-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Fe49sURNC9Fw5q57B/phTGwnHhltVx7Lq85Ynhz3btQmB0zj3Bs90xxnSPMDHwTl ClLX9F3D5UK9cyP+mVjGNg== 0000950144-95-001450.txt : 19950517 0000950144-95-001450.hdr.sgml : 19950517 ACCESSION NUMBER: 0000950144-95-001450 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19950516 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL DATA CORP CENTRAL INDEX KEY: 0000070033 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 580977458 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-59377 FILM NUMBER: 95540343 BUSINESS ADDRESS: STREET 1: NATIONAL DATA COPRORATION STREET 2: NATIONAL DATA PLAZA CITY: ATLANTA STATE: GA ZIP: 30329 BUSINESS PHONE: 4047282000 MAIL ADDRESS: STREET 1: NATIONAL DATA PLZ CITY: ATLANTA STATE: GA ZIP: 30329-2010 S-3 1 NATIONAL DATA CORP. S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 16, 1995 REGISTRATION NO. 33- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- NATIONAL DATA CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 58-0977458 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number)
NATIONAL DATA PLAZA ATLANTA, GEORGIA 30329-2010 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) E. MICHAEL INGRAM GENERAL COUNSEL AND SECRETARY NATIONAL DATA CORPORATION NATIONAL DATA PLAZA ATLANTA, GEORGIA 30329-2010 (404) 728-2000 (Name, address, including zip code, and telephone number, including area code, of agent for service) THE COMMISSION IS REQUESTED TO SEND COPIES OF ALL COMMUNICATIONS TO: JEFFREY P. ADAMS RANDOLPH C. COLEY ALSTON & BIRD KING & SPALDING ONE ATLANTIC CENTER 191 PEACHTREE STREET 1201 WEST PEACHTREE STREET ATLANTA, GEORGIA 30303-1763 ATLANTA, GEORGIA 30309-3424 (404) 572-4600 (404)881-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If the only securities being registered on this form are being registered pursuant to dividend or interest reinvestment plans, check the following box: / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: / / CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF SHARES AMOUNT TO BE AGGREGATE PRICE AGGREGATE OFFERING AMOUNT OF TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE - ------------------------------------------------------------------------------------------------------ Common Stock, $.125 par value per share.................. 3,162,500 shares $20.625 $65,226,563 $22,492 - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------
(1) Includes 412,500 shares subject to the Underwriters' over-allotment option. (2) Estimated solely for the purpose of determining the registration fee. --------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED MAY 16, 1995 2,750,000 SHARES [LOGO] NATIONAL DATA CORPORATION COMMON STOCK (PAR VALUE $.125 PER SHARE) --------------------- All of the 2,750,000 shares of Common Stock offered hereby are being sold by the Company. The Company's Common Stock is quoted on the New York Stock Exchange under the symbol "NDC." The last reported sale price of the Common Stock on the New York Stock Exchange Composite Tape on May 15, 1995 was $21.125 per share. See "Price Range of Common Stock and Dividends." SEE "CERTAIN CONSIDERATIONS" FOR CERTAIN MATTERS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK. --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ---------------------
INITIAL PUBLIC UNDERWRITING PROCEEDS TO OFFERING PRICE DISCOUNT(1) COMPANY(2) ------------------ ------------------ ------------------ Per Share.................... $ $ $ Total(3)..................... $ $ $
- --------------- (1) The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. See "Underwriting." (2) Before deducting estimated expenses of $325,000 payable by the Company. (3) The Company has granted the Underwriters an option for 30 days to purchase up to an additional 412,500 shares at the initial public offering price per share, less the underwriting discount, solely to cover over-allotments. If such option is exercised in full, the total initial public offering price, underwriting discount and proceeds to Company will be $ , $ and $ , respectively. See "Underwriting." --------------------- The shares offered hereby are offered severally by the Underwriters, as specified herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that certificates for the shares will be ready for delivery in New York, New York, on or about June , 1995. GOLDMAN, SACHS & CO. SALOMON BROTHERS INC --------------------- The date of this Prospectus is June , 1995. 3 AVAILABLE INFORMATION National Data Corporation (the "Company" or "NDC") has filed a Registration Statement on Form S-3 (together with all amendments and exhibits filed or to be filed in connection therewith, the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Common Stock offered hereby. This Prospectus does not contain all the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Securities and Exchange Commission (the "Commission"). Statements contained herein concerning the provisions of documents are necessarily summaries of such documents, and each statement is qualified in its entirety by reference to the copy of the applicable document filed with the Commission. The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and, in accordance therewith, files reports, proxy statements and other information with the Commission. Such reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices located at 7 World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can also be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The common stock of the Company, $.125 par value per share (the "Common Stock"), is listed on the New York Stock Exchange (the "NYSE") under the symbol "NDC," and such reports, proxy statements and other information concerning the Company are available for inspection at the office of the NYSE, 20 Broad Street, New York, New York 10005. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents previously filed with the Commission (File No. 0-3966) pursuant to the 1934 Act are hereby incorporated in this Prospectus by reference: 1. The Company's Annual Report on Form 10-K for the year ended May 31, 1994, as amended on September 19, 1994; 2. The Company's Quarterly Reports on Form 10-Q for the quarters ended August 31, 1994, November 30, 1994, and February 28, 1995; 3. The Company's Current Reports on Form 8-K dated November 17, 1994 and February 2, 1995; 4. The description of the Common Stock contained in the Company's Registration Statement on Form 8-A as filed with the Commission on September 11, 1969; and 5. The description of the Company's Junior Preferred Stock Purchase Rights contained in the Company's Registration Statement on Form 8-A as filed with the Commission on January 22, 1991, as amended on October 5, 1993. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act subsequent to the date of this Prospectus and prior to the termination of this offering shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the respective dates of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified and superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person to whom a Prospectus is delivered, upon written or oral request of such person, a copy of any and all of the information that has been incorporated by reference in this Prospectus (excluding exhibits unless such exhibits are specifically incorporated by reference into such documents). Please direct such requests to the Secretary, National Data Corporation, National Data Plaza, Atlanta, Georgia, 30329-2010, telephone number (404) 728-2000. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. 2 4 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements and notes thereto appearing elsewhere or incorporated by reference into this Prospectus. Except as otherwise indicated, (i) the information in this Prospectus assumes the Underwriters' overallotment option is not exercised, (ii) share and per share data have been restated to reflect a three-for-two stock split effected on March 20, 1995, and (iii) references to the "Company" or "NDC" include NDC and its subsidiaries. The Company's fiscal year ends on May 31st of each calendar year. References to fiscal years by date refer to the fiscal year ending May 31 of that calendar year. THE COMPANY National Data Corporation (the "Company" or "NDC") is a leading provider of high-volume transaction processing services and application systems to the health care and payment systems markets. The Company serves a diverse customer base comprised of more than 60,000 health care providers, 350,000 merchant locations, 35,000 corporations and 200 banking institutions, as well as federal and state government agencies. The Company markets its services directly to merchants and health care providers and indirectly through business alliances with a wide range of banks, insurance companies and distributors. The Company is one of the largest independent providers of health care transaction processing and integrated payment systems services in the United States, having processed over 1.5 billion transactions during fiscal 1994. NDC provides electronic claims processing and adjudication services, practice management systems and clinical data base information for pharmacies, dentists, physicians, hospitals, health maintenance organizations, clinics and nursing homes, as well as other health care providers. Management believes that the Company is the largest independent processor of real-time health care transactions, and that it is well positioned to capitalize on the growing demand for cost containment and improved patient care in the health care industry. Approximately 33% of the Company's total revenue for the first nine months of fiscal 1995 was derived from the Company's health care systems and services which represent the fastest growing portion of the Company's business. The Company's integrated payment systems business offers transaction processing solutions to merchants, health care providers, universities and colleges and government agencies. The Company is one of the largest providers of credit card, debit card and check verification/guarantee processing services. NDC also offers electronic tax filing and payment services to government and corporate customers. The Company recently introduced a purchase card that provides electronic payment capabilities for business-to-business purchasing transactions. Approximately 56% of the Company's total revenue for the first nine months of fiscal 1995 was derived from the Company's integrated payment systems and services. NDC also provides cash management, information reporting and electronic data interchange (EDI) services for government and corporate customers, which represented approximately 8% of the Company's total revenue for the first nine months of fiscal 1995. The Company's products offer greater convenience to purchasers and providers of goods and services and reduce processing costs, settlement delays and losses from fraudulent transactions. NDC's advanced high speed computer and telecommunications network enables the Company to electronically process, capture and transmit a high volume of point-of-service transactions 24 hours a day, seven days a week. While the transition from paper-based to electronic transaction processing continues, the earliest and most significant penetration has occurred in the areas of credit card authorization and settlement and pharmacy transaction processing. NDC believes that the rapid transition to electronic transaction processing demonstrates the potential for automation of other markets still dominated by paper-based processing, such as additional health care applications and the transfer of information between businesses. The Company's business strategy is to be a total solution provider of value-added transaction processing systems and services in the markets it serves. NDC believes that both the integrated payment 3 5 systems and the health care markets present attractive opportunities for continued growth. In pursuing its strategy, the Company seeks both to increase its penetration of existing application systems and point-of-use transaction processing markets and to continue to identify and create new markets for its services. The Company will also continue to seek to enhance existing products and develop new systems and services; for example, services relating to financial electronic data interchange and medical claims processing. To support its business strategy, NDC has expanded its focus on acquisition opportunities and alliances with other companies that allow NDC to increase its market penetration, technological capabilities, product offerings and distribution capabilities. Since the beginning of fiscal 1995, the Company has completed six acquisitions with an aggregate cash purchase price of approximately $46 million. These acquisitions give NDC expanded capabilities and customer bases in the physician and dental practice management, pharmacy practice management, hospital and medical claims processing and retail customer check guarantee areas. The Company's address is National Data Plaza, Atlanta, Georgia 30329-2010 and its telephone number is (404) 728-2000. THE OFFERING Common Stock offered......................... 2,750,000 shares Common Stock to be outstanding after the Offering................................... 22,001,429 shares(1) Use of proceeds.............................. The net proceeds of this offering will be added to the Company's working capital and will be available for general corporate purposes, including acquisitions. NYSE symbol.................................. NDC
- --------------- (1) Excludes 2,747,620 shares subject to options outstanding under the Company's stock option and employee stock purchase plans as of May 10, 1995. 4 6 SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NINE MONTHS ENDED FISCAL YEAR ENDED MAY 31, FEBRUARY 28, ---------------------------------------------------- ------------------- 1990 1991 1992 1993 1994 1994 1995 -------- -------- -------- -------- -------- -------- -------- STATEMENT OF INCOME DATA: Revenue from operations: Integrated Payment Systems.................. $128,044 $132,918 $121,774 $113,793 $112,427 $ 86,179 $100,078 Health Care Application Systems and Services..... 36,767 37,488 47,735 56,268 63,005 45,392 58,962 Government and Corporate Information Systems and Services................. 26,645 29,386 24,767 21,549 20,565 14,626 14,802 Other...................... 82,313 27,299 22,210 12,946 8,009 6,388 4,094 -------- -------- -------- -------- -------- -------- -------- Total............... 273,769 227,091 216,486 204,556 204,006 152,585 177,936 Operating income (loss)(1)... 11,453 (21,059) 14,675 15,021 18,387 12,741 17,056 Net income (loss)(1)(2)...... $ 3,082 $(14,136) $ 7,419 $ 8,489 $ 9,710 $ 5,877 $ 10,449 Fully diluted earnings (loss) per share.................. $ .17 $ (.80) $ .41 $ .45 $ .50 $ .30 $ .51
AT FEBRUARY 28, 1995 --------------------------- ACTUAL AS ADJUSTED(3) -------- -------------- BALANCE SHEET DATA: Working capital........................................................... $ 27,017 $ 81,881 Acquired intangibles and goodwill, net of accumulated amortization........ 75,692 75,692 Total assets.............................................................. 201,739 256,603 Long-term obligations..................................................... 21,549 21,549 Stockholders' equity...................................................... 118,013 172,877
- --------------- (1) For fiscal 1990 and 1991, includes, among other items, certain restructuring costs relating to the Company's decision to exit the communication services business. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- General." (2) For fiscal 1990, includes income of $1,119,000, net of taxes, relating to discontinued computer timesharing operations. For fiscal 1994 and the first nine months of fiscal 1994, includes an extraordinary charge of $1,450,000, net of income taxes, relating to the settlement of a shareholder lawsuit originally filed in 1990. Net income before the extraordinary charge was $11,160,000, or $0.57 per share, for fiscal 1994, and $7,327,000, or $0.37 per share, for the first nine months of fiscal 1994. (3) Adjusted to give effect to the sale by the Company of 2,750,000 shares of Common Stock offered hereby at an assumed initial public offering price of $21.125 per share (after deduction of the estimated underwriting discounts and estimated expenses of the offering) and the receipt of the estimated net proceeds therefrom. See "Use of Proceeds." 5 7 CERTAIN CONSIDERATIONS In addition to the other information contained in this Prospectus, the following factors should be considered carefully in evaluating an investment in the Common Stock. COMPETITION The markets for the applications systems and services offered by the Company are highly competitive. Competition in the health care transaction processing and integrated payment systems markets affects the Company's ability to gain new customers and the prices it can charge. The key competitive factors for the Company are functionality of products, quality of service and price. Many of the Company's competitors have access to significant capital and management, marketing and technological resources that are equal to or greater than those of the Company, and there can be no assurance that the Company will continue to be able to compete successfully with them. In addition, the Company competes with businesses that internally perform data processing or other services offered by the Company. See "Business -- Competition." MARKETS AND APPLICATIONS The Company's future growth and profitability will depend, in part, upon the further expansion of the health care transaction processing and integrated payment systems markets, the emergence of other markets for electronic transaction processing services and the Company's ability to penetrate such markets. Further expansion of these markets is dependent upon the continued growth in the number of transactions available to be processed and the continued automation of traditional paper-based processing systems. The Company's ability to penetrate such markets will depend, in turn, upon its ability to apply its existing technology, or to develop new technology, to meet the particular service needs of each new market. There can be no assurance that markets for the Company's services will continue to expand and develop or that the Company will be successful in its efforts, or have adequate financial, marketing and technological resources, to penetrate new markets. See "Business -- Business Strategy." INTEGRATED PAYMENT SYSTEMS BUSINESS The Company's merchant customers have liability for charges disputed by cardholders. However, in the case of merchant fraud, or insolvency or bankruptcy of the merchant, the Company may be liable for any of such charges disputed by cardholders. The Company requires cash deposits and other types of collateral by certain merchants to minimize any such contingent liability. In addition, the Company believes that the diversification of its merchant portfolio among industries and geographic regions minimizes its risk of loss. Based on its historical loss experience, the Company has established reserves for estimated losses on transactions processed which management believes are adequate. There can be no assurance, however, that such reserves for losses will be adequate. Any such losses in excess of reserves could have a material adverse effect on the financial condition and results of operations of the Company. ACQUISITION RISKS The Company intends to seek additional acquisition opportunities and alliance relationships with other businesses that will allow it to increase its market penetration, technological capabilities, product offerings and distribution capabilities. There can be no assurance that the Company will be able successfully to identify suitable acquisition candidates, complete acquisitions, integrate acquired operations into its existing operations or expand into new markets. There can also be no assurance that future acquisitions will not have an adverse effect upon the Company's operating results, particularly in the fiscal quarters immediately following the completion of such acquisitions while the operations of the acquired business are being integrated into the Company's operations. Once integrated, acquired operations may not achieve levels of revenues, profitability or productivity comparable with those 6 8 achieved by the Company's existing operations, or otherwise perform as expected. In addition, the Company competes for acquisition and expansion opportunities with companies that have substantially greater resources. DISCRETION IN USE OF PROCEEDS The net proceeds of this offering will be added to the Company's working capital and will be available for general corporate purposes, including acquisitions. As of the date of this Prospectus, the Company cannot specify with certainty the particular uses for the net proceeds to be added to its working capital and accordingly management will have broad discretion in the application of such net proceeds. Although the Company has recently entered into non-binding letters of intent with respect to two possible acquisitions, the Company currently has no other agreements, arrangements or understandings with respect to any particular acquisition, and there can be no assurance that these two acquisitions or any other acquisition will be completed. See "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" and "Business -- Business Strategy." USE OF PROCEEDS The net proceeds from the sale of the shares of Common Stock offered by the Company are estimated to be $54.9 million ($63.1 million if the Underwriters' over-allotment option is exercised in full) at an assumed initial public offering price of $21.125 and after deduction of the estimated underwriting discount and estimated expenses of the offering. The proceeds of this offering will be added to the Company's working capital and will be available for general corporate purposes, including acquisitions. An important component of the Company's growth strategy is the ability to pursue acquisitions. The purpose of this offering is to provide the Company with increased financial flexibility to pursue acquisitions of other businesses that are consistent with the Company's growth strategy. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" and "Business -- Business Strategy." Pending use of the net proceeds of this offering, the Company will make temporary investments in interest-bearing savings accounts, certificates of deposit, United States Government obligations, money market accounts, interest bearing securities or other insured short-term, interest-bearing investments. 7 9 CAPITALIZATION The following table sets forth the capitalization of the Company as of February 28, 1995, and as adjusted to reflect the sale of 2,750,000 shares of Common Stock offered hereby by the Company at an assumed initial public offering price of $21.125 per share (after deduction of the estimated underwriting discount and estimated expenses of the offering) and the receipt of the estimated $54.9 million in net proceeds therefrom. See "Use of Proceeds."
