NATIONAL PROCESSING INC, S-1/A, 1996-08-07

NATIONAL PROCESSING INC
S-1/A, 1996-08-07
COMPUTER PROCESSING & DATA PREPARATION

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 7, 1996

REGISTRATION NO. 333-05507
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 2

FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------
NATIONAL PROCESSING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

OHIO
(STATE OR OTHER JURISDICTION
OF INCORPORATION OR ORGANIZATION)

7374
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)

61-1303983
(I.R.S. EMPLOYER
IDENTIFICATION NO.)

------------------
1231 DURRETT LANE
LOUISVILLE, KENTUCKY 40285-0001
(502) 364-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------

TONY G. HOLCOMBE
CHIEF EXECUTIVE OFFICER
NATIONAL PROCESSING, INC.
1231 DURRETT LANE
LOUISVILLE, KENTUCKY 40285-0001
(502) 364-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------
COPIES TO:

DENNIS W. LABARRE, ESQ. DAVID L. ZOELLER, ESQ. PETER H. DARROW, ESQ.
CHRISTOPHER M. KELLY, ESQ. National City Corporation Cleary, Gottlieb,
Jones, Day, Reavis & Pogue 1900 E. Ninth Street Steen & Hamilton
901 Lakeside Avenue Cleveland, Ohio 44114-3484 One Liberty Plaza
Cleveland, Ohio 44114 (216) 575-2000 New York, New York 10006
(216) 586-3939 (212) 225-2000

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after this Registration Statement becomes effective.

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, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------

CALCULATION OF REGISTRATION FEE

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE(3)
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Common Stock............ 7,475,000 $16.00 $119,600,000 $41,242
</TABLE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(1) Includes 975,000 shares to cover an over-allotment option granted by the
Registrant to the Underwriters.

(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) of the Securities Act of 1933.

(3) Includes $38,069 previously paid upon filing of the Registration Statement
on June 7, 1996.

------------------

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 this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 2

NATIONAL PROCESSING, INC.

CROSS-REFERENCE SHEET

PURSUANT TO ITEM 501(b) OF REGULATION S-K

<TABLE>
<CAPTION>
ITEM
NO. FORM S-1 HEADING CAPTION OR LOCATION IN PROSPECTUS
- ----- ---------------------------------------------- ----------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page Page of
Prospectus.................................. Front Cover Page of the Registration
Statement; Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus.................................. Inside Front and Outside Back Cover
Pages of Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges................... Prospectus Summary; Risk Factors
4. Use of Proceeds............................... Use of Proceeds
5. Determination of Offering Price............... Underwriting
6. Dilution...................................... Dilution
7. Selling Security Holders...................... Not Applicable
8. Plan of Distribution.......................... Outside Front Cover Page of Prospectus;
Underwriting
9. Description of Securities to be Registered.... Prospectus Summary; Description of
Capital Stock
10. Interests of Named Experts and Counsel........ Not Applicable
11. Information with Respect to the Registrant.... Outside Front Cover Page of Prospectus;
Available Information; Prospectus
Summary; Risk Factors; Use of
Proceeds; Dividend Policy;
Capitalization; Dilution; Selected
Consolidated Financial Data;
Management's Discussion and Analysis
of Financial Condition and Results of
Operations; Business; Management;
Description of Capital Stock; Shares
Available for Future Sale;
Consolidated Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................. Not Applicable
</TABLE>
<PAGE> 3
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

AUGUST 7, 1996

PROSPECTUS

6,500,000 SHARES [LOGO]

NATIONAL PROCESSING, INC.
COMMON STOCK
(WITHOUT PAR VALUE)

All of the shares of common stock, without par value (the "Common Stock"), of
National Processing, Inc. (the "Company") being offered hereby (the "Offering")
are being sold by the Company. The Company is an Ohio corporation organized to
hold all of the capital stock of National Processing Company.

The Company is currently a wholly owned subsidiary of National City Corporation
("National City"), a bank holding company registered under the Bank Holding
Company Act of 1956, as amended. Upon consummation of the Offering, National
City will continue to own directly approximately 86.9% of the outstanding Common
Stock or, if the Underwriters exercise their over-allotment option in full,
approximately 85.2% of the outstanding Common Stock.

Prior to the Offering, there has been no public market for the Common Stock. It
is currently estimated that the initial public offering price will be between
$14.00 and $16.00 per share. See "Underwriting" for a discussion of the factors
to be considered in determining the initial public offering price.

Up to 400,000 shares of Common Stock included in the Offering are being reserved
for sale at the initial public offering price to, among others, officers,
directors and employees of the Company and its subsidiaries, and to directors
and certain senior officers of National City and one of its subsidiaries.

The Company's Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "NAP", subject to official notice of issuance.

SEE "RISK FACTORS" COMMENCING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF 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.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PRICE TO THE UNDERWRITING PROCEEDS TO THE
PUBLIC DISCOUNT COMPANY(1)
<S> <C> <C> <C>
Per Share................................ $ $ $
Total(2)................................. $ $ $
</TABLE>

- --------------------------------------------------------------------------------
(1) Before deducting offering expenses payable by the Company estimated to be
$1,310,000.

(2) The Company has granted the Underwriters a 30-day option to purchase up to
an aggregate of 975,000 additional shares of Common Stock at the Price to
the Public, less the Underwriting Discount, solely to cover over-allotments,
if any. If the Underwriters exercise such option in full, the total Price to
the Public, Underwriting Discount and Proceeds to the Company will be
$ , $ and $ , respectively. See "Underwriting."

The shares of Common Stock are offered subject to receipt and acceptance by the
Underwriters, to prior sale and to the Underwriters' right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without notice.
It is expected that delivery of the shares of Common Stock being offered hereby
will be made at the office of Salomon Brothers Inc, Seven World Trade Center,
New York, New York or through the facilities of The Depository Trust Company, on
or about , 1996.

SALOMON BROTHERS INC
MONTGOMERY SECURITIES
NATCITY INVESTMENTS, INC.
SMITH BARNEY INC.
The date of this Prospectus is , 1996.
<PAGE> 4

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (which term shall encompass any amendment
thereto) on Form S-1 under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
items of which are omitted from the Prospectus as permitted by the rules and
regulations promulgated by the Commission. For further information with respect
to the Company and the Common Stock offered in the Offering, reference is hereby
made to the Registration Statement and the exhibits thereto. Statements made in
this Prospectus as to the provisions of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
statement as to a contract, agreement or other document filed as an exhibit to
the Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference.

After consummation of the Offering, the Company will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will file reports and other
information with the Commission. The Registration Statement and the exhibits
thereto, as well as any such reports and other information to be filed by the
Company with the Commission, may be inspected and copied at the public reference
facilities of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices at 7 World Trade Center, Suite 1300,
New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material can be obtained from the public
reference section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. In addition, the Commission maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission, including the Company.

The Company intends to furnish its shareholders with annual reports
containing audited consolidated financial statements and quarterly reports
containing unaudited condensed consolidated financial information for the first
three quarters of its fiscal year.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
LEVELS ABOVE THOSE 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
<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the consolidated
financial statements and notes thereto appearing elsewhere in this Prospectus.
Unless otherwise indicated, all information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option. Investors should carefully
consider the information set forth under the caption "Risk Factors." National
Processing, Inc. is an Ohio corporation organized to hold all of the capital
stock of National Processing Company ("NPC"). Unless the context otherwise
requires, references herein to the Company mean National Processing, Inc., NPC
and the subsidiaries of NPC.

THE COMPANY

The Company is a leading provider of low-cost, high-volume transaction
processing services and customized processing solutions. Deploying technology
and applications software, the Company currently provides products and services
which include (i) processing of card and check transactions for merchants and
other commercial businesses ("Merchant Services"), (ii) outsourcing of
administrative and financial functions for corporations seeking to reduce
overhead costs ("Corporate Services"), and (iii) ticket processing and
settlement for providers of travel-related services ("Travel Services"). The
Company focuses in particular on the high-growth markets for Merchant Services
and Corporate Services by sustaining and enhancing its long-term customer
relationships, expanding its offerings of products and services, and
aggressively pursuing acquisitions.

In the Merchant Services market, the Company is the second largest
processor of merchant credit and debit card transactions and the third largest
provider of check acceptance services in the United States, according to
published industry sources. Merchant Services represented approximately 60.8% of
the Company's revenues in 1995 and were provided to over 125,000 merchant
locations. In the Corporate Services market, the Company believes that it is one
of the largest providers of outsourcing services in the United States,
processing more than 434 million transactions annually. The Company's Corporate
Services include accounts payable processing, remittance processing, audit and
funds settlement for freight-related charges and electronic imaging solutions.
Corporate Services represented approximately 23.8% of the Company's revenues in
1995. In its Travel Services market, the Company is the exclusive processor and
clearinghouse for all airline tickets issued by travel agents in the United
States and by travel agents for the U.S. government. Travel Services, which
accounted for approximately 15.4% of the Company's revenues in 1995, also
includes processing services for air cargo sales, direct airline ticket sales
and passenger flight data. As a leading provider of Merchant Services, Corporate
Services and Travel Services, the Company's current customer base includes seven
of the top ten and 22 overall of the Fortune 100 companies.

The Company has experienced steady growth in both revenue and net income in
recent years, with revenue increasing from $272.5 million in 1993 to $339.3
million in 1995, representing a compounded annual growth rate of 11.6%. Over the
same period, net income has grown from $17.4 million to $25.8 million,
representing a compounded annual growth rate of 21.8%. A significant portion of
the Company's revenue results from long-term customer relationships. The Company
estimates that the average tenure of its relationships with its 50 largest
customers is approximately ten years. The Company's net income has grown faster
than revenues through improvement in its margins as a result of continuous cost
reduction efforts and a greater mix of higher margin products. An important
contributor to the Company's cost reductions has been the use of low-cost
international labor markets. The Company established its initial presence
internationally with the opening of a processing facility in Juarez, Mexico in
1988. Over time, the Company's Juarez operations have become increasingly
significant, representing approximately 43.8% of the Company's employees as of
March 31, 1996.

The transaction processing industry has experienced strong growth in recent
years, as acceptance and use of credit and debit cards have grown. According to
industry publications, consumer usage of VISA(R) and MasterCard(R) credit and
debit cards for purchases and cash advances in the United States

3
<PAGE> 6

was $574.5 billion in 1995 compared to $463.1 billion in 1994, representing an
increase of 24.1%. Transaction volume increased 23.2% during this same period,
from 5.6 billion transactions processed in 1994 to 6.9 billion transactions
processed in 1995. The market for corporate outsourcing has also grown as
corporations have increasingly outsourced non-core functions to reduce costs,
capitalize upon advances in technology, and enhance the quality and availability
of management information. This growth is creating additional market
opportunities for transaction processing providers like the Company, who possess
the scale of operations, breadth of products and services, and expertise to
provide low-cost processing and full-featured information services.

The rapid growth of the transaction processing industry has also resulted
in considerable competition in the marketplace, while the costs of advancing
technology, the efficiencies derived from economies of scale and customer
demands for a broad product line have caused consolidation among industry
participants. The Company believes that its Merchant Services and Corporate
Services markets will continue to grow and consolidate.

The Company's objective is to continue its growth and enhance its position
as a market leader in the transaction processing industry by (i) penetrating new
markets which offer higher margin growth opportunities by broadening the range
of products and services it offers, such as Virtual PAY (TM) (which allows the
payment of bills over the Internet), expanding its sales team and entering into
relationships with independent sales organizations; (ii) expanding the customer
base for its existing products and services by offering such products and
services to middle-market companies that it has not historically targeted and
through aggressive cross-selling to its large and diverse base of long-term
customers; (iii) leveraging its status as a low-cost transaction processor by
continuously investing in systems, operations and new technology and by opening
additional international facilities; and (iv) actively pursuing acquisitions
that enhance its technology base, expand its products and services or offer
increased efficiencies or economies of scale.

The Company is an Ohio corporation organized to hold all of the capital
stock of NPC. NPC began its business in 1979 and maintains its corporate
headquarters at 1231 Durrett Lane, Louisville, Kentucky 40285-0001, telephone
(502) 364-2000.

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered........................ 6,500,000 shares(1)
Common Stock Outstanding after
the Offering.............................. 49,600,000 shares(1)(2)
Use of Proceeds............................. To fund future acquisitions and strategic
technology investments and for general
corporate purposes, including research and
product development and expansion of
international processing facilities. See
"Use of Proceeds."
Proposed NYSE Symbol........................ NAP
</TABLE>

- ---------------

(1) Does not include 975,000 shares of Common Stock that may be sold by the
Company pursuant to the Underwriters' over-allotment option.

(2) Excludes 2,245,000 shares of Common Stock issuable upon the exercise of
outstanding options granted by the Company in connection with the Offering.
See "Executive Compensation -- Compensation Pursuant to Employee Benefit
Plans."

4
<PAGE> 7

RELATIONSHIP WITH NATIONAL CITY CORPORATION

The Company is a wholly owned subsidiary of National City Corporation
("National City"), a multi-bank holding company headquartered in Cleveland, Ohio
and registered under the Bank Holding Company Act of 1956, as amended. See
"Business -- Regulation." Following completion of the Offering and assuming no
exercise of the Underwriters' over-allotment option, National City will continue
to own approximately 86.9% of the outstanding shares of Common Stock and will
have the ability to elect all of the members of the Board of Directors of the
Company. See "Risk Factors -- Control by National City and Potential Conflicts
of Interest." The Company maintains operations, employees and contracts
substantially independent of National City's other operating subsidiaries. In
connection with the Offering, the Company and National City have entered into
certain agreements pursuant to which National City and its subsidiaries will
provide the Company, and the Company will provide National City and its
subsidiaries, certain administrative support, operational, and processing
services. The Company is also a party to a tax sharing agreement and a
registration rights agreement with National City. See "Certain Transactions."

5
<PAGE> 8

SUMMARY CONSOLIDATED FINANCIAL DATA

The following summary consolidated income statement data for each of the
three years in the period ended December 31, 1995 are derived from the
consolidated financial statements of the Company, which have been audited by
Ernst & Young LLP, independent auditors. The following summary consolidated
income statement data for the years ended December 31, 1991 and 1992 and for the
three months ended March 31, 1995 and 1996 and balance sheet data as of March
31, 1996 are derived from the unaudited consolidated financial statements of the
Company. The data should be read in conjunction with the consolidated financial
statements and notes thereto and other financial information, as well as the
Management's Discussion and Analysis of Financial Condition and Results of
Operations, included elsewhere herein. The results of operations for the three
month period ended March 31, 1996 are not necessarily indicative of results to
be expected for the full year.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------- ------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:(1)
Revenues.................................. $ 173.2 $ 199.3 $ 272.5 $ 319.5 $ 339.3 $ 78.4 $ 83.9
Operating Expenses........................ 83.0 100.0 148.9 178.6 189.5 43.1 46.4
Wages and Benefits........................ 38.6 44.1 49.6 56.9 53.8 13.6 14.2
General and Administrative Expenses....... 18.9 22.5 36.0 40.2 41.8 10.4 10.6
Depreciation and Amortization(2).......... 4.1 4.7 7.4 9.6 10.4 2.5 2.8
------- ------- ------- ------- ------- ------- -------
Income from Operations.................... 28.6 28.0 30.6 34.2 43.8 8.8 9.9
Net Interest Income (Expense)............. (.7) (.5) (.4) (.6) .6 .1 .3
------- ------- ------- ------- ------- ------- -------
Income Before Taxes....................... 27.9 27.5 30.2 33.6 44.4 8.9 10.2
Provision for Income Taxes................ 11.2 10.4 12.8 14.3 18.6 3.7 4.3
------- ------- ------- ------- ------- ------- -------
Net Income................................ $ 16.7 $ 17.1 $ 17.4 $ 19.3 $ 25.8 $ 5.2 $ 5.9
====== ====== ====== ====== ====== ====== ======
Net Income per Share(3)................... $ 0.39 $ 0.40 $ 0.40 $ 0.45 $ 0.60 $ 0.12 $ 0.14
====== ====== ====== ====== ====== ====== ======
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------
ACTUAL AS ADJUSTED(4)
------ --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:(1)
Working Capital........................... $ 69.6 $158.9
Goodwill(2)............................... 72.1 72.1
Total Assets.............................. 273.0 362.4
Total Liabilities......................... 93.2 93.2
Shareholder's Equity...................... 179.8 269.2
OTHER DATA:(1)
Merchant Services
Number of merchant transactions
processed............................. 717.7 892.4 1,128.0 1,266.6 1,467.8 311.3 337.6
Corporate Services
Number of transactions processed........ 326.4 270.1 266.7 389.1 434.5 104.6 136.9
Travel Services
Number of transactions processed........ 242.6 285.1 296.3 364.4 374.1 94.1 96.9
</TABLE>

- ---------------

(1) The Company made the following acquisitions during the periods presented: on
July 1, 1991, the Company acquired Consolidated Data-Tech, Inc., an accounts
payable processor; on February 20, 1992, the Company acquired B&L
Consultants, Inc., a freight payable processor; on July 6, 1992, the Company
acquired Check Security Services of America, Inc., a check acceptance and
collection company; on February 1, 1993, the Company acquired JBS
Associates, Inc., a check acceptance and collection company; and on January
3, 1994, the Company acquired CTI Logistics, Inc., a freight payable
processor. These transactions were accounted for as purchases; accordingly,
the results of operations are included in the statements of income from the
respective acquisition dates.
(2) Goodwill related to acquisitions is amortized over 40 years.
(3) Net income per share for all periods has been calculated based on 43,100,000
shares outstanding, which reflect the retroactive effect of the
57,465 2/3-to-one stock split effective June 6, 1996.

(4) As adjusted to give effect to the sale of 6,500,000 shares of Common Stock
pursuant to the Offering and the application of the estimated net proceeds
therefrom. See "Use of Proceeds."

6
<PAGE> 9

RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered carefully by prospective investors evaluating an
investment in the shares of Common Stock offered by this Prospectus.

COMPETITION AND CONSOLIDATION

The markets for credit and debit card processing for merchants ("Merchant
Card Services") and for check acceptance and collection services ("Merchant
Check Services") are highly competitive. Together, these markets represented
approximately 60.8% of the Company's revenues for the year ended December 31,
1995. As a provider of Merchant Services, the Company faces intense competition
from numerous firms who may employ various competitive strategies. The majority
of the Company's contracts with its Merchant Services customers provide for
frequent renewal after the initial term and, accordingly, the Company and its
competitors continuously rebid such contracts. This competition may influence
the prices the Company can charge and requires the Company to control costs
aggressively in order to maintain acceptable profit margins.

Further tightening of margins may result in banks and other card and check
processors abandoning the transaction processing business, thus accelerating the
current industry consolidation. Due to market demands that require transaction
processors to provide advanced and efficient technology, certain card and check
processors have recently left the business or merged with other providers. This
consolidation has enabled certain of the Company's competitors to have access to
significant capital, 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 such
processors.

In addition, the Company believes that recently enacted changes in
telecommunications and other laws, as well as developments regarding the
Internet and other new technologies related to electronic commerce, may result
in competition from entities with access to significant capital and
technological resources not currently serving the markets for Merchant Services.

The Company also faces competition in the market for Corporate Services,
where the Company competes against a number of firms in specialized market
areas, software integrators offering operations support and logistics management
firms. The Company believes that some of these companies provide essentially the
same services as the Company. The Company also faces competition from current
and prospective customers who evaluate the Company's capabilities against the
merits of performing such services internally. See "Business -- Competition."

CHARGEBACKS; RISK OF NONPAYMENT

Under the rules of VISA U.S.A. Inc. ("VISA") and MasterCard International
Incorporated
("MasterCard"), when a merchant card services processor such as the Company (an
"acquiror") acquires card transactions, it has certain contingent liabilities
for the transactions it processes. This contingent liability arises in the event
of a billing dispute between the merchant and a cardholder that is not
ultimately resolved in favor of the merchant. In such a case, the transaction is
"charged back" to the merchant and the disputed amount is credited or otherwise
refunded to the cardholder. If the acquiror or its clearing banks are unable to
collect this amount from the merchant's account, and if the merchant refuses or
is unable due to bankruptcy or other reasons to reimburse the acquiror for the
chargeback, the acquiror bears the loss for the amount of the refund paid to the
cardholder. In most cases, this contingent liability is unlikely to arise
because most products or services are delivered when purchased, and credits are
issued on returned items. For certain industries, where the product or service
is not typically provided until some later time following the purchase, the
acquiror's contingent liability is greater. See "Business -- Products and
Services -- Merchant Services."

In certain cases, the Company bears the risk of merchant nonpayment of
applicable interchange, assessment and other fees. The Company receives payments
for merchant transactions from a card

7
<PAGE> 10

association clearing bank net of the fees payable to the card issuer
("interchange fees"). For those merchants which the Company bills on a weekly or
monthly basis, the Company then advances payment to the merchant for the gross
amount of the merchant's transactions. The Company then bills on a weekly or
monthly basis for interchange fees as well as its processing fees. To the extent
the merchant lacks sufficient funds to pay such fees, the Company's revenues
will be adversely affected. See "Business -- Products and Services -- Merchant
Services."

Credit losses incurred by the Company relating to chargebacks and
nonpayment of fees were $282,000 and $88,000 for the three months ended March
31, 1995 and 1996, respectively, and $627,000, $1,145,000 and $531,000 for the
years ended December 31, 1993, 1994 and 1995, respectively.

MERCHANT AND EMPLOYEE FRAUD

The Company is susceptible to fraudulent credit card transactions initiated
by its merchant customers. Examples of merchant fraud include inputting false
sales transactions and altering transaction amounts. The Company conducts a
background review of its customers and monitors merchant transactions against
standards it has developed to help prevent merchant fraud. The Company also has
the ability to hold a merchant's daily settlement if fraudulent activity is
suspected. Notwithstanding these measures, however, there can be no assurance
that the Company will not experience significant amounts of merchant fraud in
the future, which may have a material adverse effect on the Company's financial
condition and results of operations.

In certain of its markets, the Company is responsible for handling customer
payroll check printing and distribution as well as the processing of credit card
and check payments. In processing these transactions, there is a risk of
employee fraud due to employee access to sensitive documents or account
information. While the Company historically has experienced very little employee
fraud and attempts to mitigate the risk of employee fraud through process
controls, separation of duties, employee background checks, and contractual
limitations of liability in its contracts with customers, there can be no
assurance that the Company will continue to be successful in preventing the
fraudulent acts of employees. See "Business -- Risk Management."

POTENTIAL LOSSES FROM CHECK GUARANTEE SERVICES

The Company is obligated to fund amounts for returned checks covered under
its check guarantee program. If a merchant subscribes to the Company's check
guarantee services, the Company is ultimately responsible for the full face
value of checks that are accepted by merchants but dishonored by the check
writer's bank. At the time the Company pays merchants amounts due for guaranteed
checks that are returned, the Company makes an estimate of the uncollectible
amounts of such checks and recognizes this amount as a current period expense.
The remaining balance is presumed collectible and is recorded by the Company as
check inventory. In certain cases, the Company's estimate for uncollectible
amounts may be less than actual uncollectible amounts. In these cases, the
Company is required to recognize an additional expense associated with the
writedown of check inventory to reflect amounts actually collectible. While the
Company tracks collection rates to validate the accuracy of its estimates, there
can be no assurance that the Company will be able to match its collection rates
with its estimates in the future.

The Company sets fees for check guarantee services based on the credit
profile of the merchant's customer base, the merchant's industry classification,
its products sold and its prior experience with the Company. While the Company's
fees from check guarantee services and recoveries from collections currently
exceed aggregate amounts paid to merchants on guaranteed checks, there can be no
assurance that this performance will continue. See "Business -- Products and
Services -- Merchant Services."

8
<PAGE> 11

VISA AND MASTERCARD REGISTRATION

The Company, along with all other nonbank transaction processors, must be
sponsored by a financial institution that is a principal member of the VISA and
MasterCard credit card associations in order to process bankcard transactions.
Through National City Bank of Kentucky ("NCBK"), a wholly owned banking
subsidiary of National City that serves as a member clearing bank for the
Company, the Company is registered with VISA and MasterCard as a certified
processor and member service provider. See "Certain Transactions -- Sponsorship
Agreement." The Company's designation as a certified processor and its status as
a member service provider are dependent upon the Company's continuing adherence
to the standards of the VISA and MasterCard credit card associations. If the
Company fails to comply with these standards, the Company's designation as a
certified processor or its status as a member service provider could be
suspended or terminated. While the Company attempts to adhere to the standards
of the VISA and MasterCard associations, as they may be amended from time to
time, there can be no assurance that VISA and MasterCard will maintain the
Company's registrations or that the current VISA and MasterCard rules allowing
the Company and other nonbank transaction processors to market and provide
transaction processing services will remain in effect. Moreover, VISA and
MasterCardrules are set by the respective member financial institutions of VISA
and MasterCard, some of which are competitors of the Company. The termination of
the Company's member service provider registrations or the Company's status as a
certified processor, or any changes in the VISA or MasterCard rules that prevent
the Company's registration or otherwise limit the Company's ability to provide
transaction processing and marketing services for VISA or MasterCard, would have
a material adverse effect on the Company's financial condition and results of
operations.

POTENTIAL CONSEQUENCES OF CERTAIN CONTRACTS

The Company derived approximately 15.4% of its revenues in 1995 from its
Travel Services business, where the Company functions as the exclusive processor
and clearinghouse of airline ticket transactions generated by travel agents in
the United States through its contract with the Airlines Reporting Corporation
("ARC"), a corporation operated by the airline industry. The Company is
compensated on a "cost plus" basis under its contract with the ARC. The ARC is
currently developing a "paper free" reporting system which is scheduled to be
implemented in the years 1997 through 2000 and which is expected to reduce
significantly the amount of labor required to process and clear airline ticket
transactions generated by travel agents. Pursuant to this contract, the Company
has also completed certain projects for which it earned revenue and profit
bonuses in the past three years that will not be available after 1996. The
Company expects that the effect of the loss of these bonuses and the reduction
in labor costs will be to reduce net income associated with the ARC contract by
approximately $2.0 million in 1997 and that additional cost reductions will
reduce net income associated with the ARC contract by an additional $500,000 in
each subsequent year through the end of the current contract term. While the
Company is aggressively seeking to replace this expected lost income, there can
be no assurance that the Company's efforts will be successful.

The Company's contract with the ARC expires in December 2001. Although the
Company has been the exclusive transaction processor for the ARC since 1987, the
Company anticipates that other transaction processors will compete against the
Company for the ARC's business. See "Business -- Competition." There can be no
assurance that the Company will continue to be the exclusive transaction
processor for the ARC following the expiration of the current contract.

HOLDING COMPANY STRUCTURE

As a holding company, the Company is dependent on the cash flow from NPC
and its subsidiaries, received through dividends and other intercompany
transfers of funds, in order to meet its obligations. Dividends and other
intercompany transfers of funds from NPC, together with any net proceeds from
the Offerings retained by the Company for general corporate purposes, are
expected for the foreseeable future to be a significant source of the Company's
liquidity. See "Use of Proceeds" and "Dividend

9
<PAGE> 12

Policy." Limitations on the availability to the Company of dividends and other
intercompany transfers of funds from NPC could adversely impact the Company's
liquidity.

CONTROL BY NATIONAL CITY AND POTENTIAL CONFLICTS OF INTEREST

All of the capital stock of the Company is currently owned by National
City. Upon completion of the Offering, National City will own approximately
86.9% of the outstanding Common Stock (or approximately 85.2% of the outstanding
Common Stock if the Underwriters' overallotment options are exercised in full).
As a result, upon completion of the Offering, National City will continue to be
able to elect all of the members of the Company's Board of Directors and to
exercise a controlling influence over the business and affairs of the Company,
including any determinations with respect to mergers or other business
combinations involving the Company, the acquisition or disposition of assets by
the Company, the incurrence of indebtedness by the Company, the issuance by the
Company of any additional Common Stock or other equity securities, and the
payment of any dividends with respect to the Common Stock. Upon completion of
the Offering, a majority of the members of the Company's Board of Directors will
be directors or employees of National City or its affiliates other than the
Company.

In addition, National City will have the power to approve matters submitted
to a vote of the Company's shareholders without the consent of the Company's
minority shareholders and to cause or prevent a change in control of the
Company. Certain conflicts of interest and disagreements between National City
and the Company could arise in connection with the interpretation of the various
intercompany agreements entered into between National City or its subsidiaries
and the Company in connection with the Offering. See "Certain Transactions."
National City, through its wholly owned subsidiaries, will continue to have an
interest in the business of issuing credit cards. Although National City has
advised the Company that it does not intend to engage directly in offering
Merchant Services or Corporate Services products in competition with the
Company, National City is not contractually prohibited from offering such
products. As a result, conflicts of interest may arise between National City and
the Company in connection with future card processing or corporate services
opportunities. Such conflicts of interest will be more difficult to resolve than
would be the case if the Company did not have directors who are connected to
National City and may be resolved in a manner that may appear to be more
favorable to one of the parties. NatCity Investments, Inc., one of the
underwriters of this Offering, is a wholly owned subsidiary of National City and
is an affiliate of the Company.

