BA MERCHANT SERVICES INC, 424B4, 1996-12-19

BA MERCHANT SERVICES INC
424B4, 1996-12-19
COMPUTER PROCESSING & DATA PREPARATION

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<PAGE>

FILED PURSUANT TO RULE 424(B)(4)
FILE NO. 333-13985

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14,000,000 SHARES

[BA MERCHANT SERVICES, INC. LOGO APPEARS HERE]

CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)

----------

All of the shares of Class A Common Stock offered are being issued and sold
by the Company. Of the 14,000,000 shares of Class A Common Stock offered,
11,200,000 shares are being offered hereby in the United States and 2,800,000
shares are being offered in a concurrent international offering outside the
United States. The initial public offering price and the underwriting discount
per share are identical for both Offerings. See "Underwriting."

The Company has two classes of authorized Common Stock, Class A Common Stock
and Class B Common Stock. Holders of Class A Common Stock generally have
identical rights to holders of Class B Common Stock, except that holders of
Class A Common Stock are entitled to one vote per share while holders of Class
B Common Stock are entitled to ten votes per share on all matters submitted to
a vote of stockholders. See "Relationship with BankAmerica" and "Description of
Capital Stock."

All of the outstanding Common Stock of the Company is currently owned by the
Bank and Seafirst, which are wholly owned subsidiaries of BankAmerica
Corporation, a bank holding company registered under the Bank Holding Company
Act of 1956, as amended. Upon completion of the Offerings, BankAmerica,
indirectly through the Bank and Seafirst, will own 100% of the Company's
outstanding Class B Common Stock, which will represent approximately 68.3% of
the outstanding Common Stock of the Company (or 65.2% if the Underwriters
exercise their over-allotment options in full). See "Relationship with
BankAmerica" and "Business--Asia."

Prior to the Offerings, there has been no public market for the Class A
Common Stock. See "Underwriting" for a discussion of the factors considered in
determining the initial public offering price.

SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE CLASS A COMMON STOCK.

The Class A Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "BPI."

----------

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>
INITIAL PUBLIC UNDERWRITING PROCEEDS
OFFERING PRICE DISCOUNT(1) TO COMPANY(2)
-------------- ------------ -------------
<S> <C> <C> <C>
Per Share............................. $15.50 $0.88 $14.62
Total(3).............................. $217,000,000 $12,320,000 $204,680,000
</TABLE>
- -----
(1) The Company and BankAmerica have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933. See "Underwriting."
(2) Before deducting estimated expenses of $2,300,000 payable by the Company.

(3) The Company has granted the U.S. Underwriters an option for 30 days to
purchase up to an additional 1,680,000 shares of Class A Common Stock at
the initial public offering price per share, less the underwriting
discount, solely to cover over-allotments. Additionally, the Company has
granted an over-allotment option with respect to an additional 420,000
shares as part of the International Offering. If such options are exercised
in full, the total initial public offering price, underwriting discount and
proceeds to Company will be $249,550,000, $14,168,000 and $235,382,000,
respectively. See "Underwriting."

----------

The shares of Class A Common Stock offered hereby are offered severally by
the U.S. Underwriters, as specified herein, subject to receipt and acceptance
by them and subject to their right to reject any order in whole or in part. It
is expected that certificates for the shares will be ready for delivery in
New York, New York, on or about December 24, 1996, against payment therefor in
immediately available funds.

GOLDMAN, SACHS & CO.
MONTGOMERY SECURITIES
SALOMON BROTHERS INC

----------

The date of this Prospectus is December 18, 1996.
<PAGE>

Bank of America(R), BankAmericard(R), VERSATEL(R) and VERSATELLER(R) are
federally registered trademarks of BankAmerica Corporation.

Visa(R) is a federally registered trademark of Visa U.S.A. Inc., and
MasterCard(R) is a federally registered trademark of MasterCard International
Incorporated.

IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and the historical and pro
forma combined 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 options. Investors
should carefully consider the factors set forth under the caption "Risk
Factors." The Company was incorporated in October 1996. Prior to consummation
of the Offerings, Bank of America National Trust and Savings Association
(together with its subsidiaries, the "Bank") transferred to the Company its
domestic merchant processing business and the Seafirst Bank Division of Bank of
America NW, National Association ("Seafirst") transferred to the Company its
merchant processing business. References in this Prospectus to operations of
the Company prior to the date of transfer of such businesses to the Company are
to such businesses conducted as divisions of the Bank and Seafirst. References
in this Prospectus to "BankAmerica" shall be deemed to be references to
BankAmerica Corporation, a bank holding company registered under the Bank
Holding Company Act of 1956, as amended, and its subsidiaries and affiliates,
including the Bank and Seafirst, unless the context requires otherwise.
References in this Prospectus to the "Common Stock" shall be deemed to be
references to both the Company's Class A Common Stock, par value $.01 per
share, and the Company's Class B Common Stock, par value $.01 per share.

THE COMPANY

The Company provides an array of payment processing and related information
products and services to merchants who accept credit, charge and debit cards as
payment for goods and services throughout the United States. According to
published industry sources, the Company is the fourth largest processor of
merchant credit card transactions and the largest processor of debit card
transactions in the United States. The Company's products and services include
the processing of a wide variety of credit, charge and debit card transactions
and the provision to merchants of other related information, services and
product support.

The Company provides its products and services to a merchant customer base in
a wide variety of industries, including general retailers, restaurants and
supermarkets. The Company's customers are large multi-regional chains, middle
market merchants and small merchants that collectively operate from more than
135,000 locations. The Company's sales force of over 120 employees markets its
products and services to merchants directly and through the BankAmerica branch
network and product distribution system. In addition, the Company has grown its
customer base and increased its transaction volume through the use of agent
banks and independent sales organizations ("ISOs") that obtain customers on
behalf of the Company. The Company continually invests in technology, research
and product development and emphasizes excellent customer service in the
delivery of its products and services in order to attract and retain merchant
customers. The Company believes that its expense structure compares favorably
to that of its competitors. The Company's annual customer retention rate has
exceeded 95% in recent years.

The Company has experienced substantial growth in its transaction volume, net
revenue and net income during the three and three-quarter years ended September
30, 1996, principally through internally generated growth rather than through
acquisitions. The number of card transactions processed by the Company
increased from 201.8 million for the year ended December 31, 1993 to 319.0
million for the year ended December 31, 1995. During the same periods, the
Company's net revenue and net income increased from $88.9 million and $11.5
million to $109.9 million and $20.7 million, respectively. During the nine
months ended September 30, 1995 and the nine months ended

3
<PAGE>

September 30, 1996, the number of card transactions processed increased from
232.4 million to 270.5 million, the Company's net revenue increased from $80.6
million to $92.3 million and the Company's net income increased from $15.2
million to $18.6 million, respectively.

The Company believes that its growth in recent years has been attributable in
part to, and that it will continue to benefit from, its close affiliation with
BankAmerica. As a result of its contractual arrangements with BankAmerica, the
Company is able to utilize the Bank of America name and family of brands and
directly access BankAmerica's product distribution channels and customer base
in the conduct of its operations and the generation of new business. The Bank
of America name and brands are widely recognized by consumers and businesses
and provide the Company with substantial credibility in the merchant processing
market. The Company's relationship with BankAmerica also affords it access to
the marketing and sales capabilities of BankAmerica's approximately 1,997
retail banking branches in eleven states, the more than 850,000 small business
and middle market customers of BankAmerica, the approximately 10.9 million
BankAmerica debit card holders, the approximately 8.9 million BankAmerica
credit card holders and the approximately 8.0 million consumers holding
BankAmerica checking accounts at September 30, 1996. See "Risk Factors--Control
by BankAmerica and Potential Conflicts of Interest" and "Relationship with
BankAmerica."

The Company's principal strategic objectives are: (i) to remain as one of the
largest merchant processors through growth generated primarily through the
Company's own sales channels (and, to the extent attractive opportunities
arise, augmented through acquisitions); (ii) to continue increasing
profitability through careful attention to pricing and cost controls; (iii) to
provide a broad range of products that are both responsive to customer needs
and supported by excellent customer service; and (iv) to maintain its high
customer retention level.

The central components of the Company's business strategy to achieve these
objectives include:

. expanding its sales resources in the markets served by the BankAmerica
branch network, and in selected other markets in the United States and,
to the extent possible, in Asia, while also increasing its emphasis on
its agent bank and ISO relationships;

. continuing to capitalize on the BankAmerica relationship by taking
advantage of BankAmerica's prominent name and brand recognition, access
to BankAmerica's distribution system and customer base, the competitive
benefits from a higher volume of debit and credit card transactions
which bypass commercial networks (and the attendant network charges) and
are processed directly through BankAmerica (referred to herein as "On-
Us" transactions), access to BankAmerica's research and development
activities and the opportunities to bundle the Company's and
BankAmerica's products;

. managing its low cost structure through the introduction of new systems
that will increase efficiency, the expansion of On-Us transactions and
the integration of Seafirst's merchant processing business with the
Bank's merchant processing business;

. targeting new industries and customers, with a focus on larger "national
accounts," specialty industries and government institutions;

. expanding its product offerings, including product enhancements
resulting from the introduction of the Company's Automated Chargeback
System in 1996 and the planned introduction of its proprietary
PayLink(TM) transaction processing system during the first quarter of
1997, and expansion into check authorization and recovery services;

. increasing its emphasis on cross-selling other payment processing
products to its existing merchant customer base (particularly including
debit products and check authorization and recovery services); and

4
<PAGE>

. acquiring merchant portfolios and companies involved in the merchant
processing industry to the extent that attractive opportunities exist.

The Company was incorporated in October 1996 and combines into a single
organization: (i) the Bank's primary merchant processing business, a multi-
state operation based in California, and (ii) the merchant processing business
of Seafirst, located principally in the state of Washington. During 1996,
management of the Bank's primary merchant processing business assumed
management responsibility for the Seafirst operations. During 1997, the Company
expects to eliminate duplicative operations and combine these businesses where
possible. Such duplicative operations consist of merchant processing systems
and third party processing arrangements. The cost of eliminating such
arrangements is not expected to be material.

The Bank presently operates merchant processing businesses in five Asian
countries: Taiwan, the Philippines, Thailand, South Korea and India. To the
extent possible, the Company plans to build upon BankAmerica's initiatives in
Asia. Accordingly, the Company has entered into a definitive agreement with
BankAmerica to acquire the merchant processing businesses presently conducted
by the Bank in the Philippines and Thailand (the "Asian Acquisitions") and to
work cooperatively to allow the Company to acquire the Bank's merchant
processing businesses in Taiwan and other countries in Asia. Such expansion,
however, is dependent on approval in each such country of the local regulatory
authorities. The Company expects to receive such decisions of the local
regulatory authorities with respect to the Asian Acquisitions during the first
half of 1997, although no assurance can be given that any of the regulatory
approvals will be obtained or as to the timing thereof. Based on preliminary
indications from the Ministry of Finance in Taiwan, approval of the transfer of
the Bank's merchant processing business in Taiwan to the Company initially was
regarded by the Company as being unlikely. More recent indications received on
an informal basis from the Ministry of Finance are that such approval may be
possible. However, a formal application has not yet been submitted and the
matter remains at a preliminary stage at the date of this Prospectus. Although
the Company and BankAmerica intend to pursue Taiwanese approval of such
transfer, no assurances can be given that it will ever be obtained. In
addition, the Company and BankAmerica have agreed to evaluate the possibility
of entering into an outsourcing or other arrangement that would permit the
Company to participate meaningfully in the Bank's merchant processing business
in Taiwan in the event that such regulatory approval cannot be obtained. No
assurances can be given, however, that any such arrangement will ultimately
prove practicable. See "Risk Factors--Proposed Asian Acquisitions and
Operations," "Business--Asia" and "--Regulation."

Upon completion of the Offerings, BankAmerica will own 100% of the Company's
outstanding Class B Common Stock, which will represent approximately 68.3% of
the outstanding Common Stock of the Company (or 65.2% if the Underwriters
exercise their over-allotment options in full). The Company's headquarters are
located at One South Van Ness Avenue, San Francisco, California 94103,
telephone (415) 241-3390.

5
<PAGE>

THE OFFERINGS

<TABLE>
<C> <S>
Class A Common Stock Offered:
United States Offering.......................... 11,200,000 shares
International Offering.......................... 2,800,000 shares
Total....................................... 14,000,000 shares(1)
Common Stock to be Outstanding after the Offerings:
Class A Common Stock............................ 14,000,000 shares(1)(2)
Class B Common Stock............................ 30,200,000 shares(3)
Total....................................... 44,200,000 shares(1)(2)(3)
Voting Rights...................................... The holders of Class A
Common Stock, par value
$.01 per share (the "Class
A Common Stock"), gener-
ally have rights, includ-
ing as to dividends, iden-
tical to those of holders
of Class B Common Stock,
par value $.01 per share
(the "Class B Common
Stock"), except that hold-
ers of Class A Common
Stock are entitled to one
vote per share and holders
of Class B Common Stock
are entitled to ten votes
per share. Holders of
Class A Common Stock and
Class B Common Stock gen-
erally vote together as a
single class. See "De-
scription of Capital
Stock--Common Stock--Vot-
ing Rights."
Use of Proceeds.................................... To retire short-term debt
to an affiliate and for
general corporate purpos-
es. See "Use of Proceeds."
NYSE Symbol........................................ BPI
</TABLE>
- --------
(1) Does not include 2,100,000 shares of Class A Common Stock that may be sold
by the Company pursuant to the Underwriters' over-allotment options. See
"Underwriting."
(2) Does not include options and restricted stock grants with respect to ap-
proximately 321,000 shares of Class A Common Stock that have been awarded
by the Company to its executive officers and nonemployee directors effec-
tive upon completion of the Offerings. See "Executive Compensation."
(3) Does not include an aggregate of up to 700,000 shares of Class B Common
Stock issuable upon consummation of the Asian Acquisitions.

The offering of 11,200,000 shares of Class A Common Stock initially being
offered in the United States (the "United States Offering") and the offering of
2,800,000 shares of Class A Common Stock initially being offered outside the
United States (the "International Offering") are collectively referred to
herein as the "Offerings."

6
<PAGE>

RELATIONSHIP WITH BANKAMERICA

The Company is wholly owned by the Bank and Seafirst, which are wholly owned
subsidiaries of BankAmerica, a registered bank holding company. Upon completion
of the Offerings, BankAmerica will own 100% of the outstanding Class B Common
Stock of the Company, which will represent approximately 68.3% of the
outstanding Common Stock of the Company (or 65.2% if the Underwriters' over-
allotment options are exercised in full). Such economic ownership will
represent approximately 95.6% of the combined voting power of the Company's
outstanding Common Stock (or 94.9% if the Underwriters' over-allotment options
are exercised in full). BankAmerica will also have the ability to elect all of
the members of the Board of Directors of the Company and to exercise a
controlling influence over the business and affairs of the Company. See "Risk
Factors--Control by BankAmerica and Potential Conflicts of Interest."

At September 30, 1996, BankAmerica operated 1,997 retail banking branches in
the following states: California, Oregon, Nevada, Arizona, Washington, Alaska,
Idaho, Texas, New Mexico, Hawaii and Illinois. In California, BankAmerica's
most significant market, BankAmerica is the largest provider of retail banking
services, maintaining at September 30, 1996, approximately 1,007 branches and
at least one banking relationship with approximately one-half of the
households. At December 31, 1995, BankAmerica was the eighth largest issuer of
credit cards and the largest issuer of on-line debit cards in the United States
with 8.9 million credit card holders and 10.9 million debit card holders at
such date. BankAmerica is a leader in providing banking services to small
business and middle market merchants (with approximately 850,000 such customers
at September 30, 1996). BankAmerica conducts its wholesale commercial banking
businesses throughout the United States and abroad.