AT FEBRUARY 28, 1995 ------------------------ ACTUAL AS ADJUSTED -------- ----------- (IN THOUSANDS) Long-term obligations............................................... $ 21,549 $ 21,549 Stockholders' equity: Preferred Stock, $1.00 par value per share; 1,000,000 shares authorized; none issued........................................ -- -- Common Stock, $.125 par value per share; 30,000,000 shares authorized; 19,251,429 shares issued; 22,001,249 shares issued as adjusted(1)(2).................................................... 2,406 2,750 Capital in excess of par value.................................... 32,019 86,539 Retained earnings................................................. 85,105 85,105 Cumulative translation adjustment................................. (1,010) (1,010) Less: Deferred compensation........................................ (507) (507) Total stockholders' equity................................ 118,013 172,877 -------- ----------- Total capitalization...................................... $139,562 $ 194,426 ========= ==========
- --------------- (1) On January 24, 1995 the Company's Board of Directors declared a three-for-two stock split, effected in the form of a dividend, of the Common Stock and the rights to purchase one one-hundredth of a share of the Company's $1.00 par value Series A Junior Participating Preferred Stock (the "Junior Participating Preferred Stock"). The stock split was effected on March 20, 1995. As a result of the stock split, the Company issued an additional 6,417,895 shares of Common Stock and related rights to purchase one one-hundredth of a share of the Junior Participating Preferred Stock. (2) Excludes 2,747,620 shares subject to options outstanding under the Company's stock option and employee stock purchase plans as of May 10, 1995. 8 10 PRICE RANGE OF COMMON STOCK AND DIVIDENDS The Common Stock has been traded on the New York Stock Exchange under the symbol NDC since October 14, 1993. Prior to that time, the Common Stock was traded on The Nasdaq Stock Market's National Market. The table below sets forth the high and low sales prices of the Common Stock and the quarterly cash dividends declared per share of Common Stock during the periods indicated.
PRICE RANGE ------------------- CASH DIVIDENDS HIGH LOW DECLARED ------- ------- -------------- FISCAL YEAR ENDED MAY 31, 1993 First Quarter....................................... $ 7.67 $ 6.17 $0.073 Second Quarter...................................... 8.67 5.33 0.073 Third Quarter....................................... 12.00 8.00 0.073 Fourth Quarter...................................... 12.17 9.50 0.073 FISCAL YEAR ENDED MAY 31, 1994 First Quarter....................................... 13.00 9.50 0.073 Second Quarter...................................... 12.83 10.00 0.073 Third Quarter....................................... 14.17 9.75 0.073 Fourth Quarter...................................... 15.33 11.00 0.073 FISCAL YEAR ENDING MAY 31, 1995 First Quarter....................................... 13.50 10.33 0.073 Second Quarter...................................... 14.67 12.92 0.073 Third Quarter....................................... 17.58 13.83 0.073 Fourth Quarter (through May 15, 1995)............... 21.38 16.50 0.075(1)
- --------------- (1) Payable on May 31, 1995 to holders of record on May 22, 1995. The last sale price of the Common Stock as reported on the New York Stock Exchange Composite Tape on May 15, 1995 was $21.125. As of May 12, 1995, there were 2,134 holders of record of the Common Stock. The ability of the Company to pay dividends in the future will be dependent upon general business conditions, earnings, capital requirements, funds legally available for such dividends, contractual provisions of debt agreements and other relevant factors. 9 11 SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) The following selected financial data for the five years ended May 31, 1994 are derived from the consolidated financial statements of the Company which have been audited by Arthur Andersen LLP, independent public accountants. The financial data for the nine-month periods ended February 28, 1994 and 1995 are derived from the unaudited consolidated financial statements of the Company. In the Company's opinion, the unaudited consolidated financial statements of the Company include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of its consolidated financial position and results of operations for these periods. Operating results for the nine months ended February 28, 1995 are not necessarily indicative of the results that may be expected for fiscal 1995. The data should be read in conjunction with the consolidated financial statements of the Company and related notes incorporated by reference in this Prospectus and "Management's Discussion and Analysis of Financial Condition and Results of Operations," included elsewhere herein.
NINE MONTHS ENDED FISCAL YEAR ENDED MAY 31, FEBRUARY 28, ---------------------------------------------------- ------------------- 1990 1991 1992 1993 1994 1994 1995 -------- -------- -------- -------- -------- -------- -------- STATEMENT OF INCOME DATA: Revenue from operations: Integrated Payment Systems....................... $128,044 $132,918 $121,774 $113,793 $112,427 $ 86,179 $100,078 Health Care Application Systems and Services..... 36,767 37,488 47,735 56,268 63,005 45,392 58,962 Government and Corporate Information Systems and Services....................................... 26,645 29,386 24,767 21,549 20,565 14,626 14,802 Other............................................ 82,313 27,299 22,210 12,946 8,009 6,388 4,094 -------- -------- -------- -------- -------- -------- -------- Total........................................ $273,769 $227,091 $216,486 $204,556 $204,006 $152,585 $177,936 Operating expenses: Cost of service.................................. 166,320 143,997 130,569 122,537 117,208 89,348 97,286 Sales, general and administrative................ 80,544 75,381 71,242 66,998 68,411 50,496 63,594 Restructuring costs(1)............................. 15,452 28,772 -- -- -- -- -- -------- -------- -------- -------- -------- -------- -------- Operating income (loss)(1)......................... 11,453 (21,059) 14,675 15,021 18,387 12,741 17,056 Other income (expense): Investment and other income...................... 2,341 2,754 2,312 1,851 480 401 205 Interest expense, net............................ (7,387) (5,566) (4,196) (2,236) (1,508) (1,179) (935) -------- -------- -------- -------- -------- -------- -------- Income (loss) before taxes and extraordinary item............................................. 6,407 (23,871) 12,791 14,636 17,359 11,963 16,326 Provision (benefit) for income taxes............... 4,444 (9,735) 5,372 6,147 6,199 4,636 5,877 -------- -------- -------- -------- -------- -------- -------- Net income (loss) from: Continuing operations(1)....................... $ 1,963 $(14,136) $ 7,419 $ 8,489 $ 11,160 $ 7,327 $ 10,449 Discontinued operations........................ 1,119 -- -- -- -- -- -- Extraordinary item(2).......................... -- -- -- -- (1,450) (1,450) -- -------- -------- -------- -------- -------- -------- -------- Net income (loss).................................. $ 3,082 $(14,136) $ 7,419 $ 8,489 $ 9,710 $ 5,877 $ 10,449 ========= ========= ========= ========= ========= ========= ========= Fully diluted earnings (loss) per share: Continuing operations(1)......................... $ .11 $ (.80) $ .41 $ .45 $ .57 $ .37 $ .51 Discontinued operations.......................... .06 -- -- -- -- -- -- Extraordinary item(2)............................ -- -- -- -- (.07) (.07) -- -------- -------- -------- -------- -------- -------- -------- Fully diluted earnings (loss) per share............ $ .17 $ (.80) $ .41 $ .45 $ .50 $ .30 $ .51 ========= ========= ========= ========= ========= ========= =========
AT MAY 31, AT FEBRUARY 28, ---------------------------------------------------- ---------------- 1990 1991 1992 1993 1994 1995 -------- -------- -------- -------- -------- ---------------- BALANCE SHEET DATA: Working capital........................................ $ (4,153) $ 3,080 $ 16,464 $ 37,742 $ 48,873 $ 27,017 Acquired intangibles and goodwill, net of accumulated amortization......................................... 64,626 54,850 53,264 46,299 41,250 75,692 Total assets........................................... 277,200 212,146 194,882 175,348 183,326 201,739 Long-term obligations.................................. 54,071 39,055 40,424 26,329 23,063 21,549 Stockholders' equity................................... 110,891 93,023 96,450 101,261 109,331 118,013
- --------------- (1) In fiscal 1990 and 1991, includes, among other items, certain restructuring costs relating to the effects of the Company's decision to exit the communication services business. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- General." (2) Relates to the settlement by the Company of a shareholder lawsuit originally filed in 1990. 10 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the consolidated financial statements of the Company and related notes incorporated by reference in this Prospectus. GENERAL Founded in 1967, NDC's business initially focused on the utilization of toll-free 800 telephone service to authorize petroleum company credit cards. Shortly thereafter, the Company expanded the use of its technology to provide credit card authorization for bank issued credit cards. This service has now grown into the broad array of integrated payment systems offered by the Company. During the 1970's and 1980's, the Company diversified its business and added services such as cash management and communications services. The Company's communication services business provided telemarketing services, operator services and related telecommunications services to retailers and long distance telephone companies. From fiscal 1987 to fiscal 1990, the Company's communications services revenue increased at a compound annual rate of approximately 50%, substantially as a result of a service contract with one company. In February 1990, that company elected to take its operator service operations in-house and, as a result, the Company's communication services revenue declined substantially. The Company subsequently decided in fiscal 1991 to exit the communication services business. In addition to providing integrated payment systems and services, since the late 1980's the Company has provided pharmacy and dental practice management systems and health care transactions processing services. In 1988, the Company pioneered the development of the pharmacy claims processing business. In fiscal 1993, under the leadership of new management, the Company focused its core operations on the further development of its integrated payment systems and services business and expansion into new segments of the health care industry. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, selected items in the Company's consolidated statements of income as a percentage of total revenue.