BENEFITS OF THE OFFERING TO NATIONAL CITY

Although National City is not selling shares in the Offering, it will
receive substantial benefits as a result of the Offering. National City will
benefit from the fact that after the Offering there will be a public market for
shares of Common Stock and therefore greater liquidity for shares of Common
Stock than existed prior to the Offering. In addition, up to 400,000 shares
included in the Offering are being reserved for sale at the initial public
offering price to, among others, officers, directors and employees of the
Company and its subsidiaries and to directors and certain senior officers of
National City and its subsidiary Stored Value Systems, Inc., a Delaware
corporation ("SVS").

FACTORS RELATING TO ACQUISITIONS

An important part of the Company's growth strategy is the acquisition of
other processing companies and assets. See "Business -- Business Strategy." The
success of the Company's acquisition strategy will depend upon the Company's
ability to integrate and manage acquired businesses, realize economies of scale
and control costs. Acquisitions involve risks, including difficulties in
integrating acquired operations, diversion of management resources and
unanticipated problems and liabilities. As a result, there can be no assurance
that the Company will be able to implement its acquisition strategy
successfully. The Company has experienced certain integration and other
unanticipated difficulties as a result of past acquisitions. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

10
<PAGE> 13

Depending upon the circumstances of a particular acquisition, the Company
may fund an acquisition through the issuance of Common Stock, with cash flow
from operations, with a portion of the proceeds of the Offering or with borrowed
funds. Acquisitions may result in potentially dilutive issuances of equity
securities, increased depreciation and amortization expense, increased interest
expense, increased financial leverage, or decreased operating income, any of
which could have a material adverse effect on the Company's operating results.
There can be no assurance that the Company will be able to complete acquisitions
on terms favorable to it or that the Company's existing financial resources,
including cash flow from operations, will be sufficient to fund such
acquisitions. If the Company does not have sufficient cash resources available
to fund acquisitions, its growth could be limited unless it is able to obtain
additional capital through subsequent debt or equity financings. There can be no
assurance that the Company will be able to obtain such financings or that, if
available, such financings will be on terms acceptable to the Company.

Acquisitions by the Company and issuances of Common Stock in connection
therewith may be subject to the approval of National City. There can be no
assurance that the Company will be able to obtain the approval of National City
in connection with any such acquisitions or that National City will permit its
ownership of Common Stock to be diluted by the issuance of additional shares in
connection with such acquisitions.

EFFECT OF TECHNOLOGICAL CHANGE

Some of the markets served by the Company require the use of advanced
computer hardware and software technology, and the development of new products
and services to meet increasingly complex and rapidly changing client and
regulatory requirements. The Company's future success depends in part on its
ability to continue to adapt its technology, on a timely and cost effective
basis, to meet these requirements. There can be no assurance that the Company
will be able to respond adequately to these technological demands or that its
competitors will not develop more advanced technology that will place the
Company's products and services at a competitive disadvantage. See
"Business -- Industry Overview." The Company has recently introduced several new
products. See "Business -- Products and Services." There can be no assurance
that these new products and services will perform satisfactorily or be widely
accepted in the marketplace.

RELIANCE ON PROCESSING FACILITIES

The Company's processing business is dependent on its main processing
facilities located in Louisville, Kentucky; Juarez, Mexico and Phoenix, Arizona.
The Company is also dependent upon long-distance and local telecommunications
access in order to transmit and process information among these facilities.
Although the Company maintains disaster response plans which it considers
adequate, a natural disaster or other calamity that causes long-term damage to
one of these facilities or that interrupts its telecommunications networks could
have an adverse effect on the Company.

IMPORTANCE OF INTERNATIONAL OPERATIONS

The Company's business strategy emphasizes the increased utilization of its
processing facilities in Juarez, Mexico and the development of other non-U.S.
operations facilities. See "Business -- Business Strategy." This strategy could
be affected by many factors beyond its control, such as political and labor
unrest in Mexico, governmental changes and United States and Mexican government
laws and policies affecting investment. Expenses associated with the Company's
Mexican operations as well as the Company's expense base under its contract with
the ARC are also subject to currency fluctuations. Although the Company has not
experienced any material adverse effects arising from its operations in Mexico,
there can be no assurance that such problems will not arise in the future. To
the extent that the Company expands into other international locations, the
Company's operations may be subject to similar risks.

11
<PAGE> 14

FLUCTUATION IN QUARTERLY OPERATING RESULTS

The Company generally experiences seasonality in its business. The Company
typically realizes higher revenues in the third and fourth calendar quarters and
lower revenues in the first calendar quarter, reflecting increased transaction
volumes during the summer and holiday months and a decrease in transaction
volume during the quarter immediately following the holiday season. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

DISCRETION OVER USE OF PROCEEDS

While the Company has identified certain objectives for use of a
substantial portion of the proceeds it receives from the Offering, including
general corporate purposes, the Company has not identified any specific projects
or commitments that will necessarily be funded. Accordingly, the Company's Board
of Directors and management will have broad discretion, without any direct
action or approval on the part of the Company's shareholders, over the use of
proceeds received by the Company in connection with the Offering. See "Use of
Proceeds."

DEPENDENCE UPON KEY PERSONNEL; MANAGEMENT OF GROWTH

The success of the Company's operations during the foreseeable future will
depend largely upon the continued services of its senior executives. These
executives have entered into agreements with the Company that contain
noncompetition covenants that remain in effect, generally for a period of two
years, beyond termination of employment. See "Executive Compensation -- Certain
Agreements with Employees."

The Company's success also depends in part on its ability to attract,
manage and retain qualified management and clerical personnel. Competition for
qualified management personnel is intense. There can be no assurance that the
Company will be successful in attracting and retaining the management personnel
it requires to manage the growth of its business successfully. The Company
realizes substantial turnover on a regular basis among a large portion of its
workforce, primarily among those workers in entry-level positions who perform
tasks integral to the Company's operations such as data entry. There can be no
assurance that the Company will continue to be able to attract a sufficient
number of workers for its entry-level positions in the future. The Company's
results of operations could be adversely affected if the Company were unable to
attract, manage and retain management and clerical personnel, or if revenue were
to fail to increase at a rate sufficient to absorb any resulting increase in
associated expenses.

ANTI-TAKEOVER PROVISIONS

The Company's Amended Articles of Incorporation and Code of Regulations
contain certain provisions that may have the effect, either alone or in
combination with each other, of making more difficult or discouraging a business
combination involving the Company that is deemed undesirable by the Company's
Board of Directors, or of delaying or preventing changes in control or
management of the Company. Although such provisions do not have substantial
practical significance to investors while National City controls the Company,
such provisions could become significant should National City reduce its
ownership interest in the Company such that National City no longer controls the
Company. See "Description of Capital Stock -- Ohio Law and Certain Charter
Provisions."

REGULATION OF THE COMPANY

As a corporation that will for the foreseeable future continue to be
controlled by National City, the Company is subject to federal banking
regulations, as well as other federal and state regulations. To facilitate
National City's compliance with applicable banking laws, regulations and orders
(collectively, the "Banking Laws"), and to allow National City to obtain any
required consents or approvals, the Company's Amended Articles of Incorporation
prohibit the Company from entering into any business

12
<PAGE> 15

activities prior to the receipt of any consents and approvals required pursuant
to the Banking Laws and, if such consents are not received, prohibit the Company
from engaging in such business activities.

The restrictions imposed by the Banking Laws limit the Company's discretion
in operating its businesses. No assurance can be given that the Banking Laws
will not be amended or construed differently, or that new laws and regulations
will not be adopted, the effect of which could be to affect adversely the
operations of the Company. See "Business -- Regulation."

The Company's business is also subject to numerous federal and state
consumer protection laws and regulations, which, among other things: (i) require
the Company to obtain and maintain certain licenses and qualifications; (ii)
limit the fees and other charges the Company is allowed to charge; and (iii)
require specified disclosures. Changes in existing laws or regulations, or in
the interpretation thereof, or the promulgation of any additional laws or
regulations could have an adverse effect on the Company's business. See
"Business -- Regulation."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of Common Stock in the public market, whether
by purchasers in the Offering or other shareholders of the Company, or the
perception that such sales could occur, may adversely affect the market price of
the Common Stock. See "Shares Eligible for Future Sale" and "Underwriting."

Following the Offering, National City will beneficially own 86.9% of the
outstanding Common Stock (or approximately 85.2% of the outstanding Common Stock
if the Underwriters' over-allotment option is exercised in full), and a decision
by National City to sell shares could adversely affect the market price of the
Common Stock. The Company and National City have entered into a registration
rights agreement which requires the Company to effect a registration statement,
covering some or all of National City's shares, subject to certain terms and
conditions. See "Certain Transactions -- Registration Rights Agreement."

Upon completion of the Offering, the shares of Common Stock offered hereby
will be freely tradeable without restriction or further registration under the
Securities Act by persons other than executive officers and directors of
National City or the Company (the "Restricted Persons"). The 43,100,000 shares
of Common Stock which are held by National City are subject to a "lock-up"
agreement under which National City has agreed, subject to certain exceptions,
not to offer, sell, pledge, or otherwise dispose of any shares of Common Stock
without the prior written consent of Salomon Brothers Inc, on behalf of the
Underwriters, for a period of 360 days after the date of this Prospectus. Shares
of Common Stock held by Restricted Persons are subject to a similar "lock-up"
agreement for a period of 90 days after the date of this Prospectus. Following
such times, National City and any such Restricted Person who is an affiliate of
the Company may sell such shares only pursuant to the requirements of Rule 144
under the Securities Act or pursuant to an effective registration statement
under the Securities Act. See "Underwriting."

In connection with the Offering, the Company has granted options to key
employees and directors to purchase 2,245,000 shares of Common Stock under the
Company's stock option plans. Such plans authorize up to 4,200,000 shares of
Common Stock to be issuable upon the grant of stock options under such plans.
See "Executive Compensation -- Compensation Pursuant to Employee Benefit Plans."

NO PRIOR PUBLIC MARKET

Prior to the Offering, there has been no public market for the Common Stock
and there can be no assurance that an active trading market for the Common Stock
will develop or continue after the Offering. The initial public offering price
per share of Common Stock being offered in the Offering has been determined by
negotiations among the Company and representatives of the Underwriters and may
not be indicative of the price at which the Common Stock will trade after
completion of the Offering.

13
<PAGE> 16

DILUTION OF PURCHASERS OF COMMON STOCK

Purchasers of the Common Stock will experience immediate and substantial
dilution in the net tangible book value per share of Common Stock. The net
tangible book value of the Company's Common Stock as of March 31, 1996 was
approximately $103.0 million or $2.39 per share. After giving effect to the
receipt by the Company of the estimated net proceeds from the Offering (without
giving effect to any exercise of the Underwriters' over-allotment option), and
after deducting the underwriting discounts and estimated expenses payable by the
Company, the pro forma net tangible book value of the Common Stock as of March
31, 1996 would have been approximately $3.88 per share. This represents an
immediate increase in net tangible book value of $1.49 per share to existing
shareholders and an immediate dilution of $11.12 per share to purchasers of the
Common Stock in the Offering. See "Dilution."

14
<PAGE> 17

USE OF PROCEEDS

The net proceeds from the sale of shares of Common Stock offered pursuant
to the Offering, based on an assumed initial public offering price of $15.00 per
share, are expected to be $89,365,000 (approximately $102,966,000 if the
Underwriters' over-allotment option is exercised in full). The Company intends
to use the proceeds as follows: (i) approximately 60% to fund future
acquisitions; (ii) approximately 15% to fund strategic technology investments;
and (iii) the remaining balance for general corporate purposes, including the
funding of research, product development and the expansion of international
processing facilities. There are currently no negotiations, understandings or
agreements with respect to any acquisitions or material technology investments
or any specific projects or commitments relating to any material research,
product development or expansion of international processing facilities.

Pending application for the foregoing uses, the net proceeds will be
invested in short-term U.S. Treasury securities, certificates of deposit,
commercial paper and/or investment grade, interest-bearing securities. Such
investments may be made with or through affiliates of National City at market
rates. The Company is undertaking the Offering to provide for a public market
and thereby establish liquidity for its shares of Common Stock.

DIVIDEND POLICY

The Company currently intends to retain all future earnings for use in the
operations of its business and does not anticipate paying any cash dividends in
the foreseeable future. The declaration and payment in the future of any cash
dividends will be at the discretion of the Company's Board of Directors and will
depend upon, among other things, the earnings, capital requirements and
financial position of the Company, existing and/or future loan covenants and
general economic conditions.

The Company is a holding company whose principal asset is the capital stock
of NPC. The Company's cash flow, therefore, will consist primarily of dividends
and other intercompany transfers of funds received from NPC. The payment of any
cash dividends to holders of Common Stock will depend on the receipt of dividend
payments and other intercompany transfers of funds from NPC.

15
<PAGE> 18

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company at March 31, 1996, as adjusted to give effect to the issuance and sale
of 6,500,000 shares of Common Stock in the Offering at the assumed initial
offering price of $15.00 per share and the application of the estimated net
proceeds therefrom as set forth under "Use of Proceeds." This table should be
read in conjunction with the Consolidated Financial Statements and Notes thereto
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------
AS
ACTUAL ADJUSTED
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Capital lease obligation, less current portion...................... $ 2,635 $ 2,635
Shareholders' equity
Preferred Stock, without par value, 5,000,000 shares authorized;
no shares issued and outstanding............................... -- --
Common Stock, without par value; 95,000,000 shares authorized;
43,100,000 shares issued and outstanding; 49,600,000 shares
issued and outstanding as adjusted(1).......................... 1 1
Additional paid-in capital........................................ 64,825 154,190
Retained earnings................................................. 114,989 114,989
--------- ---------
Total shareholders' equity..................................... 179,815 269,180
--------- ---------
Total capitalization......................................... $ 182,450 $ 271,815
========= =========
</TABLE>

- ---------------

(1) Excludes a total of 4,200,000 shares of Common Stock which are reserved for
issuance pursuant to stock option plans. Options with respect to 2,245,000
shares of Common Stock have been awarded with an effective grant date
immediately prior to the Offering at an exercise price per share equal to
the initial public offering price. See "Executive
Compensation -- Compensation Pursuant to Employee Benefit Plans."

16
<PAGE> 19

DILUTION

The net tangible book value of the Company as of March 31, 1996 was
approximately $103.0 million, or $2.39 per share of Common Stock. Net tangible
book value per share is determined by dividing the amount of the Company's total
tangible assets less total liabilities by the number of shares of Common Stock
outstanding. After giving effect to the sale by the Company of the 6,500,000
shares of Common Stock offered hereby (at an assumed initial public offering
price of $15.00 per share), the pro forma net tangible book value of the Company
as of March 31, 1996 would have been approximately $192.4 million, or $3.88 per
share. This represents an immediate dilution of $11.12 per share to new
investors purchasing shares of Common Stock in the Offering. The following table
illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Initial public offering price per share................................... $ 15.00
Net tangible book value per share as of March 31, 1996.................. $ 2.39
Increase per share attributable to new investors........................ 1.49
------
Pro forma net tangible book value per share after the Offering............ 3.88
-------
Dilution per share to new investors....................................... $ 11.12
======
</TABLE>

17
<PAGE> 20

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated income statement data for each of the
three years in the period ended December 31, 1995 and the consolidated balance
sheet data as of December 31, 1993, 1994 and 1995 are derived from the
consolidated financial statements of the Company, which have been audited by
Ernst & Young LLP, independent auditors. The following selected consolidated
income statement data for the years ended December 31, 1991 and 1992 and for the
three months ended March 31, 1995 and 1996, and the balance sheet data as of
December 31, 1991 and 1992 and March 31, 1995 and 1996 are derived from the
unaudited consolidated financial statements of the Company. The data should be
read in conjunction with the consolidated financial statements and notes thereto
and other financial information, as well as the Management's Discussion and
Analysis of Financial Condition and Results of Operations, included elsewhere
herein. The results of operations for the three month period ended March 31,
1996 are not necessarily indicative of results to be expected for the full year.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------ ------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- -------- -------- -------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:(1)
Revenues................................. $ 173.2 $ 199.3 $ 272.5 $ 319.5 $ 339.3 $ 78.4 $ 83.9
Operating Expenses....................... 83.0 100.0 148.9 178.6 189.5 43.1 46.4
Wages and Benefits....................... 38.6 44.1 49.6 56.9 53.8 13.6 14.2
General and Administrative Expenses...... 18.9 22.5 36.0 40.2 41.8 10.4 10.6
Depreciation and Amortization(2)......... 4.1 4.7 7.4 9.6 10.4 2.5 2.8
------- ------- -------- -------- -------- ------- -------
Income from Operations................... 28.6 28.0 30.6 34.2 43.8 8.8 9.9
Net Interest Income (Expense)............ (.7) ( .5) (.4) (.6) .6 .1 .3
------- ------- -------- -------- -------- ------- -------
Income Before Taxes...................... 27.9 27.5 30.2 33.6 44.4 8.9 10.2
Provision for Income Taxes............... 11.2 10.4 12.8 14.3 18.6 3.7 4.3
------- ------- -------- -------- -------- ------- -------
Net Income............................... $ 16.7 $ 17.1 $ 17.4 $ 19.3 $ 25.8 $ 5.2 $ 5.9
====== ====== ======= ======= ======= ====== ======
Net Income per Share(3).................. $ 0.39 $ 0.40 $ 0.40 $ 0.45 $ 0.60 $ 0.12 $ 0.14
====== ====== ======= ======= ======= ====== ======
BALANCE SHEET DATA:(1)
Working Capital.......................... $ 14.7 $ 18.9 $ 32.9 $ 45.6 $ 64.1 $ 51.6 $ 69.6
Goodwill(2).............................. 3.8 21.4 70.0 73.5 72.6 73.2 72.1
Total Assets............................. 77.3 133.6 209.9 288.4 281.3 257.7 273.0
Total Liabilities........................ 41.6 75.8 81.0 140.2 107.3 104.4 93.2
Shareholder's Equity..................... 35.7 57.8 128.9 148.2 174.0 153.3 179.8
OTHER DATA:(1)
Merchant Services
Number of merchant transactions
processed............................ 717.7 892.4 1,128.0 1,266.6 1,467.8 311.3 337.6
Corporate Services
Number of transactions processed....... 326.4 270.1 266.7 389.1 434.5 104.6 136.9
Travel Services
Number of transactions processed....... 242.6 285.1 296.3 364.4 374.1 94.1 96.9
</TABLE>

- ---------------

(2) Goodwill related to acquisitions is amortized over 40 years.

(3) Net income per share for all periods has been calculated based on 43,100,000
shares outstanding, which reflects the retroactive effect of the 57,465 2/3
to one stock split effective June 6, 1996.

18
<PAGE> 21

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

GENERAL

The Company is a leading provider of low-cost, high-volume transaction
processing services and customized processing solutions. The Company deploys
technology and applications software primarily to merchants and other commercial
businesses, corporations and providers of travel-related services.

The Company's annual revenues have grown from $272.5 million in 1993 to
$339.3 million in 1995, representing an 11.6% compound annual growth rate.
During the same period, the Company's net income grew from $17.4 million to
$25.8 million, representing a compound annual growth rate of 21.8%. The
Company's revenue growth is attributable to increased debit and credit card
usage and strategic acquisitions. Net income has grown as a result of increased
revenue and economies of scale, aggressive cost containment and the introduction
of higher margin products and services.

Recent strategic acquisitions by the Company include the purchase of Check
Security Services of America, Inc. in 1992 and JBS Associates, Inc. in 1993
through which the Company entered the check services business; the purchase of
B&L Consultants, Inc. in 1992 and CTI Logistics, Inc. ("CTI") in 1994 through
which the Company entered the freight services business; and the purchase of the
remittance processing assets of First Data Resources, Inc. ("FDR") in December
1995 (the "FDR Remittance Acquisition"). The Company plans to continue to
supplement its growth by entering into relationships with independent sales
organizations ("ISOs") and by acquiring processing companies, processor
portfolios, ISOs, transaction processors serving corporations seeking to
outsource administrative and financial functions, and software development
operations. In evaluating acquisitions, the Company analyzes the merchant or
account base, opportunities for cost reductions, operating efficiencies and
economies of scale, and revenue enhancements.

The Company's Travel Services business, which accounted for 15.4% of the
Company's revenues for the year ended December 31, 1995, derives a substantial
portion of its revenues from an exclusive long-term contract with the ARC. The
Company is compensated on a "cost plus" basis under its contract with the ARC,
which expires in December 2001. The Company expects that, due to cost
reductions, revenues received under this contract will decline as the ARC moves
to a paper-free reporting system, which implements a program designed to reduce
the labor costs required to process paper transactions. Pursuant to this
contract, the Company has also completed certain projects for which it has
earned revenue and profit bonuses in the past three years that will not be
available after 1996. The Company expects that the effect of the loss of these
bonuses and the reduction in labor costs will be to reduce net income associated
with the ARC contract by approximately $2.0 million in 1997 and that additional
cost reductions will reduce net income associated with the ARC contract by an
additional $500,000 in each subsequent year through the end of the current
contract term.

COMPONENTS OF REVENUE AND EXPENSES

Revenues. The Company's revenues are generated from a variety of sources.
The Company's Merchant Services revenues are primarily derived from fees paid by
merchants for the authorization and processing of credit and debit card
transactions, exclusive of interchange fees, and for the acceptance of checks.
Merchant fees paid to the Company include assessment fees, which are amounts
charged by credit card associations for clearing services, advertising and other
expenses. Revenues from Corporate Services are derived from transaction fees for
the processing of remittances, accounts payable and freight bills, and for
providing integrated document solutions involving electronic imaging, archival,
processing and payment settlement. Revenues from Travel Services are dependent
on the volume of ticket sales by travel agents on behalf of airlines. A small
portion of revenues are derived from earnings on cash balances which are
maintained by customers pursuant to contract terms. Revenues derived from
services provided to affiliates are immaterial.

19
<PAGE> 22

Expenses. Operating expenses include all costs directly attributable to
the Company's provision of services to customers. The most significant
components of operating expenses are assessment fees, authorization fees and
data processing expenses. Wages and benefits include wages and benefits for
hourly employees. General and administrative expenses include management
salaries and benefits, facilities maintenance and software applications
programming. Depreciation of property and equipment and software amortization
are recognized on a straight-line basis over the estimated useful life of the
related asset. Amortization of goodwill associated with acquisitions is
recognized over 40 years. Amortization of other costs associated with the
purchase of contracts or other business assets is recognized over 15 years based
upon the Company's attrition experience and projected revenue stream.

RESULTS OF OPERATIONS

The following table summarizes the Company's operating results and sets
forth such results as a percentage of revenues for the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------- ---------------
1993 1994 1995 1995 1996
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS:
(IN MILLIONS)
Revenues...................................... $272.5 $319.5 $339.3 $78.4 $83.9
Operating Expenses............................ 148.9 178.6 189.5 43.1 46.4
Wages and Benefits............................ 49.6 56.9 53.8 13.6 14.2
General and Administrative Expenses........... 36.0 40.2 41.8 10.4 10.6
Depreciation and Amortization................. 7.4 9.6 10.4 2.5 2.8
------ ------ ------ ----- -----
Income from Operations........................ 30.6 34.2 43.8 8.8 9.9
Net Interest Income (Expense)................. (.4) (.6) .6 .1 .3
------ ------ ------ ----- -----
Income Before Taxes........................... 30.2 33.6 44.4 8.9 10.2
Provision for Income Taxes.................... 12.8 14.3 18.6 3.7 4.3
------ ------ ------ ----- -----
Net Income.................................... $ 17.4 $ 19.3 $ 25.8 $ 5.2 $ 5.9
====== ====== ====== ===== =====
AS A PERCENTAGE OF REVENUES:
Revenues...................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating Expenses............................ 54.7 55.9 55.9 55.0 55.4
Wages and Benefits............................ 18.2 17.8 15.9 17.3 16.9
General and Administrative Expenses........... 13.2 12.6 12.3 13.3 12.6
Depreciation and Amortization................. 2.7 3.0 3.0 3.2 3.3
------ ------ ------ ----- -----
Income from Operations........................ 11.2 10.7 12.9 11.2 11.8
Net Interest Income (Expense)................. (.1) (.2) .2 .1 .3
------ ------ ------ ----- -----
Income Before Taxes........................... 11.1 10.5 13.1 11.3 12.1
Provision for Income Taxes.................... 4.7 4.5 5.5 4.7 5.1
------ ------ ------ ----- -----
Net Income.................................... 6.4% 6.0% 7.6% 6.6% 7.0%
====== ====== ====== ===== =====
</TABLE>

THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995

Revenues. Consolidated revenue increased $5.5 million, or 7.0%, to $83.9
million for the three months ended March 31, 1996 from $78.4 million for the
comparable 1995 period. The increase was primarily due to (i) increases in
Merchant Card Services revenues, which rose 13.3% over the prior year's quarter
despite weather conditions that negatively impacted volume, and (ii) growth in
the remittance processing business, which experienced a 44.5% revenue increase
during the first quarter of 1996 compared to the comparable 1995 period,
primarily as a result of the FDR Remittance Acquisition in December 1995. These
increases more than offset an 8.6% revenue decline in the Company's Merchant
Check Services business, which was down primarily as a result of management's
effort to eliminate

20
<PAGE> 23

unprofitable contracts in its portfolio. The Company began limiting its
marketing efforts relating to its Merchant Check Services business in 1994 as a
result of poor collection performance and unfavorable contracts related to its
acquisitions in 1992 and in 1993. Revenue also declined in the Company's freight
services business in part as a result of a loss of certain customers following
the acquisition of CTI, and as a result of a strike in the automobile industry
and adverse weather conditions. The Company processed 571.4 million transactions
for the three months ended March 31, 1996, representing a 12.1% increase over
the comparable period in 1995.

The composition of the Company's revenue for these periods is as follows:

<TABLE>
<CAPTION>
FOR THE THREE
MONTHS
ENDED MARCH 31,
-------------------
1995 1996
---- ----
<S> <C> <C>
Merchant Services............................................... 58.0% 56.9%
Corporate Services.............................................. 24.1 26.6
Travel Services................................................. 17.9 16.5
</TABLE>

Costs and Expenses. Consolidated costs and expenses increased $4.4
million, or 6.3%, to $74.0 million for the three months ended March 31, 1996
from $69.6 million during the comparable 1995 period. The expense increases
during the three months ended March 31, 1996 were comprised of several major
items, including a $2.9 million, or 28.0%, rise in merchant processing
assessment fees resulting from increased volume and an increase in fees charged
by VISA(R), and a $1.2 million, or 35.0%, rise in wages and benefits for hourly
employees in the remittance processing business as a result of the FDR
Remittance Acquisition. Other cost increases during the quarter were offset by
reductions in the uncollectible check expense and in certain administrative
expenses and wages for businesses other than remittance.

Uncollectible check expense declined $1.4 million, or 18.9%, to $6.0
million during the three months ended March 31, 1996 from $7.4 million during
the comparable 1995 period. The smaller uncollectible check expense reflected a
9.0% improvement in the collection rate on returned checks compared to the prior
year period. The increase in the collection rate was the result of customer mix
changes, improved check acceptance methodology and better collection practices
while the smaller dollar volume was due primarily to limiting check services
marketing efforts as described above.

Depreciation and amortization for the three months ended March 31, 1996 was
$2.8 million compared to $2.5 million for the comparable 1995 period, reflecting
an increase in the amortization of intangibles related to the FDR Remittance
Acquisition and depreciation related to purchases of property and equipment for
the Company's automated chargeback and retrieval systems.

Tax Provision. Income taxes for the first three months of 1996 were $4.3
million compared to $3.7 million for the comparable period in 1995. The Company
is included in the consolidated federal income tax return of National City. It
is National City's policy to allocate taxes to its subsidiaries on a separate
return basis. See "Certain Transactions -- Tax Sharing Agreement." The Company
has commenced a tax planning program designed to manage its tax liability.

Net Income. Net income for the three months ended March 31, 1996 increased
13.5% to $5.9 million from $5.2 million for the three months ended March 31,
1995. The increase resulted from revenue growth and improved margins due to the
factors described above.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

Revenues. Consolidated revenue increased $19.8 million, or 6.2% to $339.3
million for the year ended December 31, 1995 from $319.5 million for the
comparable 1994 period. The increase was primarily due to revenue gains in
Merchant Services and Corporate Services which offset a small revenue decline in
Travel Services as a result of the devaluation of the Mexican peso, which
reduced the Company's expense base under its cost-plus contract with the ARC.
Merchant Card Services revenue increased 16.7% in 1995 compared to 1994 due to
increased transaction volume. Corporate Services

21
<PAGE> 24

revenue growth of 7.6% was attributable to strong performances by electronic
imaging solutions ("Imaging Solutions"), freight services and remittance
operations, which realized revenue increases of 27.0%, 13.0% and 8.9%,
respectively, for the year ended December 31, 1995 over the comparable 1994
period. This growth more than offset a decline of 4.0% in Merchant Check
Services revenue during this period, resulting from management's limitation of
marketing efforts as described above. The Company processed 2.3 billion
transactions during the year, representing a 12.7% transaction volume increase
over the prior year.