At September 30, 1996, BankAmerica had consolidated total assets of
approximately $243.0 billion and total shareholders' equity of approximately
$20.5 billion and was the third largest bank holding company in the United
States, based on total assets. For the years ended December 31, 1994 and 1995
and for the nine months ended September 30, 1996, BankAmerica had consolidated
total revenues of approximately $16.5 billion, $20.4 billion and $16.3 billion,
respectively, and during such periods, BankAmerica had consolidated total net
income of approximately $2.2 billion, $2.7 billion and $2.1 billion,
respectively.

The Company and BankAmerica engage in various intercompany transactions and
arrangements, including the provision by BankAmerica of various services to the
Company. Such services are provided pursuant to the Intercompany Agreements (as
described in "Relationship with BankAmerica--Intercompany Agreements and
Arrangements") which provide, among other things, for the grant to the Company
of a license to use the Bank of America name and certain trademarks and
servicemarks, including Bank of America(R), BankAmericard(R), VERSATEL(R) and
VERSATELLER(R) (collectively, the "Marks") in connection with the Company's
business. The Intercompany Agreements also provide for the provision to the
Company by BankAmerica of certain product distribution services, direct
access processing services, direct access marketing services, system support
services, association and network sponsorship and representation in the Visa(R)
and MasterCard(R) associations, telecommunications services, tax and treasury
services, regulatory and compliance, legal, accounting and audit services and
other miscellaneous support and administrative services. The Company and
BankAmerica also have entered into agreements concerning registration rights
and the allocation of tax liabilities and the leasing of certain facilities by
the Company from BankAmerica. All of the Intercompany Agreements may be
terminated by BankAmerica if it beneficially owns shares representing less than
a majority of the voting power of the outstanding Common Stock of the Company.

7
<PAGE>

In connection with the Offerings, BankAmerica and the Company have also
entered into a Non-Competition and Corporate Opportunities Allocation Agreement
(the "Corporate Opportunities Agreement"), pursuant to which BankAmerica will
not compete with the Company for a period of five years, subject to earlier
termination in the event BankAmerica owns shares representing less than a
majority of the voting power of the outstanding Common Stock of the Company,
with respect to payment processing for merchants to the extent that such
payments arise in the use of credit, charge or debit cards for the purchase of
goods and services and are authorized through an electronic medium originating
at the point of sale (the "Base Business") in the United States and, following
an acquisition of the Bank's merchant processing business in an Asian country,
the applicable foreign country, subject to certain exceptions. The Corporate
Opportunities Agreement further provides that BankAmerica will have the right,
as to any future business opportunities outside the scope of the Base Business,
to determine the allocation thereof based solely upon BankAmerica's evaluation
of what is in the best interests of the BankAmerica stockholders under the
circumstances.

The Company has entered into a definitive agreement with BankAmerica to
acquire the merchant processing businesses presently conducted by the Bank in
the Philippines and Thailand and to work cooperatively to allow the Company to
acquire from the Bank in the future the Bank's merchant processing businesses
in Taiwan and other countries in Asia.

See "Risk Factors--Control by BankAmerica and Potential Conflicts of
Interest," "--Proposed Asian Acquisitions and Operations," "Relationship with
BankAmerica," "Business--Asia" and "Description of Capital Stock."

8
<PAGE>

SUMMARY COMBINED FINANCIAL AND OTHER DATA

Set forth below are the summary combined financial and other data of the
Company as of the dates and for the periods indicated. The data should be read
in conjunction with the combined financial statements and notes thereto, as
well as "Management's Discussion and Analysis of Financial Condition and
Results of Operations," included elsewhere herein. The unaudited adjusted
balance sheet information of the Company as of September 30, 1996 has been
prepared to reflect the: (i) initial capitalization of the Company and its
incurrence of short-term debt and (ii) completion of the Offerings. Data may
not sum to the indicated totals due to rounding.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- ------------------------
1993 1994 1995 1995 1996
--------- --------- --------- ------------------------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AND COST PER TRANSACTION DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net Revenue............. $ 88.9 $ 98.1 $ 109.9 $ 80.6 $ 92.3
Operating Expense:
Salaries and Employee
Benefits.............. 19.0 20.5 22.3 16.4 18.6
Data Processing and
Communications........ 28.0 24.6 27.8 19.6 20.5
Depreciation........... 3.7 4.4 6.3 4.6 6.2
Amortization of
Intangibles........... 1.5 1.3 1.2 0.9 0.8
General and
Administrative........ 9.8 10.6 12.3 10.1 11.1
Other.................. 7.6 5.2 4.7 3.2 3.5
--------- --------- --------- ---------- ----------
Total Operating
Expense............... 69.5 66.6 74.7 54.7 60.6
--------- --------- --------- ---------- ----------
Income from Operations.. 19.4 31.5 35.2 26.0 31.6
Provision for Income
Taxes.................. 8.0 13.0 14.6 10.7 13.1
--------- --------- --------- ---------- ----------
Net Income.............. $ 11.5 $ 18.5 $ 20.7 $ 15.2 $ 18.6
========= ========= ========= ========== ==========
Pro Forma Net Income per
Share(1)............... $ 0.26 $ 0.42 $ 0.47 $ 0.34 $ 0.42
========= ========= ========= ========== ==========
OTHER DATA:
Number of Credit Card
Transactions
Processed.............. 136.2 177.0 234.5 169.1 212.9
Number of Debit Card
Transactions
Processed.............. 65.6 74.6 84.5 63.3 57.6
Cost per Credit Card
Transaction(2)......... $ 0.51 $ 0.38 $ 0.32 $ 0.32 $ 0.28
Credit Card Sales Volume
Processed.............. $ 12,642 $ 14,903 $ 18,633 $ 13,554 $ 16,371
Debit Card Sales Volume
Processed.............. 1,861 2,076 2,336 1,747 1,625
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------
ACTUAL PRO FORMA(3)
------ ------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Total Assets..................................... $135.8 $255.5
Total Liabilities................................ 32.8 32.8
Stockholders' Equity............................. 103.1(4) 222.8
</TABLE>
- -------
(1) Pro forma net income per share for all historical periods has been
calculated as if the Offerings had been completed on January 1, 1993, and
44,200,000 shares (30,200,000 shares of Class B Common Stock and 14,000,000
shares of Class A Common Stock) had been outstanding in all periods
presented.
(2) Calculated as the ratio of total operating expense to number of credit card
transactions processed.
(3) See "Capitalization" and "Pro Forma Combined Balance Sheet."
(4) Represents BankAmerica's equity interest.

9
<PAGE>

RISK FACTORS

The following factors should be considered carefully by persons evaluating
an investment in the shares of Common Stock offered hereby, in addition to the
other information set forth in this Prospectus.

COMPETITION AND INDUSTRY CONSOLIDATION

The United States domestic market and the foreign markets in which the
Company may compete for credit, charge and debit card payment processing for
merchants are intensely competitive. According to publicly available industry
sources, the ten largest merchant processors in the United States processed
approximately 70% of the credit card sales volume processed during the
calendar year 1995. Other competitors include smaller vertically integrated
processors, community and regional banks and ISOs. In Asia, competition is
highly localized within country borders where local banks have priced
aggressively in order to preserve market share against various large multi-
national banks that compete for business in the region. The Company competes
on the basis of price, the availability of products and services, the quality
of customer service and support, and transaction processing speed, quality and
reliability. Merchant processors also compete by building alliances with other
banks to gain access to their distribution systems, acquiring merchant
portfolios and enlisting ISOs. The majority of the Company's contracts with
its merchant customers are cancelable at will or on short notice or provide
for renewal at frequent periodic intervals and, accordingly, the Company and
its competitors regularly 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. Since 1991, price
competition has caused the Company's net revenue in relation to sales volume
to decline, particularly with respect to high-volume retailer customers. No
assurance can be given that the Company will be able to maintain acceptable
profit margins, whether with respect to its high-volume retailer customers or
its small and middle market customers.

CHARGEBACKS; PAYMENT RISKS

The Visa(R) and MasterCard(R) associations have rules that apply to a bank
or other processing firm that acquires a card transaction from a merchant and
processes and enters the transaction into the Visa(R) or MasterCard(R) system
for presentment to the card issuer. In the event of certain types of billing
disputes between a card holder and a merchant, the processor of the
transaction assists the merchant in investigating and resolving the dispute.
If the dispute 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 card holder. If the processor is 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 processor for the
chargeback, the processor bears the loss for the amount of the refund paid to
the card holder. In cases in which the transaction is acquired by a processor
other than the bank or other processing firm that will enter it into the
Visa(R) or MasterCard(R) system, the processor is generally required by that
bank or other firm to indemnify it against such losses. The Company has
entered into such arrangements with the Bank pursuant to the Sponsorship
Agreement. See "Relationship with BankAmerica" and "Business--Transaction
Process Flow--Dispute Resolution; Chargebacks; Payment Risks."

10
<PAGE>

Chargeback exposure can also result from fraudulent credit card transactions
initiated by merchant customers. Examples of merchant fraud include logging
fictitious sales transactions and falsification of transaction amounts on
actual sales. The Company conducts a background review of its merchant
customers and on a daily basis monitors merchant transactions against
standards it has developed in its efforts to prevent merchant fraud. The
Company also can withhold or delay a merchant's daily settlement if fraudulent
activity is suspected, thereby mitigating exposure to loss. However, there can
be no assurance that the Company will not experience significant amounts of
merchant fraud, which may have a material adverse effect on the Company's
business, financial condition and results of operations. The degree of
exposure to chargebacks may also be adversely affected by the development of
new transaction delivery channels, such as the Internet, which has yet to be
fully evaluated. See "Business--Risk Management."

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 association clearing bank less the fees retained by
the card issuer ("interchange fees"). For those merchants which the Company
bills on a periodic basis (usually monthly), the Company advances payment to
the merchant for the gross amount of the merchant's transactions. The Company
then bills the merchant periodically for the interchange fees as well as its
processing fees. Failure by the merchant to honor such invoices adversely
affects the Company's revenues. See "Business--Transaction Process Flow--
Dispute Resolution; Chargebacks; Payment Risks."

Losses incurred by the Company relating to chargebacks and nonpayment of
fees were $2.2 million and $0.7 million for the year ended December 31, 1995
and the nine months ended September 30, 1996, respectively.

The Company is not exposed to card issuer credit losses unassociated with a
dispute between the cardholder and the merchant.

CONTROL BY BANKAMERICA AND POTENTIAL CONFLICTS OF INTEREST

All of the capital stock of the Company is currently owned indirectly by
BankAmerica through the Bank and Seafirst. Upon completion of the Offerings,
BankAmerica will own 100% of the outstanding Class B Common Stock, which will
represent 68.3% of the outstanding Common Stock of the Company (or 65.2% if
the Underwriters' over-allotment options are exercised in full). Such economic
ownership will represent approximately 95.6% of the combined voting power of
the Company's outstanding Common Stock (94.9% if the Underwriters' over-
allotment options are exercised in full). Consequently, upon completion of the
Offerings, BankAmerica will continue to be able to cause the election of 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
(including capital expenditures), 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. The size of the Board of Directors is currently fixed at seven (with
one vacancy). Two of the present members of the Board of Directors are
independent of BankAmerica. The Company intends to increase the number of
incumbent directors to seven, three of whom will be independent of
BankAmerica, as soon as practicable after completion of the Offerings. See
"Management--Directors and Executive Officers of the Company."

Certain conflicts of interest and disagreements between BankAmerica and the
Company could arise in connection with the interpretation of the Intercompany
Agreements and the other agreements entered into between BankAmerica or its
affiliates and the Company in connection with the Offerings. BankAmerica has
agreed, subject to certain exceptions, not to compete with the Company for a
period of five years with respect to certain segments of the merchant
processing business in the United States

11
<PAGE>

and, following an acquisition of the Bank's merchant processing business in an
Asian country, the applicable foreign country. The Corporate Opportunities
Agreement further provides that BankAmerica will have the right, as to any
future business opportunities outside the scope of the Base Business, to
determine the allocation thereof based solely upon BankAmerica's valuation of
what is in the best interests of the BankAmerica stockholders under the
circumstances. See "Relationship with BankAmerica--Non-Competition and
Corporate Opportunities Allocation Agreement" and "Description of Capital
Stock." The Company expects that the Intercompany Agreements and the Corporate
Opportunities Agreement will govern the relationship between the Company and
BankAmerica, the provision of services and the payments therefor following the
Offerings. Because these agreements will be entered into at a time when the
Company will still be a wholly-owned subsidiary of BankAmerica, they are not
the result of arm's length negotiations between the parties, and the Company
has not been represented by separate counsel.

BankAmerica will not be required to maintain control of the Company, and any
disposition of the shares of Common Stock owned by BankAmerica could,
depending upon the manner of such disposition, have an adverse effect upon the
market price of the shares of the Company following the Offerings. Divestiture
by BankAmerica, so that it owns shares representing less than a majority of
the voting power of the outstanding Common Stock of the Company, will also
permit BankAmerica to terminate its contractual arrangements with the Company
pursuant to which the Company has access to the Bank's consumer base, the Bank
of America name and Marks, the implementation of On-Us transaction processing
and marketing, the Bank's product distribution channels, and credit and debit
card association and network sponsorships. Any such termination could have a
material adverse effect on the Company's business.

The Company believes that its growth in recent years has been attributable
in part to, and that it will continue to benefit from, its close affiliation
with BankAmerica. However, no assurances can be given that this will continue
to be the case, particularly outside the BankAmerica retail market area, or
that consumers or businesses will continue to identify the Company with
BankAmerica once the Company is no longer a wholly-owned subsidiary.

NEW TRANSACTION SYSTEM AND FUTURE EFFECTS OF TECHNOLOGICAL CHANGE

The Company is developing a new transaction processing system which will
allow the Company to decrease its reliance on third-party vendors and provide
the Company with greater ability to reduce and control costs. This system is
expected to become operational in the first quarter of 1997. There can be no
assurance that these objectives will be achieved in light of the uncertainties
inherent in complex technological projects of this type. Delays in successful
implementation of the system are possible and could adversely affect the
Company's ability in the near-term to lower transaction processing costs. See
"Business--Technology."

The merchant processing industry in general requires the use of advanced
computer hardware and software technology and has been characterized by the
development of new products and services to meet increasingly complex and
rapidly-changing client and regulatory requirements. The success of any
competitor in this industry, including the Company, depends in part on its
ability to continue to adapt its technology, on a timely and cost-effective
basis, to meet these requirements. See "Business--Competition."

GEOGRAPHICAL CONCENTRATION

At December 31, 1995, approximately 61% of the merchant locations served by
the Company were located in the State of California and the Company estimates
that approximately 40% of its charge volume processed for the year ended
December 31, 1995 was derived from merchant locations in California. A
sustained downturn in economic activity in the State of California could have
a material adverse effect on the business, financial condition or results of
operations of the Company.

12
<PAGE>

PROPOSED ASIAN ACQUISITIONS AND OPERATIONS

In connection with the pursuit of its strategic objectives, the Company
intends to acquire the Bank's merchant processing operations in Asia to the
extent possible. Such expansion, however, is dependent on approval in each
such country of the local regulatory authorities. The Company expects to
receive such decisions of the local regulatory authorities with respect to the
Asian Acquisitions during the first half of 1997, although no assurance can be
given that any of the regulatory approvals will be obtained or as to the
timing thereof. Based on preliminary indications from the Ministry of Finance
in Taiwan, approval of the transfer of the Bank's merchant processing business
in Taiwan to the Company initially was regarded by the Company as being
unlikely. More recent indications received on an informal basis from the
Ministry of Finance are that such approval may be possible. However, a formal
application has not yet been submitted and the matter remains at a preliminary
stage at the date of this Prospectus. Although the Company and BankAmerica
intend to pursue Taiwanese approval of such transfer, no assurances can be
given that it will ever be obtained. In addition, the Company and BankAmerica
have agreed to evaluate the possibility of entering into an outsourcing or
other arrangement that would permit the Company to participate meaningfully in
the Bank's merchant processing business in Taiwan in the event that such
regulatory approval cannot be obtained. No assurances can be given, however,
that any such arrangement will ultimately prove practicable. See "Business--
Asia" and "--Regulation."