NINE MONTHS FISCAL YEAR ENDED MAY ENDED 31, FEBRUARY 28, ---------------------- ------------- 1992 1993 1994 1994 1995 ---- ---- ---- ---- ---- Revenue from operations: Integrated Payment Systems............................ 56% 56% 55% 56% 57% Health Care Application Systems and Services.......... 22 28 31 30 33 Government and Corporate Information Systems and Services........................................... 11 10 10 10 8 Other................................................. 11 6 4 4 2 ---- ---- ---- ---- ---- Total......................................... 100% 100% 100% 100% 100% Cost of service......................................... 60 60 57 59 55 ---- ---- ---- ---- ---- Gross margin.......................................... 40 40 43 41 45 Sales, general and administrative expense............... 33 33 34 33 35 ---- ---- ---- ---- ---- Operating margin...................................... 7 7 9 8 10 Investment and other income............................. 1 1 0 0 0 Interest expense, net................................... (2) (1) 0 0 (1) ---- ---- ---- ---- ---- Income before income taxes and extraordinary item..... 6 7 9 8 9 Provision for income taxes.............................. 3 3 3 3 3 ---- ---- ---- ---- ---- Net income before extraordinary item.................... 3 4 6 5 6 Extraordinary item.................................... -- -- (1) (1) -- ---- ---- ---- ---- ---- Net income.............................................. 3% 4% 5% 4% 6% ==== ==== ==== ==== ====
11 13 NINE MONTHS ENDED FEBRUARY 28, 1995 COMPARED TO NINE MONTHS ENDED FEBRUARY 28, 1994 REVENUE Total revenue for the first nine months of fiscal 1995 was $177,936,000, an increase of $25,351,000 (17%) from the same period in fiscal 1994. The revenue increase was the result of increased revenue in Health Care Application Systems and Services, $13,570,000 (30%), Integrated Payment Systems, $13,899,000 (16%), and Government and Corporate Information Systems and Services, $176,000 (1%), partially offset by a decrease in Other Revenue of $2,294,000 (36%). HEALTH CARE APPLICATION SYSTEMS AND SERVICES. Health Care revenue increased for the first nine months of fiscal 1995 as compared to the same period in fiscal 1994 as a result of (i) increases in electronic claims processing, which increased $9,108,000 (45%), and (ii) increases in revenue from the Company's practice management systems for the pharmacy, dental, physician, government and institutional sectors of 26%, including the impact of acquisitions completed during the period. INTEGRATED PAYMENT SYSTEMS. Integrated Payment Systems revenues increased 16% for the first nine months of fiscal 1995 compared to the same period in fiscal 1994. This increase was the result of several factors. First, direct payment services revenue for the first nine months of fiscal 1995 increased $6,811,000 (14%) over the same period in fiscal 1994, primarily due to increased volume of merchant sales processed and equipment sales. Second, two check guarantee businesses were acquired during fiscal 1995. Offsetting these increases, revenue in the Company's indirect merchant processing business (distribution through banks) decreased 9% for the first nine months of fiscal 1995 from the same period in fiscal 1994, as a result of lower revenue per electronic transaction. This decrease was primarily a result of reduced prices associated with the renewal of a number of contracts with increased volume commitments and movement from voice to electronic transactions. GOVERNMENT AND CORPORATE INFORMATION SYSTEMS AND SERVICES. Government and Corporate Information Systems and Services revenue increased 1% for the first nine months of fiscal 1995 over the same period of the prior year due to increased sales of software for electronic data interchange (EDI) applications. OTHER. The decrease in Other Revenue of 36% for the first nine months of fiscal 1995 as compared to the same period in fiscal 1994 was principally related to the Company's decision to exit the communication services market in fiscal 1991. The customer contracts associated with this business expired in the first quarter of fiscal 1995. The remaining revenue in the Other category reflects revenue from international operations. COSTS AND EXPENSES Cost of service for the first nine months of fiscal 1995 was $97,286,000, an increase of $7,938,000 (9%) from the same period in fiscal 1994. While the cost of operations increased $5,700,000 (8%) for the first nine months of fiscal 1995 as compared to the same period in fiscal 1994, cost of operations as a percentage of revenue decreased from 47% for the first nine months of fiscal 1994 to 43% for the first nine months of fiscal 1995. Depreciation and amortization as a percentage of revenue held constant at 7%. Hardware costs increased $357,000 (5%), primarily related to volume associated with increased equipment sales in the Integrated Payment Systems business. Gross margin increased to 45% from 41% for the first nine months of fiscal 1995 as compared to the same period in fiscal 1994. Sales, general and administrative expense increased $13,098,000 (26%) for the first nine months of fiscal 1995 as compared to the same period in fiscal 1994. This increase was primarily due to sales expansion programs in the Integrated Payment Systems and Health Care Applications Systems and Services areas as well as increased sales, general and administrative expenses associated with acquired businesses. 12 14 INVESTMENT AND OTHER INCOME Investment and other income for the first nine months of fiscal 1995 was $205,000, a decrease of $196,000 (49%) over the same period in fiscal 1994. The decrease in interest income was related to a decline in the number of leases held by the Company. The Company no longer offers leases directly to its customers. INTEREST EXPENSE, NET The first nine months of fiscal 1995 showed a decrease in net interest expense of $244,000 (21%) from the same period in fiscal 1994. This decrease was primarily attributable to an adjustment of imputed interest expense on acquired merchant processing portfolios made in the first quarter of fiscal 1994 and increased overall cash balances. INCOME TAXES The provision for income taxes, as a percentage of taxable income, was 36% and 39% for the first nine months in fiscal 1995 and fiscal 1994, respectively. The overall decreased rate in the current year was primarily due to the resolution of issues associated with prior years. NET INCOME BEFORE EXTRAORDINARY ITEM The Company's net income before extraordinary item for the first nine months of fiscal 1995 was $10,449,000, an increase of $3,122,000 (43%), from $7,327,000 in the same period in fiscal 1994. EXTRAORDINARY ITEM The Company reported an extraordinary charge of $1,450,000 (net of income taxes) in the first quarter of fiscal 1994, representing the settlement costs of a lawsuit originally filed in 1990. NET INCOME Net income for the first nine months of fiscal 1995 was $10,449,000, an increase of $4,572,000 as compared to the same period in fiscal 1994. Fully diluted earnings per share for the first nine months of fiscal 1995 and fiscal 1994 were $0.51 and $0.30, respectively. The fully diluted average number of common and common equivalent shares outstanding for the first nine months of fiscal 1995 was 20,307,000, an increase of 556,000 (3%) as compared to the same period in fiscal 1994. FISCAL YEAR ENDED MAY 31, 1994 COMPARED TO FISCAL YEAR ENDED MAY 31, 1993 REVENUE Total revenue for fiscal 1994 was $204,006,000, a decrease of $550,000 (less than 1%) from revenue of $204,556,000 for fiscal 1993. The reduction was due principally to two factors. First, the decision to exit the Communication Services business caused a decline in revenue of $3,733,000 from the prior fiscal year. Second, the Integrated Payment Systems business continued to be impacted by the shift from voice to electronic authorization, as well as declining price trends on existing and new transactions in the indirect payment services business, resulting in a decline in revenue of $1,366,000. These decreases were offset by an increase of $6,737,000 in revenue from the Health Care Applications Systems and Services business principally due to increased electronic claims transaction volume. HEALTH CARE APPLICATIONS SYSTEMS AND SERVICES. Revenue for fiscal 1994 was $63,005,000, an increase of $6,737,000 (12%) from revenue of $56,268,000 for fiscal 1993. Electronic claims processing revenue increased $9,663,000 (50%) in fiscal 1994 as compared to fiscal 1993. This increase was the result of an increase in claims processed for the current customer base and new customers added during fiscal 1994. Pharmacy/dental practice management systems revenue decreased $1,970,000 (7%) in fiscal 1994. This decrease was primarily the result of decreased sales of the microcomputer-based pharmacy and dental practice management systems (DataStat(R)), which was affected by the Company's introduction of a new dental product. This decrease was offset by an increase in recurring maintenance revenue associated with the growing installed systems base. Revenue from 13 15 sales to government and institutional customers decreased $956,000 (10%), primarily as a result of decreased turnkey systems sales to institutional customers and reductions in U.S. Department of Defense spending. INTEGRATED PAYMENT SYSTEMS. Revenue for fiscal 1994 was $112,427,000, a decrease of $1,366,000 (1%) from revenue of $113,793,000 for fiscal 1993, with the decline occurring principally in the indirect side of the payment services business. The indirect business represented approximately 45% of total Integrated Payment Systems revenues for fiscal 1994. Direct merchant processing revenue increased $2,387,000 (4%) in fiscal 1994 as compared to fiscal 1993. Transaction volumes processed increased by 4% and terminal sales and fees increased as well, primarily as a result of a sales expansion program. Indirect payment services (distribution through banking institutions) revenue decreased $3,753,000 (7%) in fiscal 1994 as compared to fiscal 1993. Voice authorization revenue decreased $561,000 (6%) and electronic authorization and data capture revenue decreased $3,192,000 (7%). The decrease in voice authorization revenue was attributable to a continued shift of business to electronic authorization due to lower prices to the merchant and industry mandates. Voice authorization processing volume declined approximately 10% in the period and represented approximately 8% of total Integrated Payment Systems revenue. The decrease in electronic authorization and data capture revenue was primarily the result of price reductions of approximately 7%. The number of electronic authorization and data capture transactions processed increased modestly in fiscal 1994. GOVERNMENT AND CORPORATE INFORMATION SYSTEMS AND SERVICES. Revenue for fiscal 1994 was $20,565,000, a decrease of $984,000 (5%) from revenue of $21,549,000 for fiscal 1993. Reduced demand for cash management services was caused largely by a trend toward movement of these services to in-house, microcomputer-based systems. The reductions were partially offset by the emerging electronic tax filing/payment systems and applications for electronic data interchange. COSTS AND EXPENSES Total cost of service was $117,208,000 for fiscal 1994, representing a decrease of $5,329,000 (4%) from fiscal 1993. This decrease was largely the result of a reduction in cost of operations of $2,662,000 (3%), consisting principally of payroll and telecommunications cost reductions. Hardware costs decreased $1,251,000 (11%), directly related to volume associated with reduced sales of health care practice management systems. Depreciation expense decreased $1,411,000 (9%). Gross margin increased to 43% in fiscal 1994 from 40% in fiscal 1993. Sales, general and administrative expense was $68,411,000 for fiscal 1994, representing an increase of $1,413,000 (2%) from fiscal 1993. This increase was primarily due to sales expansion programs in the Integrated Payment Systems and the Health Care Applications Systems and Services areas. INVESTMENT AND OTHER INCOME Investment and other income for fiscal 1994 was $480,000, a decrease of $1,371,000 (74%) below the fiscal 1993 amount of $1,851,000. This decrease was principally a result of a decrease in interest income as a consequence of the Company's sale of its pharmacy and dental systems lease portfolio in fiscal 1993. INTEREST EXPENSE, NET Net interest expense for fiscal 1994 was $1,508,000, a decrease of $728,000 (33%) from fiscal 1993 interest expense of $2,236,000. This decrease was largely attributable to lower borrowings on the Company's line of credit, a decrease in interest rates and a decrease in the imputed interest rate associated with earn-out liabilities relating to the Company's purchase of several merchant processing businesses. 14 16 INCOME TAXES The provision for income taxes, as a percentage of taxable income, was 35% and 42% for fiscal years 1994 and 1993, respectively. The decreased rate in fiscal 1994 was primarily due to research and development tax credits. NET INCOME BEFORE EXTRAORDINARY ITEM Net income before extraordinary item for fiscal 1994 was $11,160,000, an increase of $2,671,000 (31%) from fiscal 1993 net income of $8,489,000. EXTRAORDINARY ITEM The Company reported an extraordinary charge of $1,450,000 (net of income taxes) in fiscal 1994, representing the settlement cost of a lawsuit originally filed in 1990. NET INCOME Net income for fiscal 1994 was $9,710,000, an increase of $1,221,000 (14%), as compared to fiscal 1993 net income of $8,489,000. Fully diluted earnings per share for fiscal 1994 were $0.50, an increase of $0.05 (10%) from the prior year. The fully diluted average number of common and common equivalent shares outstanding for fiscal 1994 was 19,480,500, an increase of 679,500 (4%) as compared to fiscal 1993. FISCAL YEAR ENDED MAY 31, 1993 COMPARED TO FISCAL YEAR ENDED MAY 31, 1992 REVENUE Total revenue for fiscal 1993 was $204,556,000, a decrease of $11,930,000 (6%) from revenue of $216,486,000 for fiscal 1992. The reduction was due principally to two factors. First, the decision to exit the Communication Services business caused a decline in revenue of $7,593,000. Second, the Integrated Payment Systems business was impacted by the shift from voice to electronic authorization, as well as price trends on new transactions in the indirect business, resulting in a decline in revenue of $7,981,000. These decreases were offset by an increase of $8,533,000 in the Health Care Applications Systems and Services business principally due to increased electronic claims transaction volume. HEALTH CARE APPLICATION SYSTEMS AND SERVICES. Revenue for fiscal 1993 was $56,268,000, an increase of $8,533,000 (18%) from revenue of $47,735,000 for fiscal 1992. Electronic claims processing revenue increased $5,173,000 (36%). This increase was the result of a 48% increase in claims processed for the current customer base and customers added in fiscal 1993. Pharmacy/dental practice management systems revenue increased $3,442,000 (14%) in fiscal 1993. This increase was primarily the result of increased sales of the DataStat(R) systems and an increase in recurring maintenance revenue associated with the growing installed systems base. Revenue from sales to government and institutional customers decreased $82,000 (1%), primarily as a result of decreased turnkey systems sales to institutional customers and overall reductions in U.S. Department of Defense spending. INTEGRATED PAYMENT SYSTEMS. Revenue for fiscal 1993 was $113,793,000, a decrease of $7,981,000 (7%) from revenue of $121,774,000 for fiscal 1992, with the decline occurring principally in the indirect payment services side of the business. The indirect business represented approximately 50% of total Integrated Payment Systems revenues for fiscal 1993. Direct merchant processing revenue decreased $2,007,000 (3%) in fiscal 1993 as compared to fiscal 1992, although transaction volumes processed increased by 12% and terminal sales and fees increased as well. Increased transaction volume had a favorable revenue impact of $5,104,000, primarily as a result of improved sales productivity. Terminal sales and other fees increased $440,000. These increases were offset by a reduction in the prices charged to merchants of $7,550,000, or approximately 15%, reflecting the shift from paper to electronic-based processing. Indirect payment services revenue decreased $5,974,000 (10%) in fiscal 1993 as compared to fiscal 1992. Voice authorization revenue decreased $2,608,000 (21%) and electronic authorization and 15 17 data capture revenue decreased $3,367,000 (7%). The decrease in voice authorization revenue was attributable to the continued shift of business to electronic authorizations due to lower prices to the merchant and industry mandates. Voice authorization processing volume declined approximately 20% between the two years and represented approximately 9% of total Integrated Payment Systems revenue for fiscal 1993. The decrease in electronic authorization and data capture revenue was primarily the result of price reductions of 10%. The number of electronic authorization and data capture transactions processed were essentially the same in both years. GOVERNMENT AND CORPORATE INFORMATION SYSTEMS AND SERVICES. Revenue for fiscal 1993 was $21,549,000, a decrease of $3,218,000 (13%) from revenue of $24,767,000 for fiscal 1993. Reduced demand for cash management services in a period of low interest rates and a trend toward movement of these services to in-house microcomputer-based systems were largely responsible for these reductions. OTHER. Revenue for fiscal 1993 was $12,946,000, a decrease of $9,264,000 (42%) from revenue of $22,210,000 for fiscal 1992. This decrease was the result of the Company's decision to exit the Communication Services market in fiscal 1991. Weak economies in Europe and Japan and the same cash management demand trends noted above were the primary causes of a revenue decline in the international business. COSTS AND EXPENSES Total cost of service was $122,537,000 for fiscal 1993, representing a decrease of $8,032,000 (6%) from fiscal 1992. This decrease was primarily the result of a reduction in the cost of operations of $11,100,000 (10%), consisting principally of payroll and telecommunications cost reductions. Hardware costs increased $2,700,000 (32%) as a result of the increased volume of sales of health care practice management systems and retail point-of-sale terminal devices. Depreciation expense was essentially flat at approximately $16,000,000 in both years. Gross margin realized for each year was 40%. Sales, general and administrative expense was $66,998,000 for fiscal 1993, representing a decrease of $4,244,000 (6%) from fiscal 1992. The decrease was the result of cost containment programs focused on elimination of redundancy and non-essential activities which were initiated in the second quarter of fiscal 1993. As a percentage of revenue, sales, general and administrative expense for fiscal 1993 and 1992 was 33% in both years. INVESTMENT AND OTHER INCOME Investment and other income for fiscal 1993 was $1,851,000, a decrease of $461,000 (20%) from the fiscal 1992 amount of $2,312,000. This decrease was principally attributable to a decrease in interest income resulting from the Company's sale of its pharmacy and dental systems lease portfolio in fiscal 1993. INTEREST EXPENSE, NET Interest expense for fiscal 1993 was $2,236.000, a decrease of $1,960,000 (47%) from fiscal 1992 interest expense of $4,196,000. This decrease was largely attributable to lower borrowings on the Company's line of credit, a decrease in interest rates and a decrease in the imputed interest expense associated with earn-out liabilities relating to the Company's purchase of several merchant processing businesses. INCOME TAXES The provision for income taxes, as a percentage of taxable income, was 42% for fiscal 1993 and 1992. NET INCOME Net income for fiscal 1993 was $8,489,000, an increase of $1,070,000 (14%) as compared to fiscal 1992 net income of $7,419,000. Fully diluted earnings per share for fiscal 1993 were $0.45, an increase 16 18 of $0.04 (10%) from fiscal 1992. The fully diluted average number of common and common equivalent shares outstanding for fiscal 1993 was 18,801,000, an increase of 757,500 (4%) as compared to fiscal 1992. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities increased 35% to $32,109,000 for the first nine months of fiscal 1995, from $23,738,000 for the same period in fiscal 1994. This increase was primarily related to increased earnings. The significant cash flows generated from operating activities are reinvested by the Company in existing businesses and are used to fund acquisitions. For the first nine months of fiscal 1995, cash used in investing activities increased to $42,515,000 compared to $8,526,000 in the same period of fiscal 1994. During the first nine months of fiscal 1995, the Company completed five acquisitions for an aggregate cash purchase price of approximately $44 million. In addition, $2,000,000, previously escrowed, was refunded to the Company in the second quarter of fiscal 1995. Net cash used in financing activities increased 26% to $6,396,000 for the first nine months of fiscal 1995 from $5,090,000 in the prior year period, primarily as a result of an increase in principal payments on capital lease agreements of $405,000 and a decrease in the net proceeds from the issuance of stock under the Company's employee stock purchase plan of $590,000. Dividends of approximately $4,207,000 and $4,116,000 were paid in the first nine months of fiscal 1995 and 1994, respectively. The Company has a $15,000,000 working capital line of credit which expires in August 1995, and which management expects to be extended on substantially the same terms. The Company also has a $40,000,000 acquisition line of credit which expires in August 1996. As of May 15, 1995, there were no amounts outstanding under either line of credit. The Company believes the net proceeds of this offering together with funds generated from operations and borrowings available under its lines of credit will be adequate to meet normal business operating needs, including possible acquisitions. 