The composition of the Company's revenues for these periods is as follows:

<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
DECEMBER 31,
-----------------
1994 1995
---- ----
<S> <C> <C>
Merchant Services................................................. 59.3% 60.8%
Corporate Services................................................ 23.5 23.8
Travel Services................................................... 17.2 15.4
</TABLE>

Costs and Expenses. Consolidated costs and expenses increased $10.2
million, or 3.6%, to $295.5 million for the year ended December 31, 1995 from
$285.3 million during the comparable 1994 period. The increase was primarily due
to higher levels of purchased services including merchant processing assessment
fees, which increased $14.3 million, or 19.8%, to $86.6 million during the year
ended December 31, 1995 from $72.3 million during the prior year. Partially
offsetting these increases, wages for hourly employees declined $3.1 million, or
5.4%, to $53.8 million for the year ended December 31, 1995 from $56.9 million
during the prior year, primarily due to transfer of work to Mexico and
devaluation of the peso.

Uncollectible check expense decreased $1.0 million, or 3.2% to $30.5
million for the year ended December 31, 1995 from $31.5 million during 1994.
This decrease resulted from a revision in collection rates which were estimated
at the time contracts were acquired by the Company, based upon actual collection
rates on returned checks.

Depreciation and amortization for the year ended December 31, 1995 was
$10.4 million compared to $9.6 million during 1994. This increase was primarily
due to additions to property and equipment related to the Company's data center
and the implementation of its merchant processing automated chargeback and
retrieval system.

Tax Provision. Income taxes for 1995 were $18.6 million, compared to $14.3
million for 1994. The Company is included in the consolidated federal income tax
return of National City. It is National City's policy to allocate taxes to its
subsidiaries on a separate return basis. See "Certain Transactions--Tax Sharing
Agreement."

Net Income. Net income for the year ended December 31, 1995 increased
33.7% to $25.8 million from $19.3 million for the year ended December 31, 1994.
The increase resulted from revenue growth and improved margins due to the
factors described above.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993

Revenues. Consolidated revenue increased $47.0 million, or 17.2%, to
$319.5 million for the year ended December 31, 1994 from $272.5 million for the
comparable 1993 period. The increase was primarily attributable to greater
transaction volume, which increased 19.5% over the prior year. The primary
sources of transaction volume increases were (i) Merchant Card Services, which
grew 18.9% in 1994 primarily as a result of industry growth; and (ii) the
acquisition of CTI, which more than doubled freight services volume.

22
<PAGE> 25

The composition of the Company's revenues for these periods is as follows:

<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
DECEMBER 31,
-----------------
1993 1994
---- ----
<S> <C> <C>
Merchant Services................................................. 60.9% 59.3%
Corporate Services................................................ 20.0 23.5
Travel Services................................................... 19.1 17.2
</TABLE>

Costs and Expenses. Consolidated costs and expenses increased $43.4
million, or 17.9%, to $285.3 million for the year ended December 31, 1994 from
$241.9 million during 1993. The increase was primarily due to higher operating
volumes. Purchased services, including merchant processing assessment fees,
increased $7.9 million, or 12.3%, to $72.3 million during the year ended
December 31, 1994 from $64.4 million during 1993. Wages for hourly employees
increased $7.3 million (including a $5.4 million increase in freight services as
a result of the acquisition of CTI), or 14.7%, to $56.9 million for the year
ended December 31, 1994 from $49.6 million during 1993.

Uncollectible check expense increased $3.6 million, or 12.9%, to $31.5
million during the year ended December 31, 1994 from $27.9 million during 1993.
This increase resulted from a revision in collection rates which were estimated
at the time contracts were acquired by the Company, based upon actual collection
rates on returned checks.

Depreciation and amortization for the year ended December 31, 1994 was $9.6
million compared to $7.4 million during 1993. The increase was primarily
attributable to increased amortization expense resulting from the acquisition of
CTI.

Tax Provision. Income taxes were $14.3 million for 1994 and $12.8 million
for 1993. The Company is included in the consolidated federal income tax return
of National City. It is National City's policy to allocate taxes to its
subsidiaries on a separate return basis. See "Certain Transactions--Tax Sharing
Agreement."

Net Income. Net income for the year ended December 31, 1994 increased
10.9% to $19.3 million from $17.4 million for the year ended December 31, 1993.
The increase resulted primarily from revenue growth.

SEASONALITY

The Company experiences seasonality in its businesses, particularly in its
Merchant Services and Travel Services business. The Company typically realizes
higher revenues in the third and fourth calendar quarters and lower revenues in
the first calendar quarter, reflecting increased transaction volumes and travel
in the summer and holiday months and a decrease in transaction volume during the
quarter immediately following the holiday season.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary uses of capital resources include acquisitions,
capital expenditures and working capital.

The Company had no outstanding obligations associated with bank
indebtedness as of December 31, 1995 or March 31, 1996. The Company maintains a
$20.0 million borrowing facility with NCBK. This borrowing facility, typically
used to finance working capital requirements, bears interest based on NCBK's
internal cost of funds. Upon any drawdowns on this facility, the Company's
obligations would be required to be fully secured by certain assets of the
Company in accordance with Section 23A of the Bank Holding Company Act of 1956,
as amended (the "Bank Holding Act"). The Company has obtained a commitment from
an unaffiliated financial institution to provide an unsecured line of credit and
revolving credit facility in an aggregate amount of $75.0 million, which will
replace its existing borrowing facility with NCBK. The closing of such credit
facility is subject to, among other things, the execution of definitive

23
<PAGE> 26

documentation, which is expected to contain representations, warranties and
covenants customary for credit facilities of this type.

Expenses associated with the Company's Mexican operations as well as the
Company's expense base under its cost-plus contract with the ARC are subject to
currency fluctuations. The Company regularly monitors its exposure to risk
resulting from such currency fluctuations and may take steps to minimize such
risks as it deems appropriate from time to time.

The Company's capital expenditures include amounts for computer systems
hardware as well as scanning and other document processing equipment. During the
year ended December 31, 1995, the Company's capital expenditures totaled
approximately $10.0 million. Such expenditures were financed from operating cash
flow, which totaled approximately $38.9 million before capital expenditures for
the twelve months ended December 31, 1995. Operating cash flow during the three
months ended March 31, 1996 totaled $17.0 million. Capital expenditures for 1996
(including expenditures totaling $3.5 million made in the first quarter of 1996)
are expected to be $10.8 million.

As the Company does not carry significant amounts of inventory and
historically has experienced short collection periods for its accounts
receivable, it does not require substantial working capital to support its
revenue growth. Working capital requirements will vary depending upon future
acquisition activity. Increases in working capital needs are expected to be
financed through operating cash flow and proceeds from the Offering. The Company
maintains cash balances held on behalf of clients pending distribution to
vendors which are shown on the balance sheet as assets and equivalent,
offsetting liabilities. These cash balances totaled approximately $55.8 million
and $51.5 million as of December 31, 1995 and March 31, 1996, respectively. From
time to time, the Company also maintains cash deposits from certain Merchant
Card Services customers as collateral for potential contingent liabilities that
are the responsibility of such customers. See "Business -- Risk Management." At
December 31, 1995, and March 31, 1996, the amount of such cash deposits was
immaterial.

It is expected that the Company's future acquisitions will be funded from
the proceeds of the Offering, through the issuance of Common Stock, with
operating cash flow or with borrowed funds. The Company currently has no
negotiations, understandings or agreements with respect to any acquisitions or
material technology investments.

24
<PAGE> 27

BUSINESS

In the Merchant Services market, the Company is the second largest
processor of merchant credit and debit card transactions and the third largest
provider of check acceptance services in the United States, according to
published industry sources (the Nilson Report -- April 1996). Merchant Services
represented approximately 60.8% of the Company's revenues in 1995 and were
provided to over 125,000 merchant locations. In the Corporate Services market,
the Company believes that it is one of the largest providers of outsourcing
services in the United States, processing more than 434 million transactions
annually. The Company's Corporate Services include accounts payable processing,
remittance processing, audit and funds settlement for freight-related charges
and Imaging Solutions. Corporate Services represented approximately 23.8% of the
Company's revenues in 1995. In its Travel Services market, the Company is the
exclusive processor and clearinghouse for all airline tickets issued by travel
agents in the United States and by travel agents for the U.S. government. Travel
Services, which accounted for approximately 15.4% of the Company's revenues in
1995, also includes processing services for air cargo sales, direct airline
ticket sales and passenger flight data. As a leading provider of Merchant
Services, Corporate Services and Travel Services, the Company's current customer
base includes seven of the top ten and 22 overall of the Fortune 100 companies.

INDUSTRY OVERVIEW

The transaction processing industry has experienced strong growth in recent
years, as acceptance and use of credit cards, debit cards and checks have grown,
and corporations have increasingly outsourced non-core administrative and
financial functions in order to reduce costs, capitalize upon advances in
technology, and enhance the quality and availability of management information.
This continuing growth has resulted in considerable competition in the
marketplace, while the costs of advancing technology, the efficiencies derived
from economies of scale, and customer demands for a broad product line have
caused rapid consolidation among transaction processing providers. The industry
is expected to continue to grow and consolidate.

25
<PAGE> 28

MERCHANT SERVICES MARKET

Payment processing for commercial businesses has grown rapidly in recent
years as a result of a proliferation in the uses and types of credit and debit
cards, wider acceptance of such cards among merchants and increased consumer use
of such cards. Advances in payment processing and telecommunications technology
have been a key factor contributing to such growth. The transition from
paper-based to electronic processing, for example, provides greater convenience
to merchants and consumers, reduces fees charged to merchants, and facilitates
faster, more accurate settlement of payments. According to industry
publications, consumer usage of VISA(R) and MasterCard(R) credit and debit cards
for purchases and cash advances in the United States was $574.5 billion in 1995
compared to $463.1 billion in 1994, representing an increase of 24.1% (the
Nilson Report -- April 1996, March 1995). Transaction volume increased 23.2%
during this same period, from 5.6 billion transactions processed in 1994 to 6.9
billion transactions processed in 1995. Despite this rapid growth, current
estimates indicate that in 1994 only 17.3% of all payment transactions were made
using a credit or debit card, compared to 14.3% in 1990.

The market for check verification services has also demonstrated rapid
growth while the market for guarantee services has been relatively flat,
according to industry publications (the Nilson Report -- April 1996). The dollar
volume of checks verified in 1995 increased 18.1% to $177.8 billion from $150.6
billion in 1994. In contrast, the dollar volume of checks guaranteed in 1995
increased 4.5% to $48.7 billion from $46.6 billion in 1994.

The transaction processing market is generally characterized by three tiers
of merchants consisting of national, regional, and numerous local merchants. The
Company and one other transaction processor have primarily focused on servicing
national merchants, while many smaller transaction processors, such as ISOs and
regional banks, have offered a more limited range of services to regional and
local businesses. ISOs are independent agents that typically market and sell a
range of transaction processing services to merchants, generally outsourcing
such services. National merchants with multiple locations and high volumes of
card and check transactions typically demand and receive a broad range of
transaction processing services as well as customized information services at
low per-transaction costs. By contrast, regional and local merchants
historically have received more standardized products and have incurred
relatively higher per-transaction costs. However, the growth in check and card
transactions and the transition from paper-based to electronic transaction
processing have caused regional and local merchants increasingly to demand
sophisticated transaction processing and information services similar to those
provided by the Company to national merchants.

The transaction processing industry is extremely competitive, which results
in pricing pressure and creates the need for continuous investment in technology
both to satisfy customer demands and to reduce operating costs. The costs to
convert from paper-based to electronic processing, meet merchant requirements
for improved service, and satisfy the demands for additional technology-driven
applications have made it difficult for small scale transaction processors to
remain competitive. Many of these providers are unwilling or unable to invest
the capital required to meet these evolving demands and are increasingly leaving
the transaction processing business or seeking partners to provide the necessary
processing for their customers. As a result, the transaction processing industry
has undergone rapid consolidation over the last several years. According to
published industry sources, the three largest credit and debit card transaction
processors handled 49.5% of total credit and debit card sales volume for
calendar year 1995. In addition, according to published sources, the three
largest check acceptance processors handled 53.5% of the total check sales
volume authorized by third-party check acceptance providers for calendar year
1995 (the Nilson Report -- April 1996). The remainder of these markets are
highly fragmented among numerous smaller transaction processors.

26
<PAGE> 29

CORPORATE SERVICES MARKET

The market for the outsourcing of corporate administrative and financial
functions has also experienced strong growth in recent years. Outsourcing is a
relatively new phenomenon that before 1980 had been limited primarily to payroll
and remittance processing (the collection of bill payments) functions. Service
organizations, such as the Company, specializing in cost-effective, high-volume
transaction processing have emerged to assist businesses in their outsourcing
efforts as they seek ways to reduce overhead costs, improve the accuracy of
payments and collections, and utilize data more effectively. Advances in
technology and increased transaction complexity have made even large-scale in-
house performance of administrative and financial functions comparatively less
efficient and outsourcing more attractive. In addition to payroll and remittance
processing, administrative functions currently outsourced include accounts
payable processing, freight cost audit and settlement, and database and document
management (through electronic imaging). The trend toward outsourcing is
creating additional market opportunities for providers like the Company, who
possess the scale of operations, broad product line and expertise to provide
low-cost processing services while simultaneously capturing management
information for use by the customer.

The corporate outsourcing marketplace is highly competitive with a few
relatively large, well capitalized providers and numerous smaller providers. The
cost advantages associated with large-scale processing, and the ability to
invest in new technology that delivers value-added services at lower per unit
costs have enabled large-scale providers to capture most of the transaction
processing and outsourcing requirements of large corporations.

BUSINESS STRATEGY

The Company's objective is to continue its growth and enhance its position
as a market leader in the transaction processing industry by serving markets for
Merchant Services, Corporate Services and Travel Services. The Company's
business strategy is comprised of the following principal components: (i)
penetration of new markets; (ii) expansion of customer relationships; (iii)
leveraging low-cost operations; and (iv) pursuing strategic acquisitions which
complement the Company's existing business lines. The Company's strategy for
each of the markets it presently serves is more fully described below.

<TABLE>
<CAPTION>
PENETRATE EXPAND LEVERAGE
NEW CUSTOMER LOW-COST PURSUE
MARKETS BASE OPERATIONS ACQUISITIONS
------------------------ ------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C>
MERCHANT - Hospitality - Market card services - Expand offshore - Merchant portfolios
SERVICES to middle market operations
- Grocery - Market check services - Imaging - Technology providers
to national market technology
- Gaming - Independent Sales - Evolve systems
Organizations
- Cross-selling
CORPORATE - Utilities - Target regional - Expand off-shore - Competitors
SERVICES businesses operations
- Financial services - Cross-selling - Imaging - Complementary
technology products
- Healthcare - Evolve systems - Technology providers
TRAVEL SERVICES - Car rental - New products - Automate - Technology
for hospitality processing enhancements
- Cruise lines industry
- Hotels
</TABLE>

27
<PAGE> 30

MERCHANT CARD SERVICES

Penetrate New Markets. The Company's Merchant Card Services staff will
aggressively pursue industries such as the hospitality and grocery markets that
it has not previously served. To penetrate these new markets, Merchant Card
Services is expanding its sales team and entering into relationships with ISOs.

Expand Customer Base. Merchant Card Services will expand its customer base
by offering to regional and local merchants its products, which have been
targeted historically to national merchants. The Company intends to use its cost
advantages to compete for new middle-market merchant contracts with aggressive
pricing strategies. These contracts typically have higher per transaction
pricing than national customer contracts.

Leverage Low-Cost Operations. Already one of the low-cost providers in the
transaction processing industry, the Company's Merchant Card Services operation
is initiating new projects to further automate its operations. By continuously
investing in systems, operations and new technology, the Company will be able to
compete effectively in price sensitive markets. In 1995, the Company invested in
capital equipment and software to automate its chargeback and retrieval system,
which both reduced costs and improved customer service. In 1996 and 1997, the
Company will replace or upgrade substantial parts of its existing processing
systems in order to enhance customer service and further reduce costs.

Pursue Acquisitions. Merchant Card Services will seek acquisitions of
merchant processing portfolios as well as strategic investments in providers of
technology to expand its offering of products and services. As the second
largest and one of the lowest-cost providers of payment processing services, the
Company believes that it is well positioned to participate in the consolidation
occurring within the card processing industry.

MERCHANT CHECK SERVICES

Penetrate New Markets. Merchant Check Services will pursue opportunities
in new markets such as the gaming industry where the Company perceives
high-margin growth opportunities. To support this effort, the Company will seek
to introduce database development and management tools that provide a
competitive advantage in the assessment of industry-specific risk factors. The
Company will also seek to establish partnerships with businesses that give it a
competitive advantage in the distribution of its products and services.

Expand Customer Base. The Company will attempt to expand the base of
customers served by Merchant Check Services by cross-selling to large, national
accounts currently served by Merchant Card Services. The Company will dedicate
part of its sales staff to pursuing opportunities that leverage existing
relationships.

Leverage Low-Cost Operations. Merchant Check Services will continue to
move its labor intensive operations to low-cost labor markets such as Juarez,
Mexico. The Company believes that this will continue to improve margins and
enhance the Company's ability to offer cost-effective solutions to its
customers. Merchant Check Services is also upgrading its systems and utilizing
imaging technology to improve customer service and reduce costs.

Pursue Acquisitions. Merchant Check Services will pursue acquisitions that
will provide technology and product enhancements, improve negative file and risk
management functions, and make point-of-sale processing easier for merchants.

CORPORATE SERVICES

Penetrate New Markets. Corporate Services will pursue outsourcing
opportunities in new industries such as utilities, financial services, and
health care which, due to deregulation or competitive pressures, are seeking
third-party providers for non-core administrative and financial functions. The
Company has added new products, such as Virtual PAY(TM) (which allows the
payment of bills over the Internet), to meet the needs of such markets on a
cost-effective basis. Corporate Services' use of imaging technology to

28
<PAGE> 31

access the Company's low-cost offshore processing provides a competitive
advantage in penetrating new markets.

Expand Customer Base. In addition to its national account base, Corporate
Services will offer integrated solutions to a growing number of regional
businesses that are seeking cost savings and improved access to management
information. Corporate Services will increase its sales force to focus on
leveraging cross-selling opportunities.

Leverage Low-Cost Operations. Using imaging technology, Corporate Services
will shift much of its labor-intensive operations to the Company's facilities in
Juarez, Mexico. This project requires software programming and capital
investments which are now underway with a technology partner. The margin
improvement from this shift will further improve the Company's strong
competitive position in these product lines.

Pursue Acquisitions. The Company will continue actively to pursue
acquisitions of existing operations that compete with the Corporate Services
businesses or complement existing product lines. The Company's acquisition
strategy will be based on enhancing its product offerings and the potential for
economies of scale and improved processing efficiency. Corporate Services will
also seek investments in technology firms to advance its imaging and database
management skills.

TRAVEL SERVICES

Penetrate New Markets. Travel Services is leveraging its knowledge of the
travel industry to provide settlement services to new industries such as
hospitality providers, cruise lines and auto rental businesses. The Company's
current work with travel agents and the airline industry uniquely positions it
to provide value-added services. For example, the Company is currently
developing a product for rental car companies and hotels that will allow them to
consolidate travel agent commission payments rather than distributing many
small-dollar-value payments individually.

Leverage Low-Cost Operations. The Company will substantially reduce labor
costs by offering automated solutions, such as its travel agent commission
payment plan.

Pursue Acquisitions. Travel Services will seek acquisitions and strategic
investments to enhance its technology base and assist in delivering electronic
solutions in new travel industry-related markets.

PRODUCTS AND SERVICES

The Company currently provides transaction processing products and services
in three principal markets: Merchant Services, Corporate Services and Travel
Services. For the year ended December 31, 1995, no Merchant Services or
Corporate Services customer accounted for more than 4.0% of the Company's
revenues. The Company believes that its customer relationships provide a
significant competitive advantage due to the high quality and low cost of its
operations.

MERCHANT SERVICES

The Company provides a variety of products and services to merchants to
facilitate the processing of transactions at the point of sale ("POS"), focusing
primarily on markets for credit card and debit card processing ("Merchant Card
Services") and for check acceptance and collection ("Merchant Check Services").
The Company processed 1,467.8 million Merchant Services transactions in 1995
compared to 1,128.0 million transactions in 1993, representing a compounded
annual growth rate of 14.1%. Merchant Services collectively accounted for
approximately 60.8% of the Company's revenues in 1995.

Merchant Card Services

The Company provides merchants with credit card, debit card and other
transaction processing services, as well as related information services and
product support. The market for Merchant Card Services has grown rapidly in
recent years as a result of wider merchant acceptance of cards, increased
consumer use of such cards and advances in transaction processing and
telecommunications technol-

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ogy. In 1995, the Company was the second largest transaction processor of
merchant debit and credit card purchases, with a 15.3% market share based on
sales volume (the Nilson Report -- April 1996). The Company's leading customers
for Merchant Card Services include several of the largest major national
retailers and the largest oil company in the United States, as measured by
transaction volume. Additionally, Merchant Card Services processes payments for
six of the ten largest airlines in the United States. The Company believes it is
the lowest cost provider of credit and debit payment processing services in the
United States.

In the market for Merchant Card Services, information and services are
transmitted electronically among the Company, the merchant-customer, and certain
other parties involved in the payment processing system. The transaction cycle
includes authorizing card transactions at the POS, capturing data related to
transactions, settling transactions through the card associations on behalf of
the merchant and providing transaction reporting to the merchant. In the course
of processing an electronic transaction, numerous functions are performed
simultaneously over various proprietary and third-party national networks. This
transaction cycle is illustrated by the following diagram (numbers indicate the
order of steps in the transaction cycle):

ARTWORK

The Company provides all of the services in the transaction cycle or
specific components of them on behalf of its customers and receives a fee,
typically on a per transaction basis, from merchants, whether national, regional
or local. With respect to regional and local merchants, the Company's pricing
differs from that of its competitors, who generally offer services priced as a
percentage of the transaction processed ("discount"). The Company's
transaction-based pricing insulates it from fluctuations in retail sales volume
per transaction, as the cost to process large and small transactions is the
same. As competition results in reduced fees being charged to regional and local
merchants, the Company believes its low-cost operations will become increasingly
beneficial. The Company is also increasing its use of marketing alliances with
ISOs to assist the Company in reaching local merchants.

Electronic Authorization. The authorization and capture processes are
completed simultaneously, usually within 3-15 seconds. The authorization process
begins when the merchant "swipes" the card through its POS terminal and includes
obtaining approval from the card issuing bank for the cardholder's purchase at
the merchant location. Through third-party national networks available on a
subscription

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basis, the Company confirms that the cardholder has the available credit to
cover the purchase and verifies that the card has not been reported lost or
stolen. As a large customer of these networks, the Company is able to obtain
such authorization information on a favorable cost basis. In the event that the
merchant is not able to connect with the electronic network, the Company
provides access to voice authorization and automated voice response that is
available 24 hours a day, seven days a week through its new call center in El
Paso, Texas.

Data Capture and Reporting. While the transaction is being processed, the
transaction data, including purchase price and card number, are captured both at
the merchant's POS terminal and at the Company. This redundancy maximizes
accurate transaction reconciliation with each merchant and protects against
potential loss of data. Periodically throughout the day, the Company aggregates
and organizes data from the merchant's POS terminal for use in settling
transactions and preparing reports for merchants. For certain national
merchants, the Company captures data via a "host-to-host" linkage with the
merchant's own mainframe computer which, in turn, allows the merchant enhanced
access to the Company's reporting capabilities on its proprietary systems. As a
result of the Company's high transaction volume and its efficient customized
reporting systems, the Company is able to provide data capture and reporting
services at a low cost per transaction.

Settlement and Clearing. Settlement involves managing a record of each
merchant's transactions and transferring funds for payment from the card issuer
to the merchant. The Company transmits transaction information to the
card-issuing bank through the card association, such as VISA(R) or
MasterCard(R), and arranges for funds to be transferred to the merchant's bank
account via Automated Clearing House ("ACH") or Fedwire transfer. The cardholder
is billed by the card issuer. Settlement payments, which are received by the
Company from a card association clearing bank and forwarded to the merchant, are
paid net of interchange fees payable to card issuers. For merchants who are
billed by the Company for processing fees on a daily basis, settlement payments
are also net of such fees. For merchants who are billed by the Company for
processing fees on a weekly or monthly basis, settlement payments are for the
gross amount of the merchant's transactions. In these cases, the Company then
bills the merchant on a weekly or monthly basis for its processing fees and for
fees payable to card issuers. For its customers who are billed weekly or
monthly, the Company bears the risk of merchant nonpayment of applicable fees
and assessments. See "Risk Factors -- Chargebacks; Risk of Nonpayment." The
Company attempts to convert merchants currently billed on a weekly or monthly
basis, usually due to their long-term relationships with the Company, to a daily
billing cycle upon the renewal of its contracts with such merchants. Each step
in the settlement process involves a number of procedures that must be completed
in accordance with VISA(R), MasterCard(R) and various card issuers'
requirements. See "-- Regulation." From the time of closing a batch of
transactions, the Company is generally able to credit the merchant's account
within 24 to 72 hours.

The Company, along with all other nonbank transaction processors that
process VISA(R) and MasterCard(R) transactions, must be sponsored by a financial
institution that is a principal member of the VISA(R)and MasterCard(R) credit
card associations in order to process bankcard transactions. Through NCBK, the
Company's clearing bank, the Company is registered with VISA(R) and
MasterCard(R) as a certified processor and member service provider under a
clearing bank arrangement. Following the Offering, NCBK will continue its
sponsorship of the Company through a sponsorship arrangement so that the Company
will remain registered with VISA(R) and MasterCard(R). See "Risk
Factors -- VISA(R) and MasterCard(R) Registration" and "Certain
Transactions -- Sponsorship Agreement."

Chargeback. In the event of a billing dispute between a cardholder and a
merchant, the Company as the "acquiror" of the transaction, assists the merchant
in investigating and resolving the dispute. If a billing dispute between a
cardholder and a merchant is not resolved in favor of the merchant, the
transaction is "charged back" to the merchant and that amount is credited or
otherwise refunded to the cardholder. If the Company or its clearing banks are
unable to collect such amounts from the merchant's account, and if the merchant
refuses or is unable due to bankruptcy or other reasons to reimburse the Company
for the chargeback, the Company bears the loss for the amount of the refund paid
to the cardholder. See "Risk Factors -- Chargebacks; Risk of Nonpayment." The
Company provides a sophisti-

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cated chargeback control system for its merchants that includes actively
prescreening disputes and the use of proprietary software programs to automate
chargeback controls. These chargeback control systems are designed to reduce the
total number of chargebacks, as well as the time and expense that the Company
and its merchant customers spend on resolving them. The Company has received
awards from VISA(R) in 1993, 1994 and 1995, and from MasterCard(R) in 1995, as
the most efficient chargeback processor in its processing category, an award
based on the ratio of chargebacks to total transactions processed. In addition,
the Company uses various risk management and fraud avoidance practices to
minimize its exposure to potential losses in this area. See "-- Risk
Management."

New Products. The Company devotes significant time and resources to the
development of new products for its Merchant Card Services business. The Company
is currently developing integrated processing technology called NPC Advantage,
due for release in April 1997, which is a host-based, front-end processing
platform providing for a single point of interaction for a merchant to
facilitate authorization, data capture and settlement of all non-cash payments.
In addition, the Company is developing a PC-based merchant work station that
provides on-line access to all processing data in a flexible format for
customized merchant reporting. This product is due for release in February 1997.
In addition, as a result of certain partnerships with other technology
providers, the Company offers POS products targeted to the retail food industry
that permit data capture relating to customer frequency, traits and other
factors. The Company has also developed a signature capture product which
electronically captures a customer's signature at the POS and stores it for
future verification. This digitized procedure eliminates paper storage and
improves response time on disputes, providing cost savings for the merchant. The
Company has also recently introduced the Compra(TM) terminal, a proprietary
product which enables the merchant to obtain credit, debit and check
authorizations through one unit, thereby achieving cost savings on counter
space, telephone line installation and hardware.

Customer Service and Support. The Company provides its merchant customers
with a variety of customer services and support. As part of the customer's
initial account applications process, business and technical representatives
explore opportunities to customize the Company's Merchant Card Services based on
the customer's business requirements. On-going services include leasing, renting
or selling POS terminals, downloading software application products and services
to POS terminals, maintaining POS terminals and customizing software for
merchant applications. To ensure customer satisfaction, the Company maintains a
24-hour-a-day, seven-days-a-week helpline staffed by full-time customer service
representatives.

Merchant Check Services

The Company provides a variety of services to merchants that accept checks
as a form of payment. These merchants include large retail and specialty stores,
restaurants and home delivery services, mail order and hospitality businesses,
automobile dealerships and gaming establishments. Under the Company's Merchant
Check Services, the merchant may choose a check verification service, whereby
the merchant retains the risk associated with returned checks and is charged a
per transaction fee, or the merchant may choose a fully bundled check guarantee
service. The Company entered this business through the acquisition of Check
Security Services of America, Inc. in July 1992 and JBS Associates, Inc. in
February 1993. The Company has since consolidated these businesses into NPC
Check Services, Inc., with its principal office in Riverdale, New Jersey.

