specifically, he will receive a severance amount of $3,615,000, payable over
three years, and continued premiums for life insurance and certain medical and
other welfare benefits for three years having an aggregate cost of approximately
$238,575. Of this total severance cost, $1,926,787 was paid to the Company by
Global Payments Inc. in connection with the spin-off. In addition, all of Mr.
Yellowlees' stock options and restricted stock awards became fully vested as
provided in the Agreement. Under the
-18-
terms of the plans under which they were issued, the stock options would have
expired unless exercised within 90 days of his termination. Four of his stock
options were amended to extend the post-termination exercise period to the
remaining term of the option. The Company did not extend the exercise period
with respect to Mr. Yellowlees' remaining options, but the Company agreed to
extend to him or his transferee three loans, each in the amount of the exercise
price of the three options that would expire after 90 days. These loans, in the
aggregate principal amount of $4,287,008, are due on the original expiration
dates of the related options, are full recourse, bear interest at market rates
and are secured by the shares of Common Stock acquired upon exercise of the
options.
Other Executive Employment Agreements. Messrs. Hoff, Miller, Rosenkoetter
and Hutto and Ms. Rumsey entered into employment agreements with the Company in
2000, the material terms of which are summarized below.
The executive is entitled to a minimum annual salary, subject to yearly
review, plus an annual at-risk incentive bonus opportunity, which is determined
annually based on a range of specific financial and non-financial objectives
reflecting the executive's area and scope of responsibility. The executive is
also entitled to participate in all incentive, savings and welfare benefit plans
generally made available to executive officers of the Company. Under the
employment agreements, the executives receive the following current salaries:
Mr. Hoff, $400,000; Mr. Miller, $310,000; Mr. Rosenkoetter, $310,000; Mr. Hutto,
$300,000 and Ms. Rumsey, $250,000.
The executives have agreed in their employment agreements not to disclose
confidential information or compete with the Company, and not to solicit the
Company's customers or recruit its employees, for a period of 24 months
following the termination of their employment.
Each of the employment agreements may be terminated by the Company at any
time for "cause" or "poor performance" (as defined therein) or for no reason, or
by the executive with or without "good reason" (as defined therein). The
agreement will also be terminated upon the death, disability or retirement of
the executive. Depending on the reason for the termination and when it occurs,
the executive will be entitled to certain severance benefits, as described
below.
If, prior to a change in control of the Company, the executive's employment
is terminated by the Company without cause (but not for poor performance) or the
executive resigns for good reason, the Company will be required to pay accrued
salary and benefits through the date of termination plus a portion of his or her
annual bonus for the current year. For up to 18 months, or until the executive
is employed elsewhere or violates certain restrictive covenants, the Company
will continue to pay the executive his or her base salary and will provide him
or her with health insurance coverage. In addition, all of the executive's
restricted stock awards will vest, and those stock options that would have
vested in the next 24 months will vest and remain exercisable for 90 days after
the end of the salary continuation period, as described above.
If, prior to a change in control of the Company, the executive's employment
is terminated by the Company for poor performance, the Company will be required
to pay the executive's accrued salary and benefits through the date of
termination plus a portion of the target annual bonus for the current year. For
up to 12 months, or until he or she is employed elsewhere or violates certain
restrictive covenants, the Company will continue to pay the executive's base
salary and will provide him or her with health insurance coverage. In addition,
all of the executive's restricted stock awards and stock options that would have
vested in the next 24 months will vest, and the options will remain exercisable
for 90 days after the earlier of six months or the end of the salary
continuation period, as described above.
-19-
If, after a change in control of the Company, the executive's employment is
terminated by the Company without cause or he or she resigns for good reason,
the Company will be required to pay the executive's accrued salary and benefits
through the date of termination plus 100% of his or her annual bonus opportunity
for the current year. For 24 months or unless the executive violates certain
restrictive covenants, the Company will continue to pay the executive's base
salary and will provide him or her with health insurance coverage. In addition,
all of the executive's restricted stock awards and stock options will vest, and
the options will remain exercisable for 90 days after the end of the salary
continuation period, as described above.