The Company's business strategy in Asia could be affected by many factors
beyond its control, such as political and labor unrest in various Asian
countries, governmental or economic changes and United States and foreign laws
and policies affecting investment. Results associated with the Company's foreign
operations will also be subject to currency fluctuations.

RELIANCE ON PROCESSING FACILITIES

The Company is dependent on its main processing facilities located in San
Francisco and Foster City, California and Spokane, Washington. 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 any of these
facilities or that interrupts its telecommunications networks could have a
material adverse effect on the business, financial condition or results of
operations of the Company.

FLUCTUATION IN QUARTERLY OPERATING RESULTS

The merchant processing industry in general is prone to seasonal fluctuations
in transaction activity. Although the Company generally experiences seasonality
in its business, fluctuations are less pronounced than in the industry
generally, due in part to its diverse merchant customer base. Those segments of
merchants that are particularly sensitive to seasonal fluctuations, such as
airlines, travel agencies, lodging and mail order merchants, each represent
relatively small percentages of the Company's processing business, as compared
to those segments of the Company's customer base that are generally not subject
to seasonality such as general retail merchants, restaurants, supermarkets and
gas stations. The Company's net revenue is generally higher in the third and
fourth calendar quarters and lower in the first calendar quarter. Increased
tourism in California and other Western states during the summer months and
retail activity prior to the beginning of the school year contribute to higher
third quarter net revenue, and holiday activity contributes to higher fourth
quarter net revenue. The decline in retail activity following the holiday season
results in lower first quarter net revenue.

13
<PAGE>

DEPENDENCE UPON KEY PERSONNEL

The success of the Company's operations during the foreseeable future will
depend largely upon the continued services of its senior executives. The
Company has a senior management team that consists of several individuals with
broad, in-depth knowledge of the payments industry and long-term industry
experience. In addition, the experience of these individuals covers all
segments of the merchant processing business, including operations, payment
technology, sales, account management and strategic planning. See
"Management."

CARD ASSOCIATION AND DEBIT NETWORK REGISTRATION

The Company, along with all other nonbank merchant processors, must be
sponsored by a financial institution that is a principal member of the credit
card associations and debit card networks in order to process credit and debit
card transactions involving such cards. Through the Bank, the Company is
registered with Visa(R) , MasterCard(R) , and various debit networks including
Interlink(R), Explore(R), Accel(R), Pulse(R) and Cash Station(R) as a
certified processor and member service provider. See "Relationship With
BankAmerica--Intercompany Agreements and Arrangements." The Company's status
as a certified processor and as a member service provider are dependent upon
the Company's compliance with the standards of the credit card association and
debit card network, as they may be amended from time to time. If the Company
fails to comply with these standards, the Company's status as a certified
processor and as a member service provider could be suspended or terminated.
Although the Company will attempt to adhere to the standards of the credit
card associations and debit card networks, there can be no assurance that such
credit card associations and debit card networks will maintain the Company's
registrations or that the current credit card associations and debit card
networks rules allowing the Company and other nonbank transaction processors
to market and provide transaction processing services will remain in effect.
Moreover, credit card associations and debit card networks rules are set by
the respective member financial institutions of such credit card associations
and debit card networks, some of which are competitors of the Company and the
Bank. The termination of the Company's member service provider registrations
or the Company's status as a certified processor, or any changes in the credit
card associations and debit card networks rules that prevent the Company's
registration or otherwise limit the Company's ability to provide merchant
processing and marketing services for such credit card associations and debit
card networks, would have a material adverse effect on the Company's business,
financial condition or results of operations.

REGULATION OF THE COMPANY

As a result of BankAmerica's control of the Company, the Company is subject
to federal banking regulations, as well as other federal and state
regulations. To facilitate BankAmerica's compliance with applicable banking
laws, regulations and orders (collectively, the "Banking Laws"), and to allow
BankAmerica to obtain any required consents or approvals, an agreement between
the Company and the Bank prohibits the Company from entering into any business
activities prior to the receipt of any consents and approvals required
pursuant to the Banking Laws.

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 have a material adverse effect
on the business, results of operations or financial position of the Company.
See "Business--Regulation."

To the extent the Company conducts operations in Asia and other foreign
countries, its operations will also be subject to the laws and regulations of
such countries. Such laws and regulations may limit the operations of the
Company in such jurisdictions and may, in certain instances, limit the ability
of the Company to conduct its business in such countries. See "Business--
Regulation."

14
<PAGE>

CERTAIN STATE TAX ISSUES

Merchant processing companies like the Company may be subject to state
taxation of certain portions of their fees charged to merchants for their
services. Application of this tax is an emerging issue in the industry and the
states have not yet adopted uniform guidelines regarding the taxation of
merchant services. In the event the Company is required to bear all or a
portion of these costs, and is unable to pass such costs through to its
merchant customers, the business, financial condition or results of operations
of the Company could be adversely affected.

ANTI-TAKEOVER PROVISIONS

The Company's Certificate of Incorporation contains 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
BankAmerica controls the Company, such provisions could become significant
should BankAmerica reduce its indirect ownership interest in the Company such
that BankAmerica no longer controls the Company. See "Description of Capital
Stock--Delaware Law and Certain Charter Provisions."

SHARES AVAILABLE FOR FUTURE SALE

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

Following the Offerings, BankAmerica will indirectly, through its
subsidiaries, own 100% of the outstanding Class B Common Stock, which will
represent approximately 68.3% of the outstanding Common Stock of the Company
(or 65.2% if the Underwriters' over-allotment options are exercised in full).
A decision by BankAmerica to sell such shares could adversely affect the
market price of the Class A Common Stock. The Company and BankAmerica have
entered into a registration rights agreement which requires the Company to
effect a registration statement covering some or all of the shares of Class B
Common Stock owned indirectly by BankAmerica, subject to certain terms and
conditions. See "Relationship with BankAmerica--Registration Rights
Agreement."

Upon completion of the Offerings, the shares of Class A Common Stock offered
in the Offerings will be freely tradable without restriction or further
registration under the Securities Act by persons other than executive officers
and directors of BankAmerica or the Company (the "Restricted Persons"). The
30,200,000 shares of Class B Common Stock which are held indirectly by
BankAmerica through its subsidiaries and the 700,000 shares of Class B Common
Stock to be issued in the Asian Acquisitions are subject to a "lock-up"
agreement under which BankAmerica has agreed, subject to certain exceptions,
not to offer, sell, contract to sell, or otherwise dispose of any shares of
Common Stock without the prior written consent of Goldman, Sachs & Co., for a
period of 180 days after the date of this Prospectus. Shares of Class A Common
Stock held by Restricted Persons who are executive officers or directors of
the Company are subject to a similar "lock-up" agreement for a period of 180
days after the date of this Prospectus. Following such period, BankAmerica 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 "Shares Available for Future Sale" and "Underwriting."

NO PRIOR PUBLIC MARKET

Prior to the Offerings, there has been no public market for the Class A
Common Stock and there can be no assurance that an active trading market for
the Class A Common Stock will develop or

15
<PAGE>

continue after the Offerings. The initial public offering price per share of
Class A Common Stock being offered in the Offerings was determined by
negotiations among the Company and representatives of the Underwriters and may
not be indicative of the price at which the Class A Common Stock will trade
after completion of the Offerings.

DILUTION OF PURCHASERS OF CLASS A COMMON STOCK

Purchasers of the Class A Common Stock will experience immediate and
substantial dilution in the net tangible book value per share of Class A
Common Stock. The net tangible book value of the Company as of September 30,
1996 (after giving effect to the initial capitalization and the incurrence of
short-term debt) was approximately $19.6 million or $0.65 per share of Common
Stock. After giving effect to the receipt by the Company of the estimated net
proceeds from the Offerings (without giving effect to any exercise of the
Underwriters' over-allotment options) and after deducting the underwriting
discounts and estimated expenses related to the Offerings payable by the
Company, the pro forma net tangible book value of the Common Stock as of
September 30, 1996 would have been approximately $5.02 per share. This
represents an immediate increase in net tangible book value of $4.37 per share
to existing stockholders and an immediate dilution of $10.48 per share to
purchasers of the Class A Common Stock in the Offerings. See "Dilution."

USE OF PROCEEDS

The net proceeds from the sale of shares of Class A Common Stock offered in
the Offerings, are expected to be approximately $202.4 million (approximately
$233.1 million if the Underwriters' over-allotment options are exercised in
full). The Company intends to use an aggregate of approximately $85-$90
million to retire short-term debt under a line of credit with an affiliate and
the balance for general corporate purposes, including future acquisitions,
strategic technology investments and the funding of research and product
development. Such debt is payable on demand, has a market-based interest rate
(BankAmerica's reference rate) and has been incurred to fund the increase of
the balance of drafts in transit following the transfer to the Company of the
merchant processing businesses of the Bank and Seafirst. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources." Except for the portion of the net proceeds
allocated to retirement of such indebtedness, management has not allocated any
portion of the proceeds to any of the specific purposes set forth above and
management will have broad discretion as to its use following completion of
the Offerings.

Pending application for the foregoing uses, the net proceeds will be
invested in short-term U.S. Treasury securities, certificates of deposit,
commercial paper, investment grade, interest-bearing securities and/or other
short-term investments. Such investments may be made with or through
BankAmerica at market rates.

DIVIDEND POLICY

The Company has not paid any dividends since its incorporation and 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 Company's future dividend policy will be determined by its Board
of Directors on the basis of various factors, including the Company's results
of operations, financial condition, capital requirements and investment
opportunities. The historical financial statements included in this Prospectus
reflect the remittance to BankAmerica of all cash generated by the Company in
excess of the amount required for the Company's operating and investing
activities.

16
<PAGE>

DILUTION

The net tangible book value of the Company as of September 30, 1996 (after
giving effect to the initial capitalization and incurrence of short-term debt)
was approximately $19.6 million, or $0.65 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 14,000,000 shares of Class A Common Stock offered in the Offerings, the
pro forma net tangible book value of the Company as of September 30, 1996
would have been approximately $222.0 million, or $5.02 per share. This
represents an immediate dilution of $10.48 per share to new investors
purchasing shares of Class A Common Stock in the Offerings. The following
table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Initial public offering price per share............................ $15.50
Net tangible book value per share as of September 30, 1996....... $0.65
Increase per share attributable to new investors................. 4.37
-----
Pro forma net tangible book value per share after the Offerings.... 5.02
------
Dilution per share to new investors................................ $10.48
======
</TABLE>

17
<PAGE>

CAPITALIZATION

The following table sets forth the consolidated short-term indebtedness and
capitalization of the Company (i) as of September 30, 1996, (ii) as adjusted
to give effect to the initial capitalization and incurrence of short-term debt
and (iii) to give effect to the Offerings and the application of the proceeds
therefrom. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources." This table should be read in conjunction with the combined
financial statements and notes thereto appearing elsewhere herein.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------------------------
ACTUAL AS ADJUSTED(1) PRO FORMA(2)
-------- -------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term Debt........................... $ -- $ 82,667 $ --
======== ======== ========
Stockholders' Equity
BankAmerica's Equity Interest............ 103,072 -- --
Preferred Stock, $.01 par value,
10,000,000 shares authorized; no shares
issued and outstanding.................. -- -- --
Class A Common Stock, $.01 par value;
200,000,000 shares authorized; no
shares issued and outstanding and as
adjusted; 14,000,000 shares issued and
outstanding as further adjusted(3)...... -- -- 140
Class B Common Stock, $.01 par value;
50,000,000 shares authorized; no shares
issued and outstanding;
30,200,000 shares issued and
outstanding as adjusted and as further
adjusted(4)............................. -- 302 302
Additional Paid-in Capital............... -- 20,103 222,337
Retained Earnings........................ -- -- --
-------- -------- --------
Total Stockholders' Equity............. 103,072 20,405 222,779
-------- -------- --------
Total Capitalization................... $103,072 $103,072 $222,779
======== ======== ========
</TABLE>
- -------

(1) As adjusted to give effect to the transfer of certain assets and
liabilities of the domestic merchant processing businesses of the Bank and
Seafirst to the Company in exchange for 30,200,000 shares of Class B
Common Stock. Because the merchant processing business of the Bank and
Seafirst are wholly owned by BankAmerica, this business contribution will
be treated as a reorganization of entities under common control and all
contributed assets and liabilities will be transferred at historical cost.
BankAmerica, however, will retain the drafts in transit of the Company for
which funds were previously advanced to merchants by BankAmerica. The
Company expects the drafts in transit balance to return to at least its
recent historical level during the period between the initial
capitalization of the Company and the completion of the Offerings as new
drafts in transit are generated from the Company's merchant processing
activities. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Quarterly Operating Results." Such
balance will be funded through a line of credit with an affiliate of
BankAmerica. The loan will bear a market-based interest rate
(BankAmerica's reference rate) and is expected to be repaid with the
proceeds of the Offerings. See "Pro Forma Combined Balance Sheet."

(2) To give effect to the sale of 14,000,000 shares of Class A Common Stock in
the Offerings (less estimated underwriting discount and offering expenses
of approximately $14.6 million) and the application of the net proceeds
therefrom.
(3) Does not include a total of 7,000,000 shares of Class A Common Stock which
will be reserved for issuance pursuant to long-term incentive compensation
and non-employee director stock option plans and 2,100,000 shares of Class
A Common Stock that may be sold by the Company pursuant to the
Underwriters' over-allotment options. Options and restricted stock grants
with respect to approximately 321,000 shares of Class A Common Stock have
been awarded by the Company to its executive officers and nonemployee
directors effective upon completion of the Offerings. See "Executive
Compensation" and "Underwriting."
(4) Does not include a total of 700,000 shares of Class B Common Stock which
are reserved for issuance upon consummation of the Asian Acquisitions.