Check Authorization. Through its check authorization services, the Company
facilitates merchant acceptance of checks as a form of payment, thereby
increasing consumer payment options and merchant sales. When a check is
presented to the merchant, the merchant electronically transmits to the Company,
over various proprietary and third-party networks, all relevant transaction data
for check authorization. All data elements are captured by the merchant, either
by manually entering the pertinent information into the merchant's POS terminals
and cash registers or through the use of more sophisticated technology, such as
magnetic ink character recognition ("MICR") check readers, which electronically
capture relevant data elements. This technology facilitates the speed of POS
check-out and significantly improves the accuracy of merchant data capture.

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Depending on the level of service provided to the merchant, the transaction
data is cross-referenced in the Company's negative database, which compiles
information concerning returned checks, uncollectible items and closed accounts,
as well as in its positive database, which compiles transaction data for
individuals who have presented checks without overdraft throughout the Company's
merchant base. These proprietary databases are updated daily from merchants,
financial institutions and other industry sources, as well as from the Company's
own experience in processing check transactions for over 75,000 customer
locations. The Company's closed account files, which cross-reference bank
account closings nationwide, are updated daily over a shared network provided by
a third-party vendor, as well as directly from financial institutions. On a
periodic basis, or if circumstances merit based on check velocity and the
merchant's customized parameters, the Company will obtain consumer credit
information from national credit reporting bureaus to augment its review
process. Before a transaction is approved, it may also be verified against
customized acceptance protocols established by the merchant and/or the Company.
These protocols vary but assist in diminishing the risk associated with
accepting checks from "unknown" checkwriters, who are not identified in the
Company's positive or negative databases.

Typically, the authorization process is completed in less than 15 seconds.
In addition, the Company maintains a fully staffed voice authorization center
and an automated voice response unit, both available 24 hours a day, seven days
a week. The authorization cycle is illustrated by the following diagram (numbers
indicate the order of steps in the authorization cycle):

ARTWORK

Check Verification. If a merchant subscribes to the Company's check
verification services, the merchant may choose to utilize all or part of the
Company's check authorization service. With the verification service, the
merchant retains the risk associated with returned checks and is charged a per
transaction fee dependent upon the level of authorization service that is
utilized.

Check Guarantee. If a merchant subscribes to the Company's check guarantee
services and complies with the Company's other standard procedures, the Company
charges the merchant a fee for all checks approved and, in exchange, the Company
will bear the risk of returned checks that are accepted by the merchant but
dishonored by the consumer's bank. The Company attempts to minimize its losses
from check guarantee services by requiring merchant customers to subscribe to
the Company's check authorization service. See "Risk Factors -- Potential Losses
from Check Guarantee Services." The

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Company sets fees for check guarantee services based on the credit profile of
the merchant's consumer base, the merchant's industry classification, products
sold, volume and average face value of checks accepted, and the merchant's prior
experience with check losses. If a merchant accepts a check that is ultimately
dishonored, whether for lack of funds or otherwise, the merchant collects the
full face value of the check from the Company, and the Company pursues
collection of the dishonored check and retains all proceeds from any recovery.
Through its check collection efforts, the Company recaptures a portion of the
amounts it pays to merchants pursuant to check guarantee services.

Check Collection. The Company assists merchants in reducing check losses
by providing collection services for dishonored checks. Check collection
services are often customized for the specific merchant's individual
requirements. In general, such services are provided under either a contingency
collection arrangement or a guarantee reimbursement arrangement. Under a
contingency arrangement, the Company will pursue collection on behalf of
merchants in exchange for a service fee and/or a portion of the face value of
the checks that are collected. Under a guarantee arrangement, the Company
purchases returned checks from merchants at a discounted percentage of the face
value. The Company's rates for collection services vary depending upon
characteristics of the checks under collection, including the age of the
returned checks, characteristics of the relevant industry, reasons why the
checks were returned, and average face values. The Company's collection efforts
are tailored to the circumstances but generally include the use of customized
letters, outbound calling programs, bank letters and/or redeposit efforts, and,
if necessary, legal action. In a guaranteed reimbursement arrangement, the
Company may itself outsource the collection effort to regional collection
agencies. See "-- Regulation." Other returned check processing services are
provided to merchants on a customized basis.

New Products. The Company makes regular investments in product development
for Merchant Check Services. In May 1996, the Company introduced a returned
check concentration product, in which returned checks are systematically routed
to a centralized bank account. This product facilitates negative file updates,
merchant reimbursement and control over returned checks and significantly
reduces the banking fees that merchants pay for returned items. Additionally,
the Company has recently introduced customized negative and positive files that
focus on gaming industry patrons. The Company is also investing in the
development and implementation of an E-Check product, scheduled for introduction
by January 1997, which will convert checks into electronic ACH transactions at
the POS, eliminating the need to process a check through the banking system. The
Company further plans to implement image-based technology in the data capture of
return items.

CORPORATE SERVICES

The Company currently provides outsourcing services for four major
corporate functions: remittance processing, freight bill processing, corporate
accounts payable and printing services, and Imaging Solutions. In providing
these services, the Company positions itself as an integrated outsourcing
solutions provider, and differentiates itself and adds value by capturing
operating and financial data to create databases that provide management
information that is typically not available when such functions are performed
internally. The Company's transaction volume in Corporate Services increased
from 266.7 million transactions in 1993 to 434.5 million transactions in 1995,
representing a compounded annual growth rate of 27.6%. Services are provided to
more than 500 customers in industries such as oil, passenger and cargo
transportation, financial services, manufacturing, utilities, retail and
telecommunications. Corporate Services collectively accounted for approximately
23.8% of the Company's revenues in 1995.

Remittance Processing Services

Remittance processing involves the acceptance of payments, typically
checks, received on behalf of a customer of the Company, as well as the related
clearing and settlement of the customer's accounts receivable. The Company
provides customers with remittance processing for payment transactions relating
to credit card purchases, utility bills or other kinds of invoice payments.
Because outsourced

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remittance processing services are generally cost effective and reduce the
customer's handling and overall collection time, the Company believes that the
market for such services will continue to expand.

Remittance payments are generally mailed directly to the Company at one of
four sites in the United States. Once received, the Company records and
processes the check and accompanying payment invoice, simultaneously capturing
the transaction documents on microfiche for archival purposes using high speed
scanners. Checks are power-encoded with MICR ink, facilitating deposit of the
item into a customer's bank account through automated procedures. These deposits
are then disbursed, customer accounts receivable files are updated and
customized electronic reports are generated for the customer. The Company also
provides a wide range of exception processing services for non-standard
payments, address change and various other customer service functions. For
providing remittance processing services, the Company is paid a
transaction-based fee that varies by complexity of the documents handled during
the processing function.

In December 1995, the Company purchased the existing remittance processing
assets of FDR and, concurrently, entered into a marketing alliance with FDR
whereby the Company will provide future FDR customers with remittance processing
services typically offered as part of a package of bundled services.

In May 1996, the Company began offering access to electronic payment
processing over the Internet through Virtual PAY . This product is accessible
through the Internet Web site home pages of the Company or corporate customers
who subscribe to it and is customized for their needs. Virtual PAY uses advanced
encryption techniques to offer secure and convenient consumer access to on-line
bill paying capabilities. Because the Company markets Virtual PAY to its
corporate customers, the service is made available at no charge to the consumer.
The consumer may use Virtual PAY to pay by credit card or by an
electronically-generated check. Consumers can decide to use Virtual PAY
regularly or only as an occasional form of payment. This service may be accessed
from any location connected to the Internet and does not require any additional
software to be installed on the consumer's PC.

Freight Services

The Company provides a specialized form of accounts payable processing for
payments relating to freight bills. The Company maintains a comprehensive
proprietary database of tariff and negotiated rate structures in place
throughout the United States and internationally that vary by distance, weight,
freight class and other factors. This database allows the Company to provide a
range of value-added services and software products that permit customers to
reduce freight costs, enhance freight logistics and improve planning and rate
negotiations. The Company believes it is one of the leading providers of freight
payment processing as measured by dollar volume of transactions. The Company
entered this market through the acquisitions of B&L Consultants, Inc. in
February 1992, and CTI Logistics, Inc. in January 1994. The Company expects
continued growth in demand for its freight services as the trend of outsourcing
corporate administrative services continues.

Approximately 45% of the Company's freight payment processing transactions
are electronic, using electronic data interchange protocols, while the remainder
are paper-based. Customers' freight bills are sent directly to the Company by
both domestic and international freight carriers. The Company audits these bills
prior to payment by reviewing the invoice, accompanying bills of lading, and
other supporting documents for content and accuracy and entering selected data
from these documents into the Company's proprietary rate verification system.
The Company's audit staff uses proprietary software to identify billing errors.
The software is designed to compare the actual rates charged for shipping with
the established freight rates housed in the system database in order to identify
billing errors and reject them for further processing and correction. The
Company's automated systems are able to perform a high volume of such tasks
quickly and accurately, reducing processing costs by focusing resources
efficiently and taking advantage of economies of scale. In this manner, the
Company generates savings for its customers that could not otherwise be realized
if processed by customers internally. The Company is paid a service fee,
typically on a per transaction basis, for each transaction processed on behalf
of its customers. The reductions in freight costs achieved by the Company
typically exceed the transaction fees charged, making this outsourcing service
self-funding to the customer. Once freight bills are verified

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for accuracy and approved, and upon receipt of the necessary customer funds, the
Company makes payment on behalf of its customers, further streamlining the
processing function.

In addition to processing services, the Company offers customers a variety
of proprietary, PC-based software applications such as PC Pro and Shipmaster
that are sold independently or can be used in conjunction with the Company's
services. These products allow customers to access real-time information
relating to the status of shipments and freight bill payments, permitting
customers to enhance the quality of their in-house freight management systems.
This also permits the Company to tailor its outsourcing services to meet the
customer's requirements. The Company continues to develop new software products
to meet the needs of its customers.

Corporate Payables and Printing Services

The Company offers accounts payable payment processing services that
consist of accepting, reviewing and making payments on invoices issued to the
Company's customers. The Company offers a wide range of value-added outsourced
services based on capturing customers' accounts payable data, and matching and
verifying the accuracy of customers' purchase orders against vendors' invoices,
receiver documents and other supporting paperwork. The Company believes it is
one of the largest providers of accounts payable outsourcing in the United
States. The Company entered this market in 1989 through internal efforts and in
July 1991 through the acquisition of Consolidated Data-Tech, Inc.

Following guidelines established by the Company's customers, skilled
payment processors review documents for accuracy, verify discounts earned and
other arrangements established between customers and their vendors, enter
appropriate data and prepare accounts for payment. Once payment is approved
based on terms established by the customer, checks are printed and payments are
distributed. Because of the nature of the accounts payable process, many of the
Company's customers request payment processing activities to be conducted
through customer-owned systems accessed by the Company through data lines and
terminal emulation. The Company's advanced capabilities in this area permit
real-time updates to customers' general ledgers and open accounts payable files,
enhancing the timeliness and quality of information available to the customer.
Additionally, the Company provides vendor call center support to answer payment
status queries and to research questions about invoice processing. The Company's
expertise in processing accounts payable transactions permits customers to
re-engineer their procurement process and materials flow, avoid late payments
and associated penalties, verify the accurate crediting of vendor discounts,
eliminate duplicate payments and reduce internal overhead and printing costs.
The implementation of image processing by the Company provides customers access
to CD-ROM retrieval of documents in electronic form.

In addition to payables processing, the Company offers high-speed,
high-resolution printing services for payroll checks, account statements,
invoices, purchase orders, coupons and other customized paper-based output.

Imaging Solutions

The Company offers electronic imaging services that provide customers with
the ability to convert paper-based transactions into a more efficient electronic
format, thereby reducing overhead costs. The Company provides customized Imaging
Solutions to improve customers' cost controls and management systems by reducing
transaction cycle time, improving financial and business information and
enhancing employee productivity.

The Company offers, via Imaging Solutions, various data capture services
including: data warehousing for archival purposes; customer service support for
claims processing and order fulfillment; application and enrollment processing;
and credit database management. These services are currently offered to airlines
and financial institutions. For example, using software developed by a third
party, the Company currently provides services to airlines seeking to verify
airfare accuracy. Additionally, the Company has developed software internally to
service its airline industry customers. Tickets are scanned to create an
electronic image, data elements are captured at the Company's facilities in
Juarez, Mexico, and rates are

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then compared to established airline fares maintained in the airline industry's
database. Using the Company's account settlement and reporting skills, the
Company's Imaging Solutions specialists then generate customized revenue reports
for accounting purposes. As the Company develops advanced technology
applications for image processing, it expects opportunities for such
applications to become increasingly significant, both as products to offer its
customers and as a technology that can be exploited internally to the benefit of
the Company's overall operations. By accessing low-cost labor markets that
permit efficient use of imaging technology, the Company expects to capitalize on
future demand for Imaging Solutions. See "-- Business Strategy."

The Company is currently developing image-based products that will permit
customers' documents to be scanned and transmitted for data entry at an offshore
processing site. These products, expected to be introduced in the third quarter
of 1997, will enable the Company to provide customers with low-cost processing
solutions as well as image-based archival and retrieval services, creating
customer opportunities for dramatic efficiency improvements.

TRAVEL SERVICES

Through an exclusive long-term contract with the Airlines Reporting
Corporation ("ARC"), a corporation formed and owned by the airline industry, the
Company acts as processor and clearing house of all airline ticket payment
transactions generated by travel agents in the United States. The Company has
been the exclusive ticket processor for the ARC since 1987. The Company is also
the exclusive provider of similar processing services for airline tickets issued
to U.S. government agencies and the armed forces, as well as air cargo sales
made by independent cargo agents. In addition, the Company processes audit
coupons for tickets sold directly by several commercial airlines. The Company
processed 374.1 million Travel Services transactions in 1995 compared to 296.3
million transactions in 1993, representing a compounded annual growth rate of
12.4%. These Travel Services are provided through two facilities in the United
States and the Company's facilities in Juarez, Mexico. Travel Services
represented 15.4% of the Company's revenues in 1995.

In fulfilling its obligations pursuant to the ARC contract, the Company
captures travel agent transaction information electronically through the various
computerized reservation systems ("CRS") for the airline industry. Captured data
is stored and compared to sales reports (which must include copies of tickets
issued) received weekly from all U.S. travel agents to verify sales reporting
accuracy. In processing the transaction, the Company ensures that travel agent
commissions are calculated accurately and that proper remittance is made to the
airlines. The accuracy rate for all significant processing categories is 99.5%
or better. The Company's accuracy rate permits it to meet its responsibility for
ensuring accurate settlement of over $60 billion annually, representing
approximately 85% of the airline industry's cash flow.

The Company processes the payments distributed to the respective airlines
and, in some cases, to travel agents. In the settlement process for non-credit
card transactions, the Company debits each agent's account in an amount equal to
the purchase price of the tickets sold by such travel agent in non-credit card
transactions during the relevant period, less commissions owed to the travel
agent for both credit card and non-credit card transactions during the period.
Amounts debited are then credited to the accounts of the relevant airlines. For
credit card transactions, the card issuer is billed on behalf of the airline and
the card issuer is thereby notified to post the transaction to the cardholder's
account. Credit card transactions are then settled in accordance with the
procedures of the card sponsor. Through this process, the Company serves the
needs of the approximately 47,000 authorized travel agency locations throughout
the United States. The Company also provides similar payment processing services
for tickets sold directly by the airlines. In those cases, the movement of funds
for non-credit card transactions is not required since the funds already reside
with the airline. For credit card transactions, and other processing services
such as itinerary capture, the Company offers customized services based on the
requirements of each airline. Further, the Company's vast database of
information allows it to offer additional value added services, including form
processing, usage tracking and database management.

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The Company is compensated on a "cost plus" basis under its contract with
the ARC, which expires in December 2001. The Company expects that, due to cost
reductions, revenues received under this contract will decline as the ARC moves
to a paper-free reporting system, which implements a program designed to reduce
the labor cost required to process paper transactions. Pursuant to this
contract, the Company has also completed certain projects for which it has
earned revenue and profit bonuses in the past three years that will not be
available after 1996. The Company expects that the effect of the loss of these
bonuses and the reduction in labor costs will reduce net income associated with
the ARC contract by approximately $2.0 million in 1997 and that additional cost
reductions will reduce net income associated with the ARC contract by an
additional $500,000 in each subsequent year through the end of the current
contract term. See "Risk Factors -- Potential Consequences of Certain Contracts"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

The Company also has exclusive contracts to provide similar services and
settlement procedures for the processing of airline tickets issued for U.S.
government agencies and the armed forces, as well as air cargo sales made by
independent air cargo agents. As with passenger sales, the airlines provide a
"settlement plan" system to obtain data and funds from agency locations that
sell government and cargo transportation. The processing for government sales is
similar to the passenger ticket processing described above. In the case of cargo
sales, these transactions involve the processing of air waybills rather than
passenger tickets. Over time, the Company expects this product to transition
from paper reporting to electronic reporting but anticipates participating fully
in this transition with its customers.

Processing and settlement services in connection with government ticket and
air cargo sales are generally priced on the basis of accounts or transactions
processed. These services are provided pursuant to written contracts that will
expire by their terms over the next one to two years but which also contain
provisions that either permit the customer to renew the contract or that
automatically extend the term unless either party takes affirmative action to
terminate such contract.

An additional product the Company provides directly to leading airlines is
the processing of passenger flight data needed to reconcile the airlines'
financial accounting. As passengers present tickets for air travel, the airlines
must record the flight coupons as proof of their earned revenues. From its
facilities in Juarez, Mexico, the Company offers processing services that
capture the required data from flight coupons, which are collected by airlines
at the gate and forwarded in bulk to the Company. The Company also has contracts
with certain airlines for processing direct ticket sales. The revenues resulting
from these two products are also expected to decline in value over the next
several years as the result of "ticketless" air travel. The Company hopes to
offset this reduction with new customer volume by consolidating all residual
paper ticket processing for airlines.

New Products. In an attempt to minimize the impact of expected reductions
in the revenues generated by Travel Services, the Company intends to launch new
products. For example, the Company is currently launching a product for auto
rental companies, hotels and cruise lines that will allow them to consolidate
travel agent commission payments rather than distributing many
small-dollar-value payments individually. The Company believes that, as a leader
in providing transaction processing and related services, it can develop other
services which will be attractive to travel industry participants.

INTERNATIONAL OPERATIONS

In international markets, the Company's strategy is to follow major
customers overseas, providing them with transaction processing and customized
processing solutions. The Company currently provides services on a selective
basis to customers in Mexico and Canada. The Company will investigate strategic
partnerships in other international markets as appropriate opportunities arise.

As part of its strategy to enhance growth by reducing labor costs, in 1988
the Company established operations in Juarez, Mexico, located approximately ten
miles from the Company's office in El Paso, Texas. By utilizing advancements in
high-speed imaging technology to transmit manually-intensive paper-based
transactions, the Juarez facilities permit the Company to reduce operating costs
by accessing low-cost labor markets. All of the Company's Imaging Solutions
processing is currently

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<PAGE> 41

performed at Juarez, as well as a significant portion of its Travel Services and
Merchant Check Services processing.

To support these operations, the Company maintains redundant data and voice
transmission networks, including multiple private, direct-access microwave
links. The Company trains clerical workers in the use of its technologies and
systems and in other aspects of its operations. As part of its strategy to
continue to emphasize its low-cost operation, the Company intends to increase
the use of its operations in Juarez and also intends to seek other opportunities
to expand its presence in low-cost international labor markets. See "-- Business
Strategy."

SALES AND MARKETING

The Company markets its products and services through traditional marketing
techniques, sales personnel located throughout the United States and newly
evolving communications methods on the Internet. The Company's sales
representatives specialize in particular services offered by the Company,
relevant product technology and the requirements of customer markets. Each sales
representative is responsible for staying abreast of developments in these
areas. In order to enhance its sales and marketing efforts, the Company hires
sales representatives who have significant experience in the industries served
by the Company.

The Company's sales force is made up of 170 sales, marketing and customer
service professionals for Merchant Services, Corporate Services and Travel
Services. Sales representatives are informed about all the Company's services
and products in order to facilitate cross-selling of products and services. To
facilitate communications across its geographically dispersed organization, the
Company uses Goldmine(R), an online customer contact system providing access to
real-time information about customers and prospects.

Through its network of sales professionals, the Company identifies
potential users of its products and services and tailors its marketing programs
to those potential users. The Company participates in industry and trade
associations and pursues strategic alliances with niche participants in various
industries.

Merchant Services is increasing its use of ISOs as an alternative marketing
channel. ISOs are independent sales organizations that target local merchants,
which historically have not been served by the larger Merchant Services
providers. ISOs typically resell a third party's transaction processing services
on a non-exclusive basis. ISOs set fees independently, retaining the residual
fee after paying the third-party processor. The Company expects that ISO
partnering will be an increasingly significant component of its Merchant
Services marketing efforts. In this regard, the Company recently established ISO
relationships that will facilitate offering services to the hospitality and
gaming industries.

The Company's future marketing strategy is to develop a differentiated
brand identity for appropriate products. Through this strategy, the Company
intends to launch new products effectively and promote its services
aggressively.

With respect to its provision of products and services, the Company enters
into written contracts with most of its clients, generally having an initial
multi-year term and providing for frequent renewal thereafter. The notice
requirements for termination of these contracts vary.

RISK MANAGEMENT

As a result of the Company's exposure to potential liability for merchant
fraud, employee fraud, chargebacks, guaranteed checks and other losses created
by its Merchant Services business, the Company views its risk management and
fraud avoidance practices as integral to its operations and overall success.
Risk management and fraud avoidance occur initially at the account application
stage, when the merchant's account application is reviewed by the Company
against certain proprietary criteria to determine acceptance or denial. These
criteria include the credit history of the applicant, the industry in which the
applicant conducts business, the Company's experience with the applicant and
various

39
<PAGE> 42

other factors. In certain instances, guarantees or contractual covenants may be
required before an application is approved. From time to time, the Company
maintains cash deposits from certain customers as collateral for potential
contingent liabilities and payment obligations that are the responsibility of
such customers. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."

In its risk management and fraud avoidance practices, the Company leverages
its more than twenty-five years of experience in processing merchant and
corporate administrative transactions. Compiling data from public records,
industry sources and the more than three billion transactions it processes
annually, the Company captures database information about approved and declined
transactions, closed accounts, credit use history and other proprietary and
publicly available information. This database allows the Company to examine
proposed transactions for fraudulent practices before funds are transferred to
or on behalf of customers. If potentially fraudulent activity is identified, the
Company analyzes and reviews the suspect transactions to resolve potential
problems. Often, problems can be resolved before funds are ultimately
transferred.

If the Company believes an extensive review of a transaction or series of
transactions is required, the Company can specify that the batches containing
the identified transactions be withheld from further processing to allow
additional time to attempt to verify the authenticity of such transactions.
Consequently, the Company has the ability to intercept and review potentially
fraudulent transactions and stop payment or otherwise resolve them, as
appropriate prior to the time when financial liability for such transactions has
shifted to the Company.

The Company also employs fraud avoidance specialists with substantive
expertise in the Company's business. The Company believes that its fraud unit
has been successful in detecting and preventing internal and external potential
misconduct. In the past, to the best of the Company's knowledge, there have been
no material instances of fraudulent misconduct by employees. Despite the
Company's risk management and fraud avoidance capabilities, the Company is
unable to identify all fraudulent activity which may result in financial
exposure to the Company.

COMPETITION

The Company faces significant competition in most of its markets. The
following summarizes certain competitive factors in each of the markets served
by the Company.

Merchant Services. In the market for Merchant Card Services, the Company
competes against several other national service providers and banks that provide
these services to their merchant customers. The market for merchant card
processing is generally characterized by three tiers of merchants consisting of
national, regional, and numerous local merchants. The Company and one other
transaction processor have primarily focused on servicing national merchants,
while many smaller transaction processors, such as ISOs and regional banks, have
offered a more limited range of services to regional and local businesses.

Uniform interchange requirements and VISA(R) and MasterCard(R) compliance
rules limit significant pricing variances among processors. Price remains,
however, a significant competitive factor among providers, creating the need for
continuous investments in technology to satisfy customer demands and reduce
operating costs. Many small scale providers cannot reduce costs sufficiently and
are leaving the transaction processing business. As a result, the transaction
processing industry has undergone rapid consolidation over the last several
years. According to published industry sources, the three largest credit and
debit card transaction processors handled 49.5% of total credit and debit card
sales volume for calendar year 1995 (when two of the three largest payment
processors merged). The Company is ranked as the second largest payment
processor and believes it processed 15.3% of total sales volume in calendar year
1995 (the Nilson Report -- April 1996). Additional competitive factors include
customer service, product offerings and features, processing speed and systems
reliability, which the Company believes are critical considerations for
merchants when selecting a transaction processor. The Company

40
<PAGE> 43

also faces competition from VISA(R) and MasterCard(R), who have recently entered
into joint ventures to provide card transaction processing services.

In the market for Merchant Check Services, the Company's business is also
highly competitive. According to published industry sources, the three largest
check acceptance processors handled 53.5% of the total check sales volume
authorized by third-party check acceptance providers for calendar year 1995.
During this period, approximately one-half of those merchants who used an
acceptance system subscribed to the services of a third-party provider, while
the other half generally used an internal system. The Company is ranked as the
third largest provider and believes it processed 11.3% of the total check sales
authorized by third-party processors in 1995. The two largest competitors of the
Company processed 30.4% and 11.8% of the total check sales authorized by
third-party processors, respectively (the Nilson Report -- April 1996). The
Company competes principally with these two other national services providers
primarily on the basis of price, product offerings and customer service.

Corporate Services. In the market for Corporate Services, the Company
competes against a number of firms in specialized market areas, software
integrators offering operations support and logistics management firms. The
Company also faces competition from current and prospective customers, who
evaluate the Company's capabilities against the merits of performing services
internally. The cost advantages associated with large-scale processing, and the
ability of high-volume processors to invest in new technology that delivers
value-added services at lower per unit costs, have enabled large-scale providers
to capture most of the transaction processing and outsourcing requirements of
large corporations.

Among the several markets of outsourced administrative functions, the
market for the Company's remittance processing services is highly competitive.
The principal basis of competition in this market is reliability, quality of
services provided and price.

In the market for payables processing and freight payments processing, the
Company competes with other specialized payables and freight service processors.
Competition is based primarily on price, quality of processing, data capture
features for accessing management information, and other product features. With
respect to freight payment processing, the Company competes against numerous
independent, mid-sized payment processors who generally lack the Company's scale
of resources. Competitive factors include price, database quality, and customer
service. The Company believes that it is an industry leader in each of these
areas and that it is one of the largest providers of payables processing and
freight payment services in the United States.

In the market for Imaging Solutions, the Company competes on a
product-by-product basis against large system integration companies that develop
image processing products for corporate outsourcing markets. Many of these
competitors possess technical and financial resources that are equivalent or
superior to those of the Company.

Travel Services. The Company is currently the exclusive processor of
airline tickets sold by travel agents throughout the United States, for the
federal government and military agencies, and air cargo sales made by U.S. air
cargo agents. These services are provided pursuant to contracts which have terms
of varying durations. See "-- Products and Services -- Travel Services." The
Company has been successful in maintaining its exclusive provider relationships
for over ten years, and the Company believes there are only a few other
companies that can compete for this high-volume processing business.

REGULATION

As a result of National City's ownership interest in the Company and until
National City no longer has a controlling interest in the Company, the Company
is subject to certain Banking Laws. For example, the Company is subject to the
supervision and examination of the Board of Governors of the Federal Reserve
System ("FRB"), one of the principal regulatory bodies having jurisdiction over
National City. The FRB reviews acquisitions and new businesses to be engaged in
by the Company, and the FRB's written approval is required in order for the
Company to consummate an acquisition. Pursuant to the Bank

41
<PAGE> 44

Holding Act, the Company shall not engage in any activity, or own, control, or
have the power to vote more than 5% of any class of voting security of any
company engaged in any activity (i) for which the Bank Holding Act requires a
bank holding company to receive prior approval from the FRB without such
approval having been obtained, or (ii) that would cause the Company or any
affiliate of the Company to violate any regulation, administrative order, or
court order made pursuant to the Bank Holding Act. If at any time it is
determined that an activity conducted by the Company or any subsidiary does not
comply with the requirements of the Bank Holding Act, the Company is required to
take all reasonable steps to cease such activity, or to divest any ownership or
control position. If National City is unable to obtain the necessary consent or
approval necessary for any business activity substantially different from those
business activities the Company currently conducts, then the Company may not
engage in any of those new business activities or proceed with the contemplated
acquisition of a business that would engage in such new activities. The Company
does not believe, however, that either the Banking Laws or the Bank Holding Act
will impede significantly the manner in which the Company intends to conduct its
business or its product and service offerings, although there can be no
assurance that the Banking Laws or Bank Holding Act will not have such an
effect.