Whether or not a change in control shall have occurred, if the employment
of the executive is terminated by reason of death, disability or retirement, the
executive will be entitled to accrued salary and benefits through the date of
termination and any death, disability or retirement benefits that may apply, but
no additional severance amount. If the Company terminates the executive for
cause, or if he or she resigns from the Company without good reason, the
executive will be entitled to his accrued salary and benefits through the date
of termination, but no additional severance amount.
For purposes of these employment agreements, a change in control of the
Company is generally defined as the acquisition by a third party of 35% or more
of the voting power of the Company, or the consummation of certain mergers,
asset sales or other major business combinations. A restructuring or separation
of any line of business of the Company will not, of itself, constitute a change
in control. Each of these employment agreements provides that the executive
will be entitled to a tax gross-up payment from the Company to cover any excise
tax liability he or she may incur as a result of payments or benefits contingent
on a change in control, but such gross-up payment will be made only if the
after-tax benefit to the executive of such tax gross-up is at least $50,000. If
not, the benefits would be reduced to an amount that would not trigger the
excise tax.
-20-
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, 1996. The figures assume an initial 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. On
February 1, 2001, the Company distributed to its stockholders all the shares of
common stock of Global Payments Inc. ("Global"), its eCommerce subsidiary. For
purposes of this graph, the distribution of the Global shares is treated as a
nontaxable cash dividend that would have been converted into additional shares
of the Company's Common Stock at the close of business on February 1, 2001.
[GRAPH]
Research Data Group Peer Group Total Return Worksheet
NATIONAL DATA CORP
Cumulative Total Return
-------------------------------------------------------------------
5/96 5/97 5/98 5/99 5/00 5/01
------- ------- ------- ------- ------- -------
NATIONAL DATA CORPORATION $100.00 $117.09 $100.88 $127.53 $ 60.36 $121.34
S & P 500 $100.00 $129.41 $169.12 $204.68 $226.13 $202.27
S & P COMPUTERS (SOFTWARE & SERVICES) $100.00 $167.24 $217.01 $369.27 $397.64 $299.23
Report of the Audit Committee
The Audit Committee oversees the Company's financial reporting process and
internal controls on behalf of the Board of Directors. The Audit Committee is
composed of independent directors, and operates under a written charter approved
by the Board of Directors, a copy of which is included as Appendix A to this
Proxy Statement.
Management has primary responsibility for the financial statements and the
reporting process, including the systems of internal controls, and has
represented to the Committee that the Company's 2001
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consolidated financial statements are in accordance with generally accepted
accounting principles. In fulfilling its oversight responsibilities, the
Committee reviewed and discussed the audited financial statements in the Annual
Report with management and Arthur Andersen, the Company's independent
accountants.
The Committee reviewed with Arthur Andersen the matters required to be
discussed under SAS 61. The Committee also received written disclosures and the
letter from Arthur Andersen required by Independence Standards Board Standard
No. 1, and discussed with Arthur Andersen their independence.
The Committee discussed with Arthur Andersen the overall scope and plans
for their audit. The Committee meets with the internal auditors and Arthur
Andersen, with and without management present, to discuss the results of their
examinations, their evaluations of the Company's internal controls, and the
overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors that the audited consolidated financial
statements be included in the Company's Annual Report on Form 10-K for the year
ended May 31, 2001, for filing with the Securities and Exchange Commission. In
further reliance on such reviews and discussions, nothing has come to the
attention of the Committee that would cause the Committee to believe that the
audited financial statements contain an untrue statement of material fact or
omit to state a material fact necessary to make the statements made, in light of
the circumstances under which they were made, not misleading. The Committee
also recommended, and the Board of Directors has approved, Arthur Andersen as
the Company's independent accountants for 2002.
Audit Committee
Neil Williams, Chairman
J. Veronica Biggins
James F. McDonald
Audit Fees
The aggregate fees billed by Arthur Andersen LLP for professional services
rendered for the audit of the Company's annual financial statements for fiscal
year 2001 and the review of the Company's financial statements included in its
Forms 10-Q for fiscal year 2001 were $402,000.