17 19 BUSINESS INDUSTRY BACKGROUND Advances in computer software, telecommunications and microprocessor technology have aided the development of on-line, real-time information processing systems that capture and transmit electronically high volumes of information. These technology advances allow information processors to offer greater convenience to purchasers and providers of goods and services and reduce processing costs, settlement delays and losses from fraudulent transactions. While the transition from paper-based to electronic information processing continues, the earliest and most significant penetration of electronic information processing has occurred in the areas of credit card authorization and settlement and pharmacy transaction processing. The Company believes that the rapid transition to electronic transaction processing in these markets demonstrates the potential for automation of other markets still dominated by paper-based processing, such as additional health care applications and the transfer of information between businesses. HEALTH CARE MARKET The health care sector of the market for information systems is growing rapidly due to the need of employers and health care payors and providers to control costs and to improve quality of care. A high percentage of health care claims are still processed using manually processed paper-based systems. Third party payors and health care providers continue to seek methods to automate processing in order to reduce costs and improve the delivery of health care services. The Company believes the health care industry is one of the largest potential markets for electronic information processing services, including the electronic transmission and capture of data for on-line eligibility verification and settlement of insurance claims. The application of technology to improve the flow of information to address patient care quality is expanding as well. Since the late 1980s, electronic processing technology has been applied to the transmission and capture of data for pharmacy claims and transaction processing. During 1994, approximately 80% of prescription claims were submitted electronically or by magnetic tape. This technology is being adapted to the processing of other health care data, including insurance claims for dentists, physicians and hospitals. As of December 31, 1994, there were approximately 150,000 dentists, 600,000 physicians and 6,500 hospitals in the United States, which represented the largest and least automated segment of the health care industry in terms of claims submitted, with only a small percentage of transactions processed electronically in real-time. Many physicians and hospitals have computer systems and therefore possess the basic capability to transmit claims electronically once standardized processing protocols are established and installed. The Company believes that the ability to offer total solutions, including practice management systems as well as information processing services, to both payors and providers in the health care markets will be an important competitive factor as automated claims processing and the availability of information in this service area continues to grow. As electronic processing of health care claims accelerates, the Company believes it will be important for companies to be able to offer integrated, value-added systems and services to industry participants who shift to automation of claims processing. PAYMENT SYSTEMS MARKET Electronic transaction processing for the payment systems market involves transaction authorization, data capture and settlement for credit and debit cards, check verification and guarantee services and financial electronic data interchange. Most retail credit card transactions are no longer processed through paper-based systems and are instead electronically authorized, with an increasing number electronically settled as well. According to industry sources, during 1994 the number of outstanding VISA and MasterCard sponsored credit and debit cards in the United States increased 20% to 341 million, the 18 20 volume of VISA and MasterCard credit and debit card sales increased 26% to $463 billion and the number of VISA and MasterCard purchase transactions increased 22% to 5.3 billion. The Company believes that the number of transactions will continue to grow and that an increasing percentage of these transactions will be processed electronically due to convenience, efficiency and a desire to reduce fraud and other processing costs. The Company believes that there are significant opportunities for continued growth in the application of electronic transaction processing services to the payment systems market. Utilization of debit cards as a general payment mechanism for goods and services continues to increase, principally in the supermarket, travel and leisure, and gasoline industries. There is also significant potential for growth in the use of credit and debit cards in other traditional cash payment markets, such as fast-food restaurants, gaming establishments, cinemas and convenience stores. The increased use of credit and debit cards for such transactions is primarily driven by the convenience they provide as well as the ability to efficiently track expenses and purchase activity. In addition, the Company believes the proliferation of affinity or co- branded cards that provide consumers with added benefits, such as discounts on gasoline or airline tickets, should contribute to increased use of credit and debit cards and the growth of the payment systems market. VISA and MasterCard, as well as other independent service providers such as the Company, provide high volume electronic transaction processing services directly to merchants and other customers as well as indirectly through banking institutions. The direct electronic transaction processing business has shown increasing growth recently as the result of a consolidation of the industry toward independent providers and away from traditional providers. The Company believes this shift is due in large part to more efficient distribution channels as well as the increased technological capabilities required for the rapid and efficient creation, processing, handling, storage and retrieval of information. These technological capabilities have become increasingly complex, requiring significant capital commitments to develop, maintain and update the systems necessary to provide these technologically advanced services at a competitive price. As a result, several large merchant processors including the Company have expanded their operations with acquisitions of new merchant accounts from banks who previously serviced those accounts. In addition, many small information processing organizations are consolidating with larger service providers. In addition to services that enable merchants to accept credit and debit cards, the payment systems market continues to expand to include increasing levels of check verification and guarantee services. Demand for these services has been growing in recent years as merchants seek to reduce losses related to bad checks and use check acceptance to increase sales. Although credit cards are rapidly growing as a method of payment, in 1994 checks were used in approximately 20% of all consumer purchases, representing 35% of the aggregate value of such purchases. BUSINESS STRATEGY The Company's business strategy is to be a total solution provider of value-added information processing services and application systems in the markets it serves. NDC believes that both the health care and the integrated payment systems markets present attractive opportunities for continued growth. In pursuing its business strategy, the Company seeks both to increase its penetration of existing information processing and application systems markets and to continue to identify and create new markets through the: - development of value-added applications, enhancement of existing products and development of new systems and services; - acquisition of, or alliance with, companies that have desirable products and/or distribution capabilities; and - extension of the terms and commitments of existing customer contracts. 19 21 The resources required to effectively compete in the Company's markets include an extensive computer and telecommunications network, a skilled customer support, operations and systems development staff, and sophisticated software systems. Management believes that the substantial investment required for the development of technologically advanced automated processing systems, accompanied by demand for enhanced service at reduced costs, will continue to cause many small and regional operators to leave the business or sell to larger competitors, resulting in industry consolidation. As a result, the Company believes that there is opportunity for increased market penetration for its services as well as the addition of new markets through acquisitions and alliances. To support its business strategy, NDC has focused on acquisition opportunities and alliances with other companies that allow it to increase its market penetration, technological capabilities, product offerings and distribution capabilities. Since the beginning of fiscal 1995, the Company has completed six acquisitions with an aggregate cash purchase price of approximately $46 million. These acquisitions give NDC expanded capabilities and customer bases in physician and dental practice management, pharmacy practice management, hospital and medical claims processing and check guarantee. Although the Company has recently entered into non-binding letters of intent with respect to two possible acquisitions, the Company currently has no other agreements, arrangements or understandings with respect to any particular acquisition, and there can be no assurance that these two acquisitions or any other acquisition will be completed. PRODUCTS AND SERVICES The following diagram depicts NDC's application systems and transaction processing network: (CHART) HEALTH CARE APPLICATION SYSTEMS AND SERVICES The Company is a leading provider of a full range of products and services that address health care cost containment and improved patient care issues. The Company's products include electronic claims processing, adjudication and payment systems, funding capabilities, practice management systems and clinical data base information for pharmacies, dentists, physicians, hospitals, HMO's, clinics and nursing homes. Revenue for Health Care Application Systems and Services products and services consists of 20 22 transaction processing fees and recurring monthly maintenance and support fees, software license revenue and proceeds from the sale of practice management systems as well as upgrade charges for additional applications. Fees for electronic claims processing services are based on a per transaction rate, with the rate varying depending upon the volume and scope of services provided. Approximately 31% and 33%, respectively, of the Company's revenue in fiscal 1994 and the first nine months of fiscal 1995 was derived from Health Care Application Systems and Services, which represent the fastest growing portion of the Company's business. ELECTRONIC PROCESSING SERVICE The Company's electronic processing services are offered to pharmacies, dentists, hospitals, HMO's and preferred provider organizations. These services include eligibility verification, patient-specific benefit coverage, claims data capture and editing, claim adjudication and retrospective and prospective drug utilization review. The Company's network includes approximately 60,000 health care provider locations. Electronic processing for health care transactions represents the Company's fastest growing service. The Company recently expanded its presence in the health care claims processing market with two acquisitions, one of a company specializing in hospital claims processing and another of a product relating to claims clearing and processing systems for physicians' offices. PRACTICE MANAGEMENT SYSTEMS The Company's practice management systems are designed to provide the health care market with applications solutions that improve the efficiency of operations, address cost containment concerns and enhance overall quality of patient care. In addition, NDC's practice management systems are offered with the Company's claims processing services, credit and debit card processing capabilities and other associated functions such as inventory reporting and ordering. PHARMACY MANAGEMENT SYSTEMS. The Company's pharmacy practice management systems, including its DataStat(R) systems, provide solutions for independent and chain pharmacies, hospitals, HMO's, clinics and nursing homes. These systems enable pharmacists to manage and perform patient registration, drug record-keeping, private and third-party billing, inventory control and ordering, price updates, management reporting and drug database updates to detect potential clinical dispensing and prescribing problems. In addition, the Company's systems provide value-added claims processing services. The Company's systems are sold and maintained by the Company and can be tailored to the needs of users utilizing micro- and mini-computer platforms. In fiscal 1994, the Company expanded its offering of pharmacy management systems with the acquisition of a Canadian-based company that focuses on providing systems to pharmacy chains in the U.S. and Canada. DENTAL MANAGEMENT SYSTEMS. The Company's dental management systems are designed to provide dentists with patient record accounting, patient scheduling and recall, billing and collection, insurance claims information and electronic processing to improve the efficiency of office management. The Company expanded its dental management product line in fiscal 1994 with the introduction of the NDC Dental System, which incorporates advanced clinical functionality with customary business automation functions. PHYSICIAN MANAGEMENT SYSTEM. The Company's physician management system is designed to provide physicians with patient scheduling, billing and collection, patient record accounting, insurance claims information and electronic processing designed to improve the efficiency of office management. The Company entered the physician practice management systems market in fiscal 1995 through the acquisition of one of the leading providers of automated systems to this market, with approximately 7,000 users of the acquired company's products. 21 23 INTEGRATED PAYMENT SYSTEMS The Company's Integrated Payment Systems products provide a wide range of transaction processing alternatives to the retail, hospitality, health care and government markets. The Company offers merchant credit and debit card processing, check verification and guarantee and other services directly to merchants and, with the exception of check guarantee, indirectly through banking institutions. Approximately 55% and 57% of the Company's revenue for fiscal 1994 and the first nine months of fiscal 1995, respectively, was derived from these services. MERCHANT PROCESSING SERVICES NDC is one of the leading merchant processing companies in the nation, serving approximately 350,000 merchant locations. NDC's merchant processing services include credit and debit card authorization, data capture and product and customer support functions, primarily for VISA and MasterCard bank cards. For merchants with a direct processing relationship, the Company also performs the financial settlement between the merchant and the card associations, reconciliation of the financial settlement and resolution of disputes between the Company's merchants and cardholders. Fees for the Company's merchant processing services are principally based on the dollar volume of transactions processed directly for merchants and a per transaction rate for transactions processed for banks on behalf of merchants. The Company provides credit and debit authorization services utilizing point-of-sale terminals, electronic cash registers and proprietary personal computer applications. These systems provide merchants with a comprehensive, nationwide authorization network for credit cards, debit cards and checks. The Company also provides electronic data capture (EDC) systems that incorporate the capabilities of its electronic point-of-sale authorization system, combined with enhanced software, to enable the Company to electronically capture the entire transaction and transmit the necessary value-added information directly to the Company's central computer system for faster clearing through the banking system. These systems allow the merchant quicker access to its funds and avoid the necessity and cost of physically processing paper charge slips. Customized value-added applications for specialty retailers, restaurants, hotels and oil companies are marketed by the Company. CHECK VERIFICATION AND GUARANTEE SERVICES The Company offers merchants a nationwide check verification service which verifies that the individual presenting a check at the point-of-sale does not have a history of writing uncollectible checks. In fiscal 1995, the Company expanded its payment system services to include check guarantee services through the acquisition of two check guarantee businesses. Check guarantee differs from check verification in that the Company not only verifies the transaction but also guarantees payment. If a check is not paid, the Company assumes the right to collect from the individual writing the check. Fees for the Company's check verification services are based on a per transaction rate, while fees for its check guarantee services are based on a percentage, or discount, of the face value of each check guaranteed by the Company. OTHER PAYMENT AND RELATED SERVICES During fiscal 1994, the Company introduced a purchase card service. This service is aimed at high volume corporate or government purchases of low dollar value items. The product is credit card-based and is intended to significantly reduce the cost of making such small purchases, while at the same time making available to the purchasing department needed controls and management information relating to its purchases. The Company also offers tax products that provide for the electronic filing and payment of corporate taxes. The Company initiates the electronic funds transfer process for payment of the taxes due, while delivering the information summary to the appropriate government agency. 22 24 GOVERNMENT AND CORPORATE INFORMATION SYSTEMS AND SERVICES NDC's Government and Corporate Information Systems and Services include cash management, information reporting and electronic data interchange (EDI). The services provide financial, management and operational data to corporate and government institutions worldwide. Corporate and government organizations use these services to collect, consolidate and report financial, administrative and operating data from more than 230,000 locations. Approximately 10% and 8% of the Company's revenue for fiscal 1994 and the first nine months of fiscal 1995, respectively, was derived from these services. SALES AND MARKETING The Company's electronic transaction processing services are offered to the health care markets directly through Company personnel and through alliances. The Company's pharmacy and dental practice management systems are marketed primarily through the Company's personnel but also jointly through alliances. The Company offers its physician practice management system through value-added resellers and by direct marketing. The Company markets its Integrated Payment Systems products and services through its own sales personnel and also through independent contractors, bank alliance programs and traditional third-party processing for banks. OPERATIONS AND SYSTEMS The Company's primary computer systems are housed in two adjacent data centers in Atlanta with key systems and data redundant across the two centers. The Company also operates a data center in southern California. Each data center has full access security, fire and smoke protection, and backup electrical power. All key communications feeds are redundant with links from separate central offices as well as microwave backup systems. Other processing capabilities are located in Dallas, Toronto and the United Kingdom. Because of the large number and variety of NDC's products and services, the Company does not rely on a single technology to satisfy its sophisticated computer systems needs but instead employs the best available technology that is suitable for each particular task. Given this approach, NDC utilizes (i) the latest Unisys mainframe class systems and the OS/2200 operating system for large scale transaction and batch data base processing; (ii) Tandem fault-tolerant computers and the Guardian operating system for high volume, fast response transaction processing; (iii) client-server technology for end-user data base applications; and (iv) UNIX and Windows(TM) based systems for focused communication applications systems. All of these systems are linked via high speed, fiber optic-based networked backbones for file exchange and inter-system communication purposes. NDC also maintains storage systems connected to the backbones, including a robotic tape library and optical storage for archival storage purposes. All of the Company's systems are supported by a systems support, operations and production control staff with an advanced network control center. The Unisys systems employed by NDC are the latest 2200/500 series. These systems combine the latest cost effective hardware with the transaction processing functionality of the OS/2200 series operating system. NDC has its Unisys back-end systems cross barred into Unisys's unique fault-tolerant Record Lock Processor which coordinates all disk access and operations to permit a triple processor system configuration to appear and act as a single system. Processors and systems may be brought on and off-line without customer impact for capacity requirements and redundancy. The Unisys back-end systems are front-ended by dual Tandem Computers Himalayan K10000 5 processor systems. Each of these systems represents Tandem's latest RISC-based technology, allowing incremental, cost-effective transaction processing and switching capacity. NDC intends during fiscal 1996 to upgrade to Tandem's recently announced K20000 technology to keep pace with growing capacity needs. The Company's communications network family is made up of several networks, each for a different customer purpose. NDC maintains three primary networks: a high speed, short transaction network called 23 25 FASTNET; a private line nationwide high bandwidth backbone network; and a dial-up voice/data network for interactive and voice traffic. The Company also maintains a number of support services offering satellite, wireless, INTERNET and ISDN/DOV connectivity. COMPETITION The markets for the applications systems and services offered by the Company are highly competitive. The Company has a number of actual and potential competitors as to all of the systems and services that it offers. Many of the Company's services compete directly with computer manufacturers that encourage businesses to purchase or lease the manufacturers' computers and establish in-house systems. In addition to this competition, the Company believes that there are several companies that have the capability to offer some of the Company's services in competition with the Company, certain of which are substantially larger than the Company. The Company believes that its ability to offer integrated solutions to its customers, including hardware, software, processing and network facilities, is a positive factor pertaining to the competitive position of the Company. The Company recognizes, however, that its industry segment is increasingly competitive. The key competitive factors for the Company are functionality of products, quality of service and price. RESEARCH AND DEVELOPMENT The Company has a research and development staff of approximately 265 persons. During fiscal 1992, 1993, 1994 and the first nine months of fiscal 1995, the Company spent approximately $7.5 million, $10.0 million, $9.5 million and $9.6 million, respectively, on activities relating to the development, improvement and maintenance of new and existing products, services and techniques. 24 26 MANAGEMENT Set forth below is the name, age, position with the Company, present principal occupation or employment and five-year employment history of each of the directors and executive officers of the Company.