The Company is engaged in check guarantee and collection services. As such,
the Company is subject to certain consumer collection laws, orders and
regulations (collectively, "Consumer Laws") and the laws of the various states
in which such activities are conducted, which, among other things: (i) require
the Company to obtain and maintain certain licenses and qualifications; (ii)
limit the fees and other charges the Company is allowed to charge; and (iii)
require specified disclosures. The Company is also subject to various other
federal, state, local and foreign laws, orders and regulations applicable to the
Company's operations in the jurisdictions where it conducts business. Where
applicable, regulators and other persons are authorized to seek remedies against
entities such as the Company for violations of such laws, including the Consumer
Laws.

Through NCBK, which serves as a member bank for the Company, the Company is
registered with VISA(R) and MasterCard(R) as a certified processor and member
service provider. As a result, the Company must adhere to the standards of the
VISA(R) and MasterCard(R) credit card associations or else risk suspension or
termination of its designation and/or status. There can be no assurance that (i)
VISA(R) and MasterCard(R) will maintain the Company's registrations; (ii) the
current VISA(R) and MasterCard(R) rules allowing the Company and other nonbank
transaction processors to market and provide transaction processing services
will remain in effect; or (iii) VISA(R) and MasterCard(R) will continue to
interpret their rules as they have done in the past, which may have an impact on
the Company's business operations.

EMPLOYEES

As of March 31, 1996, the Company had 5,564 full-time employees. Of these,
170 employees were engaged in marketing, sales and customer service, 5,006 were
engaged in operations and systems development and 388 were corporate and general
administrative employees. There were 1,419 employees based in Louisville,
Kentucky, the location of the Company's principal executive offices and one of
its main operations centers. The Company has two other principal operations
centers, located in Phoenix, Arizona, and Juarez, Mexico, at which 441 employees
and 2,438 employees were based, respectively. Remaining employees, which include
marketing and sales personnel, were based at various offices and processing
centers throughout the United States. The Company's employees are not
represented by a collective bargaining agreement, and the Company has not
experienced any work stoppages. The Company views current employee relations as
satisfactory.

PROPERTIES

The Company leases its principal executive offices and processing facility
in Louisville, Kentucky, consisting of approximately 178,000 square feet, from
NCBK. See "Certain Transactions -- Lease Agreement." The Company's lease for the
Louisville facility is scheduled to expire on February 28, 2019. The Company
also leases its operations center in Phoenix, Arizona and certain of its
facilities in Juarez, Mexico. The Phoenix facility consists of approximately
50,000 square feet, the lease on which expires on July 31, 1997. The Company's
Juarez operations utilized 160,000 square feet in the aggregate, divided

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<PAGE> 45

among three separate parcels as follows: 50,000 square feet is owned by the
Company; 65,000 square feet is subject to a lease that will expire on February
28, 1998; and 45,000 square feet is subject to a lease that will expire on March
31, 2001. The Company's other processing facilities have varying lease
expiration terms and range in size from 3,900 square feet to 41,300 square feet
and are located throughout the United States and Canada. The Company's 26
marketing and sales offices have varying lease expiration terms and range in
size from 100 square feet to 9,000 square feet and are located throughout the
United States. All properties leased by the Company are in good repair and
suitable condition for the purposes for which they are used.

LEGAL MATTERS

Various legal actions arising in the ordinary course of business are
pending against the Company. None of the litigation pending against the Company,
individually or collectively, is expected to have a material adverse effect on
the Company's financial condition, results of operations or liquidity.

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<PAGE> 46

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth certain information regarding the Company's
directors and executive officers.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------- ---- ------------------------------------------------------------
<S> <C> <C>
Tony G. Holcombe............ 40 President, Chief Executive Officer and Director
Richard A. Alston........... 40 Executive Vice President, Finance and Corporate Development
Robert E. Johnson........... 50 Executive Vice President, Travel Services
Kurt S. Knipp............... 39 Executive Vice President, Merchant Card Services
Thomas A. Wimsett........... 32 Executive Vice President, Merchant Check Services
David R. Zook............... 45 Executive Vice President, Corporate Services
William R. Robertson........ 55 Chairman of the Board of Directors
James R. Bell III........... 39 Director
Robert G. Siefers........... 50 Director
Delroy R. Hayunga........... 52 Director
</TABLE>

Mr. Holcombe has served NPC as Chief Executive Officer and a Director since
1995, as President since 1994 and as Executive Vice President, Corporate
Services from 1991 through 1994. Prior to joining the Company, Mr. Holcombe
served for two years as a management consultant with Ernst & Young LLP, a
national accounting firm, and for six years as a Vice President with C&S Banks.

Mr. Alston has served NPC as Executive Vice President, Finance and
Corporate Development since 1994. Prior to joining NPC, Mr. Alston served for
over three years as President of Alston Associates, a strategic consulting firm,
and for over five years as Senior Vice President of Sealy Inc., a mattress
manufacturer. Mr. Alston also serves as a director of Opcode Systems, Inc.

Mr. Johnson has served NPC as Executive Vice President, Travel Services
since 1987. Prior to joining NPC, Mr. Johnson served in various capacities for
19 years with Eastern Airlines. Mr. Johnson was also a member of the Board of
Directors for the Agent Reporting Plan in Puerto Rico.

Mr. Knipp has served NPC as Executive Vice President, Merchant Card
Services since 1995. Prior to joining NPC, Mr. Knipp served with National
Bankcard Corporation, a credit card processor, as Senior Vice President, Finance
from 1994 through 1995 and as Vice President, Finance from 1990 through 1994.

Mr. Wimsett has served NPC as Executive Vice President, Merchant Check
Services since 1995. Mr. Wimsett has served in various management positions with
NPC since 1985 including Senior Vice President, Merchant Check Services; Vice
President, Remittance Processing and as Operations Manager for the Juarez and
Louisville facilities.

Mr. Zook has served NPC as Executive Vice President, Corporate Services
since 1995 and in various other management positions since 1988. His most recent
roles include Executive Vice President, Merchant Check Services and Executive
Vice President, Administration. Prior to joining NPC, Mr. Zook was a senior
manager with First Bank Systems.

Mr. Robertson has served NPC as a Director since 1988 and Chairman of the
Board since 1996. Mr. Robertson has served National City as President and a
director since 1995 and as Deputy Chairman and director from 1987 through 1995.
Mr. Robertson also serves as a director of Capitol American Financial
Corporation.

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<PAGE> 47

Mr. Bell has served NPC as a Director since 1996. Mr. Bell has served NCBK
as a director and Chairman of the Board since 1995. Mr. Bell also served as
Senior Vice President for National City Bank, an affiliate of National City,
from 1989 through 1994.

Mr. Siefers has served as a Director of NPC since 1996. Mr. Siefers has
served as Executive Vice President and Chief Financial Officer of National City
since 1991. Mr. Siefers currently serves as a director of Health Care &
Retirement Corporation, an integrated long-term health care provider.

Mr. Hayunga has been a Director of NPC since 1985. Mr. Hayunga served as
Chief Executive Officer of NPC from 1985 to 1995. Mr. Hayunga currently serves
as President of SVS, a wholly owned subsidiary of National City.

The Board of Directors intends to appoint three independent directors as
soon as practicable following the Offering. The size of the Board of Directors
is fixed at not less than five nor more than nine directors, divided into two or
three classes depending on the size of the board, with each class serving for
staggered terms of two years (if the board is divided into two classes) or three
years (if the board is divided into three classes). Each class of directors will
hold office until the annual meeting of shareholders in the year their
respective term ends, at which time their successors are elected. The Board of
Directors will establish a standing Audit Committee and Compensation Committee.
The functions of the Audit Committee will include recommending to the Board of
Directors the retention of independent auditors, reviewing the scope of the
annual audit undertaken by the Company's independent auditors and the progress
and results of their work, and reviewing the financial statements of the
Company, its internal accounting and auditing procedures, as well as its
corporate program to ensure compliance with all applicable laws. The functions
of the Compensation Committee will include reviewing and approving executive
compensation policies and practices, reviewing salaries and bonuses for certain
officers of the Company, administering the Company's 1996 Stock Option Plan,
Nonemployee Directors Stock Option Plan and considering such other matters as
may from time to time be referred by the Board of Directors to the Compensation
Committee.

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<PAGE> 48

EXECUTIVE COMPENSATION

COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth certain summary information concerning
compensation earned by the Company's Chief Executive Officer and the five other
most highly compensated executive officers for the year ended December 31, 1995
as well as its former Chief Executive Officer.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------------------
AWARDS
ANNUAL COMPENSATION ---------------------------
------------------------------------------- SECURITIES
OTHER RESTRICTED UNDERLYING ALL
NAME AND PRINCIPAL ANNUAL STOCK OPTIONS/ OTHER
POSITION YEAR SALARY BONUS COMP AWARD(S) SARS COMP
- ------------------------------- ---- --------- -------- ------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Tony G. Holcombe 1995 $ 225,000 $138,600 10,000 $ 23,277(1)(2)
President and
Chief Executive Officer
Richard A. Alston 1995 142,034 72,800 5,000 64,852(3)
Executive Vice President,
Finance and Corporate
Development
Robert E. Johnson 1995 157,500 70,200 4,000 30,938(1)(2)
Executive Vice President,
Travel Services
Kurt S. Knipp 1995 149,452 90,800 5,000 131,587(3)
Executive Vice President,
Merchant Card Services
Thomas A. Wimsett 1995 103,833 58,000 3,500 17,413(1)(4)
Executive Vice President,
Merchant Check Services
David R. Zook 1995 157,500 190,000(5) 7,000 69,665(1)(2)(6)
Executive Vice President,
Corporate Services
Delroy R. Hayunga 1995 245,417 220,000 $4,800 (7) 10,500 49,216(1)(2)(8)
Former Chief Executive Officer
</TABLE>

- ---------------

(1) All Other Compensation includes the Savings and Investment Plan and
Executive Savings Plan matching and profit sharing components. For the year
1995 each of the named executive officers were credited with the following
matching and profit sharing amounts: Tony G. Holcombe, $16,873; Robert E.
Johnson, $12,740; Thomas A. Wimsett, $7,413; David R. Zook, $12,749; and
Delroy R. Hayunga, $20,438.

(2) Includes premium for participation in the Split Dollar Life Program paid by
the Company on behalf of the following individuals: Tony G. Holcombe,
$6,404; Robert E. Johnson, $18,198; David R. Zook, $6,915; and Delroy R.
Hayunga, $21,023.

(3) As an inducement for certain individuals to commence employment, the Company
paid amounts associated with one-time relocation expenses and signing
bonuses as follows: Richard A. Alston, $64,852; and Kurt S. Knipp, $131,587.

(4) Includes $10,000 signing bonus paid by the Company pursuant to an employment
agreement.

(5) Includes retention bonus payment by the Company of $130,000 pursuant to a
prior agreement.

(6) Includes $50,000 payment by the Company as a signing bonus.

(7) Represents amount allocated for auto allowance.

(8) Includes $2,203 for a deferred compensation tax distribution and $5,552 as
payment with respect to financial services fees.

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<PAGE> 49

CERTAIN AGREEMENTS WITH EMPLOYEES

Each of Tony G. Holcombe, Richard A. Alston, Robert E. Johnson, Kurt S.
Knipp, Thomas A. Wimsett and David R. Zook (the "Executive Officers") have
employment agreements (the "Employment Agreements") with NPC. Each of the
Employment Agreements provides for a minimum annual base salary that does not
differ materially from the amounts shown as salary on the Summary Compensation
Table. The agreements with Messrs. Holcombe, Alston, Johnson and Knipp provide
generally that if such Executive Officer is terminated for any reason other than
his violation of the contract, his salary (and, in the case of Mr. Holcombe, his
bonus) will be continued for two years after his termination. The Employment
Agreements with Mr. Wimsett and Mr. Zook contain similar provisions which
provide, in the case of Mr. Wimsett, for his salary to be continued for one
year, and in the case of Mr. Zook, for his salary to be continued through the
end of his non-compete period referred to below. Certain of the Employment
Agreements provide for fixed bonuses and/or formula bonuses that vary depending
on the income achieved by the businesses managed by such Executive Officers. The
Employment Agreements also generally provide for the continuation of certain
employee benefits, including in certain cases the ability to exercise stock
options, for two years.

Each of the Executive Officers has agreed pursuant to the Employment
Agreements not to compete with the Company in the United States (and, with
respect to Mr. Holcombe, in Mexico) by engaging in any capacity in any business
that is competitive with, in the case of Messrs. Holcombe and Alston, any
business of NPC, and in the case of the other Executive Officers, the business
of the Company for which such officer bears primary managerial responsibility.
These non-competition restrictions remain in effect for the period in which such
Executive Officer is entitled to salary following termination as described
generally above, except in the case of Mr. Zook, where the restriction continues
until the earlier of March 1, 1998 and any date on which compensation is not
paid when due or as described in Mr. Zook's employment agreement.

The Company has also entered into separate severance agreements (the
"Severance Agreements") with each of the Executive Officers and certain other
key employees, which are designed to ensure continuity of management in the
event of a change in control ("Change in Control"). The Severance Agreements
provide that following a Change in Control such executives will be entitled to
severance compensation upon termination of employment during the period
commencing with the occurrence of the Change in Control and continuing until the
earliest of (i) the third anniversary of the occurrence of the Change in
Control, (ii) death, or (iii) attainment of age sixty-five and upon the
occurrence of one or more certain additional events. The Severance Agreements
also provide fifteen executives the right to terminate their employment with the
Company for any reason during the thirty-day period immediately following the
first anniversary of the first occurrence of a Change in Control with the right
to receive severance compensation.

The severance compensation will be a lump sum payment in an amount equal to
three times the sum (for Executive Officers) and two times the sum (for other
executives) of (i) base pay at the highest rate in effect for any period prior
to the termination date plus (ii) incentive pay in an amount equal to not less
than the highest aggregate annual bonus, incentive or other payments of cash
compensation made or to be made in regard to services rendered in any calendar
year during the three calendar years immediately preceding the year in which the
Change in Control occurs less the sum of (iii) any and all payments received
from the Company, National City, a successor or their affiliates following a
Change in Control plus (iv) any future payments to be made in accordance with
any employment agreements or other contracts between the Company and such other
entities (specifically excluding payments from any deferred compensation plan).
For three years (for Executive Officers) and two years (for other executives)
following termination, the Company will arrange to provide the executives with
welfare benefits substantially similar to those they were receiving or were
entitled to receive immediately prior to the termination date, with such
three-year period qualifying as service with the Company for the purpose of
determining service credits and benefits under the Company's various retirement
benefit plans. Each executive may waive one year of severance pay in exchange
for being released from the non-competition restrictions contained in their
respective Employment Agreements.

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<PAGE> 50

The Company has agreed to pay any and all legal fees incurred by the
executives in connection with the interpretation, enforcement, or defense of his
rights under the Severance Agreements. The terms of the Severance Agreements run
until the later of (i) the close of business on May 24, 1999 or (ii) the
expiration of the three-year period of severance benefit coverage. Beginning
next year, the Severance Agreements will automatically be renewed for successive
one year terms unless the Company or the executive gives notice of intent to
terminate before such renewal.

Under the Severance Agreements, a Change in Control occurs upon either of
the following events: (i) the Company is merged, consolidated or reorganized
into or with another person other than National City, a successor of National
City or an affiliate of National City, and as a result of such merger,
consolidation or reorganization, less than fifty percent of the combined voting
power of the then outstanding securities of such resulting corporation is held
by National City or (ii) the Company sells or otherwise transfers all or
substantially all of its assets to another corporation, or the Company causes or
permits the sale or transfer of all or substantially all of the assets of any
subsidiary that has assets equal to or greater than eighty percent of the total
assets of the Company, as reported on a consolidated basis, and as a result of
such sale or transfer less than fifty percent of the combined voting power of
the then outstanding securities of such corporation is held by National City.

COMPENSATION PURSUANT TO EMPLOYEE BENEFIT PLANS

Described below are certain employee benefit plans of the Company and
National City pursuant to which cash or non-cash compensation was paid or
distributed to the Company's executive officers during fiscal year 1995, or is
proposed to be paid or distributed to its executive officers in the future.

The following table provides information on option grants of National City
common stock ("National City Common Stock") during fiscal year 1995 to the named
executives.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS/SARS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION
UNDERLYING NATIONAL CITY EXERCISE OR FOR OPTION TERM (1)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED(2) FISCAL YEAR(3) ($/SH) DATE 5% 10%
- ------------------------- ------------ -------------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Tony G. Holcombe......... 10,000 .50% $29.875 6/14/05 $187,882 $476,131
Richard A. Alston........ 5,000 .25 29.875 6/14/05 93,941 238,065
Robert E. Johnson........ 4,000 .20 29.875 6/14/05 75,153 190,452
Kurt S. Knipp............ 5,000 .25 29.875 6/14/05 93,941 238,065
Thomas A. Wimsett........ 3,500 .18 29.875 6/14/05 65,759 166,646
David R. Zook............ 7,000 .35 29.875 6/14/05 131,518 333,291
Delroy R. Hayunga........ 10,500 .53 29.875 6/14/05 197,276 499,938
</TABLE>

- ---------------

(1) The amounts under these columns are the result of calculations at the 5% and
10% rates dictated by the Commission when the "Potential Realizable Value"
alternative is used and are not intended to be a forecast of the price of
National City Common Stock.

(2) One half of each option grant becomes exercisable one year after the date of
the grant and the remainder becomes exercisable on the second anniversary of
the grant. For incentive stock options, a further restriction is placed on
the exercise of options such that the maximum number of shares of National
City Common Stock which become initially available for purchase under all
post-1986 incentive stock option grants from National City in any calendar
year shall be limited to that number of shares the aggregate exercise price
of which does not exceed $100,000.

(3) National City granted options representing 1,993,050 shares to employees
during 1995.

48
<PAGE> 51

The following table sets forth the National City stock options exercised by
each of the named executives during fiscal year 1995 and the December 31, 1995
value of all unexercised options for National City Common Stock held by the
Executive Officers.

AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT 12/31/95 AT 12/31/95(1)
SHARES ------------- ---------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- ------------------------------------ ----------- ----------- ------------- ---------------
<S> <C> <C> <C> <C>
Tony G. Holcombe.................... -- -- 15,299/12,501 $163,407/49,070
Richard A. Alston................... -- -- 0/5,000 0/16,250
Robert E. Johnson................... 13,430 $ 177,647 20,949/6,151 270,309/27,251
Kurt S. Knipp....................... -- -- 0/5,000 0/16,250
Thomas A. Wimsett................... -- -- 1,450/4,950 9,606/20,981
David R. Zook....................... -- -- 7,899/9,501 65,686/39,319
Delroy R. Hayunga................... 45,312 482,874 21,573/16,501 204,462/73,882
</TABLE>

- ---------------

(1) The ultimate realization of profit on the sale of such options on National
City Common Stock is dependent upon the market price of such stock at the
time of the sale. National City Common Stock had a closing price on December
31, 1995 (the end of the fiscal year) on the New York Stock Exchange of
$33.125. The numbers shown reflect the value of unexercised options
accumulated over a ten-year period based on the 1995 year-end closing price.

The following table provides information on the awards to Long-Term
Incentive Compensation Plan ("LTP") participants during fiscal year 1995.

LONG-TERM INCENTIVE PLANS -- AWARDS
IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
PERFORMANCE OR
NUMBER OF OTHER PERIOD ESTIMATED FUTURE PAYOUTS UNDER
SHARES, UNITS UNTIL NON-STOCK PRICE PLANS(3)
OR OTHER MATURATION OR -----------------------------------------
NAME RIGHTS(1) PAYOUT(2) THRESHOLD TARGET MAXIMUM
- ------------------------------ -------------- -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Tony G. Holcombe.............. -- 12/31/97 -- $67,500 $ 135,000
Richard A. Alston............. -- 12/31/97 -- 28,407 56,814
Robert E. Johnson............. -- 12/31/97 -- 31,500 63,000
Kurt S. Knipp................. -- 12/31/97 -- 29,890 59,781
Thomas A. Wimsett............. -- 12/31/97 -- 20,767 41,533
David R. Zook................. -- 12/31/97 -- 31,500 63,000
</TABLE>

- ---------------

(1) The Company's LTP currently covers Executive Officers only. The LTP provides
for cash awards based on a percentage of the individual's base pay. No
shares or other rights are granted.

(2) Payouts under the LTP are based upon the Company's three year compound net
income growth. Rolling three year performance cycles begin on January 1,
1995. Payouts occur at the end of the cycle.

(3) Payouts of "Target" and "Maximum" awards are made in the event the Company
attains 10% and 15% compound annual growth rates, respectively. Executive
Officers other than the President receive 20% and 40% of base salary for
Target and Maximum awards, respectively. The President receives 30% and 60%
of base salary for Target and Maximum awards, respectively.

49
<PAGE> 52

SHORT-TERM INCENTIVE COMPENSATION PLAN

Under the Company's Short-Term Incentive Compensation Plan ("STP"), all
officers of the Company selected by the administrative committee of the STP are
eligible to receive incentive cash bonus awards generally based on a combination
of individual, department and Company performance standards. The goals of the
plan are to (i) reward and encourage individual accomplishment, (ii) encourage
eligible employees to achieve broad corporate goals, and (iii) focus senior
management on objectives that improve the intrinsic value of the Company.

In order to determine the amount of bonus payments, a formula has been
developed under the STP that establishes performance standards required to earn
"minimum", "target", and "maximum" bonus payments which are expressed as a
percentage of base salary. The administrative committee has discretion in
establishing key financial goals and levels of performance. In the past fiscal
year, the administrative committee determined that net income must equal the
amount established in the Company's annual budget in order to achieve a
"minimum" bonus. Net income in the past fiscal year must exceed the annual
budget by 15% during a year in order to achieve a "target" bonus and must exceed
the annual budget by 20% during a year in order to achieve a "maximum" bonus.

The maximum bonus level attainable under the STP varies by salary grade.
The maximum percentage of base salary normally payable under the STP to the
Chief Executive Officer, Executive Vice Presidents, Senior Vice Presidents, and
Vice Presidents is 70%, 55%, 40% and 20% of base salary, respectively. Bonus
payments are made annually each March for performance by the individual during
the preceding year. At the administrative committee's discretion, each
participant may elect to defer all or a portion of the bonus payment. In the
event of a change in control, each participant will be paid the maximum benefit
the participant is entitled to receive under the STP.

1996 STOCK OPTION PLAN

General. The Board of Directors adopted the 1996 Stock Option Plan (the
"Option Plan") as of June 5, 1996, and National City as sole shareholder
approved the Option Plan on the same day. The purpose of the Option Plan is to
enable the Company to attract, compensate and retain officers and other key
employees and provide them with appropriate employment incentives and rewards
for superior performance by encouraging capital accumulation and stock
ownership.

The Option Plan authorizes the granting of options to purchase shares of
Common Stock (the "Option Rights") and is administered by the Board of Directors
who may from time to time delegate all or any part of its authority under the
Option Plan to a committee of not less than three directors appointed by the
Board of Directors. To the extent necessary to comply with Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), certain matters relating
to the award of Option Rights have been delegated to the Compensation and
Organization Committee of National City.

In furtherance of the purpose of the Option Plan, it is intended that
concurrently with the Offering the Board of Directors will grant Option Rights
with respect to an aggregate of 2,120,000 shares of Common Stock to a group of
key employees including Executive Officers (the "Initial Awards").

The Option Plan is filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. A general description of the Option Plan and
the Initial Awards is set forth below. The following description of the Option
Plan is qualified in its entirety by reference to the full text of the Option
Plan.

Shares Available. Subject to adjustment as described below under
"Adjustments," the aggregate number of shares of Common Stock that may be issued
or transferred and covered by outstanding awards granted under the Option Plan
will not exceed 4,000,000 shares, which may be shares of original issuance or
treasury shares or a combination thereof. In addition, the Option Plan provides
that the

50
<PAGE> 53

number of shares of Common Stock that may be sold under the Option Plan will be
increased by the number of shares of Common Stock that are delivered to the
Company in connection with the exercise of a stock option and shares delivered
or relinquished in a payment of federal, state and local income tax withholding
liabilities upon exercise of a stock option.

Eligibility. Upon adoption of the Option Plan, grants of Option Rights may
be made to officers (including officers who are members of the Board of
Directors) and other key employees of the Company or of any of its subsidiaries.
Appreciation Rights (as defined below) may be granted to any present or future
holder of outstanding Option Rights.

Terms of Option Grants. The Option Plan contemplates that Option Rights
may be granted by the Board of Directors with respect to shares of Common Stock,
in accordance with the provisions of the Option Plan, which include:

(a) Each grant must specify the number of shares of Common Stock to
which it pertains.

(b) Each grant shall be at an option price which is not less than the
market price of Common Stock on the date of grant, or prior to or within
ten days after the commencement of any trading, the fair market value per
share of the Common Stock as determined by the Board of Directors in its
discretion.

(c) Successive grants may be made to the same executive whether or not
any Option Rights previously granted to such participant remain
unexercised. Pursuant to the Option Plan no participant may be granted more
than 400,000 Option Rights, subject to adjustment, during the life of the
Option Plan. Nothing in the Option Plan would require that earlier options
be exercised or expire before later options are exercised.

(d) Option Rights granted under the Option Plan may be stock options
intended to qualify under particular provisions of the Code or stock
options not intended to be so qualified or a combination of the foregoing.

(e) No Option Rights may be exercised later than 10 years from the
date of grant.

Agreements evidencing Option Rights may contain such other terms and
provisions, consistent with the Option Plan, as the Board of Directors may
approve. The Company anticipates that grants of Option Rights normally will
specify a period of service before they will become exercisable. Shares covered
by Option Rights which are terminated for any reason or expire unexercised may
be made the subject of new Option Rights.

Upon exercise of an Option Right, the option price will be payable (i) in
cash, (ii) by the transfer to the Company of previously owned shares of Common
Stock with a value equal to the total option price, (iii) at the discretion of
the Board of Directors, from the proceeds of a sale through a broker on the date
of exercise of some or all of the shares of Common Stock to which the exercise
relates, or (iv) by any combination of such methods of payment.

No Option Rights intended to be "incentive stock options" under the Code
will be granted which would allow the aggregate fair market value (at date of
grant) of all incentive stock options that may be exercised for the first time
during any calendar year to exceed $100,000.

Appreciation Rights. The Board of Directors is authorized to issue
appreciation rights ("Appreciation Rights") in respect of up to 4,000,000 shares
in order to provide optionees an alternative means of realizing Option Rights
benefits. The holder of an Appreciation Right may, in lieu of exercising all or
any part of his Option Rights, receive from the Company an amount in cash or
shares equal to 100%, or such lesser percentage as the Board of Directors may
determine, of the spread between the option price and the current market value
of the shares subject to the Option Rights. Exercise of an Appreciation Right
will result in cancellation of the related Option Right, and the exercise of the
Option Right will result in the

51
<PAGE> 54

cancellation of the related Appreciation Right. The Plan does not provide for
the granting of Additional Options (as defined below) on Appreciation Rights.

Additional Options. The Board of Directors may, at or after the date of
grant with respect to any outstanding option, grant additional options
("Additional Options") and may establish the terms and conditions of such
Additional Options. Pursuant to an Additional Option, the option holder would be
granted a new option at the then prevailing market price when the payment of the
exercise price of the option to which such Additional Option relates is made by
using shares of Common Stock owned by the option holder and/or when shares of
Common Stock are tendered or relinquished as payment of the amount to be
withheld under federal, state and local income tax laws in connection with the
exercise of the option to which such Additional Option relates. The new option
granted upon such exercise would be an option to purchase the number of shares
not exceeding the sum of (i) the number of shares of Common Stock tendered as
payment upon the exercise of the option to which such "Additional Option" is
related and (ii) the number of shares of Common Stock tendered or relinquished
as payment of the amount to be withheld under income tax laws (at a rate not to
exceed the participant's marginal tax rate) in connection with the exercise of
the option to which such Additional Option relates. Additional Options may be
granted with respect to options previously granted under the Option Plan or any
other stock option plan of the Company or any of its subsidiaries now or
hereafter in effect, or pursuant to any stock option plan of any corporation
which is merged into the Company and where the Company has assumed the
obligations of such corporation under such option plan. The Option Plan provides
that the Board of Directors has the discretion as to setting terms and
conditions of the Additional Options subject to the following provisions: (1)
the Additional Option exercise price shall be the closing price, per share, of
the shares of Common Stock, on the New York Stock Exchange on the date the
employee delivers shares of Common Stock to exercise the Option that has the
Additional Option feature and/or delivers or relinquishes shares of Common Stock
in payment of income tax withholding on the exercise of an Option that has the
Additional Option feature; (2) the Additional Option shall not be exercised
within six months after it is granted and (3) the Additional Option shall have
the same termination provisions as the underlying option to which such
Additional Option relates.