18
<PAGE>

PRO FORMA COMBINED BALANCE SHEET

The following unaudited Pro Forma Combined Balance Sheet of the Company as
of September 30, 1996 has been prepared to reflect the: (i) initial
capitalization of the Company and its incurrence of short-term debt and
(ii) completion of the Offerings. These events are reflected as if each had
been consummated on September 30, 1996. The following unaudited Pro Forma
Combined Balance Sheet does not reflect the consummation of the Asian
Acquisitions because the assets and liabilities related to those businesses
represent less than 2% of the assets and liabilities of the Company. An
unaudited pro forma combined statement of operations has not been presented
for the nine months ended September 30, 1996 or the years ended December 31,
1994 and 1995, because the effects of the (i) initial capitalization of the
Company and its incurrence of short-term debt, (ii) completion of the
Offerings, and (iii) operating results related to the Asia merchant processing
businesses (the Philippines and Thailand) will not have a material impact on
the Company's operating results.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------------------------------------
INITIAL
CAPITALIZATION
AND
INCURRENCE
OF SHORT-
ACTUAL TERM DEBT OFFERINGS PRO FORMA
-------- -------------- --------- ---------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Cash and Cash Equivalents.. $ 1 $ -- $202,374 (3) $119,708
(82,667)(4)
Drafts in Transit.......... 82,667 (82,667)(1) -- 82,667
82,667 (2)
Accounts Receivable........ 28,967 -- -- 28,967
-------- --------- -------- --------
Total Current Assets..... 111,635 -- 119,707 231,342
Property and Equipment,
net....................... 17,066 -- 17,066
Other Assets............... 7,141 -- -- 7,141
-------- --------- -------- --------
Total Assets............. $135,842 $ -- $119,707 $255,549
======== ========= ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Merchants Payable.......... $ 15,312 $ -- $ -- $ 15,312
Short-term Debt............ -- 82,667 (2) (82,667)(4) --
-------- --------- -------- --------
Total Current
Liabilities............. 15,312 82,667 (82,667) 15,312
Accrued Liabilities........ 9,463 -- -- 9,463
Other Liabilities.......... 7,995 -- -- 7,995
-------- --------- -------- --------
Total Liabilities........ 32,770 82,667 (82,667) 32,770
BankAmerica's Equity
Interest(5)............... 103,072 (103,072)(1) -- --
Class A Common Stock....... -- -- 140 (3) 140
Class B Common Stock....... -- 302 (1) -- 302
Additional Paid in
Capital................... -- 20,103 (1) 202,234 (3) 222,337
-------- --------- -------- --------
Total Liabilities and
Stockholders Equity..... $135,842 $ -- $119,707 $255,549
======== ========= ======== ========
</TABLE>
- -------
(1) To reflect the transfer of certain assets and liabilities of the domestic
merchant processing businesses of the Bank and Seafirst to the Company in
exchange for 30,200,000 shares of Class B Common Stock. At the time of the
initial capitalization, BankAmerica, however, will retain the then
outstanding drafts in transit of the Company for which funds were
previously advanced to merchants by BankAmerica. The unaudited pro forma
combined balance sheet of the Company reflects the retention of
approximately $82.7 million of drafts in transit (the total of such items
outstanding at September 30, 1996). Because the merchant processing
businesses of the Bank and Seafirst are wholly owned by BankAmerica, this
business contribution will be treated as a reorganization of entities
under common control and all contributed assets and liabilities will
therefore be transferred at historical cost.

(2) The Company expects the drafts in transit balance to return to at least
its recent historical level during the period between the initial
capitalization of the Company and the consummation of the Offerings as new
drafts in transit are generated from the Company's merchant processing
activities. Such balance will be funded through a line of credit with a
banking affiliate of BankAmerica. The loan will bear a market-based
interest rate (BankAmerica's reference rate) and is expected to be repaid
with the proceeds of the Offerings.

(3) To reflect the issuance of 14,000,000 shares of Class A Common Stock in
the Offerings (less estimated underwriting discount and offering expenses
of approximately $14.6 million).
(4) To reflect the repayment of the line of credit arrangement with a banking
affiliate of the assumed amount of approximately $82.7 million using a
portion of the proceeds from the Offerings. Because the short-term debt is
expected to be outstanding less than four weeks, interest expense is
considered immaterial.
(5) Certain employees of the Company have restricted stock and stock options
under BankAmerica's management stock plans. If those employees were to
elect to exchange all of their BankAmerica stock options for options from
the Company, the Company would incur compensation expense of approximately
$3.8 million based on stock prices at November 20, 1996. This expense is
non-recurring and therefore has not been reflected in the pro forma
presentation. The Company intends to consolidate certain duplicative
computer systems currently used by the Bank and Seafirst. The cost of
eliminating such arrangements is not expected to be material. The tax
provisions recorded for the Company as part of the consolidated
BankAmerica Corporation tax provision are materially the same as would
have been recorded on the separate return basis, because the Company has
generated sufficient income historically to utilize all of the tax assets
generated by the Company. Therefore, no adjustment to the pro forma
combined balance sheet is necessary to record the tax provision calculated
on the separate return basis.

19
<PAGE>

SELECTED COMBINED FINANCIAL AND OTHER DATA

The following selected combined operating data for the three years ended
December 31, 1995 and the combined balance sheet data as of December 31, 1994
and 1995 are derived from the combined financial statements of the Company,
which have been audited by Ernst & Young LLP, independent auditors, whose
report is included elsewhere herein. The following selected combined operating
data for the two years ended December 31, 1991 and 1992 and for the nine
months ended September 30, 1995 and September 30, 1996, and the balance sheet
data as of December 31, 1991, 1992 and 1993 and September 30, 1995 and 1996
are derived from the unaudited combined financial statements of the Company.
The unaudited interim combined financial statements have been prepared on a
basis consistent with the audited combined financial statements and, in the
opinion of management, include all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of such data. The
data should be read in conjunction with the combined financial statements and
notes thereto, as well as "Management's Discussion and Analysis of Financial
Condition and Results of Operations," included elsewhere herein. The results
of operations for the nine-month period ended September 30, 1996 are not
necessarily indicative of results to be expected for the full year. Data may
not sum to the indicated totals due to rounding.

<TABLE>
<CAPTION>
AS OF AND
FOR THE
NINE
MONTHS
AS OF AND FOR THE ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
---------------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AND COST PER TRANSACTION DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net Revenue............. $ 75.0 $ 81.6 $ 88.9 $ 98.1 $ 109.9 $ 80.6 $ 92.3
Operating Expense:
Salaries and Employee
Benefits.............. 18.6 18.0 19.0 20.5 22.3 16.4 18.6
Data Processing and
Communications........ 26.4 28.2 28.0 24.6 27.8 19.6 20.5
Depreciation .......... 3.7 3.7 3.7 4.4 6.3 4.6 6.2
Amortization of
Intangibles........... -- 0.7 1.5 1.3 1.2 0.9 0.8
Occupancy.............. 1.2 1.3 2.3 2.3 1.9 1.4 1.4
General and
Administrative........ 10.2 9.6 9.8 10.6 12.3 10.1 11.1
Other.................. 1.5 1.6 5.3 2.9 2.8 1.7 2.1
------- -------- -------- -------- -------- -------- --------
Total Operating
Expense............... 61.6 63.1 69.5 66.6 74.7 54.7 60.6
------- -------- -------- -------- -------- -------- --------
Income from Operations.. 13.4 18.5 19.4 31.5 35.2 26.0 31.6
Provision for Income
Taxes.................. 5.4 7.4 8.0 13.0 14.6 10.7 13.1
------- -------- -------- -------- -------- -------- --------
Net Income.............. $ 8.0 $ 11.1 $ 11.5 $ 18.5 $ 20.7 $ 15.2 $ 18.6
======= ======== ======== ======== ======== ======== ========
Pro Forma Net Income per
Share(1)............... $ 0.18 $ 0.25 $ 0.26 $ 0.42 $ 0.47 $ 0.34 $ 0.42
======= ======== ======== ======== ======== ======== ========
OTHER DATA:
Number of Credit Card
Transactions
Processed.............. 110.7 122.3 136.2 177.0 234.5 169.1 212.9
Number of Debit Card
Transactions
Processed.............. N.A. N.A. 65.6 74.6 84.5 63.3 57.6
Cost per Credit Card
Transaction(2)......... $ 0.56 $ 0.52 $ 0.51 $ 0.38 $ 0.32 $ 0.32 $ 0.28
Credit Card Sales Volume
Processed.............. $ 8,828 $ 10,171 $ 12,642 $ 14,903 $ 18,633 $ 13,554 $ 16,371
Debit Card Sales Volume
Processed.............. N.A. N.A. 1,861 2,076 2,336 1,747 1,625
BALANCE SHEET DATA (AT
PERIOD END):
Total Assets............ $ 83.3 $ 90.8 $ 90.1 $ 105.2 $ 116.0 $ 108.0 $ 135.8
Total Liabilities....... 6.8 18.9 19.1 21.2 16.8 19.5 32.8
BankAmerica's Equity
Interest............... 76.5 71.9 71.0 84.0 99.2 88.5 103.1
</TABLE>
- --------
(1) Pro forma net income per share for all periods has been calculated as if
the Offerings had been completed on January 1, 1991 and 44,200,000 shares
(30,200,000 shares of Class B Common Stock and 14,000,000 shares of Class
A Common Stock) had been outstanding in all periods presented.
(2) Calculated as the ratio of total operating expense to number of credit
card transactions processed.

20
<PAGE>

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

GENERAL

The Company was incorporated in October 1996 and combines into a single
organization: (i) the Bank's primary merchant processing business, a multi-
state business based in California, and (ii) the merchant processing business
of Seafirst, conducted principally in Washington. During 1996, management of
the Bank's primary merchant processing business assumed operating
responsibility for the Seafirst operations. During 1997, the Company expects
to eliminate the duplicative operations of BankAmerica's merchant processing
businesses and combine these businesses where possible. Such duplicative
operations consist of merchant processing systems and third party processing
arrangements. The cost of eliminating such operations is not expected to be
material. The Company's historical financial statements reflect the combined
results of operations of these businesses as if they had been conducted by the
Company.

The Company's net revenue is generated primarily from fees (including
merchant discount fees) received under processing agreements with merchants,
agent banks and ISOs, which are offset by Visa (R) and MasterCard (R)
interchange fees and assessments, in the case of credit transactions, and
network interchange and license fees and charges of debit networks, in the
case of debit transactions. The Company also receives fees for additional
services it performs, such as fees received for processing charge card
transactions, providing enhanced reporting options and selling or renting
terminal products to merchants as well as fees earned from software
maintenance, customer service and from deploying and repairing credit card
terminals. See "Business--Products and Services." In addition, net revenue
includes fees collected from BankAmerica as compensation for checking account
balances generated by the Company's customers which amounts are substantially
offset by fees paid to BankAmerica for business referrals made by
BankAmerica's retail branch personnel.

The Company's operating expenses consist primarily of: (i) salaries and
employee benefits and general and administrative expense which reflect overall
growth in the Company's business volume as well as increases in its sales
force; (ii) data processing and communication charges, which relate directly
to processing credit, charge and debit card transactions; (iii) depreciation
of point-of-sale ("POS") terminals purchased by the Company for rental to its
merchant base and depreciation of investments made by the Company in
proprietary technologies; and (iv) amortization of intangibles, primarily
composed of an annual charge of approximately $1.0 million related to the
buyout of a non-compete agreement in 1992, which will be fully amortized by
the end of 1997.

The Company depreciates furniture and equipment on a straight line basis
over a period ranging from two to seven years and depreciates POS terminals
rented to merchants on a straight line basis over three to five years.

Beginning in the first quarter of 1997, the Company intends to replace its
existing transaction processing system with its new PayLink(TM) proprietary
transaction processing system. The PayLink(TM) system will both reduce the
Company's reliance on third-party vendors for the processing of existing
transactions and provide it with significant additional capacity to process
future growth. The Company will incur the expenses associated with operating
both systems until such replacement is completed. As a result, the Company
expects to have higher than normal data processing and communications expenses
during this period. The Company does not expect to fully realize the benefits
associated with this system until 1998.

21
<PAGE>

The Company and BankAmerica engage in various intercompany transactions and
arrangements, including the provision by BankAmerica of various services to
the Company. Such services are provided pursuant to the Intercompany
Agreements which provide, among other things, for the grant to the Company of
a license to use the Marks in connection with the Company's business. The
Intercompany Agreements also provide for the provision to the Company by
BankAmerica of certain product distribution services, direct access processing
services, direct access marketing services, system support services,
association and network sponsorship and representation in the Visa(R) and
Mastercard(R) associations, telecommunications services, tax and treasury
services, regulatory and compliance, legal, accounting and audit services and
other miscellaneous support and administrative services. The Company and
BankAmerica also have entered into agreements concerning registration rights
and the allocation of tax liabilities and the leasing of certain facilities by
the Company from BankAmerica. All of the Intercompany Agreements may be
terminated by BankAmerica if it beneficially owns shares representing less
than a majority of the voting power of the outstanding Common Stock of the
Company. See "Relationship with BankAmerica--Intercompany Agreements and
Arrangements."

The Company's general and administrative expense includes a number of
expense categories for services performed for the Company by BankAmerica prior
to the Company's incorporation. Such services include purchasing, advertising,
marketing, data processing, personnel and human resources, legal services,
accounting, appraisal and audit services and treasury and tax services.
Pursuant to the Administrative Services Agreement, BankAmerica will continue
to perform many of such services for the Company. Following the completion of
the Offerings, the pricing of these arrangements will be on a mutually
agreeable, competitive market basis. The Company believes that the costs of
these arrangements will not differ materially from historical costs. For
information regarding amounts paid by the Company to BankAmerica under the
historical intercompany arrangements, see Note 9 of Notes to Combined
Financial Statements. The Company intends to undertake its own finance
operations and expects that over time responsibility for certain other
functions will be assumed by the Company. The Company does not expect any such
transitions to materially affect the level of its general and administrative
expenses.

In recent years, the Company has seen a change in the composition of its
merchant base, with an increasing percentage of high-volume retailers. Fees
per transaction paid to the Company by high-volume retailers in relation to
sales volume generally are lower than with respect to the Company's overall
merchant base. As a result of this change in the merchant base and price
competition, the Company's net revenue has not increased at the same rate as
its sales volume, and the Company expects this trend to continue.

In recent years, there has been a trend toward consolidation in the merchant
processing industry. Further tightening of margins may result in banks and
other card processors abandoning the merchant processing business, thus
accelerating the trend toward consolidation. Due to market demands requiring
processors to provide advanced and efficient technology, certain processors
have recently left the business or merged with other providers. See "Risk
Factors--Competition and Industry Consolidation," "Business--Industry
Overview" and "--Competition." The Company's principal strategic objectives
include efforts to maintain its position as one of the largest merchant
processors through growth generated primarily through the Company's own sales
channels (and, to the extent attractive opportunities arise, augmented through
acquisitions). See "Business--Business Strategy." Internationally, the Company
intends to emphasize the Asian markets where it believes that the electronic
payments medium and related merchant processing volume has strong growth
potential. To the extent possible, the Company plans to build upon
BankAmerica's initiatives in Asia. See "Business--Business Strategy--Expand
Sales Resources," "--Asia" and "--Regulation."

Upon completion of the Offerings, neither the Company nor its operations
will be included in the consolidated federal income tax return of BankAmerica.
See "Relationship with BankAmerica--Tax Allocation Agreement."

22
<PAGE>

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated the percentage of
net revenue represented by certain items on the Company's combined statement
of operations:

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
------------------- --------------
1993 1994 1995 1995 1996
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Net Revenue................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Total Operating Expense.................... 78.2 67.9 68.0 67.8 65.7
Income from Operations..................... 21.8 32.1 32.0 32.2 34.3
Net Income................................. 12.9 18.9 18.8 18.9 20.1
</TABLE>

NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995

NET REVENUE

Net revenue increased by $11.7 million, or 14.5%, to $92.3 million for the
nine months ended September 30, 1996, compared to the year-earlier period.
This increase was primarily attributable to a 17.6% increase in credit, charge
and debit card sales volume from $15.3 billion to $18.0 billion. The increase
in sales volume resulted primarily from growth in the Company's merchant base
as a result of its continued emphasis on marketing and sales. Growth in credit
card sales volume was partially offset by a decline in debit card sales volume
reflecting the loss by the Interlink debit card network of a major debit card
issuer. In addition, the Company implemented a price increase in April 1996 to
offset interchange rate increases in April 1996 and April 1995, adding
approximately $1.0 million to net revenue during the nine months ended
September 30, 1996. This price increase was accomplished without any material
customer attrition. As in prior periods, approximately 95% of the net revenue
was from merchant relationships originated by the Company's direct sales
force.

Sales volume increased at a higher rate than net revenue as a result of a
continuing change in the composition of the Company's merchant base. The
proportion of sales volume attributable to high volume retailers increased
during the nine months ended September 30, 1996 as compared to the year-
earlier period, reflecting the success of the Company's sales efforts directed
toward this market segment. Fees per transaction paid to the Company by high-
volume retailers in relation to sales volume generally are lower than with
respect to the Company's overall merchant base.