NAME BUSINESS EXPERIENCE AGE ---- ------------------- --- DIRECTORS Robert A. Yellowlees Chairman of the Board of the Company since June 1992; 56 President, Chief Executive Officer and Chief Operating Officer of the Company since May 1992; Chairman of the Board of Spectrum Research Group, consultants on management of technology; director of John H. Harland Co. Mr. Yellowlees has been a director of the Company since April 1985. Edward L. Barlow General Partner, Whitcom Partners, an investment 60 partnership, for more than five years. Mr. Barlow has been a director of the Company since January 1969. James B. Edwards President of the Medical University of South Carolina 67 since November 1982; director of The Harry Frank Guggenheim Foundation, Phillips Petroleum Company, The William Benton Foundation, Encyclopedia Britannica, Inc., SCANA Corporation, IMO Industries, Inc., WMX Technologies, Inc. and Norfolk-Southern Corporation Advisory Board. Dr. Edwards has been a director of the Company since January 1989. Don W. Sands Member of the Board of Governors of the Georgia World 68 Congress Center since 1985; Chief Executive Officer Emeritus and Counselor to the Board of Directors of Gold Kist, Inc. since November 1991; President, Chief Executive Officer and Chairman of the Management Committee of Gold Kist Inc. from July 1988 through October 1991; director of Golden Poultry Co. Mr. Sands has been a director of the Company since September 1989. Neil Williams Managing Partner of Alston & Bird since 1985, attorneys 59 and counsel for the Company. Mr. Williams has been a director of the Company since April 1977. EXECUTIVE OFFICERS Jerry W. Braxton Chief Financial Officer of the Company since January 1992; 48 Vice President -- Treasurer and Vice President -- Controller of Contel Corporation from 1976 through 1991. Richard S. Cohan General Manager, Health Care Information Network, of the 42 Company since April 1995; Senior Vice President, Health Care Business Development from December 1993 through March 1995; Senior Vice President of the Health Care Application Systems and Services unit of the Company from September 1992 to November 1993; Group Vice President and General Manager of the Health Care Institutional Services unit of the Company from December 1987 through August 1992. Donald B. Graham Senior Vice President, Operations, of the Company since 54 January 1994; President and Chief Executive Officer of Information Systems of America from February 1988 until July 1993.
25 27
NAME BUSINESS EXPERIENCE AGE - -------------------------------------------------------------------------------------- --- James R. Henderson General Manager, Pharmacy and Dental Application Systems, 49 of the Company since April 1995; Executive Vice President, Health Care Application Systems and Services from December 1993 through March 1995; Executive Vice President, Product Line Management from September 1992 through November 1993; Executive Vice President of Worldwide Sales, Marketing and Operations for Quality Micro Systems, Inc. from 1988 until 1991. Donald L. Howard Vice President -- Human Resources of the Company since 56 February 1980. E. Michael Ingram General Counsel and Secretary of the Company since January 43 1985. J. David Lyons General Manager, Payment Services, of the Company since 56 April 1995; Executive Vice President, Marketing & Sales of the Company from July 1993 through March 1995; Senior Vice President of Sales and Marketing of Syncordia from September 1990 to March 1993; Vice President and General Manager of International Sales and Service for Data General Corporation from 1988 to 1990. Kevin C. Shea General Manager, Integrated Payment Systems, of the 44 Company since April 1995; Executive Vice President, Integrated Payment Systems from September 1992 through March 1995; Executive Vice President, National Data Payment Systems, Inc. ("NDPS") from December 1990 through August 1992; Group Vice President, NDPS from June 1988 through November 1990. M.P. Stevenson, Jr. Vice President and Controller of the Company since 40 September 1992; Division Controller, NDPS from March 1992 to August 1992; Director, Internal Audit from March 1986 to February 1992.
26 28 DESCRIPTION OF CAPITAL STOCK The authorized capital stock of the Company consists of 30,000,000 shares of Common Stock, par value $.125 per share, and 1,000,000 shares of Preferred Stock, par value $1.00 per share. The following description of the capital stock is qualified in all respects by reference to the Restated Certificate of Incorporation, as amended, and Bylaws, as amended, of the Company, copies of which are on file at the Company's principal executive offices. COMMON STOCK The holders of Common Stock, subject to such rights as may be granted to the holders of Preferred Stock, elect all directors and are entitled to one vote per share. All shares of Common Stock participate equally in dividends when, as and if declared by the Board of Directors and share ratably, subject to the rights and preferences of any Preferred Stock, in net assets on liquidation. The shares of Common Stock outstanding prior to this offering are, and the shares to be outstanding upon completion of this offering will be, duly authorized, validly issued, fully paid and nonassessable. The shares of Common Stock have no preference, conversion, exchange, preemptive or cumulative voting rights. STOCK PURCHASE RIGHTS Pursuant to a Rights Agreement dated as of January 18, 1991, each share of Common Stock is issued one right (a "Right") which entitles the registered holder to purchase from the Company one one-hundredth of a share (a "Unit") of Series A Junior Participating Preferred Stock, par value $1.00 per share (the "Junior Preferred Stock"), at a purchase price of $45.00 per Unit, subject to adjustment. Until the Distribution Date the Rights are unexercisable and attach to and transfer with the Common Stock certificates. The Distribution Date will occur upon the earlier of an announcement of the acquisition by a third party of 15% or more of the Common Stock, or the commencement of a tender offer for 15% or more of the Common Stock. The Rights may have certain anti-takeover effects because the rights will cause substantial dilution to a person or group that attempts to acquire the Company on terms not approved by the Board of Directors of the Company unless the offer is conditioned on a substantial number of Rights being acquired. However, the Rights should not interfere with any merger or other business combination approved by a majority of the directors since the Rights may be redeemed by the Company at $.01 per Right at any time on or prior to a stock acquisition. Thus, the Rights are intended to encourage persons who may seek to acquire control of the company to initiate such an acquisition through negotiations with the Board of Directors. However, the effect of the Rights may be to discourage a third party from making a partial tender offer or otherwise attempting to obtain a substantial equity position in the equity securities of, or seeking to obtain control of, the Company. To the extent any potential acquirers are deterred by the Rights, the Rights may have the effect of preserving incumbent management in the office. PREFERRED STOCK The Company is authorized to issue 1,000,000 shares of Preferred Stock, par value $1.00 per share, none of which is outstanding, although 300,000 shares of Preferred Stock have been reserved for issuance pursuant to the Rights described above. Preferred Stock may be issued from time to time by the Board of Directors of the Company, without stockholder approval, in such series and with such voting powers, full or limited, and such designations, preferences and relative, participating, optional or other special rights, qualifications, limitations or restrictions as may be fixed by the Board of Directors. The issuance of Preferred Stock by the Board of Directors could adversely affect the rights of holders of shares of Common Stock since Preferred Stock may be issued having preference with respect to dividends and in liquidation over the Common Stock, and have voting rights, contingent or otherwise, that could dilute the voting rights, net income per share and net book value of the Common Stock. In addition, while the Board of Directors has no current intention of doing so, the ability of the Board of Directors to issue shares of Preferred Stock and to set the voting powers and such designations, preferences and 27 29 relative, participating, optional or other special rights, qualifications, limitations or restrictions thereof without further stockholder action could help to perpetuate incumbent management of the Company or prevent a business combination involving the Company that is favored by the Company's stockholders. As of the date of this Prospectus, other than in connection with the Rights described above, the Board of Directors has not authorized the issuance of any shares of Preferred Stock, and the Company has no agreements, arrangements or understandings with respect to the issuance of any shares of Preferred Stock. REGISTRAR AND TRANSFER AGENT The Company's registrar and transfer agent is Wachovia Bank of North Carolina, N.A., Winston-Salem, North Carolina. 28 30 UNDERWRITING Subject to the terms and conditions of an underwriting agreement (the "Underwriting Agreement"), the Company has agreed to sell to each of the Underwriters named below, and each of such Underwriters, for whom Goldman, Sachs & Co. and Salomon Brothers Inc are acting as representatives, has severally agreed to purchase from the Company, the respective number of shares of Common Stock set forth opposite its name below:
NUMBER OF SHARES UNDERWRITER OF COMMON STOCK -------------------------------------------------------------------- --------------- Goldman, Sachs & Co. ............................................... Salomon Brothers Inc................................................ --------------- Total..................................................... 2,750,000 ==============
Under the terms and conditions of the Underwriting Agreement, the Underwriters are committed to take and pay for all of the shares of Common Stock offered hereby, if any are taken. The Underwriters propose to offer the shares of Common Stock in part directly to the public at the initial public offering price set forth on the cover page of this Prospectus, and in part to certain securities dealers at such price less a concession of $ per share. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share to certain brokers and dealers. After the shares of Common Stock are released for sale to the public, the offering price and other selling terms may from time to time be varied by the representatives. The Company has granted the Underwriters an option exercisable for 30 days after the date of this Prospectus to purchase up to an aggregate of 412,500 additional shares of Common Stock to cover over-allotments, if any. If the Underwriters exercise their over-allotment option, the Underwriters have severally agreed, subject to certain conditions, to purchase approximately the same percentage thereof that the number of shares to be purchased by each of them, as shown in the foregoing table, bears to the 2,750,000 shares of Common Stock offered hereby. The Company, its directors and executive officers have agreed, subject to limited exceptions, not to offer, sell, contract to sell, pledge or otherwise dispose of, or, with respect to the Company, file a registration statement under the Securities Act with respect to, any Common Stock or any securities of the Company that are substantially similar to the Common Stock, including but not limited to any securities that are convertible into or exercisable or exchangeable for, or that represent the right to receive, Common Stock or any substantially similar securities for a period of 90 days after the date of this Prospectus without the prior written consent of the representatives of the Underwriters. The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. LEGAL MATTERS Certain legal matters with respect to the legality of the shares of Common Stock offered will be passed upon for the Company by Alston & Bird, Atlanta, Georgia. Certain legal matters in connection with this offering are being passed upon for the Underwriters by King & Spalding, Atlanta, Georgia. 29 31 EXPERTS The consolidated financial statements and schedules of the Company included in the Company's Annual Report on Form 10-K for the year ended May 31, 1994, as amended, incorporated in this Prospectus and Registration Statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are incorporated herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said reports. Such Form 10-K should be read in conjunction with Notes 3 and 5 to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1995 and Item 7 to the Company's Current Report on Form 8-K dated November 17, 1994 for a description and information relating to significant events subsequent to the filing of the Form 10-K. The financial statements of Mercantile Systems, Inc. included in the Company's Current Report on Form 8-K dated November 17, 1994, incorporated in this Prospectus and Registration Statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto, and are incorporated herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said report. The combined financial statements of Yes Check Services, Inc. and Select Check, Inc. included in the Company's Current Report on Form 8-K dated November 17, 1994, incorporated in this Prospectus and Registration Statement have been audited by KPMG Peat Marwick LLP, independent public accountants, as indicated in their report with respect thereto, and incorporated herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said report. 30 32 - --------------------------------------------------------- - --------------------------------------------------------- NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. --------------------- TABLE OF CONTENTS
PAGE ---- Available Information................... 2 Incorporation of Certain Documents by Reference............................. 2 Prospectus Summary...................... 3 Certain Considerations.................. 6 Use of Proceeds......................... 7 Capitalization.......................... 8 Price Range of Common Stock and Dividends............................. 9 Selected Financial Data................. 10 Management's Discussion and Analysis of Financial Condition and Results of Operations............................ 11 Business................................ 18 Management.............................. 25 Description of Capital Stock............ 27 Underwriting............................ 29 Legal Matters........................... 29 Experts................................. 30
- --------------------------------------------------------- - --------------------------------------------------------- - --------------------------------------------------------- - --------------------------------------------------------- 2,750,000 SHARES NATIONAL DATA CORPORATION COMMON STOCK (PAR VALUE $.125 PER SHARE) --------------------- [LOGO] --------------------- GOLDMAN, SACHS & CO. SALOMON BROTHERS INC REPRESENTATIVES OF THE UNDERWRITERS - --------------------------------------------------------- - --------------------------------------------------------- 33 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The expenses in connection with the issuance and distribution of the Common Stock, other than underwriting discounts, are set forth in the following table. All amounts except the Securities and Exchange Commission registration fee and the NASD filing fee are estimated. Securities and Exchange Commission registration fee..................... $ 22,492 NASD filing fee......................................................... 7,023 NYSE listing fee........................................................ 11,000 Printing and engraving expenses......................................... 60,000 Accountants' fees and expenses.......................................... 100,000 Legal fees and expenses................................................. 85,000 Blue Sky fees and expenses.............................................. 8,000 Transfer agent and registrar fees....................................... 2,500 Miscellaneous........................................................... 28,985 ---------- Total......................................................... $ 325,000 ==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Company's Bylaws provide for indemnification of directors and officers of the Company to the full extent permitted by Delaware law. Section 145 of the General Corporation Law of the State of Delaware provides generally that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at its request in such capacity in another corporation or business association, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. In addition, pursuant to the authority of Delaware law, the Restated Certificate of Incorporation of the Company also eliminates the monetary liability of directors to the fullest extent permitted by Delaware law. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT NUMBER EXHIBIT DESCRIPTION ------ ---------------------------------------------------------------------- 1 Form of Underwriting Agreement 5 Opinion of Alston & Bird 23.1 Consent of Alston & Bird (included in Exhibit 5 above) 23.2 Consent of Arthur Andersen LLP 23.3 Consent of KPMG Peat Marwick LLP
II-1 34 ITEM 17. UNDERTAKINGS. (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein and the offering of such securities at that time shall be deemed the initial bona fide offering thereof. (h) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (i) The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-2 35 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Atlanta, and State of Georgia, on May 15, 1995. NATIONAL DATA CORPORATION By: /s/ ROBERT A. YELLOWLEES -------------------------------------- Robert A. Yellowlees Chairman of the Board POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below constitutes and appoints Robert A. Yellowlees and E. Michael Ingram and each of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities indicated on May 15, 1995.