Initial Awards. The Initial Awards will be granted at a price equal to the
price set forth on the cover page of the Prospectus (the "IPO Price"). The
Initial Awards will be nonqualified Option Rights and will become exercisable to
the extent of one-third of the shares covered thereby on each of the first
through the third anniversaries of the date of grant, in each case for so long
as the optionee remains in the continuous employ of the Company or one of its
subsidiaries, provided that the Option Rights will immediately become fully
exercisable (i) if the option holder dies, (ii) if the option holder voluntarily
terminates his employment (a) at or after age 62 with at least 20 years of
continuous service with the Company or any of its affiliates or (b) at or after
age 65 with at least 5 years of continuous service with the Company or any of
its affiliates ("Retirement") or (iii) upon the occurrence of a change in
control of the Company.

The Initial Awards will terminate automatically and without further notice
on the earliest of the following dates: (i) the date the option holder ceases to
be employed by the Company or one of its subsidiaries for any reason other than
death, permanent disability, Retirement or a change in control, (ii) 90 days
after the option holder ceases to be employed by the Company or one of its
subsidiaries by reason of either Retirement or under circumstances determined by
the Board of Directors to be for the convenience of the Company, (iii) one year
after the option holder dies or becomes permanently disabled either while he is
employed by the Company or within such 90 day period, or (iv) 10 years from the
date of grant. In the event that the option holder commits an act that the Board
of Directors determines to have been intentionally committed and materially
inimical to the interests of the Company, his or her Initial Award, as the case
may be, will terminate immediately at the time of that determination
notwithstanding any other provision of the agreement evidencing such Option
Rights.

Transferability. No Option Right or Appreciation Right will be
transferable by a participant except by will or the laws of descent and
distribution. Option Rights may not be exercised during a participant's

52
<PAGE> 55

lifetime except by the participant or, in the event of his incapacity, by his
guardian or legal representative acting in a fiduciary capacity on behalf of the
participant under state law and court supervision.

Adjustments. The Board of Directors may make or provide for such
adjustments in the maximum number of shares of Common Stock covered by Option
Rights and Appreciation Rights granted, and in the prices per share applicable
under such Option Rights and Appreciation Rights, as the Board of Directors in
its sole discretion, exercised in good faith, may determine is equitably
required to prevent dilution or enlargement of Option Rights that would
otherwise result from any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company,
merger, consolidation, spin-off, reorganization, partial or complete
liquidation, issuance of rights or warrants to purchase securities or any other
corporate transaction or event having an effect similar to any of the foregoing.
The Board of Directors may also make or provide for such adjustments in the
aggregate number of shares that may be issued or transferred and covered by
outstanding awards granted under the Option Plan and the maximum number of
shares with respect to which Option Rights may be granted to any one participant
as it may in good faith determine to be appropriate in order to reflect any
transaction or event described in the immediately preceding sentence.

Amendment or Termination of the Option Plan. The Board of Directors may,
at any time, suspend or discontinue the Option Plan or revise or amend it in any
respect whatsoever; provided, however, that if and to the extent required by
Rule 16b-3 promulgated under Section 16(b) of the Exchange Act or by any
comparable or successor exemption under which the Board of Directors believes it
is appropriate for the Option Plan to qualify, if and to the extent required
under Section 422 of the Code (if and to the extent that the Board of Directors
deems it appropriate to comply with Section 422) and if and to the extent
required to treat some or all of the Option Rights, Appreciation Rights or
Additional Options (collectively "Incentive Awards") as "performance-based
compensation" within the meaning of Section 162(m) of the Code (if and to the
extent that the Board of Directors deems it appropriate to meet such
requirements), no amendment shall be effective without the approval of the
shareholders of the Company, that (i) except for the adjustments described
above, increases the aggregate number of shares of Common Stock that may be
issued under or the number of Option Rights that may be awarded to any one
participant under the Option Plan, (ii) materially increase the benefits
accruing to participants under the Option Plan or (iii) materially modifies the
requirements as to eligibility for participation in the Option Plan. No
amendment may, without the consent of an Option Rights holder, reduce such
holder's rights under any previously granted and outstanding award.

NONEMPLOYEE DIRECTORS STOCK OPTION PLAN

General. The Board of Directors approved the Nonemployee Directors Plan
(the "Director Plan") as of June 5, 1996, and National City as sole shareholder
approved the Director Plan on the same day. The purpose of the Director Plan is
to attract, retain and compensate highly qualified individuals who are not
current employees of the Company as members of the Board of Directors and to
enable them to increase their ownership of shares of Common Stock. The Director
Plan will be beneficial to the Company and its shareholders since it will allow
these directors to have a greater personal financial stake in the Company
through stock ownership, in addition to underscoring their common interest and
identification with shareholders in increasing the value of Common Stock.

In furtherance of the purpose of the Director Plan, it is intended that in
connection with the Offering, participants will be granted options with respect
to an aggregate of 125,000 shares of Common Stock to all directors eligible to
participate in the Director Plan (the "Initial Director Options").

The full text of the Director Plan has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.

Set forth below is a general description of the Director Plan and the
Initial Director Options. The following description of the Plan is qualified in
its entirety by reference to the full text of the Director Plan.

53
<PAGE> 56

Shares Available. Subject to adjustment as described below under
"Adjustments", the aggregate number of shares of Common Stock that may be issued
or transferred and covered by outstanding awards granted under the Director Plan
will not exceed 200,000 shares, which may be authorized and unissued shares or
treasury shares or a combination thereof.

Eligibility. All members of the Company's Board of Directors who are not
current employees of the Company, any of its subsidiaries, or any of its
affiliates except for former employees of the Company at the time of option
award ("Nonemployee Directors") are eligible to participate in the Plan.

Terms of Option Grants. All Option Rights granted under the Director Plan
will be evidenced by stock option agreements in writing ("Option Agreements") in
such form as the Board of Directors may approve and which will in substantial
form provide the following:

(a) Each grant shall be at an option price which is equal to the fair
market value per share of Common Stock on the date of grant, except for
options granted prior to or within ten days following consummation of the
Offering, which will be at an option price equal to the IPO Price.

(b) Each option granted under the Director Plan will be exercisable to
the extent of one-third of the shares covered thereby on each of the first
through the third anniversaries of the date of grant. No Option Right may
be exercised more than 10 years from the date of grant.

(c) Except as otherwise described below, no option will be exercisable
after the date of cessation of an option holder's services as a Director of
the Company. Upon the death of an option holder at any time or upon
cessation of service six months or more after the date of grant, all of the
then outstanding Formula Award options (as described below) of such option
holders will become immediately exercisable. If an option holder's service
ceases for any reason, any exercisable Formula Award options may be
exercised by the option holder within three months after such cessation of
service. If an option holder dies within such three-month period, or if
cessation of his service is due to such option holder's death, such Formula
Award options may be exercised at any time within one year after such death
by the option holder's estate in accordance with applicable law. The
effects of cessation of an option holder's service as a Director of the
Company will be determined by the Board of Directors in its sole discretion
and set forth in an Option Agreement; provided the cessation of service
terms for Discretionary Awards (as described below) will be no more
favorable than those set forth above for Formula Awards.

(d) Upon exercise of an Option Right, the option price will be payable
(i) in cash, (ii) by the transfer to the Company of previously owned shares
of Common Stock with a value equal to the total option price, or (iii) from
the proceeds of a sale through a broker on the date of exercise of some or
all of the shares of Common Stock to which the exercise relates.

(e) Each option granted is not transferable by the option holder other
than by will or by the laws of descent and distribution.

Options granted under the Director Plan are not intended to qualify under
Section 422 of the Code.

Formula Awards. Options to purchase 25,000 shares of Common Stock
("Automatic Initial Awards") will be granted upon election to the Company's
Board of Directors to each Nonemployee Director who is neither an employee of
National City or any of its affiliates nor has been previously employed by the
Company ("Nonaffiliated Director"). Any Nonaffiliated Director who is so elected
within ten days following consummation of the Offering will receive Automatic
Initial Awards to purchase Common Stock at the IPO Price, and Nonaffiliated
Directors elected after such ten-day period will receive such awards at the fair
market value per share of the Common Stock. Options to purchase 2,500 shares of
Common Stock will be granted automatically to each Nonaffiliated Director on the
first Friday following each of the Company's Annual Meetings of Shareholders
("Automatic Annual Awards").

54
<PAGE> 57

Discretionary Awards. The Board of Directors may grant options to
Nonemployee Directors who have previously been employed by the Company. The
recipients, dates of grant, and number of shares covered by each option will be
determined in the sole discretion of the Board of Directors. No Nonaffiliated
Director may receive Discretionary Awards, and no Nonemployee Director who is
eligible to receive Discretionary Awards may receive Formula Awards. In
connection with the Offering, Delroy R. Hayunga, former Chief Executive Officer
of NPC, will receive a grant of 50,000 Initial Director Options.

Administration. The Director Plan is administered by the Board of
Directors who may from time to time delegate all or any part of its authority
under the Plan to a committee consisting of not less than three directors
appointed by the Board of Directors. Subject to the provisions of the Director
Plan, the Board of Directors is authorized to interpret the Director Plan, to
establish, amend and rescind any rules and regulations relating to the Director
Plan, and to make all other determinations necessary or advisable for the
administration of the Director Plan.

Adjustments. The Board of Directors is required to make or provide for
adjustments in (i) the option price; (ii) the number or kind of shares or other
securities covered by outstanding options; (iii) the number or kind of shares of
the Company's capital stock or other securities which may be acquired pursuant
to options granted under the Director Plan; and (iv) the number of such
securities to be awarded to each option holder as the Board of Directors in its
sole discretion, exercised in good faith, determines is equitably required to
prevent dilution or enlargement of rights of option holder that would otherwise
result from (a) any stock dividend, stock split, combination of shares, issuance
of rights or warrants to purchase stock, spin-off, recapitalization or other
changes in the capital structure of the Company, (b) any merger, consolidation,
reorganization or partial or complete liquidations, or (c) any other corporate
transaction or event having an effect similar to any of the foregoing. The
determination of the Board of Directors as to what adjustments will be made, and
the extent thereof, will be final, binding and conclusive.

Amendment, Suspension or Termination of the Director Plan. The Board of
Directors may, at any time, suspend or discontinue the Director Plan or revise
or amend it in any respect whatsoever; provided, however, that if and to the
extent required by Rule 16b-3 promulgated under Section 16(b) of the Exchange
Act or by any comparable or successor exemption under which the Board of
Directors believes it is appropriate for the Director Plan to qualify, no
amendment shall be effective without the approval of the shareholders of the
Company, that (i) except as described above under "adjustments" materially
increases the number of shares of Common Stock that may be issued under the
Plan, (ii) materially increases the benefits accruing to individuals pursuant to
the Director Plan or (iii) materially modifies the requirements as to
eligibility for participation in the Director Plan; and provided further,
however, if and to the extent required by Rule 16b-3 promulgated under Section
16(b) of the Exchange Act or by any comparable or successor exemption under
which the Board of Directors believes it is appropriate for the Director Plan to
qualify the provisions of the Director Plan may not be amended more than once
every six months, other than to comply with changes in the Code, the Employee
Retirement Income Security Act of 1974, as amended or the rules thereunder. No
action may, without the consent of a participant, reduce the participant's
rights under any previously granted and outstanding Option Right.

55
<PAGE> 58

PLAN BENEFITS

Set forth in the table below are the numbers of shares of Common Stock
covered by the Initial Awards and Initial Director Options that are intended to
be granted concurrently with the Offering under the Option Plan and the Director
Plan.

<TABLE>
<CAPTION>
OPTION DIRECTOR DOLLAR
NAME AND POSITION PLAN PLAN VALUE(1)
--------------------------------------------- --------- -------- --------
<S> <C> <C> <C>
Tony G. Holcombe............................. 200,000 -- --
President and Chief
Executive Officer
Richard A. Alston............................ 100,000 -- --
Executive Vice President
Robert E. Johnson............................ 100,000 -- --
Executive Vice President
Kurt S. Knipp................................ 100,000 -- --
Executive Vice President
Thomas A. Wimsett............................ 100,000 -- --
Executive Vice President
David R. Zook................................ 100,000 -- --
Executive Vice President
Delroy R. Hayunga
Former Chief Executive Officer............. -- 50,000 --
Executive Group (6 persons).................. 700,000 -- --
Non-Executive Director Group................. -- 125,000 --
Non-Executive Officer........................ 1,420,000 -- --
Employee Group
</TABLE>

- ---------------

(1) The Option Rights granted to date have an exercise price per share equal to
the IPO Price. Therefore there is no value assignable as of the IPO date.

FEDERAL INCOME TAX CONSEQUENCES

The Company presently anticipates that Option Rights granted pursuant to
the Option Plan will be either "non-qualified" or "incentive stock" options.
Option Rights granted pursuant to the Director Plan will be "non-qualified"
options.

Non-qualified Option Rights will not result in any taxable income to the
optionee or deduction to the Company at the time they are granted. In general,
the holder of non-qualified Option Rights will recognize taxable ordinary income
at the time of the exercise of the Option Rights or related Additional Options
in an amount measured by the excess of the fair market value of the shares at
that time over the option price. The tax basis to the option holder for
non-qualified option shares acquired will be the option price plus such taxable
ordinary income and when the option holder disposes of the shares capital gain
or loss will be recognized, either long or short term, depending on the holding
period of the shares.

The amount included in the income of the option holder of non-qualified
Option Rights or related Additional Options as taxable ordinary income generally
determines the amount of the deduction to which the Company will be entitled.

Option Rights or Additional Options which are incentive stock options will
not result in taxable income to the option holder or a deduction to the Company
at the time granted nor at the time exercised if certain holding period
requirements are observed. The option holder must hold the stock more than two
years from date of grant and one year from date of exercise. If these holding
requirements are met, the option holder will be entitled to capital gain
treatment and the Company will not be entitled to any deduction. If these
holding requirements are not met, in general, the option holder will recognize
taxable ordinary income and the corporation will be entitled to a deduction
measured by the excess of the fair

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market value of the shares of Common Stock at the time of exercise or
disqualifying sale over the option price, whichever produces a lesser gain.

The tax basis to the option holder for Common Stock acquired on exercise of
an Option Right or Additional Option that is an incentive stock option will be
the option price. The difference between the fair market value at the date of
exercise and the option price of the incentive stock option, however, will be an
item of tax preference. Thus, it will have to be included when making the
alternative minimum tax calculation for the year in which the incentive stock
option was exercised.

The granting of an Appreciation Right will not produce taxable income to
the option holder or a deduction to the Company. Upon exercise of Appreciation
Rights, the amount of any cash received and the fair market value of any Common
Stock received will be taxable to the option holder as ordinary income and in
general, determines the amount of the deduction to which the Company is
entitled.

In the case of officers and directors, the tax consequences may differ from
those described above in limited circumstances where the sale of stock that is
received as a result of an award could subject the officer or director to suit
under Section 16(b) of the Exchange Act.

The Company believes that it is in the best interests of shareholders to
retain as much flexibility as possible with respect to the design and payment of
compensation to key employees. The Company does, however, recognize the
constraints imposed on this flexibility by Section 162(m) of the Code, which
disallows a tax deduction for non-exempted compensation paid by the Company in
excess of $1,000,000 to certain key employees. The Company's compensation plans
are currently structured in such a manner that it is unlikely that non-exempted
compensation paid to any executive officer in any year will exceed the
limitation on deductions established by Section 162(m).

LONG-TERM INCENTIVE COMPENSATION PLAN

The LTP focuses upon providing superior returns for the Company. Payments
under the LTP are based upon the Company's attainment of established performance
standards for annual compound growth rates over three years. Payments under the
LTP are made at the end of each three year period, the first of which began on
January 1, 1995.

Executive Officers of the Company are eligible to participate in the LTP.
Directors of the Company who are not also employees are not eligible to
participate.

The amount of an award under the LTP varies based upon the actual compound
growth rate achieved. The performance standard set under the LTP requires a 10%
net income growth rate in order to achieve a bonus payout of 20%-30% of base
salary and a 15% growth rate in order to achieve a bonus payout of 40%-60% of
base salary, depending upon grade.

Awards under LTP are in cash, in unfunded future benefits, or in a
combination of both. At the discretion of the administrative committee of the
LTP, each participant may elect to defer all or a portion of the bonus payment.
In the event of a change in control of the Company, the LTP permits officers to
participate to the end of all current plan cycles, a right which becomes vested
in each such participant as of the date of the change in control.

EMPLOYER MATCHING PLANS

Savings Plan. The Executive Officers participate in the National City
Savings and Investment Plan (the "Savings Plan"), a qualified salary reduction
profit-sharing plan within the meaning of Section 401(k) of the Code. Under the
Savings Plan, all eligible employees (generally, an eligible employee is one who
has completed one year of continuous service, is 21 years of age or older and
has completed 1,000 hours of service) of National City and its adopting
subsidiaries may participate in the Savings Plan by directing their employers to
make Salary Reduction Contributions (as defined in the Savings Plan) to the
Savings Plan Trust (the "Trust") for their accounts and to reduce their
compensation by an equal amount. Contributions may be directed in any whole
percentage between 1% and 10% of the employee's

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base compensation. The Company makes contributions to the Trust ("Employer
Matching Contributions") in an amount equal to the Employer Matching
Contribution Percentage then in effect. (The Employer Matching Contribution
Percentage is currently an amount equal to 100% of the first 3% of the
employee's pay contributed as a Salary Reduction Contribution, plus 50% of the
next 4% of the employee's pay similarly contributed as a Salary Reduction
Contribution.)

The Savings Plan has a profit-sharing feature based upon National City's
profitability, as measured by the percentage return on common equity ("ROE")
from year to year. The profit-sharing contribution is in addition to the regular
Employer Matching Contributions. The additional amount of this profit-sharing
contribution in any year depends on National City's ROE for that year and
ranges, in five cent increments, from no additional contributions if a minimum
ROE of 12% is not attained to a maximum of 50 cents for each $1.00 of an
individual's Salary Reduction Contributions for the year if National City's ROE
is equal to or greater than 18.5%. In 1995, the profit-sharing contribution was
40 cents for each $1.00 of an individual's Salary Reduction Contribution.

Executive Plan. The National City Executive Savings Plan (the "Executive
Plan") is a non-qualified salary reduction profit-sharing plan, similar to the
Savings Plan. The Executive Plan is to supplement the Savings Plan with respect
to employee Salary Reduction Contributions and the attendant Employer Matching
Contributions which by reason of an individual's annual compensation would not
be otherwise allowed because of the annual maximum limit of the Code or because
of the application, under the Code, of actual deferral percentage testing
against prohibited excessive deferrals by highly compensated employees. The
Executive Plan is substantially similar to the Savings Plan as to amounts of
employee Salary Reduction Contributions and Employer Matching Contributions.

The benefits of the Executive Plan are without regard to any limitation
imposed by the Code, or any other applicable law limiting the amount payable
under a qualified plan (such as the Savings Plan), and represent unfunded
general obligations of National City. Portions of such benefits are subject to
certain provisions for forfeiture as set forth in the Executive Plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 1995, the Chief Executive Officer ("CEO") of the Company (Tony G.
Holcombe serving from August 1 and Delroy R. Hayunga serving from January 1 to
August 1) participated in deliberations of the Company's Board of Directors
concerning Executive Officer Compensation. In addition, the CEO serves on the
committee that administers the LTP, which includes payouts awarded to the Chief
Executive Officer and the STP, which includes bonus payments to the Chief
Executive Officer. See "-- Compensation Pursuant to Employee Benefit Plans --
Long-Term Incentive Compensation Plan."

COMPENSATION OF DIRECTORS

The three outside directors to be appointed will receive an annual retainer
of $12,000 to be paid in four quarterly installments of $3,000 each. In
addition, the outside directors will receive $1,000 for each board meeting
attended and $1,000 for each committee meeting attended (committee chairmen
receive an additional $500 per committee meeting) whether or not held on the
same day as a board meeting. No other director will receive cash compensation
for his services as a director.

The three outside directors to be appointed and Mr. Hayunga are currently
eligible to receive non-qualified stock options to purchase shares of Common
Stock at a price equal to the IPO Price pursuant to the Company's Nonemployee
Directors Stock Option Plan. See "-- Compensation Pursuant to Employee Benefit
Plans -- Nonemployee Directors Stock Option Plan."

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CERTAIN TRANSACTIONS

The Company is or will be a party to the following agreements with National
City or its affiliates.

SPONSORSHIP AGREEMENT

In connection with the Offering, the Company and NCBK have entered into a
sponsorship agreement (the "Sponsorship Agreement") whereby the Company will act
as NCBK's sole agent for the purposes of providing electronic data authorization
and capture, reporting, settlement and clearing services for merchants who
participate in the VISA(R) and MasterCard(R) programs. The Company, along with
other nonbank transaction processors, must be sponsored by a financial
institution that is a member of the VISA(R) and MasterCard(R) associations.
NCBK, being a member of such associations, will act as the Company's sole
sponsor under the terms of the Sponsorship Agreement.

The Company will retain full responsibility for performance of Merchant
Card Services, except for certain obligations or responsibilities that NCBK will
assume pursuant to the Sponsorship Agreement. The Sponsorship Agreement provides
that the Company will comply with (i) all VISA(R) and MasterCard(R) bylaws,
manuals, operating regulations and other written materials as they may from time
to time be amended which bind or apply to NCBK as a member of VISA(R) and
MasterCard(R) with respect to Merchant Card Services or to the Company as a
third party processor, (ii) all agreements between merchants and NCBK with
respect to Merchant Card Services, and (iii) all applicable federal or state
laws and regulations. Under the Sponsorship Agreement, the Company will receive
all fees, discounts and other amounts payable by merchants for Merchant Card
Services and will bear the expenses of maintaining facilities necessary to
provide such services. The term of the Sponsorship Agreement is for a period of
five years, subject to automatic renewals for successive one-year terms. Either
party may, however, decline to renew the Sponsorship Agreement upon six months
notice to the other party prior to the automatic renewal date.

The Company has agreed to indemnify NCBK for any failure to perform its
obligations under the Sponsorship Agreement and for certain other actions.

LEASE AGREEMENT

The Company is party to a lease agreement with NCBK for its facility in
Louisville, Kentucky, which serves as the Company's principal executive offices
and one of its main processing facilities and comprises approximately 178,000
square feet. Under this lease, the term of which expires on February 28, 2019,
the Company pays an aggregate of $502,176 as annual rent. NCBK leases the
property on which the Company's facilities are located from a third party.
NCBK's lease is scheduled to expire on February 28, 2019, and NCBK has the
option to renew this lease in ten-year increments for up to 40 years.

ADMINISTRATIVE SERVICES AGREEMENT

The Company and National City have entered into an Administrative Services
Agreement (the "Services Agreement") whereby National City will provide certain
support and administrative services to the Company. Such services will include
human resources, internal audit, legal and tax services. Under the Services
Agreement, the Company has agreed to pay National City not less than $825,000 in
connection with the provision of human resources and certain tax related
services and will pay additional amounts for other services that may be provided
on an as-needed basis. National City will have the option to increase its prices
any time after renewal of the contract. The Company will also reimburse National
City for reasonable out-of-pocket expenses incurred in connection with the
rendering of services to the Company. These expenses may include items such as
travel expenses, lodging and meals, clerical expenses and miscellaneous
expenses. The miscellaneous expenses may not exceed $2,000 per month without
prior approval from the Company. The Services Agreement has a term of one year,
subject to renewal for one additional year by the Company. Certain
indemnification provisions are also set forth in

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the Services Agreement under which the Company will indemnify National City
against claims which may arise in connection with rendering of such services,
subject to certain exceptions.

CARD SERVICES AGREEMENTS

The Company has entered into Card Services Agreements (the "Card Services
Agreements") with various banking subsidiaries of National City (the "Banks")
pursuant to which the Company will provide, on the Bank's behalf, a broad range
of services for merchants with whom the Banks have contracted to provide
Merchant Services. Under the terms of the Card Services Agreements, the Company
will provide various Merchant Services and will be compensated on a per
transaction basis, which may be adjusted from time to time to reflect unforeseen
processing costs or excess activity. Each Card Services Agreement will have a
term of five years, subject to renewal for successive one-year terms unless
terminated by either party. Under the Card Services Agreements, each party will
indemnify the other against certain claims.

REMITTANCE PROCESSING SERVICES AGREEMENTS

The Company has entered into Remittance Processing Services Agreements (the
"Lockbox Agreements") with the Banks for the purpose of processing day-to-day
remittances for collection. The Company will perform these remittance processing
services for the Banks' existing and future remittance processing services
customers. Such services include processing, equipment, facilities, staffing and
customer service. The Company will be responsible for all mailroom and
facilities costs by year end 1996. The Company will not be responsible for any
other kind of service not specifically identified in the Lockbox Agreements,
including research and photocopying.

For basic remittance processing, the Company will charge a cost-plus markup
necessary to yield a negotiated percentage after-tax return on revenue. Basic
remittance processing services include opening envelopes, extracting payments,
encoding and endorsing checks, preparing and delivering deposits to the Banks,
fulfilling any other specific processing requirements for a customer as
negotiated, and electronically transmitting accounts receivable information to
the customer on a daily basis.

The Banks will pay the Company fees on a per transaction basis in addition
to basic remittance processing fees. During the third year of the initial term
of the Lockbox Agreements, and on the anniversary date of the agreement every
year thereafter, the Company will be able to review and adjust the pricing
schedule. The initial term of the Lockbox Agreements will expire December 31,
1999, and shall be automatically renewed for successive three-year terms unless
terminated by either party.

CHECK PROCESSING SERVICES AGREEMENT

Prior to the Offering, the Company and NCBK will enter into a Check
Processing Services Agreement (the "Check Processing Agreement") whereby NCBK
will process and clear customer checks received by the Company's lockbox
operations. Under the Check Processing Agreement, NCBK will also deposit these
checks into the accounts of the Company's customers. The Company will pay NCBK
fees on a per transaction basis, as well as the transportation and bank-related
costs associated with the processing of such checks. Fees charged by NCBK will
be based on market-competitive pricing to be agreed upon by NCBK and the
Company. The initial term of the Check Processing Agreement will expire December
31, 1997, and will be automatically renewed for successive one-year terms unless
terminated by either party as provided therein. Under the Check Processing
Agreement, the Company will also indemnify NCBK against certain claims.

REGISTRATION RIGHTS AGREEMENT

In connection with the Offering, National City and the Company have entered
into a Registration Rights Agreement (the "Registration Rights Agreement").
Pursuant to the Registration Rights Agreement, in the event the Offering is
consummated, National City would have the right to require the Company to use
its best efforts to register under the Securities Act and the securities or blue
sky laws of

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any jurisdiction designated by National City all or a portion of the issued and
outstanding Common Stock held by National City (the "Registrable Shares") for
sale in accordance with National City's intended method of disposition thereof.
Such demand rights would be subject to the condition that the Company would not
be required to effect more than two demand registrations. National City will
also have the right to participate, or "piggy-back," in equity offerings
initiated by the Company, subject to reduction of the size of the Offering on
the advice of the managing underwriter. National City will pay all expenses
relating to the performance of, or compliance with, demand registration requests
under the Registration Rights Agreement and the Company will pay all expenses
relating to the performance of, or compliance with, "piggy-back" registrations
under the Registration Rights Agreement. In either case, however, National City
will be responsible for underwriters' discounts and selling commissions with
respect to the Registrable Shares being sold and the fees and expenses of its
counsel in connection with such registration. National City's rights under the
Registration Rights Agreement will be fully assignable. Under the Registration
Rights Agreement, the Company has agreed to indemnify National City against
certain claims.

TAX SHARING AGREEMENT

In connection with the Offering, the Company and National City have entered
into a Tax Sharing Agreement (the "Tax Sharing Agreement"), which will govern
tax related matters affecting taxable periods ending prior to and subsequent to
the Offering, including preparation and filing of tax returns, payment of taxes
and indemnification for tax liabilities. In general, under the Tax Sharing
Agreement, the Company will be responsible for filing tax returns and paying
taxes of the Company, other than returns that are filed on a consolidated,
combined or unitary basis with National City, in which case the Company will be
responsible for its share of such taxes, determined as if the Company and its
subsidiaries filed separate returns. The Tax Sharing Agreement provides that
National City will retain control of preparing, filing and the audit of its
consolidated, combined or unitary returns, which include the Company and its
subsidiaries. The Company will be allowed to participate in, but not control,
any such audits with respect to matters for which it may be required to
indemnify National City under the Tax Sharing Agreement.

SVS AGREEMENT

The Company and SVS, a wholly owned subsidiary of National City, have
entered into an Administrative Services Agreement (the "SVS Agreement") for
certain support services to be provided by NPC to SVS, including, without
limitation, data center operations, human resources, purchasing facilities and
accounting. The Company will be compensated based on mutually agreeable hourly
rate or cost-plus pricing which may be adjusted upon renewal of the contract
with advance written notice. The SVS Agreement will continue in effect until
terminated by either party. Under the SVS Agreement, SVS and the Company will
indemnify each other against certain claims.