OPERATING EXPENSE

Operating expense increased by $6.0 million, or 10.9%, to $60.6 million for
the nine months ended September 30, 1996, compared to the year-earlier period.
Of this increase, $2.2 million is attributable to salary and employee benefits
increases resulting primarily from the opening of the Company's New York and
Chicago sales and marketing offices and $1.7 million is attributable to
increased depreciation primarily related to terminals added to support new
merchant locations. An additional $0.9 million is attributable to increased
data processing and communications costs and $1.0 million is attributable to
increased general and administrative expense (primarily expense associated
with merchant supplies) reflecting increased transaction volume.

In recent years, the Company has significantly expanded its sales force,
increasing the number of its sales professionals from 56 at December 31, 1993
to 122 at September 30, 1996. The Company plans to continue to expand its
sales resources, with resultant increases in related salaries and employee
benefits. See "Business--Business Strategy--Expand Sales Resources."

Operating expense declined from $0.32 to $0.28 per credit card transaction.
This decline reflected greater economies of scale, expense reduction resulting
from the Company's performing in-house

23
<PAGE>

certain processing functions previously performed by third parties and the
favorable renegotiation of a third party vendor arrangement. In addition, the
Company began to realize cost savings as a result of the expansion of its
processing of On-Us debit card transactions.

INCOME FROM OPERATIONS

Income from operations increased $5.7 million, or 21.9%, to $31.6 million
for the nine months ended September 30, 1996, compared to $26.0 million for
the nine months ended September 30, 1995. Operating income as a percentage of
net revenue increased from 32.2% for the nine months ended September 30, 1995
to 34.3% for the nine months ended September 30, 1996.

INCOME TAXES

Income taxes were $13.1 million for the nine months ended September 30,
1996, compared to $10.7 million for the same period in 1995, reflecting higher
operating income.

NET INCOME

Net income increased $3.3 million, or 22.0%, to $18.6 million for the nine
months ended September 30, 1996, compared to $15.2 million for the nine-month
period ended September 30, 1995. Net income as a percentage of net revenue
increased to 20.1% from 18.9% during the same periods.

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

NET REVENUE

Net revenue increased by $11.8 million, or 12.0%, to $109.9 million for 1995
compared to 1994. This increase was primarily attributable to a 23.5% increase
in credit, charge and debit card sales volume from $17.0 billion to $21.0
billion. The increase in sales volume resulted from growth in the Company's
merchant base as a result of its continued emphasis on marketing and sales.
Sales volume and net revenue in 1995 were negatively affected by the loss in
the first quarter of 1995 of a major account associated with Seafirst's
merchant processing business. The account, lost as a result of increased price
competition, represented approximately 3.0% of the 1994 net revenue associated
with Seafirst's merchant processing business.

The Company also was subject to an increase in April 1995 of the interchange
rates charged by the credit card associations which the Company, for
competitive purposes, chose not to pass on to its customers. The increased
interchange rates reduced 1995 net revenue by approximately $1.4 million.

Sales volume increased at a higher rate than net revenue as a result of a
continuing change in the composition of the Company's merchant base. The
proportion of sales volume attributable to high-volume retailers increased
during 1995 as compared to 1994, reflecting the success of the Company's sales
efforts directed towards this segment. In particular, four of the Company's
current five largest accounts, as measured by sales volume, were acquired at
the end of 1994. The increased sales volume also reflects an increasing
proportion of debit card sales volume processed by the Company. Fees on debit
card transactions generally are lower than fees on credit card transactions in
relation to the associated sales volume.

OPERATING EXPENSE

Operating expense increased by $8.1 million, or 12.2%, to $74.7 million for
1995 compared to 1994. Of this increase, $3.2 million is attributable to
increased data processing and communications costs, reflecting the increased
transaction volume. Salary and employee benefits increased by $1.8 million,
reflecting growth in the direct sales staff and related support personnel.
Depreciation

24
<PAGE>

related to new terminals to support new merchant locations resulted in an
additional $1.9 million of depreciation expense. The remainder of the increase
was attributable to increases in general and administrative costs, including
merchant supply costs, driven by the increased sales volume.

Operating expense declined from $0.38 to $0.32 per credit card transaction,
reflecting greater economies of scale.

INCOME FROM OPERATIONS

Operating income increased $3.7 million, or 11.7%, to $35.2 million for 1995
compared to 1994. Operating income as a percentage of net revenue did not
change materially, decreasing from 32.1% in 1994 to 32.0% in 1995.

INCOME TAXES

Income taxes were $14.6 million for 1995, compared to $13.0 million for
1994, reflecting an increase in income from operations.

NET INCOME

Net income increased $2.1 million, or 11.5%, to $20.7 million for 1995
compared to 1994. Net income as a percentage of net revenue decreased slightly
to 18.8% from 18.9% in 1994.

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

NET REVENUE

Net revenue increased by $9.2 million, or 10.4%, to $98.1 million for 1994
compared to 1993. The increase was primarily attributable to a 17.1% increase
in credit, charge and debit card sales volume from $14.5 billion to $17.0
billion as the Company's operations began to benefit from the sales and
marketing strategy initiated in 1993. The strategy, initiated by the Company's
new management team, involved a significant expansion in the sales resources
and promotional efforts directed at the Bank's customer base.

Also contributing to the increase in net revenue was the full year impact of
the implementation by the Company in October 1993 of a pricing adjustment to
calculate its discount against merchants' gross sales volume, an adjustment
that conformed to prevailing industry practice. The Company previously had
calculated its discount based on the merchants' sales volume net of refunds.
This repricing contributed approximately $2.6 million to net revenue in 1994
and approximately $0.6 million in 1993.

Further contributing to growth in net revenue was the increase in fees,
effective April 1994, charged on accounts acquired in BankAmerica's 1992
acquisition of Valley Bank of Nevada.

Sales volume increased at a higher rate than net revenue as a result of
change in the composition of the Company's merchant base. The proportion of
sales volume attributable to high-volume retailers increased during 1994 as
compared to 1993, reflecting the success of the Company's sales efforts
directed toward this segment. Fees paid to the Company by high-volume
retailers in relation to sales volume are generally lower than the Company's
overall merchant base.

The increased sales volume also reflects an increasing proportion of debit
card transaction volume in relation to the total sales volume processed by the
Company. Fees on debit card transactions are generally lower than fees on
credit card transactions in relation to the associated charge volume.

25
<PAGE>

OPERATING EXPENSE

Operating expense decreased $2.9 million, or 4.2%, to $66.6 million for 1994
compared to 1993. Data processing and communications costs declined by $3.4
million, reflecting the impact of the Company's renegotiation of a number of
major vendor agreements. Other operating expense declined by $2.4 million,
primarily reflecting a reduction in fraud and credit losses as a result of
more stringent monitoring of account activity initiated in late 1993.
Offsetting these declines, salaries and employee benefits increased by $1.5
million, reflecting increases in sales and sales support staff. In addition,
general and administrative expense increased by $0.8 million as a result of
higher transaction volume. Operating expense per credit card transaction
declined from $0.51 to $0.38, reflecting the above-described expense reduction
in combination with greater economies of scale.

INCOME FROM OPERATIONS

Income from operations increased $12.1 million, or 62.5%, to $31.5 million
for 1994 compared to 1993. Operating income as a percentage of net revenue
increased from 21.8% in 1993 to 32.1% in 1994.

INCOME TAXES

Income taxes were $13.0 million for 1994 compared to $8.0 million for 1993,
reflecting higher operating income.

NET INCOME

Net income increased $7.1 million, or 61.7%, to $18.5 million for 1994
compared to 1993. Net income as a percentage of net revenue increased to 18.9%
in 1994 from 12.9% in 1993.

LIQUIDITY AND CAPITAL RESOURCES

The Company generated cash flows from operations of $23.1 million, $14.4
million, $12.8 million and $18.3 million for the nine months ended September
30, 1996 and the years ended December 31, 1995, 1994 and 1993, respectively.

Prior to the time BankAmerica transferred its domestic merchant processing
businesses to the Company, funds generated by the Company's operations and not
used for investment were remitted to BankAmerica. For the first nine months of
1996 and for the years ended December 31, 1995, 1994 and 1993, the Company
remitted to BankAmerica $14.7 million, $5.5 million, $5.5 million and
$12.4 million, respectively.

At the time of the transfer to the Company of the merchant processing
businesses of the Bank and Seafirst, BankAmerica retained substantially all of
the drafts in transit relating to the transferred businesses. Following the
contribution, the Company has funded its working capital requirements through
borrowings from an affiliate. See "Capitalization." The Company expects to
repay such debt in full out of the proceeds of the Offerings. See "Use of
Proceeds." The Company anticipates that for the foreseeable future it
generally will be able to satisfy its working capital requirements from the
remaining net proceeds of the Offerings and internally-generated funds. The
Company currently intends to retain future earnings for use in its business
and does not anticipate paying any cash dividends in the foreseeable future.
The Company's future dividend policy will be determined by its Board of
Directors on the basis of various factors, including the Company's results of
operations, financial condition, capital requirements and investment
opportunities. See "Dividend Policy."

The Company had capital expenditures of $8.8 million, $9.5 million, $7.7
million and $5.9 million for the nine months ended September 30, 1996, and the
years ended December 31, 1995, 1994, and

26
<PAGE>

1993, respectively. These expenditures were primarily for merchant terminals
as well as technology-related equipment to support transaction processing. The
Company expects to spend approximately $2.0 million in the fourth quarter of
1996 and approximately $15.0 million in 1997, of which $10 million is related
to the acquisition of terminals to support new merchant locations and the
remainder is for strategic technology investments (including the Company's new
Paylink(TM) transaction processing system, expected to become operational in
the first quarter of 1997) and the funding of research and product
development.

As part of its strategy to maintain its position as one of the industry's
largest merchant processors, the Company intends on a selective basis to
pursue acquisition opportunities. The Company currently is not a party to any
negotiations, understandings or agreements with respect to any such
acquisitions which would be material to the Company. In the event the Company
is successful in pursuing such acquisitions, substantial external funding may
be required. Although the Company believes that under such circumstances it
would be able to access the capital markets on terms and in amounts adequate
to accomplish its objective, there can be no assurance this will be the case.

QUARTERLY OPERATING RESULTS

The merchant processing industry in general is prone to seasonal
fluctuations in transaction activity. Although the Company's business
generally experiences seasonality in its business, fluctuations are less
pronounced than in the industry generally, due in part to its diverse merchant
customer base. Those segments of merchants that are particularly sensitive to
seasonal fluctuations, such as airlines, travel agencies, lodging and mail
order merchants, each represent relatively small percentages of the Company's
processing business, as compared to those segments of the Company's customer
base that are generally not subject to seasonality such as general retail
merchants, restaurants, supermarkets and gas stations. The Company's net
revenue is generally higher in the third and fourth calendar quarters and
lower in the first calendar quarter. Increased tourism in California and other
Western states during the summer months and retail activity generated by the
beginning of the school year contribute to higher third quarter net revenue,
and holiday activity contributes to higher fourth quarter net revenue. The
decline in retail activity following the holiday season negatively affects
first quarter net revenue.

27
<PAGE>

BUSINESS

The Company provides an array of payment processing and related information
products and services to merchants who accept credit, charge and debit cards
as payment for goods and services throughout the United States. According to
published industry sources, the Company is the fourth largest processor of
merchant credit card transactions and the largest processor of debit card
transactions in the United States. The Company's products and services include
the processing of a wide variety of credit, charge and debit card transactions
and the provision to merchants of other related information, services and
product support.

The Company provides its products and services to a merchant customer base
in a wide variety of industries, including general retailers, restaurants and
supermarkets. The Company's customers are large multi-regional chains, middle
market merchants and small merchants that collectively operate from more than
135,000 locations. The Company's sales force of over 120 employees markets its
products and services to merchants directly and through the BankAmerica branch
network and product distribution system. In addition, the Company has grown
its customer base and increased its transaction volume through the use of
agent banks and ISOs that obtain customers on behalf of the Company. The
Company continually invests in technology, research and product development
and emphasizes excellent customer service in the delivery of its products and
services in order to attract and retain merchant customers. The Company
believes that its expense structure compares favorably to that of its
competitors. The Company's annual customer retention rate has exceeded 95% in
recent years.

The Company has experienced substantial growth in its transaction volume,
net revenue and net income during the three and three-quarter years ended
September 30, 1996, principally through internally generated growth rather
than through acquisitions. The number of card transactions processed by the
Company increased from 201.8 million for the year ended December 31, 1993 to
319.0 million for the year ended December 31, 1995. During the same periods,
the Company's net revenue and net income increased from $88.9 million and
$11.5 million to $109.9 million and $20.7 million, respectively. During the
nine month periods ended September 30, 1995 and September 30, 1996, the number
of card transactions processed increased from 232.4 million to 270.5 million,
the Company's net revenue increased from $80.6 million to $92.3 million and
the Company's net income increased from $15.2 million to $18.6 million,
respectively.

The Company believes that its growth in recent years has been attributable
in part to, and that it will continue to benefit from, its close affiliation
with BankAmerica. As a result of its contractual arrangements with
BankAmerica, the Company is able to utilize the Bank of America name and Marks
and directly access BankAmerica's branch network and product distribution
channels and customer base in the conduct of its operations and the generation
of new business. The Bank of America name and brands are widely recognized by
consumers and businesses and provide the Company with substantial credibility
in the merchant processing market. The Company's relationship with BankAmerica
also affords it access to the marketing and sales capabilities of
BankAmerica's approximately 1,997 retail banking branches in eleven states,
the more than 850,000 small business and middle market customers of
BankAmerica, the approximately 10.9 million BankAmerica debit card holders,
the approximately 8.9 million BankAmerica credit card holders and the
approximately 8.0 million consumers holding BankAmerica checking accounts at
September 30, 1996. See "Relationship with BankAmerica."

28
<PAGE>

in the future the Bank's merchant processing businesses in Taiwan and other
countries in Asia. Consummation of the Asian Acquisitions and the acquisition
of the Bank's other merchant processing businesses in Asia is subject to local
governmental regulatory approval. There is no assurance that any of such
regulatory approvals will be obtained or as to the timing thereof. See "Risk
Factors--Proposed Asian Acquisitions and Operations" and "Business--
Regulation." The Company believes that there are significant opportunities in
the future for growth in Asia. To the extent the Company is able to consummate
the Asian Acquisitions and can acquire any of the other BankAmerica merchant
processing businesses in Asia, the Company will be able to capitalize on these
opportunities.

The Company was incorporated in October 1996 and combines into a single
organization: (i) the Bank's primary merchant processing business, a multi-
state operation based in California; and (ii) the merchant processing business
of Seafirst, located principally in the state of Washington. During 1996,
management of the Bank's primary merchant processing business assumed
management responsibility for the Seafirst operations. During 1997, the
Company expects to eliminate duplicative operations and combine these
businesses where possible. Such duplicative operations consist of merchant
processing systems and third party processing arrangements. The cost of
eliminating such operations is not expected to be material.

INDUSTRY OVERVIEW

The merchant processing industry provides merchants with credit, charge and
debit card and other payment processing services, as well as related
information services. Payment processing for commercial businesses has grown
rapidly in recent years as a result of the proliferation in the uses and types
of credit, charge and debit cards, wider acceptance of such cards among
merchants and increased consumer use of such cards. Important contributors to
this growth have included advances in payment processing and
telecommunications technology as well as the transition from paper-based to
electronic processing, which provides greater convenience to merchants and
consumers, reduces fees charged to merchants and facilitates faster, more
accurate settlement of payments. In addition, the expansion of electronic
distribution of government benefits (electronic benefits transfer ("EBT")
programs) and electronic payment for the settlement of government obligations
are expected to further expedite the displacement of cash and check
transactions.

According to industry publications, consumer use of Visa(R) and
MasterCard(R) credit cards for purchases and cash advances in the United
States totaled $538.2 billion in 1995, compared to $440.9 billion in 1994, an
increase of 22%. Also according to industry publications, customer use of on-
line debit cards for purchases in the United States totaled $22.8 billion in
1995, compared to $15.7 billion in 1994, an increase of 45.2%. The following
chart illustrates the growth in consumer usage of credit cards and debit cards
for purchases and cash advances in the United States from 1980 to 1995 and the
projected growth to the year 2000.