SIGNATURE TITLE - --------------------------------------------- ---------------------------------------------- /s/ ROBERT A. YELLOWLEES Chairman of the Board and Chief Executive - --------------------------------------------- Officer Robert A. Yellowlees (Principal Executive Officer) /s/ JERRY W. BRAXTON Chief Financial Officer (Principal Financial - --------------------------------------------- and Accounting Officer) Jerry W. Braxton /s/ EDWARD L. BARLOW Director - --------------------------------------------- Edward L. Barlow /s/ JAMES B. EDWARDS Director - --------------------------------------------- James B. Edwards /s/ DON W. SANDS Director - --------------------------------------------- Don W. Sands /s/ NEIL WILLIAMS Director - --------------------------------------------- Neil Williams
II-3 EX-1 2 FORM OF UNDERWRITING AGREEMENT 1 NATIONAL DATA CORPORATION COMMON STOCK UNDERWRITING AGREEMENT June __, 1995 Goldman, Sachs & Co., Salomon Brothers Inc As representatives of the several Underwriters named in Schedule I hereto, c/o Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004 Ladies and Gentlemen: National Data Corporation, a Delaware corporation (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of 2,750,000 shares and, at the election of the Underwriters, up to 412,500 additional shares of Common Stock par value $.125 per share ("Stock") of the Company. The aggregate of 2,750,000 shares to be sold by the Company is herein called the "Firm Shares" and the aggregate of 412,500 additional shares to be sold by the Company is herein called the "Optional Shares". The Firm Shares and the Optional Shares that the Underwriters elect to purchase pursuant to Section 2 hereof are herein collectively called the "Shares". 1. The Company represents and warrants to, and agrees with, each of the Underwriters that: (a) A registration statement on Form S-3 (File No. 33-____) in respect of the Shares has been filed with the Securities and Exchange Commission (the "Commission"); such registration statement and any post-effective amendment thereto, each in the form heretofore delivered to you, and, excluding exhibits thereto but including all documents incorporated by reference in the prospectus contained therein, to you for each of the other Underwriters, have been declared effective by the Commission in such form; no other document with respect to such registration statement or document incorporated by reference therein has heretofore been filed with the Commission; and no stop order suspending the effectiveness of such registration statement has been issued and no proceeding for that purpose has been initiated or, to the best knowledge of the Company, threatened by the 2 Commission (any preliminary prospectus included in such registration statement or filed with the Commission pursuant to Rule 424(a) of the rules and regulations of the Commission under the Securities Act of 1933, as amended (the "Act"), is hereinafter called a "Preliminary Prospectus"; the various parts of such registration statement, including all exhibits thereto and including (i) the information contained in the form of final prospectus filed with the Commission pursuant to Rule 424(b) under the Act in accordance with Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to be part of the registration statement at the time it was declared effective and (ii) the documents incorporated by reference in the prospectus contained in the registration statement at the time such part of the registration statement became effective, each as amended at the time such part of the registration statement became effective, are hereinafter collectively called the "Registration Statement"; such final prospectus, in the form first filed pursuant to Rule 424(b) under the Act, is hereinafter called the "Prospectus"; any reference herein to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Act, as of the date of such Preliminary Prospectus or Prospectus, as the case may be; any reference to any amendment or supplement to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include any documents filed after the date of such Preliminary Prospectus or Prospectus, as the case may be, under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and incorporated by reference in such Preliminary Prospectus or Prospectus, as the case may be; and any reference to any amendment to the Registration Statement shall be deemed to refer to and include any annual report of the Company filed pursuant to Section 13(a) or 15(d) of the Exchange Act after the effective date of the Registration Statement that is incorporated by reference in the Registration Statement; (b) No order preventing or suspending the use of any Preliminary Prospectus has been issued by the Commission, and each Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder, and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through Goldman, Sachs & Co. expressly for use therein; -2- 3 (c) The documents incorporated by reference in the Prospectus, when they were filed with the Commission conformed in all material respects to the requirements of the Exchange Act and the rules and regulations of the Commission thereunder, and none of such documents contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and any further documents so filed and incorporated by reference in the Prospectus or any further amendment or supplement thereto, when such documents are filed with the Commission, will conform in all material respects to the requirements of the Exchange Act and the rules and regulations of the Commission thereunder and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through Goldman, Sachs & Co. expressly for use therein; (d) The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus will conform, in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder and do not and will not, as of the applicable effective date as to the Registration Statement and any amendment thereto and as of the applicable filing date as to the Prospectus and any amendment or supplement thereto, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through Goldman, Sachs & Co. expressly for use therein; (e) Neither the Company nor any of its subsidiaries has sustained since the date of the latest audited financial statements included or incorporated by reference in the Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, that is material to the Company and its subsidiaries taken as a whole, otherwise than as set forth or contemplated in the Prospectus; and, since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been any change in the capital stock or long-term debt of the Company or any of its subsidiaries, considered on a -3- 4 consolidated basis, or any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries taken as a whole, otherwise than as set forth or contemplated in the Prospectus; (f) The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all material personal property owned by them, in each case free and clear of all liens, encumbrances and defects except such as are described in the Prospectus or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries; (g) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, or is subject to no material liability or disability by reason of the failure to be so qualified in any such jurisdiction; and each subsidiary of the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation; (h) The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and conform to the description of the Stock contained in the Prospectus; and, with respect to each subsidiary of the Company other than Yes Check Services, Inc., all of the issued shares of capital stock of each such subsidiary and, with respect to Yes Check Services, Inc., all of the shares of capital stock of Yes Check Services, Inc. beneficially owned by the Company, have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims; -4- 5 (i) The unissued Shares to be issued and sold by the Company to the Underwriters hereunder have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued and fully paid and non-assessable and will conform to the description of the Stock contained in the Prospectus; (j) The issue and sale of the Shares to be sold by the Company and the compliance by the Company with all of the provisions of this Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such action result in any violation of the provisions of the Certificate of Incorporation or Bylaws of the Company or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for sale of the Shares or the consummation by the Company of the transactions contemplated by this Agreement, except the registration under the Act of the Shares and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters; (k) Neither the Company nor any of its subsidiaries is in violation of its Certificate of Incorporation or Bylaws or in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, material lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound; (l) The statements set forth in the Prospectus under the caption "Description of Capital Stock", insofar as they purport to constitute a summary of the terms of the Stock and insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate, complete and fair; (i) Other than as set forth in the Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the -5- 6 subject which, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a material adverse effect on the current or future consolidated financial position, stockholders' equity or results of operations of the Company and its subsidiaries taken as a whole; and, to the best of the Company's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others; (m) The Company is not and, after giving effect to the offering and sale of the Shares, will not be an "investment company" or an entity "controlled" by an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended (the "Investment Company Act"); (n) Neither the Company nor any of its affiliates does business with the government of Cuba or with any person or affiliate located in Cuba within the meaning of Section 517.075, Florida Statutes; (o) Arthur Andersen LLP, who have certified certain financial statements of the Company and its subsidiaries and of Mercantile Systems, Inc., and KPMG Peat Marwick, who have certified certain financial statements of Yes Check Services, Inc. and Select Check, Inc., in each case incorporated by reference in the Registration Statement, are, to the best knowledge of the Company, each independent public accountants as required by the Act and the rules and regulations of the Commission thereunder; (p) The unaudited pro forma condensed consolidated financial statements of the Company and its subsidiaries incorporated by reference in the Registration Statement comply as to form in all material respects with the applicable accounting requirements of the Act and the rules and regulations promulgated thereunder and management of the Company believes (i) the assumptions underlying the pro forma adjustments are reasonable, (ii) that such adjustments have been properly applied to the historical amounts in the compilation of such statements and (iii) that such statements fairly present, with respect to the Company and its subsidiaries, the condensed consolidated pro form financial position and results of operations and the other information purported to be shown therein at the respective dates or for the respective periods therein specified; and (q) The Company and its subsidiaries own or have the right to use all patents, patent applications, trademarks, trademark applications, tradenames, service marks, copyrights, franchises, trade secrets, software, proprietary or other confidential information and intangible properties and assets (collectively, "Intangibles") necessary to their respective businesses as presently conducted or as the -6- 7 Prospectus indicate the Company and its subsidiaries propose to conduct, except where the failure to own or have the right to use would not have a material adverse effect on the current or future consolidated financial position, stockholders' equity or results of operations of the Company and its subsidiaries; to the best knowledge of the Company, none of the Company or its subsidiaries has infringed or is infringing, and none of the Company or its subsidiaries has received notice of infringement with respect to, asserted Intangibles of others; and, to the best knowledge of the Company, there is no infringement by others of Intangibles of the Company and its subsidiaries. 2. Subject to the terms and conditions herein set forth, (a) the Company agrees to sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company, at a purchase price per share of $_______, the number of Firm Shares (to be adjusted by you so as to eliminate fractional shares) determined by multiplying the aggregate number of Shares to be sold by the Company by a fraction, the numerator of which is the aggregate number of Firm Shares to be purchased by such Underwriter as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the aggregate number of Firm Shares to be purchased by all of the Underwriters from the Company hereunder and (b) in the event and to the extent that the Underwriters shall exercise the election to purchase Optional Shares as provided below, the Company agrees to sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company, at the purchase price per share set forth in clause (a) of this Section 2, that portion of the number of Optional Shares as to which such election shall have been exercised (to be adjusted by you so as to eliminate fractional shares) determined by multiplying such number of Optional Shares by a fraction the numerator of which is the maximum number of Optional Shares which such Underwriter is entitled to purchase as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the maximum number of Optional Shares that all of the Underwriters are entitled to purchase hereunder. The Company hereby grants to the Underwriters the right to purchase at their election up to 412,500 Optional Shares, at the purchase price per share set forth in the paragraph above, for the sole purpose of covering overallotments in the sale of the Firm Shares. Any such election to purchase Optional Shares may be exercised on one occasion only by written notice from you to the Company given within a period of 30 calendar days after the date of this Agreement and setting forth the aggregate number of Optional Shares to be purchased and the date on which such Optional Shares are to be delivered, as determined by you but in no event earlier than the First Time of Delivery (as defined in Section 4 hereof) or, unless you and the Company otherwise agree -7- 8 in writing, earlier than two or later than ten business days after the date of such notice. 3. Upon the authorization by you of the release of the Firm Shares, the several Underwriters propose to offer the Firm Shares for sale upon the terms and conditions set forth in the Prospectus. 4. (a) The Shares to be purchased by each Underwriter hereunder, in definitive form, and in such authorized denominations and registered in such names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior notice to the Company shall be delivered by or on behalf of the Company to Goldman, Sachs & Co., through the facilities of the Depository Trust Company ("DTC"), for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by certified or official bank check or checks, payable to the order of the Company in New York Clearing House (next day) funds. The Company will cause the certificates representing the Shares to be made available for checking and packaging at least twenty-four hours prior to the Time of Delivery (as defined below) with respect thereto at the office of DTC or its designated custodian (the "Designated Office"). The time and date of such delivery and payment shall be, with respect to the Firm Shares, 9:30 a.m., New York time, on June __, 1995 or such other time and date as Goldman, Sachs & Co. and may agree upon in writing, and, with respect to the Optional Shares, 9:30 a.m., New York time, on the date specified by Goldman, Sachs & Co. in the written notice given by Goldman, Sachs & Co. of the Underwriters' election to purchase such Optional Shares, or such other time and date as Goldman, Sachs & Co. and the Company may agree upon in writing. Such time and date for delivery of the Firm Shares is herein called the "First Time of Delivery", such time and date for delivery of the Optional Shares, if not the First Time of Delivery, is herein called the "Second Time of Delivery", and each such time and date for delivery is herein called a "Time of Delivery". (b) The documents to be delivered at each Time of Delivery by or on behalf of the parties hereto pursuant to Section 7 hereof, including the cross receipt for the Shares and any additional documents requested by the Underwriters pursuant to Section 7(j) hereof, will be delivered at the offices of King & Spalding, 191 Peachtree Street, Atlanta, Georgia 30303-1763 (the "Closing Location"), and the Shares will be delivered at the Designated Office, all at such Time of Delivery. A meeting will be held at the Closing Location at 1:00 p.m., New York City time, on the New York Business Day next preceding such Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Section 4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New -8- 9 York are generally authorized or obligated by law or executive order to close. 5. The Company agrees with each of the Underwriters: (a) To prepare the Prospectus in a form approved by you and to file such Prospectus pursuant to Rule 424(b) under the Act not later than the Commission's close of business on the second business day following the execution and delivery of this Agreement, or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the Act; to make no further amendment or any supplement to the Registration Statement or Prospectus prior to the last Time of Delivery which shall be disapproved by you promptly after reasonable notice thereof; to advise you, promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any supplement to the Prospectus or any amended Prospectus has been filed and to furnish you with copies thereof; to file promptly all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus and for so long as the delivery of a prospectus is required in connection with the offering or sale of the Shares; to advise you, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or prospectus, of the suspension of the qualification of the Shares for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or prospectus or suspending any such qualification, promptly to use its best efforts to obtain the withdrawal of such order; (b) Promptly from time to time to take such action as you may reasonably request to qualify the Shares for offering and sale under the securities laws of such jurisdictions as you may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Shares, provided that in connection therewith the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction; -9- 10 (c) To furnish the Underwriters with copies of the Prospectus in such quantities as you may from time to timereasonably request, and, if the delivery of a prospectus is required at any time prior to the expiration of nine months after the time of issue of the Prospectus in connection with the offering or sale of the Shares and if at such time any events shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason it shall be necessary during such period to amend or supplement the Prospectus or to file under the Exchange Act any document incorporated by reference in the Prospectus in order to comply with the Act or the Exchange Act, to notify you and upon your request to file such document and to prepare and furnish without charge to each Underwriter and to any dealer in securities as many copies as you may from time to time reasonably request of an amended Prospectus or a supplement to the Prospectus which will correct such statement or omission or effect such compliance, and in case any Underwriter is required to deliver a prospectus in connection with sales of any of the Shares at any time nine months or more after the time of issue of the Prospectus, upon your request but at the expense of such Underwriter, to prepare and deliver to such Underwriter as many copies as you may request of an amended or supplemented Prospectus complying with Section 10(a)(3) of the Act; (d) To make generally available to its securityholders as soon as practicable, but in any event not later than eighteen months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Act), an earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the Act and the rules and regulations of the Commission thereunder (including, at the option of the Company, Rule 158); (e) During the period beginning from the date hereof and continuing to and including the date 90 days after the date of the Prospectus, not to offer, sell, contract to sell, pledge or otherwise dispose of, or file a Registration Statement under the Act with respect to, except as provided hereunder, any stock or any securities of the Company that are substantially similar to the Shares, including but not limited to any securities that are convertible into or exchangeable for, or that represent the right to receive, Stock or any such substantially similar securities (other than (i) pursuant to stock option, restricted stock, retirement and stock purchase plans existing on, or upon the conversion or exchange of convertible or exchangeable -10- 11 securities outstanding as of, the date of this Agreement or (ii) in payment in whole or in part of the purchase price in connection with the acquisition of all or a portion of the outstanding capital stock or assets of another person or entity provided the Company shall have obtained and delivered to the Underwriters an executed written agreement of such transferee of any such securities in form and substance satisfactory to you to be bound by the transfer restrictions set forth in this Section 5(e)), without your prior written consent; (f) To furnish to its stockholders as soon as practicable after the end of each fiscal year an annual report (including a balance sheet and statements of income, stockholders' equity and cash flows of the Company and its consolidated subsidiaries certified by independent public accountants) and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the effective date of the Registration Statement), consolidated summary financial information of the Company and its subsidiaries for such quarter in reasonable detail; (g) During a period of three years from the effective date of the Registration Statement, to furnish to you copies of all reports or other communications (financial or other) furnished to stockholders, and to deliver to you (i) as soon as they are available, copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed; and (ii) such additional information concerning the business and financial condition of the Company as you may from time to time reasonably request, provided that to the extent any such information is non-public, you agree to keep such information confidential until such time as such information is in the public domain (such financial statements to be on a consolidated basis to the extent the accounts of the Company and its subsidiaries are consolidated in reports furnished to its stockholders generally or to the Commission); (h) To use the net proceeds received by it from the sale of the Shares pursuant to this Agreement in the manner specified in the Prospectus under the caption "Use of Proceeds"; and (i) To use its best efforts to list, subject to notice of issuance, the Shares on the New York Stock Exchange (the "Exchange"). 