Financial Information Systems Design and Implementation Fees
There were no fees billed by Arthur Andersen LLP for professional services
rendered for information technology services relating to financial information
systems and implementation for fiscal year 2001.
All Other Fees
The aggregate fees billed by Arthur Andersen LLP for services to the
Company, other than the services described above under "Audit Fees," were
$646,000.
Transactions with Related Parties
For estate planning reasons, Mr. Yellowlees transferred three stock options
for a total of 765,495 shares of Company stock to MRY Partners, a family limited
partnership of which Mr. Yellowlees serves as the sole general partner. These
stock options, which originally had ten-year exercise periods, would by their
terms expire 90 days after Mr. Yellowlees' termination of employment. The
Company did not extend the exercise period with respect to these options, but
the Company agreed to
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extend to MRY Partners three loans in the amount of the exercise prices of the
options, in the aggregate amount of $4,287,008. The partnership exercised the
options with the proceeds of the loans. The loans are represented by full
recourse notes which bear interest at the applicable federal rate in effect at
the time the loans were made (4.63%, 4.63% and 4.77%, respectively), and are
secured by the shares of stock acquired upon exercise of the options. The loans
expire on July 28, 2002, June 1, 2003, and June 1, 2004, respectively.
Prior to the spin-off of Global Payments Inc. from the Company on January
31, 2001, Mr. Yellowlees served as President and Chief Executive Officer of both
the e-commerce and the healthcare information lines of business of the Company.
Upon the separation of these businesses, Mr. Yellowlees' previous executive
positions were eliminated, and he became entitled to certain severance payments
and benefits in the aggregate amount of $3,853,575, as described above under
"Employment, Severance and Change in Control Arrangements -- Robert A.
Yellowlees." In connection with the spin-off, Global Payments Inc. paid to the
Company $1,926,787 of such severance amounts payable to Mr. Yellowlees.
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee served as an officer or
an employee of the Company or any of its subsidiaries during the fiscal year
ended May 31, 2001, and none of such persons has ever served as an officer of
the Company or any of its subsidiaries. Ms. Biggins serves as a Senior Partner
of Heidrick & Struggles, an executive search firm to which the Company paid
approximately $230,000 in fees for services during the fiscal year ended May 31,
2001.
-23-
2. PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO CHANGE THE NAME OF THE
COMPANY
The Board of Directors has unanimously adopted a resolution to amend the
Company's Certificate of Incorporation, as previously amended (the
"Certificate"), to change the name of the Company to NDCHealth Corporation. If
approved by the stockholders at the Annual Meeting, Article First of the
Certificate would be amended to read in its entirety as follows: "The name of
the corporation is "NDCHealth Corporation."
The Company recently completed the spin off of its eCommerce line of
business and is now focused exclusively on providing a full range of information
services and solutions to the healthcare industry. To create a strong unified
image in the marketplace, the Company is using the NDCHealth brand to identify
its products and services and build upon its solid reputation in healthcare.
The Board of Directors believes that changing the legal name of the Company to
NDCHealth Corporation will eliminate any confusion between the corporate name
and the brand identity, and will serve to reinforce the Company's strategy of
providing end-to-end healthcare solutions.
An affirmative vote of the holders of a majority of the outstanding shares
of Common Stock is required for approval of the proposed amendment to change the
Company's name. If the name change is approved by the stockholders at the
Annual Meeting, the Company will thereafter file a Certificate of Amendment to
its Certificate with the Delaware Secretary of State amending Article First,
which will become effective at the close of business on the date the Secretary
of State accepts the filing.
The change of name of the Company will not in any way affect the validity or
transferability of outstanding stock certificates or otherwise change the
capital structure of the Company. Stockholders should not return their existing
certificates to the Company or its transfer agent, but instead should retain
their certificates. If the name change is approved, the Company will apply to
the New York Stock Exchange for the continued listing of the Common Stock under
the new corporate name.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT
TO CHANGE THE COMPANY'S NAME. 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 AMENDMENT.