29
<PAGE>

RETAIL SALES VOLUME
(DOLLARS IN BILLIONS)

[GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
1980 1990 1995 2000
<S> <C> <C> <C> <C>
Cash $934.4 $1,612.1 $ 839 $ 819.83
Checks $540.0 $1,188.1 $2,085 $2,121.75
Credit Cards $189.6 $ 446.5 $ 740 $1,437.16
Debit Cards $ 0.4 $ 10.6 $ 51 $ 264.31
Other $ 84.7 $ 121.8 $ 56 $ 450.13
</TABLE>
Source: The Nilson Report
* Stored value cards, EBT, remote payments, food stamps, money orders and
travelers checks.

The merchant processing industry has undergone significant consolidation in
recent years. In 1995, the top ten merchant processors processed approximately
70% of credit card sales volume compared to 53% in 1992. This consolidation is
a result of an increasing requirement to invest in technology in order to
remain competitive, scale-driven cost benefits and demand for increased product
capabilities by customers. Many smaller-scale transaction processors, unwilling
or unable to meet the changing needs of the industry are leaving the business
or seeking partners to provide the necessary processing for their customers,
providing opportunities for large scale processors.

BUSINESS STRATEGY

The Company's principal strategic objectives are:

. to remain one of the largest merchant processors through growth
generated primarily through the Company's own sales channels (and, to
the extent attractive opportunities arise, augmented through
acquisitions);

. to continue increasing profitability through careful attention to
pricing and cost controls;

. to provide a broad range of products that are both responsive to
customer needs and supported by excellent customer service; and

. to maintain its high customer retention level.

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<PAGE>

In order to achieve these objectives, the Company is pursuing a strategy
with the following components:

EXPAND SALES RESOURCES

In recent years, the Company has significantly expanded its sales force. At
December 31, 1993, the Company had 56 sales professionals. At September 30,
1996, the Company's direct sales force numbered 122. Growth has occurred
across all sales channels, most significantly in the markets served by the
BankAmerica retail branch system. The Company plans to continue to expand its
sales resources.

DOMESTIC DIRECT SALES--BANKAMERICA MARKETS. The Company expects to continue
to pursue aggressively the sales opportunities generated through the
BankAmerica customer base and branch distribution system. The Company has
recently established a centralized unit to follow up efficiently small
merchant leads generated by BankAmerica's retail branch system and expects
this initiative to allow its field sales force to increase its focus on larger
merchants.

DOMESTIC DIRECT SALES--EXTERNAL MARKETS. The Company is expanding its sales
effort to cover domestic markets outside of the BankAmerica retail market area
and has offices staffed by a 33-employee sales force in Chicago and New York.
In 1997, the Company plans to add over 25 additional sales professionals in at
least two new markets.

INTERNATIONAL. The Company intends to acquire the Bank's merchant processing
operations in Asia to the extent possible. Following consummation of the Asian
Acquisitions, the Company intends to maintain and expand the Bank's sales
efforts in the Philippines and Thailand through its direct sales staff as well
as by further exploiting the BankAmerica branch presence. The Company and
BankAmerica expect to work cooperatively to allow the Company to acquire,
operate or participate in the Bank's merchant processing businesses and
initiatives in Taiwan, South Korea, India, the People's Republic of China and
Indonesia. In addition, the Company expects to pursue business opportunities
in other Asian markets.

AGENT BANKS AND INDEPENDENT SALES ORGANIZATIONS. The Company intends to
increase its emphasis on its agent bank program and on establishing
relationships with ISOs. The Company increased its agent bank sales force by
two and signed 24 new agent bank clients during the first nine months of 1996.
The Company plans to utilize these channels to increase its coverage of
markets where it does not have or intend to establish a field sales force and,
in the case of ISOs, to access specific industries and products which augment
its current capabilities.

TELEMARKETING. The Company utilizes the Bank's retail telemarketing group,
comprised of over 100 telesales specialists, to generate merchant referrals
for the Company's direct sales force and conduct outbound sales calls
utilizing sales lead databases provided by BankAmerica. In addition, the
Company operates a telemarketing group from its San Francisco office
consisting of 21 sales specialists who conduct direct telesales and provide
branch support.

CAPITALIZE ON BANKAMERICA RELATIONSHIP

Under the terms of the Intercompany Agreements, the Company will continue to
have access during the term of the agreements to the Bank of America name and
family of brands and directly access BankAmerica's product distribution
channels and customer base. The Company believes that this relationship
provides a significant competitive advantage. See "Relationship with
BankAmerica--Intercompany Agreements and Arrangements."

ASSOCIATE WITH BANKAMERICA BRAND. The Company's association with the widely
recognized Bank of America name and family of brands, including
BankAmericard(R), VERSATEL(R) and VERSATELLER(R), provide it with substantial
credibility in markets around the world.

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<PAGE>

ACCESS BANKAMERICA DISTRIBUTION CHANNELS. The Company expects to continue to
utilize its access to BankAmerica distribution channels to generate new sales
in a cost-effective manner at attractive prices.

EXPAND ON-US TRANSACTIONS. BankAmerica's debit card holders represent a
significant proportion of all debit card holders in BankAmerica's retail
market area; BankAmerica customers generated approximately 104.6 million
transactions during 1995 on the Interlink(R) and Accel(R) networks
representing approximately 48.7% of the total number of transactions processed
through these networks during this period. As a result, a significant portion
of the debit transactions processed by the Company represent potential On-Us
transactions which could be processed directly through BankAmerica, bypassing
the debit networks (and the attendant network charges). This advantage, which
the Company believes it enjoys to a greater degree than its principal
competitors in the payment processing industry, reduces the Company's
processing costs and gives the Company greater pricing flexibility in
competing for business. The Company has recently commenced marketing this
capability for on-line debit card transactions in California, and expects over
time to expand this capability to other debit card transactions and to credit
card transactions.

UTILIZE BANKAMERICA RESEARCH AND DEVELOPMENT. The Company is working
cooperatively with BankAmerica on a variety of research and development
efforts in the payments industry.

BUNDLE BANKAMERICA AND COMPANY PRODUCTS. The Company has increased its
emphasis on working with BankAmerica sales professionals to bundle payment
processing products with various business credit and deposit products. The
Company believes that more extensive product relationships with customers--
spanning both bank and payment processing products--contribute to the
Company's high customer retention level.

MANAGE COST STRUCTURE

CONTINUE TO INVEST IN TECHNOLOGY. The Company has recently introduced a
number of new systems that have reduced both the Company's overall expense
base and, more significantly, its marginal costs (and, at the same time, offer
improved service to its customers). Among these systems are (i) the Automatic
Chargeback System, (ii) ASAP--the Account Setup Automation Program and
(iii) the Interoffice Information System. The Company also expects that the
introduction of its proprietary PayLink(TM) transaction processing system
during the first quarter of 1997 will further reduce its processing costs and
improve its operating leverage beginning in 1998.

EXPAND ON-US TRANSACTIONS. As the Company expands the proportion of its
business which is On-Us transactions, the cost reductions resulting from the
avoided network charges will increase.

INTEGRATE OPERATIONS. During 1996, management of the Bank's primary merchant
processing business assumed responsibility for Seafirst's merchant processing
business. During 1997, the Company expects to eliminate duplicative operations
and combine these businesses where possible. Such duplicative operations
consist of merchant processing systems and third party processing
arrangements. The cost of eliminating such operations is not expected to be
material.

MANAGE VENDOR RELATIONSHIPS. The Company is working to consolidate its
vendor relationships and use its scale and prominence in the industry to
negotiate fee reductions.

TARGET NEW INDUSTRIES AND CUSTOMERS

NATIONAL ACCOUNTS. The Company intends to continue to add larger "national
accounts" to its customer base where pricing and profitability is acceptable.
The Company believes that it may have an advantage in attracting larger
accounts because of its low-cost structure in situations where it can utilize
its On-Us capabilities.

32
<PAGE>

SPECIALTY MARKETS. The Company has dedicated significant product development
and marketing resources to the development of specially tailored products to
serve specific niche markets and industries, including supermarkets, gaming
establishments and hotels. The Company has established a strong position in
these specialty markets and expects to continue its focus on these and other
such markets.

GOVERNMENT INSTITUTIONS. The Company believes that credit and debit card
acceptance among federal, state and local governmental entities will increase
significantly over the next several years and is actively pursuing business
opportunities in this sector. The Company believes that its affiliation with
BankAmerica, which has a significant number of banking relationships with a
variety of governmental institutions, particularly in the western United
States, will play an important role in enhancing the Company's presence in
this sector.

SPECIAL CREDIT PROGRAM. During 1996, the Company established a program for
small merchants with credit characteristics that do not meet the Company's
normal criteria. Prior to the establishment of this program, such merchants
were referred to other merchant processors. Under the program, the Company
mitigates the potential risk by charging higher discount rates than in its
standard program, generally requiring reserve deposits and carefully
monitoring the merchants in the program.

EXPAND SERVICE OFFERINGS

DEPLOYMENT OF PAYLINK(TM) TRANSACTION PROCESSING SYSTEM. During the first
quarter of 1997, the Company expects to begin operating its PayLink(TM)
transaction processing system. The new system will allow the Company to more
readily customize product features for its customers, improve management
information reporting generated for customers, generally reduce the time
required for product enhancements and new products to reach the marketplace
and reduce the Company's dependence on outside vendors to perform front-end
processing.

ENHANCED CHARGEBACK SYSTEM. The Company recently implemented an Automated
Chargeback System which allows its merchant customers to interface
electronically with the Company's chargeback database in order to monitor and
resolve chargebacks.

ELECTRONIC BENEFITS TRANSFER. The Company expects that significant payment
processing opportunities will exist as government entitled programs (e.g.,
food stamps) evolve to support electronic access of benefits by recipients.
The Company is presently introducing an EBT product which will enable it to
offer a complete menu of products to its supermarket and other merchant
customers who accept EBT payments.

QUASI-CASH ACCESS. The Company, in conjunction with a transaction software
company, has developed a specialized product enabling card holders to access
available lines of credit in order to generate a negotiable instrument at
gaming establishments.

ELECTRONIC COMMERCE. The Company is currently conducting several pilot
programs aimed at designing solutions which enable merchants to accept credit
card transactions over the Internet.

STORED VALUE CARDS. The Company has been conducting two sizable pilot
programs designed to test the point of sale technology currently available,
the merchant receptivity to this payment method and the usage rates of card
holders.

CORPORATE PURCHASING CARDS. The Company has introduced specialized products
enabling vendors of goods or services to accept special credit cards designed
to automate the low value (under $25,000) corporate procurement transaction.

33
<PAGE>

CHECK AUTHORIZATION AND RECOVERY. The Company is currently exploring the
possibility of offering check authorization and recovery services directly to
its merchant customers. Over time, the Company believes that its real-time
access to BankAmerica data regarding checking account balances and other
customer information will enable the Company to compete effectively in this
market.

INCREASE CROSS-SELLING EFFORT

The Company is intensifying its efforts to cross-sell other merchant
processing products to its existing customer base. In particular, the Company
is focused on expanding the number of merchants that accept debit cards (and,
over time, increasing the volume of its debit card On-Us transactions) and its
offerings of ancillary services such as check authorization and recovery
services.

GROW THROUGH ACQUISITIONS

The Company expects to evaluate and selectively pursue acquisitions of
merchant portfolios and of companies involved in the merchant processing
industry that offer the potential to contribute products, technologies or
customers. The Company also expects that, as has occurred historically,
merchant portfolios acquired through bank acquisitions made by BankAmerica
will provide additional acquisition opportunities for the Company.

PRODUCTS AND SERVICES

The Company provides a variety of products and services to merchants to
facilitate the processing of transactions at the point of sale, focusing
primarily on markets for credit, charge and debit card processing and for
check acceptance and recovery. The Company processes payments made with
Visa(R), MasterCard(R), Diners Club(R), Carte Blanche(R), American Express(R),
Discover(R) and JCB(R) cards. The Company also processes payments made with
debit cards from a variety of networks, including Interlink(R), Explore(R),
MAC(R), NYCE(R), Honor(R), Cash Station(R), Pulse(R) and Accel(R).

CORE PRODUCTS AND SERVICES

The core products and services provided by the Company are described below:

. ELECTRONIC AUTHORIZATION SERVICES. The Company provides electronic
transaction authorization services for all major credit, charge and
debit cards. Authorization generally involves approving a card holder's
purchase at the point of sale after verifying that the card is not lost
or stolen and that the transaction amount is within the card holder's
credit or account limit.

. DATA CAPTURE AND REPORTING SERVICES. The Company records data relating
to transactions at the time of the transaction authorization and
receives data aggregated and organized by the merchant using a software
application programmed by the Company into the merchant's terminal. The
Company compiles this aggregated data and uses it to provide merchants
with information services such as specialized management reports.

. SETTLEMENT, CLEARING AND ACCOUNTING SERVICES. The Company processes
transactions for settlement, forwards transaction data to credit card
associations for payment and provides monthly statements to merchants.

. BILLING DISPUTE RESOLUTION SERVICES. The Company assists merchants in
investigating and resolving billing disputes with customers.

. TERMINAL SERVICES. The Company rents and sells POS terminals to its
merchant customers. The Company customizes and regularly updates the
software that drives the terminals and provides terminal maintenance
services.

. CUSTOMER SERVICE AND SUPPORT. The Company maintains a telephonic call-in
service staffed by customer service representatives which is available
24 hours a day, seven days a week.

34
<PAGE>

MARKETING PROGRAMS

The Company and BankAmerica jointly offer a number of services designed to
allow merchant customers to target market retail customers and to reward
retail bank customers who are frequent customers of a merchant. Merchant
customers, through joint marketing programs of BankAmerica and the Company,
are able to communicate directly with BankAmerica retail customers by
advertising and through statement messages and inserts, automatic teller
machine ("ATM") transaction receipts, newsletters and direct mail. A related
service to be commenced in the first quarter of 1997 will allow merchants to
track individual retail customer activity and to reward shoppers that exceed
certain pre-determined shopping levels over a specific time interval with in-
store discounts, sweepstakes entries or on-the-spot prizes.

SPECIALTY APPLICATIONS

The Company also provides products and services tailored to the needs of
individual merchants or a particular industry. In the retail industry a
variety of products are offered to support different types of equipment at the
point of sale, including POS terminals, electronic cash registers and personal
computers. For restaurants, the Company offers products that assist merchants
in managing the entry and distribution of tips to servers. For lodging
establishments, the Company offers products which assist such establishments
in managing the unique circumstances that result from transaction activity of
differing types occurring over a period of days. The Company offers additional
products to support supermarkets and large volume/low dollar amount merchants
who find it economically beneficial to process transactions in batches rather
than individually. For very small merchants, the Company offers voice
authorization and the deposit of paper drafts at BankAmerica or agent bank
branches. These products are supported through a variety of arrangements that
involve the use of the Company's internal authorization and capture system or
third-party authorization and capture systems.