6. The Company covenants and agrees with the several Underwriters that the Company will pay or cause to be paid the following: (a) the fees, disbursements and expenses of the -11- 12 Company's counsel and accountants in connection with the registration of the Shares under the Act and all other expenses in connection with the preparation, printing and filing of the Registration Statement, any Preliminary Prospectus and the Prospectus and amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers; (b) the cost of printing or producing any Agreement among Underwriters, this Agreement, the Blue Sky Memorandum, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Shares; (c) all expenses in connection with the qualification of the Shares for offering and sale under state securities laws as provided in Section 5(b) hereof, including the fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky survey; (d) all fees and expenses in connection with listing the Shares on the Exchange; (e) the filing fees incident to securing any required review by the National Association of Securities Dealers, Inc. of the terms of the sale of the Shares; (f) the cost of preparing stock certificates; (g) the cost and charges of any transfer agent or registrar; and (h) all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section. It is understood, however, that except as provided in this Section, and Sections 8 and 11 hereof, the Underwriters will pay all of their own costs and expenses, including the fees of their counsel, stock transfer taxes on resale of any of the Shares by them, and any advertising expenses connected with any offers they may make. 7. The obligations of the Underwriters hereunder, as to the Shares to be delivered at each Time of Delivery, shall be subject, in their discretion, to the condition that all representations and warranties and other statements of the Company herein are, at and as of such Time of Delivery, true and correct, the condition that the Company shall have performed all of its and their obligations hereunder theretofore to be performed, and the following additional conditions: (a) The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) within the applicable time period prescribed for such filing by the rules and regulations under the Act and in accordance with Section 5(a) hereof; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or, to the best knowledge of the Company, threatened by the Commission; and all requests for additional information on the part of the Commission shall have been complied with to your reasonable satisfaction; -12- 13 (b) King & Spalding, counsel for the Underwriters, shall have furnished to you such opinion or opinions, dated such Time of Delivery, with respect to the matters covered in paragraphs (i), (vii), (xi) and (xiv) and certain matters covered by paragraph (ii) of subsection (c) below as well as such other related matters as you may reasonably request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters; (c) Alston & Bird, counsel for the Company, shall have furnished to you their written opinion, dated such Time of Delivery, in form and substance satisfactory to you, to the effect that: (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus; (ii) The Company has an authorized capitalization as set forth in the Prospectus, and the Shares being delivered at such Time of Delivery have been duly and validly authorized and issued and are fully paid and non-assessable; and the Shares conform in all material respects to the description of the Stock contained in the Prospectus; (iii) To such counsel's knowledge and other than as set forth in the Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a material adverse effect on the current or future consolidated financial position, stockholders' equity or results of operations of the Company and its subsidiaries; and, to the best of such counsel's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others; (iv) This Agreement has been duly authorized, executed and delivered by the Company; (v) The issue and sale of the Shares being delivered at such Time of Delivery and the compliance by the Company with all of the provisions of this Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions -13- 14 of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument filed as an exhibit to the Registration Statement or any document incorporated by reference therein or any other material agreement or instrument known to such counsel to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such action result in any violation of the provisions of the Certificate of Incorporation or Bylaws of the Company or any statute or any order, rule or regulation known to such counsel of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties; (vi) No consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the sale of the Shares or the consummation by the Company of the transactions contemplated by this Agreement, except the registration under the Act of the Shares, and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters; (vii) The statements set forth in the Prospectus under the caption "Description of Capital Stock", insofar as they purport to constitute a summary of the terms of the Stock and insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate, complete and fair; (viii) The Company is not an "investment company" or an entity "controlled" by an "investment company", as such terms are defined in the Investment Company Act; (ix) The documents incorporated by reference in the Prospectus or any further amendment or supplement thereto made by the Company prior to such Time of Delivery (other than the financial statements and related schedules included or incorporated therein, as to which such counsel need express no opinion), when they were filed with the Commission complied as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission thereunder; and they have no reason to believe that any of such documents, when such documents were so filed, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in -14- 15 the light of the circumstances under which they were made when such documents were so filed, not misleading; and (x) The Registration Statement and the Prospectus and any further amendments and supplements thereto made by the Company prior to such Time of Delivery (other than the financial statements and related schedules included or incorporated therein, as to which such counsel need express no opinion) comply as to form in all material respects with the requirements of the Act and the rules and regulations thereunder; although they do not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectus, except for those referred to in the opinion in subsection (xi) of this Section 7(c), they have no reason to believe that, as of its effective date, the Registration Statement or any further amendment thereto made by the Company prior to such Time of Delivery (other than the financial statements and related schedules included or incorporated therein, as to which such counsel need express no opinion) contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that, as of its date, the Prospectus or any further amendment or supplement thereto made by the Company prior to such Time of Delivery (other than the financial statements and related schedules included or incorporated therein, as to which such counsel need express no opinion) contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading or that, as of such Time of Delivery, either the Registration Statement or the Prospectus or any further amendment or supplement thereto made by the Company prior to such Time of Delivery (other than the financial statements and related schedules included or incorporated therein, as to which such counsel need express no opinion) contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and they do not know of any amendment to the Registration Statement required to be filed or of any contracts or other documents of a character required to be filed as an exhibit to the Registration Statement or required to be incorporated by reference into the Prospectus or required to be described in the Registration Statement or the Prospectus which are not filed or incorporated by reference or described as required; -15- 16 (d) E. Michael Ingram, General Counsel and Secretary of the Company, shall have furnished to you his written opinion, dated such Time of Delivery, in form and substance satisfactory to you, to the effect that: (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus; (ii) The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company (including the Shares being delivered at such Time of Delivery) have been duly and validly authorized and issued and are fully paid and non-assessable; (iii) The Company has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, or is subject to no material liability or disability by reason of failure to be so qualified in any such jurisdiction (such counsel being entitled to rely in respect of the opinion in this clause upon opinions of local counsel and in respect of matters of fact upon certificates of officers of the Company, provided that such counsel shall state that they believe that both you and they are justified in relying upon such opinions and certificates); (iv) Each subsidiary of the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation; and all of the issued shares of capital stock of each such subsidiary have been duly and validly authorized and issued, are fully paid and non-assessable, and are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims (such counsel being entitled to rely in respect of the opinion in this clause upon opinions of local counsel and in respect of matters of fact upon certificates of officers of the Company or its subsidiaries, provided that such counsel shall state that they believe that both you and they are justified in relying upon such opinions and certificates); (v) The Company and its subsidiaries have good and marketable title in fee simple to all real property owned by them, in each case free and clear of all liens, encumbrances and defects except such as are described in -16- 17 the Prospectus or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not materially interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries (in giving the opinion in this clause, such counsel may state that no examination of record titles for the purpose of such opinion has been made, and that they are relying upon a general review of the titles of the Company and its subsidiaries, upon opinions of local counsel and abstracts, reports and policies of title companies rendered or issued at or subsequent to the time of acquisition of such property by the Company or its subsidiaries, upon opinions of counsel to the lessors of such property and, in respect of matters of fact, upon certificates of officers of the Company or its subsidiaries, provided that such counsel shall state that they believe that both you and they are justified in relying upon such opinions, abstracts, reports, policies and certificates); (vi) To such counsel's knowledge and other than as set forth in the Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a material adverse effect on the current or future consolidated financial position, stockholders' equity or results of operations of the Company and its subsidiaries; and, to the best of such counsel's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others; (vii) The issue and sale of the Shares being delivered at such Time of Delivery and the compliance by the Company with all of the provisions of this Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument filed as an exhibit to the Registration Statement or any document incorporated by reference therein or any other material agreement or instrument known to such counsel to which the Company or -17- 18 any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such action result in any violation of the provisions of the Certificate of Incorporation or Bylaws of the Company or any statute or any order, rule or regulation known to such counsel of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties; and (viii) Neither the Company nor any of its subsidiaries is in violation of its Certificate of Incorporation or Bylaws or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, or lease or agreement or other instrument to which it is a party or by which it or any of its properties may be bound except for any such violation or default that would not have a material adverse effect on the current or future consolidated financial position, stockholders' equity or results of operations of the Company and its subsidiaries; (e) On the date of the Prospectus at a time prior to the execution of this Agreement, at 9:30 a.m., New York City time, on the effective date of any post-effective amendment to the Registration Statement filed subsequent to the date of this Agreement and also at each Time of Delivery, Arthur Andersen LLP and KPMG Peat Marwick shall have furnished to you a letter or letters, dated the respective dates of delivery thereof, in form and substance satisfactory to you, to the effect set forth in Annex I and Annex II hereto, respectively; (f) (i) Neither the Company nor any of its subsidiaries shall have sustained since the date of the latest audited financial statements included or incorporated by reference in the Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus, and (ii) since the respective dates as of which information is given in the Prospectus there shall not have been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any change, or any development involving a prospective change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries, otherwise than as set forth or contemplated in the Prospectus, the effect of which, in any such case described in Clause (i) or (ii), is in the judgment -18- 19 of the Representatives so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at such Time of Delivery on the terms and in the manner contemplated in the Prospectus; (g) On or after the date hereof there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the Exchange; (ii) a suspension or material limitation in trading in the Company's securities on the Exchange; (iii) a general moratorium on commercial banking activities declared by either Federal or New York State authorities; or (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war, if the effect of any such event specified in this Clause (iv) in the judgment of the Representatives makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at such Time of Delivery on the terms and in the manner contemplated in the Prospectus; (h) The Shares at such Time of Delivery shall have been duly listed, subject to notice of issuance, on the Exchange; (i) The Company has obtained and delivered to the Underwriters executed copies of an agreement from each executive officer and director of the Company substantially to the effect set forth in Section 5(e) hereof in form and substance satisfactory to you; and (j) The Company shall have furnished or caused to be furnished to you at such Time of Delivery certificates of officers of the Company satisfactory to you as to the accuracy of the representations and warranties of the Company herein at and as of such Time of Delivery, as to the performance by the Company of all of its obligations hereunder to be performed at or prior to such Time of Delivery, and as to such other matters as you may reasonably request, and the Company shall have furnished or caused to be furnished certificates as to the matters set forth in subsections (a) and (f) of this Section. 8. (a) The Company will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact -19- 20 required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by any Underwriter through Goldman, Sachs & Co. expressly for use therein. (b) Each Underwriter will indemnify and hold harmless the Company against any losses, claims, damages or liabilities to which the Company may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Underwriter through Goldman, Sachs & Co. expressly for use therein; and will reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such action or claim as such expenses are incurred. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, -20- 21 after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Underwriters on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. -21- 22 The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this subsection (d) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this subsection (d) to contribute are several in proportion to their respective underwriting obligations and not joint. (e) The obligations of the Company under this Section 8 shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act; and the obligations of the Underwriters under this Section 8 shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company and to each person, if any, who controls the Company within the meaning of the Act. 9. (a) If any Underwriter shall default in its obligation to purchase the Shares which it has agreed to purchase hereunder at a Time of Delivery, you may in your discretion arrange for you or another party or other parties to purchase such Shares on the terms contained herein. If within thirty-six hours after such default by any Underwriter you do not arrange for the purchase of such Shares, then the Company shall be entitled to a further period of thirty-six hours within which to procure another party or other parties satisfactory to you to purchase such Shares on such terms. In the event that, within the respective prescribed periods, you notify the Company that you have so arranged for the purchase of such Shares, or the Company notify you that it has so arranged for the purchase of such Shares, you or the Company shall have the right to postpone such Time of Delivery for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the -22- 23 Company agrees to file promptly any amendments to the Registration Statement or the Prospectus which in your opinion may thereby be made necessary. The term "Underwriter" as used in this Agreement shall include any person substituted under this Section with like effect as if such person had originally been a party to this Agreement with respect to such Shares. (b) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you and the Company as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased does not exceed one-eleventh of the aggregate number of all the Shares to be purchased at such Time of Delivery, then the Company shall have the right to require each non-defaulting Underwriter to purchase the number of Shares which such Underwriter agreed to purchase hereunder at such Time of Delivery and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the number of Shares which such Underwriter agreed to purchase hereunder) of the Shares of such defaulting Underwriter or Underwriters for which such arrangements have not been made; but nothing herein shall relieve a defaulting Underwriter from liability for its default. (c) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you and the Company as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased exceeds one-eleventh of the aggregate number of all of the Shares to be purchased at such Time of Delivery, or if the Company shall not exercise the right described in subsection (b) above to require non-defaulting Underwriters to purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement (or, with respect to the Second Time of Delivery, the obligations of the Underwriters to purchase and of the Company to sell the Optional Shares) shall thereupon terminate, without liability on the part of any non-defaulting Underwriter or the Company, except for the expenses to be borne by the Company and the Underwriters as provided in Section 6 hereof and the indemnity and contribution agreements in Section 8 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default. 