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DESCRIPTION OF CAPITAL STOCK

AUTHORIZED CAPITAL STOCK

The authorized capital stock of the Company consists of 95,000,000 shares
of Common Stock, without par value, and 5,000,000 shares of Preferred Stock,
without par value, issuable in series. The following summary description of the
capital stock of the Company is qualified in its entirety by reference to the
form of Amended Articles of Incorporation of the Company and the Code of
Regulations of the Company, a copy of each of which is filed as an exhibit to
the Registration Statement of which this Prospectus forms a part.

COMMON STOCK

As of August 7, 1996 there were 43,100,000 shares of Common Stock
outstanding and held of record by National City. There will be 49,600,000 shares
of Common Stock outstanding after giving effect to the sale of shares of Common
Stock offered hereby and assuming no exercise of the Underwriters'
over-allotment option. An additional 4,200,000 shares of Common Stock are
reserved for issuance upon the Company's grants of options to key employees and
directors under the Company's stock option plans. See "Executive Compensation --
Compensation Pursuant to Employee Benefit Plans." All outstanding shares are,
and all shares to be outstanding after completion of the offering will be duly
authorized, validly issued, fully paid and nonassessable.

Holders of shares of Common Stock are entitled to one vote per share on all
matters to be voted upon by the shareholders. The holders of Common Stock are
not entitled to cumulative voting rights. Holders of Common Stock are entitled
to receive dividends and other distributions when, as and if declared from time
to time by the Board of Directors out of funds legally available for such
purposes subject to any preferential rights of, and any sinking fund or
redemption or purchase rights with respect to, outstanding shares of Preferred
Stock, if any. In the event of a voluntary or involuntary liquidation,
dissolution or winding up of the Company, the holders of shares of Common Stock
would be entitled to share ratably in all assets remaining after payment of
liabilities subject to prior distribution rights and payment of any
distributions owing to holders of shares of Preferred Stock then outstanding, if
any. Holders of the shares of Common Stock have no preemptive or conversion
rights, and the shares of Common Stock are not subject to further calls or
assessment by the Company. There are no redemption or sinking fund provisions
applicable to the shares of Common Stock.

PREFERRED STOCK

There are no shares of Preferred Stock outstanding. The Board of Directors
has the authority, without further action by the shareholders, to issue
Preferred Stock in one or more series and to fix the rights, designations,
preferences, privileges, qualifications, and restrictions thereof, including
dividend rights, conversion rights, terms and rights of redemption, liquidation
preferences, and sinking fund terms (any or all of which may be greater than the
rights of the Common Stock). The Board of Directors also has the authority,
without further action by the shareholders and to the extent now or hereafter
permitted by law, to amend the Articles of Incorporation to fix the voting
rights of any unissued or treasury shares of any class of Preferred Stock. The
Board of Directors, without shareholder approval, can issue shares of Preferred
Stock with conversion, voting and other rights which could adversely affect the
rights of the holders of shares of Common Stock.

OHIO LAW AND CERTAIN CHARTER PROVISIONS

Control of the Company by National City, as well as certain statutory
provisions of Ohio law and the Company's Amended Articles of Incorporation and
Code of Regulations, may have the effect of deterring hostile takeovers or
delaying or preventing changes in control or changes in management of the
Company, including transactions in which shareholders of the Company might
otherwise receive a premium over the then current market price for their shares.
The size of the Board of Directors is fixed at not less than five nor more than
nine directors divided into two or three classes depending on the size of the
board, with each class serving for staggered terms of two years (if the board is
divided into two

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classes) or three years (if the board is divided into three classes). Each class
of directors will hold office until the annual meeting of shareholders in the
year their respective term ends, at which time their successors are elected. In
addition to having a potential anti-takeover effect, classification reduces the
ability to alter the composition of the Board of Directors.

The Company's Amended Articles of Incorporation and Code of Regulations
contain various provisions that may have the effect, either alone or in
combination with each other, of making more difficult or discouraging a business
combination or an attempt to obtain control of the Company that is not approved
by the Board of Directors. These provisions include (i) the right of the Board
of Directors to issue unissued and unreserved shares of Common Stock without
shareholder approval, (ii) the right of the Board of Directors to issue shares
of Preferred Stock, without shareholder approval, in one or more series and to
designate the number of shares of each such series and the relative rights and
preferences of such series, including voting rights (to the extent now or
hereafter permitted by law), terms of redemption, redemption prices and
conversion rights, (iii) the classification of the Board of Directors, as
described above, (iv) a limitation on the removal of directors except upon the
vote of 65% of the outstanding shares, (v) a limitation on the ability of
shareholders to call a special meeting except upon the consent of shareholders
representing 50% of the outstanding shares entitled to vote at such meeting, and
(vi) a limitation on the ability of shareholders to fill vacancies in the Board
of Directors except after a vote to increase the number of directors at a
meeting called for that purpose.

The Company's Code of Regulations also contains provisions requiring
advance notice to the Company of (i) nominations of candidates for election to
the Board of Directors who are not nominated by the Company and (ii) proposals
to be brought before the Company's annual meeting of shareholders (other than
proposals made by the Company). Without compliance with these provisions, any
such nominations or shareholder proposals may not be considered by the Company.

Further, Ohio law prohibits any person who owns 10% or more of a
corporation's stock from engaging in mergers, consolidations, majority share
acquisitions, asset sales, loans and certain other transactions with the
corporation for a three-year period after acquiring the 10% ownership, unless
approval is first obtained from the corporation's board of directors. After the
three-year waiting period, the 10% shareholder can complete the transaction only
if, among other things: (i) approval is received from two-thirds of all voting
shares and from a majority of shares not held by the 10% shareholder or certain
affiliated persons; or (ii) the transaction meets certain criteria designed to
ensure fairness to all remaining shareholders. National City's ownership of its
43,100,000 shares of Common Stock has been approved by the Company's Board of
Directors and is therefore not restricted by these statutory provisions.

DIRECTOR AND OFFICER INDEMNIFICATION AND LIABILITY

Generally, a director of an Ohio corporation will not be found to have
violated his fiduciary duties unless there is proof by clear and convincing
evidence that the director has not acted in good faith, in a manner he
reasonably believes to be in or not opposed to the best interests of the
corporation, or with the care that an ordinarily prudent person in a like
position would use under similar circumstances. In general, a director is liable
for monetary damages for any action or omission as a director only if it is
proved by clear and convincing evidence that such act or omission was undertaken
either with deliberate intent to cause injury to the corporation or with
reckless disregard for the best interests of the corporation.

Under Ohio law, a corporation must indemnify its directors, as well as its
officers, employees and agents, against expenses where any such person is
successful on the merits or otherwise in defense of an action, suit or
proceeding. A corporation may indemnify such persons in actions, suits and
proceedings (including derivative suits) if the individual has acted in good
faith and in a manner that he believes to be in or not opposed to the best
interests of the corporation. In the case of a criminal proceeding, the
individual must also have no reasonable cause to believe that his conduct was
unlawful. Indemnification may be made only if ordered by a court or if
authorized in a specific case upon a determination that the applicable standard
of conduct has been met. Such a determination may be made

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by a majority of the disinterested directors, by independent legal counsel or by
the shareholders. In order to obtain reimbursement for expenses in advance of
the final disposition of any action, the individual must provide an undertaking
to repay the amount if it is ultimately determined that he is not entitled to be
indemnified.

In general, Ohio law requires that all expenses, including attorneys fees,
incurred by a director in defending any action, suit or proceeding be paid by
the corporation as they are incurred in advance of final disposition if the
director agrees to repay such amounts if it is proved by clear and convincing
evidence that his action or omission was undertaken with deliberate intent to
cause injury to the corporation or with reckless disregard for the best
interests of the corporation and if the director reasonably cooperates with the
corporation concerning the action, suit or proceeding.

The Company's Code of Regulations provides for indemnification which is
coextensive with that permitted under Ohio law. The Company's Code of
Regulations authorizes the Company to enter into indemnification agreements with
each present and future director and such officers, employees or agents as
specified in the Code of Regulations. The Code of Regulations also authorizes
the Company to enter into agreements to indemnify such persons to the maximum
extent permitted by applicable law. The indemnification so granted may exceed
the indemnification specifically authorized by the Ohio General Corporation Law.
Each agreement would represent a contractual obligation of the Company which
could not be altered unilaterally.

NEW YORK STOCK EXCHANGE LISTING

Prior to the date of this Prospectus, there has been no established public
trading market for the Common Stock. The Company's Common Stock has been
approved for listing on the New York Stock Exchange under the symbol NAP,
subject to official notice of issuance.

TRANSFER AGENT AND REGISTRAR

The Company presently intends to use National City Bank as the Transfer
Agent and Registrar for the Common Stock.

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SHARES AVAILABLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have 49,600,000 shares of
Common Stock outstanding. The 6,500,000 shares sold in the Offering (7,475,000
shares if the Underwriters' over-allotment option is exercised in full) will be
freely tradeable without restriction or further registration under the
Securities Act, except for any such shares acquired by a Restricted Person. The
43,100,000 shares of Common Stock which are held by National City are subject to
a "lock-up" agreement under which National City has agreed, subject to certain
exceptions, not to offer, sell, pledge, or otherwise dispose of any shares of
Common Stock without the prior written consent of a representative of the
Underwriters for a period of 360 days after the date of this Prospectus. Shares
of Common Stock held by Restricted Persons are subject to a similar "lock-up"
agreement for a period of 90 days after the date of this Prospectus. Following
such times, National City and any such Restricted Person who is an "affiliate,"
of the Company as such term is defined in Rule 144 under the Securities Act
("Rule 144"), may sell such shares only pursuant to the requirements of Rule 144
under the Securities Act or pursuant to an effective registration statement
under the Securities Act. Furthermore, the shares held by National City are
"restricted securities" within the meaning of Rule 144.

In general, under Rule 144, a person (or group of persons whose shares are
aggregated) who has beneficially owned for at least two years shares of Common
Stock which are treated as "restricted securities," including persons who may be
deemed affiliates of the Company, would be entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of 1% of
the then outstanding shares of Common Stock or the average weekly trading volume
in the Common Stock during the four calendar weeks preceding such sale. Sales
under Rule 144 are also subject to certain manner of sale provisions, notice
requirements and the availability of current public information about the
company. A person who is not deemed to be an affiliate and who has beneficially
owned restricted shares for at least three years is entitled to sell such shares
to the public without regard to such limitations of Rule 144. Under Rule 144, a
Restricted Person who is deemed an affiliate is entitled to sell shares
purchased in the Offering subject to the volume, manner of sale and other
requirements described above. All of the currently outstanding shares of Common
Stock held by National City are deemed to have been held for two years.

Prior to the offering, there has been no active public market for the
Company's Common Stock, and no prediction can be made as to the effect, if any,
that sales of shares under Rule 144 or the availability of shares for sale will
have on the market price of the Common Stock prevailing from time to time after
this offering. The Company is unable to estimate the number of shares that may
be sold in the public market under Rule 144, because such amount will depend on
the trading volume in and market price for the Common Stock and other factors.
Nevertheless, sales of substantial amounts of shares in the public market, or
the perception that such sales may occur, could adversely affect prevailing
market prices for the Common Stock or the Company's ability to raise equity in
the future.

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UNDERWRITING

Upon the terms and subject to the conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement"), the Company has agreed to sell to each
of the Underwriters named below, (the "Underwriters"), for whom Salomon Brothers
Inc, Montgomery Securities, NatCity Investments, Inc. and Smith Barney Inc. are
acting as representatives (the "Representatives"), and each of the Underwriters
has severally agreed to purchase from the Company, the respective number of
shares of Common Stock set forth opposite of its name below.

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
------------------------------------------------------ ----------------
<S> <C>
Salomon Brothers Inc..................................
Montgomery Securities.................................
NatCity Investments, Inc..............................
Smith Barney Inc......................................
----------------
Total................................................. 6,500,000
================
</TABLE>

In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all the
shares of Common Stock offered hereby (other than those subject to the
over-allotment option described below) if any such shares are purchased. In the
event of a default by an Underwriter, the Underwriting Agreement provides that,
in certain circumstances the purchase commitments of the nondefaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.

The Representatives have advised the Company that the several Underwriters
propose initially to offer the shares of Common Stock to the public at the price
to public set forth on the cover page of this Prospectus and to certain dealers
at such price less a concession not in excess of $ per share. The
Underwriters may allow and such dealers may reallow a concession not in excess
of $ per share to other dealers. After the initial public offering, the
price to public and such concessions may be changed.

The Company has granted the Underwriters an option, exercisable within 30
days of the date of this Prospectus, to purchase up to 975,000 additional shares
of Common Stock from the Company at the same price per share as the initial
6,500,000 shares of Common Stock to be purchased by the Underwriters. The
Underwriters may exercise such option only to cover over-allotments, if any,
incurred in connection with the Offering. To the extent the Underwriters
exercise such option, each Underwriter will have a firm commitment, subject to
certain conditions, to purchase the same proportion of such additional shares of
Common Stock as the number of shares of Common Stock to be purchased and offered
by such Underwriter in the table above bears to the total number of shares of
Common Stock initially offered by the Underwriters hereby.

At the request of the Company, up to 400,000 shares of Common Stock in the
Offering have been reserved for sale at the initial public offering price to,
among others, officers, directors and employees of the Company and to directors
and certain senior officers of National City and SVS. The number of shares of
Common Stock available for sale in the Offering will be reduced to the extent
such persons purchase such shares. Purchases will be prohibited to the extent
that they are requested in lots of less than 100 shares. Any reserved shares not
so purchased will be offered by the Underwriters on the same basis as the other
shares available through the Offering.

The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act, or contribute to payments the Underwriters may be required
to make in respect thereof.

66
<PAGE> 69

The Company, National City and their respective directors and officers have
each agreed with the Underwriters not to offer, sell or contract to sell, or
otherwise dispose of, directly or indirectly, or announce the offering of, or
file or cause to be filed a registration statement (other than a registration
statement on Form S-8) under the Securities Act with respect to any shares of
Common Stock or any securities or options convertible into or exchangeable or
exercisable for shares of Common Stock for a period of 90 days, or, in the case
of National City, 360 days, from the date of the Underwriting Agreement without
the prior written consent of Salomon Brothers Inc; provided, that the Company
may grant options pursuant to the Option Plan and the Director Plan as in effect
on the date of the Underwriting Agreement, as long as any option so granted
shall not become exercisable within the 90-day period immediately following the
date of the Underwriting Agreement.

The Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.

Prior to this Offering, there has been no public market for the Common
Stock. Accordingly, the initial public offering price for the Common Stock will
be determined by negotiation among the Company and the Representatives. Among
the factors to be considered in determining the initial public offering price
will be the Company's record of operations, its current financial condition, its
future prospects, the market for its services, the experience of management, the
economic conditions of the Company's industry in general, the general condition
of the equity securities market and the demand for similar securities of
companies considered comparable to the Company and other relevant factors. There
can be no assurance, however, that the prices at which the Common Stock will
sell in the public market after this Offering will not be lower than the price
at which the shares of Common Stock are sold by the Underwriters.

The rules of the National Association of Securities Dealers, Inc. ("NASD")
provide that no NASD member shall participate in a public offering of an
issuer's securities where the issuer is an affiliate of such NASD member, unless
a "qualified independent underwriter" shall have been engaged on the terms
provided in such rules. NatCity Investments, Inc., one of the Underwriters of
this Offering, is a wholly-owned subsidiary of National City and an affiliate of
the Company.

In view of such affiliation, the offering made hereby is being conducted in
accordance with the rules of the NASD, and Salomon Brothers Inc, one of the
Representatives of the Underwriters, is acting as "qualified independent
underwriter" within the meaning of such rules. In connection therewith, Salomon
Brothers Inc has exercised its usual standards of "due diligence" with respect
to the Registration Statement of which this Prospectus forms a part and has
recommended the maximum price at which the shares of Common Stock may be offered
hereby. Salomon Brothers Inc will receive no separate fee for its services as
qualified independent underwriter.

The Common Stock has been approved for listing, subject to official notice
of issuance, on the New York Stock Exchange under the symbol "NAP." The
Underwriters have advised the New York Stock Exchange that they will undertake
to ensure that the New York Stock Exchange share distribution standards required
to be satisfied for initial listing of the Common Stock will be met.

LEGAL MATTERS

A legal opinion to the effect that the shares of Common Stock offered
hereby when issued will be validly issued, fully paid and nonassessable will be
rendered by Jones, Day, Reavis & Pogue, Cleveland, Ohio, counsel to the Company.
Certain legal matters will be passed upon for the Underwriters by Cleary,
Gottlieb, Steen & Hamilton, New York, New York.

EXPERTS

The consolidated financial statements of National Processing, Inc. at
December 31, 1995 and 1994, and for each of the three years in the period ended
December 31, 1995, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.

67
<PAGE> 70

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NATIONAL PROCESSING, INC.
Report of Independent Auditors....................................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and
March 31, 1996 (unaudited)......................................................... F-3
Consolidated Statements of Income for each of the three years in the period ended
December 31, 1995, and for the three-month periods ended
March 31, 1995 and 1996 (unaudited)................................................ F-5
Consolidated Statements of Changes in Shareholder's Equity for each of
the three years in the period ended December 31, 1995, and for the
three-month period ended March 31, 1996 (unaudited)................................ F-6
Consolidated Statements of Cash Flows for each of the three years in the period
ended December 31, 1995, and for the three-month periods
ended March 31, 1995 and 1996 (unaudited).......................................... F-7
Notes to Consolidated Financial Statements........................................... F-8
</TABLE>

F-1
<PAGE> 71

REPORT OF INDEPENDENT AUDITORS

Board of Directors
National Processing, Inc.

We have audited the accompanying consolidated balance sheets of National
Processing, Inc. and subsidiaries (a wholly owned subsidiary of National City
Corporation) as of December 31, 1995 and 1994, and the related consolidated
statements of income, changes in shareholder's equity, and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of National
Processing, Inc. and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.

Ernst & Young LLP

Cleveland, Ohio
June 6, 1996

F-2
<PAGE> 72

NATIONAL PROCESSING, INC.

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------- --------
1994 1995 1996
-------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 16,779 $ 22,618 $ 36,062
Accounts receivable.................................. 70,624 82,409 61,814
Check inventory...................................... 7,846 6,376 6,272
Restricted deposits--client funds.................... 85,506 55,773 51,535
Other current assets................................. 671 1,603 4,448
Income tax receivable from NCC....................... 1,662 -- --
-------- -------- --------
Total current assets................................... 183,088 168,779 160,131

Property and equipment:
Furniture and equipment.............................. 49,115 62,456 65,007
Building and leasehold improvements.................. 8,383 9,199 9,218
Property leased from affiliate....................... 6,955 4,173 4,173
Land and improvements................................ 636 616 616
-------- -------- --------
65,089 76,444 79,014
Accumulated depreciation and amortization............ 37,132 44,948 46,577
-------- -------- --------
27,957 31,496 32,437
Other assets:
Goodwill, net of accumulated amortization
of $4,049 in 1994, $5,982 in 1995 and
$6,474 in 1996.................................... 73,456 72,604 72,112
Deferred contract costs, net......................... -- 4,816 4,736
Other assets......................................... 3,907 3,601 3,609
-------- -------- --------
Total other assets..................................... 77,363 81,021 80,457
-------- -------- --------
Total assets........................................... $288,408 $281,296 $273,025
========= ========= =========
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE> 73

NATIONAL PROCESSING, INC.

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------- --------
1994 1995 1996
-------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Restricted deposits--client funds.................... $ 85,506 $ 55,773 $ 51,535
Accounts payable--trade.............................. 4,462 9,625 6,157
Merchant payable--check services..................... 9,147 7,307 8,783
Accrued bankcard assessments......................... 12,789 17,297 12,893
Income tax payable to NCC............................ -- 1,045 4,000
Other accrued liabilities............................ 11,119 13,623 7,207
Borrowings from affiliates........................... 14,421 -- --
-------- -------- --------
Total current liabilities.............................. 137,444 104,670 90,575
Obligation under property leased from affiliate........ 2,815 2,671 2,635
-------- -------- --------
Total liabilities...................................... 140,259 107,341 93,210
Shareholder's equity:
Preferred stock; without par value;
5,000,000 shares authorized;
no shares issued or outstanding................... -- -- --
Common stock, without par value;
95,000,000 shares authorized; 43,100,000
shares issued and outstanding..................... 1 1 1
Contributed capital.................................. 64,825 64,825 64,825
Retained earnings.................................... 83,323 109,129 114,989
-------- -------- --------
Total shareholder's equity............................. 148,149 173,955 179,815
-------- -------- --------
Total liabilities and shareholder's equity............. $288,408 $281,296 $273,025
========= ========= =========
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE> 74

NATIONAL PROCESSING, INC.

CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------- --------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................................ $272,511 $319,532 $339,295 $ 78,350 $ 83,947
Operating expenses...................... 148,927 178,633 189,505 43,027 46,396
Wages and benefits...................... 49,541 56,966 53,801 13,618 14,204
General and administrative expenses..... 36,048 40,214 41,807 10,413 10,650
Depreciation and amortization........... 7,402 9,554 10,423 2,503 2,786
-------- -------- -------- -------- --------
Operating profit........................ 30,593 34,165 43,759 8,789 9,911
Net interest (expense) income........... (363) (582) 620 87 294
-------- -------- -------- -------- --------
Income before income taxes.............. 30,230 33,583 44,379 8,876 10,205
Provision for income taxes.............. 12,846 14,327 18,573 3,709 4,345
-------- -------- -------- -------- --------
Net income.............................. $ 17,384 $ 19,256 $ 25,806 $ 5,167 $ 5,860
========= ========= ========= ========= =========
Net income per share.................... $0.40 $0.45 $0.60 $0.12 $0.14
========= ========= ========= ========= =========
Shares used in computation.............. 43,100 43,100 43,100 43,100 43,100
========= ========= ========= ========= =========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 75

NATIONAL PROCESSING, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON CONTRIBUTED RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ----------- -------- --------
<S> <C> <C> <C> <C>
Balance at January 1, 1993............... $1 $11,214 $ 46,683 $ 57,898
Capital contribution from NCC............ 53,611 53,611
Net income............................... 17,384 17,384
-- ----------- -------- --------
Balance at December 31, 1993............. 1 64,825 64,067 128,893
Net income............................... 19,256 19,256
-- ----------- -------- --------
Balance at December 31, 1994............. 1 64,825 83,323 148,149
Net income............................... 25,806 25,806
-- ----------- -------- --------
Balance at December 31, 1995............. 1 64,825 109,129 173,955
Net income (unaudited)................... 5,860 5,860
-- ----------- -------- --------
Balance at March 31, 1996 (unaudited).... $1 $64,825 $114,989 $179,815
======== =========== ========= =========
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE> 76

NATIONAL PROCESSING, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------- ---------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income........................ $ 17,384 $ 19,256 $ 25,806 $ 5,167 $ 5,860
Items not requiring cash
currently:
Uncollectible check expense..... 27,931 31,542 30,538 7,406 5,951
Depreciation and amortization... 7,402 9,554 10,423 2,503 2,786
Changes in current assets and
liabilities:
Accounts receivable.......... (7,819) (8,383) (11,785) 13,546 20,595
Check inventory.............. (34,515) (27,256) (29,068) (6,292) (5,847)
Accounts payable--trade...... 1,201 1,528 5,163 351 (3,468)
Merchant payable--check
services................... (618) (2,121) (940) (1,846) 1,476
Accrued bankcard
assessments................ 2,374 1,804 4,508 (2,848) (4,404)
Income taxes
payable/receivable......... (4,414) (2,343) 2,107 3,067 2,955
Other current
assets/liabilities......... 77 6,571 1,411 1,535 (9,261)
Other, net................... (1,687) (537) 773 (525) 350
-------- -------- -------- -------- --------
Net cash provided by operating
activities...................... 7,316 29,615 38,936 22,064 16,993
INVESTING ACTIVITIES
Capital expenditures.............. (10,035) (10,825) (10,066) (1,678) (3,513)
Acquisitions, net of cash
acquired........................ 4,221 (6,179) (8,466) -- --
-------- -------- -------- -------- --------
Net cash used for investing
activities...................... (5,814) (17,004) (18,532) (1,678) (3,513)
FINANCING ACTIVITIES
Principal payments under property
leased from affiliate........... (182) (144) (144) (35) (36)
Due to affiliates................. (4,833) (2,885) (14,421) (14,421) --
-------- -------- -------- -------- --------
Net cash used for financing
activities...................... (5,015) (3,029) (14,565) (14,456) (36)
-------- -------- -------- -------- --------
Net (decrease) increase in cash
and cash equivalents............ (3,513) 9,582 5,839 5,930 13,444
Cash and cash equivalents,
beginning of period............. 10,710 7,197 16,779 16,779 22,618
-------- -------- -------- -------- --------
Cash and cash equivalents, end of
period.......................... $ 7,197 $ 16,779 $ 22,618 $ 22,709 $ 36,062
========= ========= ========= ========= =========
</TABLE>

See notes to consolidated financial statements.

F-7
<PAGE> 77

NATIONAL PROCESSING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INFORMATION PERTAINING TO MARCH 31, 1996
AND FOR THE THREE-MONTH PERIODS ENDED
MARCH 31, 1995 AND MARCH 31, 1996
IS UNAUDITED

A. ORGANIZATION AND BUSINESS

ORGANIZATION

National Processing, Inc. (the Company) (a wholly owned subsidiary of
National City Corporation (NCC), a bank holding company headquartered in
Cleveland, Ohio) became the owner of all of the outstanding shares of National
Processing Company (NPC) on June 5, 1996. In connection with its organization,
the Company issued 750 shares of common stock to NCC, and NCC contributed the
common stock of NPC (also a wholly owned subsidiary of NCC) to the Company.
Since both the Company and NPC are wholly owned subsidiaries of NCC, this
transfer of assets has been accounted for on the basis of historical cost. The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries. All significant intercompany transactions are
eliminated in consolidation.

BUSINESS

The Company is a leading provider of transaction processing services and
customized processing solutions. The Company currently provides these services
in three principal areas: Merchant Services, Corporate Services and Travel
Services. Within Merchant Services, the Company focuses primarily on markets for
credit and debit card processing and for check acceptance and collection. The
Company's Corporate Services business provides integrated outsourcing solutions
for customers' remittance processing, freight bill processing, corporate
accounts payable and imaging functions. Customers of the Company's Merchant
Services and Corporate Services are diverse in terms of both industries and size
with no significant concentration in any particular industry or customer type.
Through an exclusive long-term contract with the Airlines Reporting Corporation
("ARC"), which contract accounts for approximately $50 million in annual
revenues for the Company, Travel Services acts as a processor and clearing house
of all airline ticket payment transactions generated by travel agents in the
United States.

B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

Financial statements prepared in accordance with generally accepted
accounting principles necessitate the use of estimates and assumptions, by
management, that influence the reported amounts of revenues and expenses, assets
and liabilities and the disclosure requirement for contingent assets and
liabilities during and at the date of the financial statements. As a
consequence, actual results could differ from those estimates.

REVENUE RECOGNITION

The Company recognizes as fee income the amounts charged by its various
businesses for the related processing activities. All revenues are recognized at
the time services are rendered.

CASH AND CASH EQUIVALENTS

Cash equivalents consist of highly liquid bank certificates of deposit
which are readily convertible to cash.

F-8
<PAGE> 78

NATIONAL PROCESSING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

FINANCIAL INSTRUMENTS

The Company's financial instruments consist of accounts receivable,
restricted deposits, accounts payable, merchants payable, and payables to
affiliates. The carrying values of these financial instruments approximate their
fair values.

CHECK INVENTORY

The amount paid for checks submitted to the Company by merchants
participating in its various check guarantee programs are recorded in an
inventory account at the amount the Company deems ultimately collectible,
subject to revision based on a continuous review of collection statistics. The
check inventory is classified as current in accordance with trade practice.

RESTRICTED DEPOSITS--CLIENTS FUNDS

The Company's travel and freight processing businesses regularly receive
funds, as part of the settlement process, in advance of the related
disbursement. Such monies are set aside in restricted accounts and a liability
is recorded for an equal and offsetting amount.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost and depreciated on a straight-line
basis over the estimated useful life or term of the lease, whichever is shorter.
Maintenance and repairs are expensed as incurred, while improvements that extend
the useful life of the related assets are capitalized and depreciated over the
remaining life of the related assets. The ranges of estimated useful lives are
as follows:

<TABLE>
<S> <C>
Furniture and equipment 3 to 10 years
Building and leasehold improvements 5 to 20 years
Property leased from affiliates 35 years
Land improvements 15 years
</TABLE>

Upon the sale or disposal of property or equipment, the cost and accumulated
depreciation accounts are adjusted accordingly and any gain or loss is
recognized in income. Depreciation expense was $5.3 million, $7.3 million, and
$8.1 million in 1993, 1994, and 1995, respectively, and $1.9 million and $2.2
million in the first three months of 1995 (unaudited) and 1996 (unaudited),
respectively.

ACQUISITIONS

Operations of companies acquired in purchase transactions are included in
the statements of income from the respective acquisition dates. The excess of
the purchase price over the net assets acquired (goodwill) is amortized on a
straight-line basis over 40 years.