NEW PRODUCT INITIATIVES

The Company devotes substantial time and resources to the development of new
products and services. The Company's new product initiatives include
electronic commerce pilot programs; a quasi-cash access product for the gaming
industry; several stored value card products; electronic benefit transfer and
payment products; and a corporate purchasing card product. These new product
initiatives are described below:

ELECTRONIC COMMERCE. The Company is pursuing several initiatives in the
developing arena of electronic commerce. The Company has entered into several
pilot programs with high technology companies specializing in Internet
navigational software, including Netscape Communications Corp. and Cybercash,
Inc. Through these programs, the Company is designing and developing credit
card payment solutions for on-line retail sales and has activated several
merchant pilot programs. In addition, the Company is working actively with
BankAmerica's Interactive Banking Group which has, within the last year,
introduced bill payment by telephone, launched a new home banking service and
established the first financial institution site on America Online(R). The
Company and BankAmerica also are involved in the development and evaluation of
data encryption standards for the secure transport of card holder data across
the Internet. The Company and BankAmerica will be participating in Visa's
pilot program on the Internet during the first and second quarters of 1997. It
is the Company's objective to deliver a complete, secure on-line payment
solution to Internet merchants by the time Visa(R) implements its anticipated
system-wide launch of Internet card payment transactions in the third quarter
of 1997. There can be no assurance the Company will develop the requisite
technology to accomplish this objective.

QUASI-CASH ACCESS. For many years, the gaming industry has utilized the
services of a small number of credit card processors whose specialized
products enable credit card holders to access their available lines of credit
to generate a negotiable check at the gaming establishment. This

35
<PAGE>

negotiable check is then cashed by the gaming establishment for the card
holder. These "quasi-cash" transactions subject card holders to a convenience
fee which credit card processors charge for each transaction. For this reason,
revenue margins associated with these transactions exceed the industry norm.
To compete in this industry, the Company has developed a new product pursuant
to which customers at gaming establishments can use their credit or debit
cards at automated terminals to obtain authorization for negotiable
instruments which are redeemable for cash at the gaming establishment. The
Company is utilizing BankAmerica's lending and cash management relationships
with major gaming industry companies to market this new product. The Company
recently signed an agreement with a large gaming concern to install this
product in most of its gaming venues.

STORED VALUE CARDS. The Company is working closely with the Bank's
Interactive Banking Group to bring consumers and merchants together in pilot
programs to test and evaluate emerging stored value card payment technologies.
The Bank has issued approximately 4,000 reloadable stored value cards to
employees at one of the Bank's facilities who may use their cards at vending
machines and cashier counters at the cafeteria and at selected merchants in
the surrounding area. The Company is the processor for the reload transactions
whereby employees may use their credit or debit cards to load value onto their
stored value cards. In addition, at the headquarters of Visa U.S.A. Inc. and
Visa International, Inc. in Foster City, California, the Bank has issued
approximately 17,000 disposable and 2,500 reloadable stored value cards to
employees. The Company is the processor for transactions that involve the
purchase of these cards through card dispensing machines. Employees can buy
the cards using cash, credit cards or debit cards.

GOVERNMENT PAYMENTS. The government sector will present an opportunity for
increased merchant processing volume for the Company as a result of the
proliferation of EBT programs, where recipients will be able to access their
benefits through a benefit card that operates much like a commercial debit
card. In addition, there is increasing demand among government agencies for
the ability to accept credit, debit and smart cards for payments that have
traditionally been paper-based. The Company is in the process of enhancing its
product offerings to support the unique requirements of these government-
related payment transactions.

CORPORATE PURCHASING CARDS. Recently, both Visa(R) and MasterCard(R) have
introduced corporate purchasing cards which are designed to enable large
companies to conduct their relatively low dollar value (under $25,000)
procurement transactions through the use of credit cards. These card products
are designed to alleviate the paper-intensive purchase order and check
remittance process that many larger companies experience when acquiring goods
or services for their companies. The Company's specialized processing services
for corporate purchasing cards enables vendors of goods or services to accept
the cards as payment and generates the necessary transaction support data (for
example, invoice number and tax amount) for the corporate purchaser paying for
the goods or services. The Company works closely with BankAmerica to enroll
vendors in this new program.

TRANSACTION PROCESS FLOW

A sequence of events is triggered at the merchant location when a merchant
accepts a customer's credit, charge or debit card for the payment of goods or
services. Although these events involve a variety of equipment, computer
systems and telecommunications processes, transactions are generally completed
within 10 to 20 seconds. The transaction cycle includes authorizing card
transactions at the point of sale, capturing data related to transactions,
settling transactions through the card associations and debit card networks 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.

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<PAGE>

TRANSACTION CYCLES

CREDIT CARD TRANSACTION CYCLE. The transaction cycle for credit card
transactions is illustrated by the following diagram (numbers indicate the
order of steps in the transaction cycle):

Credit Card Transaction Cycle

(CYCLE DEPICTION APPEARS HERE)

The referenced chart describes the credit card transaction cycle as follows:

1 - Merchant sells goods or services to Cardholder

2 - Cardholder pays Merchant with credit card

3 - Merchant transmits authorization request to Authorization Provider

4 - Authorization Provider transmits authorization request to Card Association

5 - Card Association verifies credit availability with Credit Card Issuer

6 - Credit Card Issuer approves transaction and notifies Card Association

7 - Card Association approves transaction and notifies Card Association

8 - Authorization Provider approves transaction and notifies Merchant

9 - Merchant transmits transactions data to the Company

10 - The Company transmits transaction data to Card Association

11 - Card Association transmits transaction data to Credit Card Issuer

12 - Credit Card Issuer remits payment funds to Card Association

13 - Card Association remits payment to the Company

14 - The Company remits payment to Merchant

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<PAGE>

DEBIT CARD TRANSACTION CYCLE. The transaction cycle for debit card
transactions is illustrated by the diagram below. On-line debit card
transactions use a "Single Message Format" which combines both the
authorization record and the settlement record generated by the merchant into
one transaction--or message. As such, the initial authorization transaction
serves to prompt the debit card issuer to remit payment to the debit card
network at the end of the day, and the debit card network to remit payment to
the merchant processor. Doing so eliminates the need for the merchant
processor to submit a settlement file to the network at the end of the day in
order to receive payment for processed transactions.

Debit Card Transaction Cycle

[CYCLE DEPICTION APPEARS HERE]

The referenced chart describes the debit card transaction cycle as follows:

1. Merchant sells goods or services to Cardholder
2. Cardholder pays Merchant with debit card
3. Merchant transmits authorization to the Company
4. The Company transmits authorization request to debit card network
5. Debit card network transmits authorization request to Debit Card Issuer
6. Debit Card Issuer approves transaction and notifies Debit Card Network
7. Debit Card Network approves transaction and notifies the Company
8. The Company approves transaction and notifies Merchant
9. Debit Card Issuer remits funds to Debit Card Network
10. Debit Card Network remits funds to the Company
11. The Company remits funds to Merchant

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<PAGE>

ON-US DEBIT CARD TRANSACTION CYCLE. In the On-Us debit card transaction
cycle, illustrated in the diagram below, the merchant processor communicates
directly with the debit card issuer. The merchant processor submits an
authorization request to the debit card issuer and the debit card issuer
remits payment funds directly to the merchant processor. In an On-Us
transaction, both the debit card issuer and the merchant processor avoid
paying transaction fees to the debit card network.

On-Us Debit Card Transaction Cycle

[CYCLE DEPICTION APPEARS HERE]

The referenced chart describes the On-US debit Card transaction cycle as
follows:

1 - Merchant sells goods or services to Cardholder
2 - Cardholder pays Merchant with Versatel(R) card
3 - Merchant transmits authorization request to the Company
4 - The Company transmits authorization request to BankAmerica (Versatel(R))
5 - BankAmerica (Versatel(R)) approves transaction and notifies the Company
6 - The Company approves transaction and notifies Merchant
7 - BankAmerica (Versatel(R)) remits payment funds to the Company
8 - The Company remits payment funds to Merchant

The Company is well-positioned to benefit from converting a significant
portion of its debit and credit card transactions to be processed as On-Us
transactions. BankAmerica is the eighth largest issuer of credit cards and is
the largest on-line debit card issuer in the United States. At September 30,
1996, BankAmerica had 10.9 million debit card holders and 8.9 million credit
card holders. During 1995, BankAmerica debit card customers generated 94.6
million transactions on the Interlink debit card network and 10.0 million
transactions on the Accel debit card network, the largest share of any bank on
either network. Because of BankAmerica's strength as a debit and credit card
issuer and the Company's strong merchant processing presence, a significant
portion of the Company's transactions are executed by BankAmerica debit and
credit card holders and therefore could be processed as On-Us transactions.
This advantage, which the Company believes that few of its competitors in the
merchant processing industry enjoy to the same extent, offers the Company the
potential to reduce its processing costs and therefore gives the Company
greater pricing flexibility in competing for business. The Company has
recently commenced marketing this capability for on-line debit card
transactions originating in California. The Company expects to expand its On-
Us processing during 1997 to include on-line debit card transactions outside
of California, off-line debit card transactions and credit card transactions.

ELECTRONIC AUTHORIZATION

The authorization and data capture processes are completed at the same time,
usually within 3 to 15 seconds. The authorization process begins when the
merchant enters or "swipes" the card through its POS terminal and is completed
upon obtaining approval from the card issuer for the card holder's purchase.
Utilizing third-party national authorization networks available on a
subscription basis, the Company confirms with the card issuer that the card
holder has adequate credit to cover the amount

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<PAGE>

of the purchase and verifies that the card has not been reported lost or
stolen. As a large customer of these networks, the Company has been able to
obtain such authorization information on a favorable cost basis. In the case
of certain On-Us transactions originating in California involving debit cards
issued by BankAmerica, the Company obtains the necessary authorization
directly from BankAmerica, thus avoiding the necessity of utilizing the third
party authorization network and the attendant fees. 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.

For debit card transactions, authorization is conducted through the use of a
card holder Personal Identification Number ("PIN") rather than a signature.
The PIN is encrypted at the POS terminal and is carried along with the
financial data associated with the transaction. At the card issuer, the PIN is
decrypted and matched to the PIN on record for that account. The use of a PIN
is critical in keeping disputes and losses related to debit card transactions
to a minimum.

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 helps to ensure accurate
transaction reconciliation with each merchant and protects against potential
data loss. From time to time each day, the Company "batches" or aggregates and
organizes data from the merchant's POS terminal for use in settling
transactions and preparing merchant reports. 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.

SETTLEMENT, ACCOUNTING AND CLEARING

The Company processes transactions for settlement, forwards transaction data
to credit card associations for payment and provides monthly payments to
merchants. The settlement process involves managing a record of each
merchant's transactions and transferring funds for payment from the card
issuer to the merchant. Transaction information is transmitted by the Company
to the card-issuing bank through the card association, such as Visa(R) or
MasterCard(R). The Company then arranges for funds to be transferred to the
merchant's bank account via Automated Clearing House ("ACH") or Fedwire
transfer, or BankAmerica's internal deposit system in the case of a merchant
with a BankAmerica deposit account. The card holder then 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 retained by card issuers. Settlement payments for merchants,
who are billed by the Company for processing fees on a daily basis, are also
net of such interchange fees. For merchants who are billed by the Company for
processing fees on a monthly basis, settlement payments are for the gross
amount of the merchant's transactions. In these cases, the merchant is billed
by the Company on a monthly basis for its processing fees and for interchange
fees payable to card issuers. Similar settlement processes exist for
transactions made with Diners Club(R) and JCB(R) cards. American Express(R)
and Discover(R) transactions processed by the Company are transmitted to those
issuers who then credit merchants directly for transactions involving those
cards. For its merchant customers who are billed weekly or monthly, the
Company bears the risk of merchant nonpayment of applicable fees and
assessments. See "Risk Factors--Chargebacks; Payment Risks" and "Transaction
Process Flow--Dispute Resolution; Chargebacks; Payment Risks." 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

40
<PAGE>

Company is generally able to credit the merchant's account within 24 to 72
hours. When making settlement payments to merchants for their credit and debit
card transaction activity, if the merchant has a checking account with
BankAmerica, the Company generates an entry directly to the merchant's account
with BankAmerica. If the merchant has a non-BankAmerica checking account, the
Company generates an entry through the ACH.

For debit card transactions, settlement is similar to credit cards in that
it is conducted at the end of the day and in batch mode. However, the merchant
and processor do not have to submit a settlement file. Rather, the card issuer
tracks the transactions and dollar amounts owed to the debit networks and
remits payment to the network. The networks in turn track the dollar amounts
owed to each processor and remit payment accordingly.

In order to process credit and debit card transactions, nonbank merchant
processors such as the Company must be sponsored by a financial institution
that is a principal member of the credit card associations and debit networks.
Through the Bank, the Company is registered with Visa(R) and MasterCard(R) and
various debit networks including Interlink(R), Explore(R), Accel(R), Pulse(R)
and Cash Station(R) as a certified processor and member service provider under
a clearing bank arrangement. Following the Offerings, the Bank will continue
its sponsorship of the Company through a sponsorship arrangement so that the
Company will remain registered with Visa(R), MasterCard(R) and various debit
networks. See "Risk Factors--Card Association and Debit Network Registration"
and "Relationship with BankAmerica--Intercompany Agreements and Arrangements."

DISPUTE RESOLUTION; CHARGEBACKS; PAYMENT RISKS

The Visa(R) and MasterCard(R) associations have rules that apply to a bank
or other processing firm that acquires a card transaction from a merchant and
processes it into the Visa(R) or MasterCard(R) system for presentment to the
merchant processor. In the event of certain types of billing disputes between
a card holder and a merchant, the Company, as the merchant processor of the
transaction, assists the merchant in investigating and resolving the dispute.
If the dispute 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 card holder. If the Company or any of its clearing banks is 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 card holder. See "Risk Factors--Chargebacks; Payment Risks." In cases
in which the transaction is processed by a merchant processor other than the
entity that will enter it into the Visa(R) or MasterCard(R) system, the
merchant processor is generally required by that entity to indemnify it
against such losses. The Company has entered into such indemnification
arrangements with BankAmerica pursuant to the Sponsorship Agreement. The
Company provides a sophisticated chargeback control system for its merchants
that actively prescreens disputes and uses 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
also uses various risk management and fraud avoidance practices to minimize
its exposure to potential losses in this area. See "--Risk Management."

The Company believes that its exposure to chargebacks is mitigated by the
relatively low percentage of the type of merchant accounts in the Company's
merchant customer base that are commonly associated with higher chargeback
volumes.

Chargeback exposure to the Company can also result from fraudulent credit
card transactions initiated by merchant customers. Examples of merchant fraud
include logging fictitious sales transactions and falsification of transaction
amounts on actual sales. The Company conducts a background review of its
merchant customers and on a daily basis monitors merchant transactions

41
<PAGE>

against standards it has developed in its efforts to prevent merchant fraud.
The Company also can withhold or delay a merchant's daily settlement if
fraudulent activity is suspected.

STATEMENTS AND BILLING

The Company generally prepares and mails monthly statements to merchants.
Monthly statements list daily sales volume and identify the fees assessed for
processing transactions and renting equipment. For merchants billed under the
discount rate method, the Company calculates the discount on a daily basis as
part of its settlement payments to the merchant. Fees are calculated by
multiplying the merchant's sales volume against its discount rate and any
uncollected fee amount is debited from the merchant's checking account.
Merchants billed on a flat fee basis are billed either weekly or monthly and
receive their settlement payments for the gross amount of the transaction.

THIRD-PARTY VENDORS

The Company contracts with third parties to provide certain processing
services. The Company also contracts with a number of parties to provide
electronic authorization for portions of its customer base. The Company
anticipates that over time an increasing proportion of its customers will
utilize the Company's new transaction processing system and that the
utilization of third party vendors will diminish. See "--Technology."

The Company also contracts with a third-party vendor to process transactions
for settlement, merchant accounting and clearing for customers other than
former Seafirst customers, which are presently processed by the Company's own
systems. During 1997, the Company anticipates converting the former Seafirst
customers to such third-party vendor.

NET REVENUE

The Company's net revenue is generated primarily from fee income earned
under processing agreements with merchants, agent banks and ISOs, which is
offset by Visa(R) and MasterCard(R) interchange fees and assessments and the
fees and charges of debit networks in the case of debit transactions. However,
in On-Us debit transactions involving BankAmerica debit cards, the fees and
charges of debit networks are avoided, thus enhancing the Company's
competitive position. The Company also receives income for several value-added
services it provides, such as enhanced reporting options and terminal products
it sells and leases to merchants. See "--Products and Services."