-24-
Additional Information
Auditors. The independent public accounting firm of Arthur Andersen LLP
--------
served as the Company's auditors for the fiscal year ended May 31, 2001 and is
serving as auditors for the Company for the current fiscal year which began June
1, 2001. 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, however, stockholders voting electronically (via phone or the
Internet) should understand that there may be costs associated with electronic
access, such as usage charges from Internet service providers or telephone
companies and the like. 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 Shareholder-New Jersey to solicit proxies
on behalf of the Company and it is estimated that the fees for such services
will not exceed $10,000.
Other Matters. Neither Management nor the Board of Directors is aware 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.
Stockholder Proposals. Proposals of stockholders of the Company intended to
---------------------
be presented for consideration at the 2002 Annual Meeting of Stockholders must
be received by the Company at its principal executive offices on or before May
3, 2002, in order to be included in the Company's proxy statement and form of
proxy relating to the 2002 Annual Meeting. In addition, with respect to any
stockholder proposal that is not submitted for inclusion in the proxy statement
and form of proxy relating to the 2002 Annual Meeting, but is instead sought to
be presented directly to the stockholders at the 2002 Annual Meeting, management
will be able to vote proxies in its discretion if the Company either (i)
receives notice of the proposal before the close of business on July 17, 2002
and advises stockholders in the proxy statement for the 2002 Annual Meeting
about the nature of the proposal and how management intends to vote on the
proposal, or (ii) does not receive notice of the proposal before the close of
business on July 17, 2002.
Stockholder List. The Company will maintain a list of stockholders entitled
----------------
to vote at the Annual Meeting at its corporate offices at National Data Plaza,
Atlanta, Georgia 30329-2010. The list will be available for examination by any
stockholder for any purpose germane to the Annual Meeting during normal business
hours for a period of ten days prior to the meeting. The list will also be
available for examination at the Annual Meeting.
Annual Report on Form 10-K. A copy of the Company's Annual Report on Form
--------------------------
10-K, including the financial statements and financial statement schedules (but
without exhibits) for the fiscal year ended May 31, 2001 will be provided, free
of charge, upon written request of any stockholder addressed to National Data
Corporation, National Data Plaza, Atlanta, Georgia 30329-2010, Attention:
Investor Relations. Additionally, the EDGAR version of the Company's 10-K is
available on the Internet on the Securities and Exchange Commission's web site
(www.sec.gov).
Closing Price. The closing price of the Common Stock, as reported by the
-------------
New York Stock Exchange on August 28, 2001, was $38.66.
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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
except as set forth below, the Company believes that, during the 2001 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 Exchange Act, except that a late Form 3 was filed on behalf
of E. Christine Rumsey, Vice President--Human Resources.
-26-
APPENDIX A
----------
NATIONAL DATA CORPORATION
AUDIT COMMITTEE CHARTER
. The Audit Committee is a committee of the Board of Directors. The Audit
Committee assists the Board of Directors in fulfilling the Board's
oversight responsibilities by reviewing the financial information which
will be provided to the shareholders and others, the systems of internal
controls which management and the Board of Directors have established, and
the audit process.
. In meeting its responsibilities, the Audit Committee is expected to:
1. Provide an open avenue of communication with the Company's internal
auditors and independent accountant.
2. Recommend to the Board of Directors the independent accountant to be
nominated, review and approve the compensation of the independent
accountant, and review and approve the discharge of the independent
accountant.
3. Confirm the independence of the internal auditor and the independent
accountant.
4. Consider, in consultation with the independent accountant, the
director of internal auditing, and other members of management as
appropriate, the audit scope and plan of the internal auditors and the
independent accountant.
5. Consider and review:
The adequacy of the Company's system of internal controls
. Any related significant findings and recommendations of the
independent accountant and internal auditors together with
management's responses thereto.
. Any difficulties encountered in the course of audits, including
any restrictions on the scope of work or access to required
information.