MERCHANT PAYABLE--CHECK SERVICES

As part of its check services operations, the Company reimburses merchants
for checks that are dishonored. The liability to merchants for returned checks
guaranteed by the Company is established in part based upon an estimate of the
volume of checks accepted by the various merchants which are expected to be
dishonored. Differences between the estimated and actual merchant guaranteed
check liability are recorded at the time the checks are acquired from the
merchants.

F-9
<PAGE> 79

NATIONAL PROCESSING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
ACCRUED BANKCARD ASSESSMENTS

The liability to the VISA(R) and MasterCard(R) organizations originating
from the Company's agreements with these agencies, as an authorized processor,
is accrued and settled on a monthly and quarterly basis, respectively. The
Company recovers these assessment charges through various contractual
arrangements with its customers.

INCOME TAXES

The Company is included in the consolidated federal income tax return of
NCC. NCC's policy is to allocate income taxes to its subsidiaries on a separate
return basis.

NET INCOME PER SHARE

Net income per share is based upon the number of common shares outstanding
during each period. The number of common shares used in the determination of per
share amounts has been adjusted in all periods presented to give retroactive
effect to the 57,465 2/3 for 1 stock split which was effective on June 6, 1996.

C. ACQUISITIONS

In February 1993, NCC acquired JBS Associates, Inc. (JBS), a check
guarantee and authorization business, for total consideration of $53.6 million,
consisting of cash of $24.3 million and approximately 1.5 million shares of NCC
common stock, and contributed the net assets of JBS to NPC. In January 1994, the
Company acquired certain assets of CTI Logistics, Inc., a freight payment
processor. These transactions were accounted for as purchases and, accordingly,
the purchase prices were allocated to the assets acquired based on their
estimated fair values.

In December 1995, the Company acquired certain of the assets of the
remittance processing business of First Data Resources Inc. (FDR) under an
agreement wherein NPC will provide remittance processing for current and future
customers of FDR. $4.8 million was allocated to the cost of the contract and is
being amortized over 15 years beginning in 1996.

On January 1, 1996, the Company adopted Statement of Financial Accounting
Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." This standard requires that long-lived
assets and certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The impairment is measured based on the present value of
expected future cash flows from the use of the asset and its eventual
disposition. If the expected future cash flows are less than the carrying amount
of the asset, an impairment loss is recognized. The adoption of this statement
did not have a material impact on financial position or results of operations.

D. TRANSACTIONS WITH AFFILIATES

The Company maintains a line of credit with National City Bank of Kentucky
(NCBK), a wholly-owned subsidiary of NCC, for its short-term borrowing needs.
The Company also leases certain facilities from NCBK under long-term agreements
classified as "Property Leased From Affiliate" in the accompanying financial
statements. Future minimum payments under these leases, which expire between
1999 and 2019, are $5.1 million, including interest of $2.4 million.

F-10
<PAGE> 80

NATIONAL PROCESSING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

D. TRANSACTIONS WITH AFFILIATES -- (CONTINUED)
Borrowings made are pursuant to formalized arrangements with NCBK. The
borrowings outstanding totaled $14.4 million at December 31, 1994. No
obligations were outstanding at December 31, 1995 or March 31, 1996 (unaudited).
The interest rate on borrowings was 5.94%, 5.91%, and 5.38% at December 31, 1994
and 1995 and March 31, 1996 (unaudited), respectively. The Company paid $0.4
million, net, in 1993, and $0.6 million, net, in 1994, received $0.6 million,
net, in 1995 for interest and received $0.1 million and $0.3 million, net, for
the three month period ended March 31, 1995 (unaudited) and 1996 (unaudited),
respectively.

The Company uses the proof and transit department of NCBK to provide
processing for remittances. The charges for these services, which are included
in operating expenses, were $3.7 million each year in 1993, 1994, and 1995 and
$1.0 million and $0.9 million for the three month period ended March 31, 1995
(unaudited) and 1996 (unaudited), respectively.

The Company receives certain administrative services, such as internal
audit and legal, from NCC and its affiliates. Charges for these services are
included in general and administrative expenses and totalled $1.1 million, $1.8
million, and $2.1 million in 1993, 1994, and 1995, respectively, and $0.5
million and $0.5 million for the three month period ended March 31, 1995
(unaudited) and 1996 (unaudited), respectively.

E. OPERATING LEASES

The Company leases various offices, facilities and equipment under
noncancellable lease agreements with expiration dates through 2003. During the
normal course of business, most of these leases will be renewed or replaced by
other leases. Future minimum rental payments under these leases are $4.4 million
in 1996; $2.9 million in 1997; $2.2 million in 1998; $1.9 million in 1999; $1.5
million in 2000 and $8.5 million thereafter. Rent expense under operating leases
was $3.9 million, $5.1 million, and $5.6 million in 1993, 1994 and 1995,
respectively, and $1.3 million and $1.5 million for the three month period ended
March 31, 1995 (unaudited) and 1996 (unaudited), respectively.

F. PROVISION FOR INCOME TAXES

The provision for income taxes consists of the following (in thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31 MARCH 31
--------------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Federal:
Current............................ $12,075 $11,163 $14,826 $3,370 $3,778
Deferred........................... (776) (843) (812) (484) (54)
State................................ 1,547 4,007 4,559 823 621
------- ------- ------- ------ ------
$12,846 $14,327 $18,573 $3,709 $4,345
======== ======== ======== ====== ======
</TABLE>

F-11
<PAGE> 81

NATIONAL PROCESSING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

F. PROVISION FOR INCOME TAXES -- (CONTINUED)

The temporary differences that gave rise to deferred tax assets and
liabilities, which are included in the income tax receivable from or payable to
NCC, are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------- ---------
1994 1995 1996
------- ------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Bad debts.............................................. $ 212 $ 673 $ 624
Pension................................................ 29 453 421
Benefits and deferred compensation..................... 1,186 854 959
Other.................................................. 23 26 26
Deferred tax liabilities:
Depreciation........................................... (1,024) (1,342) (1,342)
Amortization........................................... (315) (122) (90)
Other.................................................. (700) (319) (321)
------- ------- ---------
Net deferred tax (liabilities) assets.................... $ (589) $ 223 $ 277
======== ======== =========
</TABLE>

The reconciliation of the U.S. statutory income tax rate to the Company's
effective tax rate is as follows:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31 MARCH 31
------------------------ --------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
U.S. statutory rate.............................. 35.0% 35.0% 35.0% 35.0% 35.0%
Non-deductible amortization...................... 2.0 2.0 1.5 1.9 1.7
State taxes, net of federal benefit.............. 3.3 7.8 6.7 6.0 4.0
Other............................................ 2.2 (2.1) (1.3) (1.1) 1.9
---- ---- ---- ---- ----
42.5% 42.7% 41.9% 41.8% 42.6%
===== ===== ===== ===== =====
</TABLE>

Cash paid to NCC for income taxes was $11.9 million, $14.3 million, and
$15.4 million in 1993, 1994, and 1995, respectively. Cash received from NCC for
income taxes was $0.1 million and cash paid to NCC for income taxes was $0.9
million for the three months ended March 31, 1995 (unaudited) and 1996
(unaudited), respectively.

G. EMPLOYEE BENEFIT PLANS

An employee thrift plan offers all employees, who meet certain age and
eligibility requirements, a program of regular savings and investment funded by
their own contributions and discretionary matching contributions of NPC. NPC
recorded $1.1 million, $1.6 million, and $2.1 million, respectively, in matching
contributions during 1993, 1994, 1995 and $0.5 million and $0.6 million for the
three month period ended March 31, 1995 (unaudited) and 1996 (unaudited),
respectively.

NPC receives a charge from NCC for the administration of the remaining
assets and liabilities associated with a curtailed defined benefit retirement
plan which amounted to $1.0 million, $0.5 million, and $0.2 million in 1993,
1994, and 1995, respectively, and $0.1 million and $0.1 million for the three
month period ended March 31, 1995 (unaudited) and 1996 (unaudited),
respectively.

F-12
<PAGE> 82

NATIONAL PROCESSING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

H. STOCK OPTIONS

The Company was authorized on June 5, 1996 to grant options up to 4,000,000
and 200,000 shares of common stock under an employee stock option plan (the
Employee Plan) and a non-employee directors stock option plan (the Directors
Plan), respectively. The Employee Plan authorizes the issuance of options to
purchase common stock to officers and key employees at the market price of the
shares on the date of grant. Options generally become exercisable 33% annually
beginning one year from the date of grant. The Directors Plan authorizes the
issuance of options to purchase common stock to certain directors at the market
price of the shares on the date of grant.

In connection with its initial public offering of common stock, the Company
expects to grant options of 2,120,000 and 125,000 shares under the Employee Plan
and the Directors Plan, respectively, at the initial public offering price,
which will be accounted for in accordance with APB Opinion No. 25.

In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 defines a fair value-based method of accounting for
stock-based employee compensation plans. Under the fair-value based method,
compensation cost is measured at the grant date based upon the value of the
award and is recognized over the service period. The standard encourages all
entities to adopt this method of accounting for all employee stock compensation
plans. However, it also allows an entity to measure compensation costs for its
plans as prescribed in APB Opinion No. 25, "Accounting for Stock Issued to
Employees." If an entity elects to use the accounting in Opinion 25, pro forma
disclosures of net income and earnings per share must be made as if the fair
value method of accounting, as defined by SFAS No. 123, had been applied. The
disclosure requirements of SFAS No. 123 will be adopted as required for
financial statements in 1996.

I. COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Company is involved in litigation
from time to time. In the opinion of management, the ultimate liability, if any,
arising from this litigation is not expected to have a material adverse effect
on the Company's financial condition, results of operations, or liquidity.

J. SELECTED QUARTERLY DATA (UNAUDITED)

Selected quarterly data for the years ended December 31, 1995 and 1994 are
as follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Revenues.......................... $78,350 $84,902 $85,136 $90,907 $339,295
Operating profit.................. 8,789 10,719 10,496 13,755 43,759
Net income........................ 5,167 6,301 6,170 8,168 25,806
Net income per share.............. 0.12 0.15 0.14 0.19 0.60
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
------------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Revenues.......................... $72,972 $79,102 $80,675 $86,783 $319,532
Operating profit.................. 6,765 9,196 8,707 9,497 34,165
Net income........................ 3,581 4,908 4,675 6,092 19,256
Net income per share.............. 0.09 0.11 0.11 0.14 0.45
</TABLE>

F-13
<PAGE> 83

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL 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

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information.................. 2
Prospectus Summary...................... 3
Risk Factors............................ 7
Use of Proceeds......................... 15
Dividend Policy......................... 15
Capitalization.......................... 16
Dilution................................ 17
Selected Consolidated Financial Data.... 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 19
Business................................ 25
Management.............................. 44
Executive Compensation.................. 46
Certain Transactions.................... 59
Description of Capital Stock............ 62
Shares Available for Future Sale........ 65
Underwriting............................ 66
Legal Matters........................... 67
Experts................................. 67
Index to Financial Statements........... F-1
</TABLE>

UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

6,500,000 SHARES

NATIONAL PROCESSING, INC.

COMMON STOCK
(WITHOUT PAR VALUE)

LOGO

SALOMON BROTHERS INC

MONTGOMERY SECURITIES

NATCITY INVESTMENTS, INC.

SMITH BARNEY INC.

PROSPECTUS

DATED , 1996
<PAGE> 84

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following is a list of the estimated expenses to be incurred by the
Registrant in connection with the issuance and distribution of the Common Stock
being registered hereby, other than underwriting discounts and commissions.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee..................... $ 41,242
National Association of Securities Dealers, Inc. filing fee............. 12,460
New York Stock Exchange application fee................................. 244,113
Transfer Agent's and Registrar's fees................................... 23,000
Printing and engraving costs............................................ 374,000
Accounting fees and expenses............................................ 200,000
Legal fees and expenses (not including Blue Sky)........................ 400,000
Blue Sky fees and expenses.............................................. 15,000
Miscellaneous expenses.................................................. 185
---------------
Total......................................................... $ 1,310,000
===============
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 1701.13 of the Ohio Revised Code sets forth the conditions and
limitations governing the indemnification of officers, directors and other
persons. Section 1701.13 provides that a corporation shall have the power to
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 (other than an action by or in
the right of the corporation) 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
the request of the corporation in a similar capacity with another corporation or
other entity, against expenses (including attorneys fees), judgments, fines and
amounts paid in settlement incurred in connection therewith if he acted in good
faith and in a manner that he reasonably believed to be in, or not opposed to,
the best interests of the corporation and, with respect to a criminal
proceeding, had no reasonable cause to believe that his conduct was unlawful.
With respect to a suit by or in the right of the corporation, indemnity may be
provided to the foregoing persons under Section 1701.13 on a basis similar to
that set forth above, except that no indemnity may be provided in respect of any
claim, issue or matter as to which such person has been adjudged to be liable to
the corporation unless and to the extent that the court in which such action,
suit or proceeding was brought determines that despite the adjudication of
liability but in view of all the circumstances of the case such person is
entitled to indemnity for such expenses as the court deems proper. Moreover,
Section 1701.13 provides for mandatory indemnification of a director, officer,
employee or agent of the corporation to the extent that such person has been
successful in defense of any such action, suit or proceeding and provides that a
corporation shall pay the expenses of an officer or director in defending an
action, suit or proceeding upon receipt of an undertaking to repay such amounts
if it is ultimately determined that such person is not entitled to be
indemnified. Section 1701.13 establishes provisions for determining whether a
given person is entitled to indemnification, and also provides that the
indemnification provided by or granted under Section 1701.13 is not exclusive of
any rights to indemnity or advancement of expenses to which such person may be
entitled under any regulation, agreement, vote of stockholders or disinterested
directors or otherwise.

Under certain circumstances provided in Regulations 30, 31 and 32 of the
Registrant's Code of Regulations and subject to Section 1701.13 of the Ohio
Revised Code (which sets forth the conditions and limitations governing the
indemnification of officers, directors and other persons), the Registrant will
indemnify any director or officer or any former director or officer of the
Registrant against expenses, including attorney's fees, judgments, fines and
amounts paid in settlement, actually and reasonably incurred by him by reason of
the fact that he is or was such director or officer in connection with any

II-1
<PAGE> 85

threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative. A copy of the Registrant's Code of
Regulations is included herein as Exhibit 3.1(ii).

The Registrant currently is negotiating to obtain an insurance policy
insuring the directors and officers of the Registrant against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act").

Reference is made to the Form of Underwriting Agreement filed as Exhibit
1.1 hereto with respect to the indemnification provisions contained therein.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

On June 5, 1996, the Registrant issued 750 shares of Common Stock to
National City Corporation and National City Corporation contributed all of the
shares of National Processing Company ("NPC") to the Registrant.

On June 6, 1996, the Registrant effected a 57,465 2/3-to-one stock split in
the form of a stock dividend of 43,099,250 shares to National City Corporation.

The foregoing transactions were effected pursuant to the exemption from
registration provided by Section 4(2) of the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits. The following Exhibits are filed herewith and made a part
hereof:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------------- ---------------------------------------------------------------------------
<C> <S>
* 1.1 Form of Underwriting Agreement.
* 3.1(i) Amended Articles of Incorporation of the Registrant.
* 3.1(ii) Code of Regulations of the Registrant.
* 4.1 Specimen Certificate for the Common Stock, without par value, of the
Registrant.
* 4.2 Registration Rights Agreement between the Registrant and National City
Corporation, dated July 16, 1996.
5.1 Opinion of Jones, Day, Reavis & Pogue as to the validity of the securities
being offered.
*10.1 Absolute Net Ground Lease by and between Preston Manor, Inc. and Allied
Stores Corporation, dated January 16, 1969.
*10.2 Second Amendment to Lease by and between William G. Earley, Plaza Centers,
Inc. and First National Bank of Louisville, dated April 15, 1986.
*10.3 Building Lease between First National Bank of Louisville and NPC of
Arizona, dated September 1, 1984.
*10.4 Sponsorship Agreement between NPC and National City Bank of Kentucky, dated
June 30, 1996.
*10.5 Administrative Services Agreement between NPC and National City
Corporation, dated July 15, 1996.
*10.6 Form of Remittance Processing Services Agreement by and among NPC and
certain bank subsidiaries of National City Corporation.
*10.7 Administrative Services Agreement by and among NPC and Stored Value
Systems, Inc., dated July 3, 1996.
*10.8 Form of Card Services Agreement by and among NPC and its affiliated
corporations and certain bank subsidiaries of National City Corporation.
*10.9 Tax Sharing Agreement between the Registrant and National City Corporation,
dated July 17, 1996.
</TABLE>

II-2
<PAGE> 86

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------------- ---------------------------------------------------------------------------
<C> <S>
*10.10 The Agreement between Airlines Reporting Corporation and First National
Bank of Louisville and NPC for Area Settlement Plan Processing Services,
dated October 16, 1986.
*10.11 First Amendment to Agreements between Airlines Reporting Corporation and
First National Bank of Louisville and NPC, dated December 12, 1991.
*10.12 1994 Amendment to Agreements between Airlines Reporting Corporation and
NPC, dated December 31, 1994.
*10.13 Supplemental Agreement by and between NPC and Airlines Reporting
Corporation, dated February 24, 1995.
*10.14 Amendment to Agreement between Airlines Reporting Corporation and National
City Bank of Kentucky and NPC for Area Settlement Plan Processing Services,
dated August 19, 1995.
10.15 [Intentionally Omitted]
10.16 [Intentionally Omitted]
*10.17 Employment Agreement and Undertaking of Confidentiality between NPC and
Tony G. Holcombe, dated November 1, 1994.
*10.18 Employment Agreement and Undertaking of Confidentiality between NPC and
Richard A. Alston, dated January 18, 1995.
*10.19 Employment Agreement and Undertaking of Confidentiality between NPC and
Robert E. Johnson, dated April 4, 1995.
*10.20 Employment Agreement and Undertaking of Confidentiality between NPC and
Kurt S. Knipp, dated February 6, 1995.
*10.21 Employment Agreement and Undertaking of Confidentiality between NPC and
Thomas A. Wimsett, dated May 23, 1995.
*10.22 Employment, Non-Disclosure and Non-Competition Agreement between NPC and
David R. Zook, dated March 17, 1995.
*10.23 Severance Agreement between the Registrant and Tony G. Holcombe, dated June
7, 1996.
*10.24 Severance Agreement between the Registrant and Richard A. Alston, dated
June 7, 1996.
*10.25 Severance Agreement between the Registrant and Robert E. Johnson, dated
June 7, 1996.
*10.26 Severance Agreement between the Registrant and Kurt S. Knipp, dated June 7,
1996.
*10.27 Severance Agreement between the Registrant and Thomas A. Wimsett, dated
June 7, 1996.
*10.28 Severance Agreement between the Registrant and David R. Zook, dated June 7,
1996.
*10.29 1996 Stock Option Plan and Form of Stock Option Agreement.
*10.30 Nonemployee Directors Stock Option Plan and Form of Stock Option Agreement.
*10.31 NPC's Short-Term Incentive Compensation Plan for Senior Executives, dated
January 1, 1995.
*10.32 NPC's Long-Term Incentive Compensation Plan for Senior Officers, dated
January 1, 1995.
10.33 [Intentionally Omitted]
10.34 [Intentionally Omitted]
10.35 [Intentionally Omitted]
*10.36 Amendment to Building Lease between National City Bank of Kentucky and NPC,
dated July 3, 1996.
*10.37 Form of Severance Agreement between the Registrant and certain Senior Vice
Presidents.
</TABLE>

II-3
<PAGE> 87

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------------- ---------------------------------------------------------------------------
<C> <S>
*10.38 Check Processing Services Agreement between National City Bank of Kentucky
and NPC.
*10.39 Commitment Letter of SunTrust Bank, Nashville, N.A. to the Registrant,
dated July 16, 1996.
*21.1 Subsidiaries of the Registrant.
23.1 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1).
23.3 Consent of Ernst & Young, LLP, independent auditors, dated August 7, 1996.
*24.1 Powers of Attorney.
</TABLE>

- ---------------
* Previously filed.

(b) Financial Statement Schedules.

All schedules have been omitted because they are not applicable, not
required or the required information is included in the financial statements and
notes thereto.

ITEM 17. UNDERTAKINGS

(a) Equity Offerings of Nonreporting Registrants. The undersigned
Registrant hereby undertakes to provide to the Underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.

(b) Acceleration of Effectiveness. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the Company pursuant to the
foregoing provisions or otherwise, the Company 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
that the payment by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company 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 Company 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.

(1) For the purpose 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 purposes 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 public offering thereof.

II-4
<PAGE> 88

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Amendment No. 2 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Cleveland, State of Ohio, on August 7, 1996.

NATIONAL PROCESSING, INC.

By: /s/ Richard A. Alston
Executive Vice President,
Finance and Corporate Development

Pursuant to the requirements of the Securities Act of 1933, this Amendment
Number 1 to the Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ----------------------------------- ----------------
<S> <C> <C>
* President, Chief Executive Officer August 7, 1996
Tony G. Holcombe and Director (Principal Executive
Officer)
/s/ Richard A. Alston Executive Vice President, Finance August 7, 1996
Richard A. Alston and Corporate Development
(Principal Financial Officer)
* Chief Accounting Officer August 7, 1996
Glen Rhodes (Principal Accounting Officer)
* Director August 7, 1996
James R. Bell III
* Director August 7, 1996
William R. Robertson
* Director August 7, 1996
Robert G. Siefers
* Director August 7, 1996
Delroy R. Hayunga
</TABLE>

* The undersigned by signing his name hereto, does sign and execute this
Amendment No. 2 to the Registration Statement pursuant to the Powers of
Attorney executed by the above-named officers and directors of the Company and
which have been filed with the Securities and Exchange Commission on behalf of
such officers and directors.

By: /s/Richard A. Alston
Richard A. Alston
as Attorney-in-Fact

II-5
<PAGE> 89

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- --------------- -----------------------------------------------------------
<C> <S> <C>
*1.1 Form of Underwriting Agreement.
*3.1(i) Amended Articles of Incorporation of the Registrant.
*3.1(ii) Code of Regulations of the Registrant.
*4.1 Specimen Certificate for the Common Stock, without par
value, of the Registrant.
*4.2 Registration Rights Agreement between the Registrant and
National City Corporation, dated July 16, 1996.
5.1 Opinion of Jones, Day, Reavis & Pogue as to the validity of
the securities being offered.
*10.1 Absolute Net Ground Lease by and between Preston Manor,
Inc. and Allied Stores Corporation, dated January 16, 1969.
*10.2 Second Amendment to Lease by and between William G. Earley,
Plaza Centers, Inc. and First National Bank of Louisville,
dated April 15, 1986.
*10.3 Building Lease between First National Bank of Louisville
and NPC of Arizona, dated September 1, 1984.
*10.4 Sponsorship Agreement between NPC and National City Bank of
Kentucky, dated June 30, 1996.
*10.5 Administrative Services Agreement between NPC and National
City Corporation, dated July 15, 1996.
*10.6 Form of Remittance Processing Services Agreement by and
among NPC and certain bank subsidiaries of National City
Corporation.
*10.7 Administrative Services Agreement by and among NPC and
Stored Value Systems, Inc., dated July 3, 1996.
*10.8 Form of Card Services Agreement by and among NPC and its
affiliated corporations and certain bank subsidiaries of
National City Corporation.
*10.9 Tax Sharing Agreement between the Registrant and National
City Corporation, dated July 17, 1996.
*10.10 The Agreement between Airlines Reporting Corporation and
First National Bank of Louisville and NPC for Area
Settlement Plan Processing Services, dated October 16,
1986.
*10.11 First Amendment to Agreements between Airlines Reporting
Corporation and First National Bank of Louisville and NPC,
dated December 12, 1991.
*10.12 1994 Amendment to Agreements between Airlines Reporting
Corporation and NPC, dated December 31, 1994.
*10.13 Supplemental Agreement by and between NPC and Airlines
Reporting Corporation, dated February 24, 1995.
*10.14 Amendment to Agreement between Airlines Reporting
Corporation and National City Bank of Kentucky and NPC, for
Area Settlement Plan Processing Services, dated August 19,
1995.
10.15 [Intentionally Omitted]
10.16 [Intentionally Omitted]
*10.17 Employment Agreement and Undertaking of Confidentiality
between NPC and Tony G. Holcombe, dated November 1, 1994.
*10.18 Employment Agreement and Undertaking of Confidentiality
between NPC and Richard A. Alston, dated January 18, 1995.
*10.19 Employment Agreement and Undertaking of Confidentiality
between NPC and Robert E. Johnson, dated April 4, 1995.
</TABLE>

<PAGE> 90

<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- --------------- -----------------------------------------------------------
<C> <S> <C>
*10.20 Employment Agreement and Undertaking of Confidentiality
between NPC and Kurt S. Knipp, dated February 6, 1995.
*10.21 Employment Agreement and Undertaking of Confidentiality
between NPC and Thomas A. Wimsett, dated May 23, 1995.
*10.22 Employment, Non-Disclosure and Non-Competition Agreement
between NPC and David R. Zook, dated March 17, 1995.
*10.23 Severance Agreement between the Registrant and Tony G.
Holcombe, dated June 7, 1996.
*10.24 Severance Agreement between the Registrant and Richard A.
Alston, dated June 7, 1996.
*10.25 Severance Agreement between the Registrant and Robert E.
Johnson, dated June 7, 1996.
*10.26 Severance Agreement between the Registrant and Kurt S.
Knipp, dated June 7, 1996.
*10.27 Severance Agreement between the Registrant and Thomas A.
Wimsett, dated June 7, 1996.
*10.28 Severance Agreement between the Registrant and David R.
Zook, dated June 7, 1996.
*10.29 1996 Stock Option Plan and Form of Stock Option Agreement.
*10.30 Nonemployee Directors Stock Option Plan and Form of Stock
Option Agreement.
*10.31 NPC's Short-Term Incentive Compensation Plan for Senior
Executives, dated January 1, 1995.
*10.32 NPC's Long-Term Incentive Compensation Plan for Senior
Officers, dated January 1, 1995.
10.33 [Intentionally Omitted]
10.34 [Intentionally Omitted]
10.35 [Intentionally Omitted]
*10.36 Amendment to Building Lease between National City Bank of
Kentucky and NPC, dated July 3, 1996.
*10.37 Form of Severance Agreement between the Registrant and
certain Senior Vice Presidents.
*10.38 Check Processing Services Agreement between National City
Bank of Kentucky and NPC.
*10.39 Commitment Letter of SunTrust Bank, Nashville, N.A. to the
Registrant, dated July 16, 1996.
*21.1 Subsidiaries of the Registrant.
23.1 Consent of Jones, Day, Reavis & Pogue (included in Exhibit
5.1).
23.3 Consent of Ernst & Young, LLP, independent auditors, dated
August 7, 1996.
*24.1 Powers of Attorney.
</TABLE>

- ---------------
* Previously filed.

<PAGE> 1
Exhibit 5.1

August 7, 1996

National Processing, Inc.
1231 Durrett Lane
Louisville, Kentucky 40285-0001

Re: 7,475,000 Shares of Common Stock, without
par value, of National Processing, Inc.
---------------------------------------

Gentlemen:

We are acting as counsel for National Processing, Inc., an
Ohio corporation (the "Company"), in connection with the issuance and sale of up
to 7,475,000 shares, including 975,000 shares which may be sold pursuant to an
over-allotment option granted by the Company to the Underwriters (as defined
below), of Common Stock, without par value, of the Company (the "Shares") in
accordance with the terms and conditions of an Underwriting Agreement (the
"Underwriting Agreement") to be entered into among the Company, Salomon Brothers
Inc, Montgomery Securities, NatCity Investments, Inc. and Smith Barney Inc., as
representatives of the Underwriters named therein (the "Underwriters") with
respect to the Shares.

We have examined such documents, records and matters of law as
we have deemed necessary for purposes of this opinion, and based thereupon we
are of the opinion that, subject to the approval of the specified terms of sale
of the Shares by the Pricing Committee of the Board of Directors of the Company:

The Shares will be duly authorized and, when issued and
delivered by the Company to the Underwriters pursuant to the Underwriting
Agreement against payment of the consideration therefor as provided therein,
will be validly issued, fully paid and nonassessable.

We hereby consent to the filing of this opinion as Exhibit 5.1
to Amendment No. 2 to the Registration Statement on Form S-1 filed by the
Company to effect the registration of the Shares under the Securities Act of
1933 and to the reference to us under the caption "Legal Matters" in the
Prospectus constituting a part of such Registration Statement.

Very truly yours,

JONES, DAY, REAVIS & POGUE

<PAGE> 1
Exhibit 23.3

Consent of Independent Auditors

We consent to the references to our firm under the captions "Experts," "Summary
Consolidated Financial Data," and "Selected Consolidated Financial Data" and to
the use of our report dated June 6, 1996, in Amendment No. 2 to the
Registration Statement (Form S-1 No. 333-05507) and related Prospectus of
National Processing, Inc., for the registration of 7,475,000 shares of its
Common Stock.

ERNST & YOUNG LLP

Cleveland, Ohio
August 7, 1996