10. The respective indemnities, agreements, representations, warranties and other statements of the Company and the several Underwriters, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Underwriter or any controlling person of any Underwriter, or the Company, or any officer or director or controlling person of the Company, and shall survive delivery of and payment for the Shares. -23- 24 11. If this Agreement shall be terminated pursuant to Section 9 hereof, the Company shall not then be under any liability to any Underwriter except as provided in Sections 6 and 8 hereof; but, if for any other reason any Shares are not delivered by or on behalf of the Company as provided herein, the Company will reimburse the Underwriters through you for all out-of-pocket expenses approved in writing by you, including fees and disbursements of counsel, reasonably incurred by the Underwriters in making preparations for the purchase, sale and delivery of the Shares not so delivered, but the Company shall then be under no further liability to any Underwriter in respect of the Shares not so delivered except as provided in Sections 6 and 8 hereof. 12. In all dealings hereunder, you shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by you jointly or by Goldman, Sachs & Co. on behalf of you as the representatives. All statements, requests, notices and agreements hereunder shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to you as the Representatives in care of Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004, Attention: Registration Department; and if to the Company shall be delivered or sent by mail, telex or facsimile transmission to the address of the Company set forth in the Registration Statement, Attention: Secretary; provided, however, that any notice to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at its address set forth in its Underwriters' Questionnaire or telex constituting such Questionnaire, which address will be supplied to the Company by you on request. Any such statements, requests, notices or agreements shall take effect upon receipt thereof. 13. This Agreement shall be binding upon, and inure solely to the benefit of, the Underwriters and the Company and, to the extent provided in Sections 8 and 10 hereof, the officers and directors of the Company and each person who controls the Company or any Underwriter, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Shares from any Underwriter shall be deemed a successor or assign by reason merely of such purchase. 14. Time shall be of the essence of this Agreement. As used herein, the term "business day" shall mean any day when the Commission's office in Washington, D.C. is open for business. 15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. -24- 25 16. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. If the foregoing is in accordance with your understanding, please sign and return to us one for the Company and each of the Representatives plus one for each counsel counterparts hereof, and upon the acceptance hereof by you, on behalf of each of the Underwriters, this letter and such acceptance hereof shall constitute a binding agreement among each of the Underwriters and the Company. It is understood that your acceptance of this letter on behalf of each of the Underwriters is pursuant to the authority set forth in a form of Agreement among Underwriters, the form of which shall be submitted to the Company for examination, upon request, but without warranty on your part as to the authority of the signers thereof. Very truly yours, NATIONAL DATA CORPORATION By: -------------------------- Name: Title: Accepted as of the date hereof: GOLDMAN SACHS & CO. SALOMON BROTHERS INC By: ----------------------------- (Goldman Sachs & Co.) On behalf of each of the Underwriters -25- 26 SCHEDULE I
NUMBER OF OPTIONAL SHARES NUMBER OF TO BE PURCHASED FIRM SHARES IF MAXIMUM UNDERWRITER TO BE PURCHASED OPTION EXERCISED =========== =============== ================ Goldman Sachs & Co . . . . . . . . . . . . Salomon Brothers Inc . . . . . . . . . . . ------------- ------------- Total . . . . . . . . . . . . . . . . . ============= =============
27 SCHEDULE II 28 ANNEX I Pursuant to Section 7(d) of the Underwriting Agreement, Arthur Andersen LLP shall furnish letters to the Underwriters with respect to the Company and its subsidiaries to the effect that: (i) They are independent certified public accountants with respect to the Company and its subsidiaries within the meaning of the Act and the applicable published rules and regulations thereunder; (ii) In their opinion, the financial statements and any supplementary financial information and schedules examined by them and included or incorporated by reference in the Registration Statement or the Prospectus comply as to form in all material respects with the applicable accounting requirements of the Act or the Exchange Act, as applicable, and the related published rules and regulations thereunder; (iii) They have made a review in accordance with standards established by the American Institute of Certified Public Accountants of the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Company's Quarterly Reports on Form 10-Q for the quarters ended August 31, 1994, November 30, 1994 and February 28, 1995 incorporated by reference into the Prospectus and, on the basis of specified procedures including inquiries of officials of the Company who have responsibility for financial and accounting matters regarding whether the unaudited condensed consolidated financial statements referred to in paragraph (vi)(A)(i) below comply as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations, nothing came to their attention that caused them to believe that the unaudited condensed consolidated financial statements do not comply as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations; (iv) The unaudited selected financial information with respect to the consolidated results of operations and financial position of the Company for the five most recent fiscal years included in the Prospectus and included or incorporated by reference in Item 6 of the Company's Annual Report on Form 10-K for the most recent fiscal year agrees with the corresponding amounts (after restatement where applicable) in the audited consolidated financial statements for such five fiscal years which were included or incorporated by reference in the Company's Annual Reports on Form 10-K for such fiscal years; 29 (v) They have compared the information in the Prospectus under selected captions with the disclosure requirements of Regulation S-K and on the basis of limited procedures specified in such letter nothing came to their attention as a result of the foregoing procedures that caused them to believe that this information does not conform in all material respects with the disclosure requirements of Items 301, 302, 402 and 503(d), respectively, of Regulation S-K; (vi) On the basis of limited procedures, not constituting an examination in accordance with generally accepted auditing standards, consisting of a reading of the unaudited financial statements and other information referred to below, a reading of the latest available interim financial statements of the Company and its subsidiaries, inspection of the minute books of the Company and its subsidiaries since the date of the latest audited financial statements included or incorporated by reference in the Prospectus, inquiries of officials of the Company and its subsidiaries responsible for financial and accounting matters and such other inquiries and procedures as may be specified in such letter, nothing came to their attention that caused them to believe that: (A) (i) the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Company's Quarterly Reports on Form 10-Q for the quarters ended August 31, 1994, November 30, 1994 and February 28, 1995 incorporated by reference in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Exchange Act as it applies to Form 10-Q and the related published rules and regulations, or (ii) any material modifications should be made to the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Company's Quarterly Reports on Form 10-Q for the quarters ended August 31, 1994, November 30, 1994 and February 28, 1995 incorporated by reference in the Prospectus, for them to be conformity with generally accepted accounting principles; (B) any other unaudited income statement data and balance sheet items included in the Prospectus do not agree with the corresponding items in the unaudited consolidated financial statements from which such data and items were derived, and any such unaudited data and items were not determined on a basis substantially consistent with the basis for the corresponding amounts in the audited consolidated financial statements included or incorporated by reference in the Company's -2- 30 Annual Report on Form 10-K for the most recent fiscal year; (C) the unaudited financial statements which were not included in the Prospectus but from which were derived the unaudited condensed financial statements referred to in Clause (A) and any unaudited income statement data and balance sheet items included in the Prospectus and referred to in Clause (B) were not determined on a basis substantially consistent with the basis for the audited financial statements included or incorporated by reference in the Company's Annual Report on Form 10-K for the most recent fiscal year; (D) the unaudited pro forma condensed consolidated financial statements included in the Company's Current Report on Form 8-K dated November 17, 1994 incorporated by reference in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Act and the published rules and regulations thereunder or the pro forma adjustments have not been properly applied to the historical amounts in the compilation of those statements; (E) as of a specified date not more than five days prior to the date of such letter, there have been any changes in the consolidated capital stock (other than issuances of capital stock upon exercise of options and stock appreciation rights, upon earn-outs of performance shares and upon conversions of convertible securities, in each case which were outstanding on the date of the latest balance sheet included or incorporated by reference in the Prospectus) or any increase in the consolidated long-term debt of the Company and its subsidiaries, or any decreases in consolidated net current assets or stockholders equity or other items specified by the Representatives, or any increases in any items specified by the Representatives, in each case as compared with amounts shown in the latest balance sheet included or incorporated by reference in the Prospectus, except in each case for changes, increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (F) for the period from the date of the latest financial statements included or incorporated by reference in the Prospectus to the specified date referred to in Clause (E) there were any decreases in consolidated net revenues or operating profit or the total or per share amounts of consolidated net income or other items specified by the Representatives, or any increases in any items specified by the Representatives, -3- 31 in each case as compared with the comparable period of the preceding year and with any other period of corresponding length specified by the Representatives, except in each case for increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (vii) In addition to the examination referred to in their report incorporated by reference in the Prospectus and the limited procedures, inspection of minute books, inquiries and other procedures referred to in paragraphs (iii) and (vi) above, they have carried out certain specified procedures, not constituting an examination in accordance with generally accepted auditing standards, with respect to certain amounts, percentages and financial information specified by the Representatives which are derived from the general accounting records of the Company and its subsidiaries, which appear in the Prospectus (excluding documents incorporated by reference) or in Part II of, or in exhibits and schedules to, the Registration Statement specified by the Representatives or in documents incorporated by reference in the Prospectus specified by the Representatives, and have compared certain of such amounts, percentages and financial information with the accounting records of the Company and its subsidiaries and have found them to be in agreement. Pursuant to Section 7(d) of the Underwriting Agreement, Arthur Andersen LLP shall furnish letters to the Underwriters with respect to Mercantile Systems, Inc. ("Mercantile") to the effect that: (i) They are independent certified public accountants with respect to Mercantile within the meaning of the Act and the applicable published rules and regulations thereunder; (ii) In their opinion, the financial statements and any supplementary financial information and schedules examined by them and incorporated by reference in the Registration Statement or the Prospectus comply as to form in all material respects with the applicable accounting requirements of the Act or the Exchange Act, as applicable, and the related published rules and regulations thereunder; (iii) They have made a review in accordance with standards established by the American Institute of Certified Public Accountants of the unaudited combined statements of operations and cash flows in the Company's Current Report on Form 8-K dated November 17, 1994 incorporated by reference into the Prospectus and, on the basis of specified procedures including inquiries of officials of Mercantile who have responsibility for financial and accounting matters regarding whether the unaudited financial statements comply as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations, nothing came to their attention that caused them to believe that the unaudited combined financial statements (A) do not comply as to form in all material respects with the applicable accounting -4- 32 requirements of the Act and the Exchange Act and the related published rules and regulations or (B) any material modifications should be made to the unaudited combined financial statements for them to be conformity with generally accepted accounting principles. -5- 33 ANNEX II Pursuant to Section 7(d) of the Underwriting Agreement, Peat Marwick shall furnish letters to the Underwriters with respect to Yes Check Services, Inc. and Select Check, Inc. (the "Acquired Companies") to the effect that: (i) They are independent certified public accountants with respect to the Acquired Companies within the meaning of the Act and the applicable published rules and regulations thereunder; (ii) In their opinion, the financial statements and any supplementary financial information and schedules examined by them and incorporated by reference in the Registration Statement or the Prospectus comply as to form in all material respects with the applicable accounting requirements of the Act or the Exchange Act, as applicable, and the related published rules and regulations thereunder; and (iii) They have made a review in accordance with standards established by the American Institute of Certified Public Accountants of the unaudited combined balance sheet of Mercantile at May 31, 1994 included in the Company's Current Report on form 8-K dated November 17, 1994 incorporated by reference into the Prospectus and on the basis of specified procedures including inquiries of officials of the Company who have responsibility for financial and accounting matters regarding whether the unaudited combined balance sheet complies as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations, nothing came to their attention that caused them to believe that the unaudited combined balance sheet (A) does not comply as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations or (B) any material modifications should be made to the unaudited combined balance sheet for it to be in conformity with general accepted accounting principles. EX-5 3 OPINION OF ALSTON & BIRD 1 ALSTON & BIRD One Atlantic Center 1201 West Peachtree Street Atlanta, Georgia 30309-3424 404-881-7000 Fax: 404-881-7777 Telex: 54-2996 May 15, 1995 National Data Corporation National Data Plaza Atlanta, Georgia 30329 Ladies and Gentlemen: This opinion is given in connection with the filing of a Registration Statement on Form S-3 (the "Registration Statement") with the Securities and Exchange Commission by National Data Corporation, a corporation organized and existing under the laws of the State of Delaware (the "Company"), with respect to the registration under the Securities Act of 1933, as amended, of 3,162,500 shares of the Company's $.125 par value common stock ("Common Stock") being sold by the Company (the "Shares"). As counsel for the Company in connection with the sale of the Common Stock, we have examined such corporate records and documents as we have deemed relevant and necessary as the basis for the opinion set forth herein. We are familiar with or have reviewed the actions taken by the Company in connection with the authorization, registration, issuance and sale of the Common Stock. In conducting our examination, we have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies, and the authenticity of the originals of such documents. Based upon the foregoing, it is our opinion that the shares of Common Stock covered by the Registration Statement have been duly authorized and, following due execution and delivery of the Underwriting Agreement in the form of Exhibit 1 to the Registration Statement between the Company, Goldman, Sachs & Co. and Salomon Brothers Inc, as Representatives of the several underwriters named in Schedule I thereto (the "Underwriting Agreement"), the Shares when issued and sold to the several underwriters as provided in the Underwriting Agreement, will be validly issued, fully paid, and non-assessable by the Company under the General Corporation Law of the State of Delaware as in effect on the date hereof. We consent to the use of this opinion as an exhibit to the Registration Statement and to the reference made to our firm under the caption "Legal Matters" in the Prospectus constituting part of the Registration Statement. ALSTON & BIRD By: /s/ Jeffrey P. Adams ------------------------- EX-23.2 4 CONSENT OF ARTHUR ANDERSEN 1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our reports dated July 15, 1994 included in National Data Corporation's Annual Report on Form 10-K for the year ended May 31, 1994 and our report dated March 4, 1994 included in National Data Corporation's Current Report on Form 8-K dated November 17, 1994 and to all references to our firm included in this Registration Statement. Arthur Andersen LLP Atlanta, Georgia May 15, 1995 EX-23.3 5 CONSENT OG PEAT MARWICK 1 ACCOUNTANTS' CONSENT The Boards of Directors Yes Check Services, Inc. and Select Check, Inc.: We consent to the incorporation by reference in this registration statement on Form S-3 of National Data Corporation of our report dated March 18, 1994, with respect to the combined balance sheets of Yes Check Services, Inc. and Select Check, Inc. as of December 31, 1993, and the related combined statements of operations and cash flows for the period from February 1, 1993, date of inception, through December 31, 1993, which report appears in the Form 8-K of National Data Corporation dated November 17, 1994. Our report dated March 18, 1994, contains an explanatory paragraph that states that the 1993 loss from operations and the net capital deficiency raise substantial doubt about the combined entities' ability to continue as going concerns. The combined financial statements do not include any adjustments that might result from the outcome of this uncertainty. KPMG Peat Marwick LLP Chicago, Illinois May 15, 1995 -----END PRIVACY-ENHANCED MESSAGE-----