6. Review with the independent accountant and management, at the
completion of the annual examination, the audit of the financial
statements, including footnotes and audit report.
7. Meet with the director of internal auditing, the independent
accountant, and management in separate executive sessions to discuss
any matters that the Committee or these groups believe should be
discussed privately with the Audit Committee.
8. Prepare a report to the shareholders as required by the Securities and
Exchange Commission. The report should be included in the annual
proxy statement effective for the 2001 Annual Meeting.
9. Review and be responsive to any regulatory agencies' concerns or
inquiries with regard to reports or correspondence on behalf of the
Board of Directors.
The Audit Committee shall have the power to conduct or authorize
investigation into any matters within the Committee's scope of responsibilities.
The Committee shall be empowered to retain independent counsel, accountants, or
others to assist it in the conduct of any investigation.
The Committee shall meet at least quarterly, either in person or by
telephone conference.
Membership of the Audit Committee shall consist of at least three or more
independent directors who shall serve at the pleasure of the Board of Directors.
Audit Committee members and the Committee chairman shall be designated by the
full Board of Directors.
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
Patricia A. Wilson 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 October 25, 2001, at 11:00 A.M., EST,
(the "Annual Meeting"), or at any adjournments thereof, upon the proposals
described in the Notice of Annual Meeting of Stockholders and Proxy Statement,
both dated August 31, 2001, 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 of the nominees named herein becomes unable to 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.
1.ELECTION OF DIRECTORS.
On the proposal to elect the following directors to serve until the 2004
Annual Meeting of Stockholders of the Company or until his or her successor is
elected and qualified:
J. Veronica Biggins Terri A. Dial Kurt M. Landgraf
FOR [_] WITHHOLD AUTHORITY [_]
Instructions: To withhold authority to vote for any individual nominee, write
the nominee's name in the space provided below.
- -------------------------------------------------------------------------------
2.AMENDMENT OF CERTIFICATE OF INCORPORATION
On the proposal to amend the Company's Certificate of Incorporation to
change the name of the Company to NDCHealth Corporation.
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 election of the director nominees, FOR the proposed amendment to the
Company's Certificate of Incorporation to change the Company's name and with
discretionary authority on all other matters that may properly come before the
Annual Meeting and any adjournments thereof.
Shares Held: ______________________
-----------------------------------
Signature of Stockholder
-----------------------------------
Signature of Stockholder (If
Held Jointly)
Dated: ____________________________
Month Day
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.
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.
-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
Please detach proxy at perforation before mailing.
YOU MAY VOTE BY TELEPHONE OR THE INTERNET.
DETACH CARD
If you are voting by telephone or the internet, please do not mail your
proxy.
Vote By Telephone Vote By Internet Vote By Mail
Call Toll-Free using a Access the Website and Return your proxy in the
Touch-Tone phone cast your vote postage-paid envelope
1-800-250-9081 http://www.votefast.com provided.
Vote 24 hours a day, 7 days a week!
Your telephone or internet vote must be received by 11:59 p.m. EST
on October 24, 2001, to be counted in the final tabulation.
Your control number is
Vote By Telephone
Have your proxy card available when you call the Toll-Free number 1-800-250-
9081 using a Touch-Tone phone. You will be prompted to enter your control
number and then you can follow the simple prompts that will be presented to
you to record your vote.
Vote By Internet
Have your proxy card available when you access the website
http://www.votefast.com. You will be prompted to enter your control number and
then you can follow the simple prompts that will be presented to you to record
your vote.
Vote By Mail
Please mark, sign and date your proxy card and return it in the postage paid
envelope provided or return it to: SunTrust Bank, Atlanta, P.O. Box 4625,
Atlanta, GA 30302.
To Change Your Vote
Any subsequent vote by any means will change your prior vote. For example, if
you voted by telephone, a subsequent internet vote will change your vote. The
last vote received before 11:59 p.m. EST, October 24, 2001, will be the one
counted. You may also revoke your proxy by voting in person at the Annual
Meeting.