The Company has two principal billing methods. First--under the discount
rate method--the Company charges a per-transaction fee that is a percentage of
the dollar amount of the transaction (the "discount"). Out of the discount
collected, the Company pays an interchange fee and an assessment fee charged
by the Visa(R) and MasterCard(R) associations and records the remainder as net
revenue. The discount rate method is used by the Company for the substantial
majority of its clients, in particular smaller merchants.

Second--under the flat fee method--the Company charges a client a flat fee
for each transaction, plus the interchange and assessment fees. Merchants
receive their settlement payments for the gross amount of the transaction.
Larger merchants, agent banks and ISOs are generally billed using this method.

42
<PAGE>

The Company's principal transaction expenses are Visa(R) and MasterCard(R)
association interchange fees and assessments and the fees and charges of debit
networks in debit transactions (other than On-Us transactions). Interchange
fees are stated fees charged by the Visa(R) and MasterCard(R) associations to
reimburse card-issuing banks for the risk of transaction fraud, processing
expenses and funding during the period from purchase to payment. The fee
schedules are set by the Visa(R) and MasterCard(R) associations and are based
upon the type of merchant, transaction type (electronic or paper-based) and
settlement time. Interchange fees generally range from 1.25% to 2.1% of the
transaction amount. Although interchange rates vary by merchant industry, they
are generally uniform among merchant processors. Assessments are stated fees
charged by Visa(R) and MasterCard(R) associations to fund their internal
operations and are generally uniform among merchant processors.

In certain cases, the Company, as a processor, bears the risk of merchant
nonpayment of applicable interchange, assessment and other fees. The Company
receives payments for merchant transactions from a card association clearing
bank less the fees payable to the card issuer. For those merchants which the
Company bills on a periodic basis (generally monthly), the Company advances
payment to the merchant for the gross amount of the merchant's transactions.
The Company then bills the merchant periodically for the interchange fees and
processing fees. Any failures by merchants to honor such invoices adversely
affects the Company's net revenue.

MARKETING, SALES, AND CUSTOMER SERVICE AND SUPPORT

DISTRIBUTION CHANNELS

The Company markets its products and services throughout the United States
through its own sales force of 122 employees. The Company's direct sales
activities in the United States are divided into the following distinct
channels: BankAmerica markets, external markets, specialty markets and
telemarketing. The Company also markets domestically indirectly through agent
banks and ISOs.

BANKAMERICA MARKETS. The Company has over 56 professionals who are solely
responsible for generating business in the eleven states in which BankAmerica
has a retail banking presence. The group is organized geographically and
operates from 25 sales offices in eleven states. The group works closely with
BankAmerica branch and other retail banking personnel to cultivate cooperative
sales efforts. BankAmerica branch personnel are paid referral fees by the
Company for leads which result in new sales. The Company's sales professionals
are compensated through a combination of salary plus commission.

The Company believes that its access to the BankAmerica retail branch system
and customer base allows it to generate and service small merchant customers
in BankAmerica markets in a more cost-efficient manner than its competitors.
The Company believes that such customers are less price sensitive and have
more attractive retention characteristics than other market segments.

EXTERNAL MARKETS. During 1996, the Company expanded coverage of its field
sales force beyond BankAmerica's retail markets through the opening of sales
offices in Chicago and New York. Each of these offices is staffed by sales
employees who are compensated on a 100% commission basis. The Company plans to
continue this effort in 1997 and to enter at least two new markets and add
over 25 sales professionals.

SPECIALTY MARKETS. The Company has dedicated significant product development
and marketing resources to the development of specially tailored products to
serve specific niche markets and industries, including supermarkets, gaming
establishments and lodging establishments. The Company has established a
strong market position in these specialty markets and expects to continue its
focus on these and other such markets. The Company also is developing
specially tailored products in the

43
<PAGE>

EBT area to serve the needs of government agencies who are migrating from
checks to the electronic distribution of benefits and the settlement of
payment obligations. The Company has seven sales personnel who concentrate on
these specialty markets.

TELEMARKETING. The Company utilizes the Bank's retail teleservicing group,
comprised of over 100 telesales specialists, to direct merchant referrals to
the Company's direct sales force and conduct outbound sales calls utilizing
sales lead databases provided by BankAmerica. The primary focus of this
group's efforts is to cross-market the Company's products to that portion of
BankAmerica's 850,000 small business and middle market customers currently not
subscribing to the Company's merchant processing services. In addition, the
Company recently established a centralized telemarketing group composed of 21
professionals to follow-up on small merchant leads generated by BankAmerica
personnel in order to allow its field sales force to increase its focus on
larger merchants.

AGENT BANKS. A dedicated group of five sales professionals are responsible
for generating agent bank relationships with financial institutions. Once an
agent bank relationship is established, the Company assigns an account
representative to work with the agent bank to develop business. Agent banks
are compensated by assessing merchant discount fees in excess of fees charged
by the Company to the agent bank. The Company had relationships with 151 agent
banks at September 30, 1996.

INDEPENDENT SALES ORGANIZATIONS. The Company has contractual arrangements
with four ISOs which assist the Company in obtaining new customers. ISOs are
sales organizations that typically resell a third party's transaction
processing services on a non-exclusive basis. ISOs set fees independently,
retaining a residual fee after paying the third party. The ISOs provide
varying degrees of customer service to the merchants that the Company approves
for processing. The fees charged to ISOs by the Company vary based upon the
level of service provided, allocation of risk of loss and the transaction
volume. As part of the process of approving an ISO, an analysis of the credit
of the ISO, as well as its principals, is performed. This analysis encompasses
a business and personal credit review and contacting Visa(R) and MasterCard(R)
regarding the sales agent's relationship with prior processors. The Company is
required to register its ISOs with Visa(R) and MasterCard(R) and file
quarterly sales and activity reports. The Company has recently increased its
focus on this distribution channel with a goal of penetrating regions and
industries where it does not currently have a direct presence or intend to
develop one.

CUSTOMER SERVICE AND SUPPORT

The Company emphasizes customer service in the delivery of its products and
services to its merchant customers. The services are provided by a customer
service unit with 115 personnel located in San Francisco and Azusa, California
and Spokane, Washington. 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 telephonic call-in service staffed by full-time
customer service representatives. The Company's customer service and support
activities include periodic customer surveys to ascertain customer
satisfaction levels and to identify problem areas requiring remediation,
careful monitoring of call waiting times to assure prompt response,
maintenance of a detailed log with respect to each customer service call,
including the reason for the call and an automated order system for the
furnishing of new supplies to customers.

PORTFOLIO MANAGEMENT

The Company's portfolio management group consists of 55 account managers
located in ten offices in six states. This group is responsible for
maintaining and expanding the relationship with each merchant in the Company's
customer base. Every merchant is assigned an account manager who

44
<PAGE>

maintains periodic communication with the customer. This account management
and communication process enables the Company to achieve high account
retention levels and cross-sell the Company's products.

ASIA

BANK'S ASIAN OPERATIONS

The Bank presently operates merchant processing businesses in five Asian
countries: Taiwan, the Philippines, Thailand, South Korea and India. In Asia,
where the sales organizations are managed separately for each country, the
Bank markets both through direct sales professionals and through agent banks.
In addition, the Bank has recently established an agent bank program in the
People's Republic of China, is licensed to conduct business in Indonesia and
is exploring opportunities to enter Vietnam. The headquarters of the Bank's
Asian merchant processing businesses is in Hong Kong.

TAIWAN

The Bank's merchant processing business in Taiwan generated $996.5 million
in sales volume in 1995 and $957.5 million for the nine months ended September
30, 1996. Taiwan represented approximately 79% of the net revenue of the
Bank's Asian merchant processing businesses for the nine months ended
September 30, 1996. The Taiwan operations are comprised of approximately
59 employees including a 15-employee direct sales force. Based on preliminary
indications from the Ministry of Finance in Taiwan, approval of the transfer
of the Bank's merchant processing business in Taiwan to the Company initially
was regarded by the Company as being unlikely. More recent indications
received on an informal basis from the Ministry of Finance are that such
approval may be possible. However, a formal application has not yet been
submitted and the matter remains at a preliminary stage at the date of this
Prospectus. Although the Company and BankAmerica intend to pursue Taiwanese
approval of such transfer, no assurances can be given that it will ever be
obtained. In addition, in the definitive agreement relating to the Asian
Acquisitions, the Company and BankAmerica have agreed to evaluate during the
term of such agreement the possibility of entering into an outsourcing or
other arrangement that would permit the Company to participate meaningfully in
the Bank's merchant processing business in Taiwan in the event that such
regulatory approval cannot be obtained. This agreement will terminate on
December 31, 1997, unless mutually extended. There is no assurance that any
such outsourcing or other arrangement will ultimately prove practicable. See
"Risk Factors--Proposed Asian Acquisitions and Operations" and "--Regulation."
It is the intention of the Company and BankAmerica that any future acquisition
of the Bank's Taiwanese merchant processing business, or any of the Bank's
other merchant processing businesses in Asia, would involve the issuance by
the Company to BankAmerica of additional shares of the Company's Class B
Common Stock in exchange therefor. The amount of such shares or other
consideration and the other terms and conditions of any such transaction would
be subject to the agreement of the Company and BankAmerica. There can be no
assurance that the Company and BankAmerica will be able to reach agreement on
the terms of any such acquisition. See "--Potential Future Asian Markets."

ASIAN ACQUISITIONS

The Company is entering into a definitive agreement to acquire each of the
merchant processing businesses presently conducted by the Bank in the
Philippines and Thailand in consideration for the issuance by the Company of
550,000 and 150,000 additional shares, respectively, of Class B Common Stock.
Consummation of the Asian Acquisitions is subject only to, and will close as
soon as possible after receipt of applicable foreign regulatory approvals. The
Company expects to receive the decision of foreign regulatory authorities
during the first half of 1997, although no assurance can be given that any
such approvals will be obtained or as to the timing thereof. On December 9,
1996, the Federal Reserve Board granted the approval required under certain
United States banking laws for such acquisitions. For additional information
regarding such foreign regulatory approvals, see "Business--Regulation."

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<PAGE>

The Bank's merchant processing business in the Philippines generated $97.5
million in sales volume during 1995 and $84.2 million during the nine months
ended September 30, 1996. The Company has 26 employees in the Philippines
including a direct sales force of ten employees. The Bank's merchant
processing operations in Thailand generated $51.4 million in sales volume
during 1995 and $48.1 million during the nine months ended September 30, 1996.
The Bank has 12 employees in Thailand including a direct sales force of three
employees.

POTENTIAL FUTURE ASIAN MARKETS

Following the Offerings, the Company expects to explore opportunities to
expand its business to other Asian markets beyond those which are the subject
of the Asian Acquisitions. In the definitive agreement with respect to the
Asian Acquisitions, the Company and BankAmerica have agreed to work
cooperatively to allow the Company to acquire in the future the Bank's
merchant processing businesses that are conducted in Taiwan, South Korea,
India, The People's Republic of China and Vietnam. With respect to certain
countries, however, local regulatory requirements may make it difficult or
preclude the Company from operating such businesses. In addition, there can be
no assurance that, following the Offerings, the Company and BankAmerica will
be able to reach agreement on the terms of such acquisitions.

MERCHANT CUSTOMER BASE

The Company provides merchant processing services to a diverse customer
base, consisting of businesses located throughout the United States (and
assuming consummation of the Asian Acquisitions, the Philippines and Thailand)
that range from large multi-regional chains to small merchants. At September
30, 1996, the Company provided merchant processing services to over 110,000
merchant locations directly, over 13,500 merchant locations through 151 agent
banks not affiliated with the Company, and over 12,000 merchant locations
through ISOs.

The Company's merchant accounts were distributed by type of merchant at
September 30, 1996 (as measured by annualized credit card sales volume for the
nine months ended September 30, 1996) as follows:

<TABLE>
<CAPTION>
MERCHANT TYPE PERCENTAGE
------------- ----------
<S> <C>
General Retailers............................................. 33%
Supermarkets.................................................. 13
Lodging Establishments........................................ 9
Restaurants................................................... 8
Mail Order Companies.......................................... 7
Airlines...................................................... 4
Gasoline Retailers............................................ 1
Travel Agencies............................................... 1
Other......................................................... 24
---
Total....................................................... 100%
===
</TABLE>

As indicated by the above table, the composition of the Company's merchant
customer base emphasizes general retail merchants, supermarkets and
restaurants and other similar merchants whose businesses are not generally
prone to customer chargebacks which can increase the processor's operating
costs and expose it to losses. See "--Transaction Process Flow--Dispute
Resolution; Chargebacks; Payment Risks." In addition, the Company believes
that these types of merchants engage in businesses which are less prone to
seasonal variation than some other types of merchants.

46
<PAGE>

These merchant accounts were distributed by size at September 30, 1996 (as
measured by annualized credit card sales volume for the nine months ended
September 30, 1996) as follows:

<TABLE>
<CAPTION>
TOTAL
SALES
VOLUME
SALES VOLUME (IN MILLIONS) PERCENTAGE
------------ ------------- ----------
<S> <C> <C>
Less than $250,000.............................. $ 3,325 16%
$250,000 to $50 million......................... 11,621 54
More than $50 million........................... 6,393 30
------- ---
Total....................................... $21,339 100%
======= ===
</TABLE>

The above table demonstrates that a significant percentage of the Company's
business is with merchants with less than $50 million in annual sales volume.
In the Company's experience, its smaller retail merchant customers have been
less price sensitive than large corporate businesses regarding their merchant
processing requirements. No single merchant accounted for more than 5% of the
net revenue of the Company in 1995. See "--Business Strategy" and "--
Technology."

TECHNOLOGY

In order to remain competitive in the merchant processing industry, the
Company has dedicated significant resources to developing proprietary
technologies that lower costs and enhance service. The Company believes its
continuing investment in technology will allow it to remain competitive in the
industry. The principal systems that the Company has developed are described
below:

PAYLINK(TM) TRANSACTION PROCESSING SYSTEM

The Company's new PayLink(TM) proprietary transaction processing system is
an advanced system with which the Company intends to replace its existing
system beginning in the first quarter of 1997. Business directed to third-
party processors in recent years will be redirected in-house, thus reducing
the Company's reliance on external vendors and reducing operating costs. The
Company believes that the client server architecture, on which the new system
is based, will enhance the Company's position among the technological leaders
of the payment processing business. The new system will enable the Company to
meet the processing requirements of diverse media, including the Internet. It
also will enable the Company to expand the types and delivery methods of
information reported to merchants. The Company also believes that the
flexibility resulting from the open architecture design of the system will
result in reduced maintenance costs normally associated with mainframe
systems, improved product differentiation and reduced product development
time.

ON-US TRANSACTIONS

The Company has recently developed the capability to process On-Us
transactions directly with the Bank and Seafirst and thereby to by-pass the
networks and the attendant network charges. The capability is presently
operational for on-line debit transactions initiated in California. The
Company expects to expand this capability in the future to include other types
of transactions, including:

NON-CALIFORNIA ON-LINE DEBIT TRANSACTIONS. BankAmerica is currently
consolidating the card authorization systems of its various banking
subsidiaries. The Company understands that this consolidation is expected to
be completed in 1997. Upon completion, the Company expects to offer On-Us
capabilities for debit transactions in the ten other states in the BankAmerica
market area.

OFF-LINE DEBIT TRANSACTIONS. The Company is presently developing a system to
process off-line On-Us debit transactions directly and expects that this
capability will be operational by 1998.

CREDIT CARD TRANSACTIONS. The Company understands that BankAmerica is
planning to complete the migration of its credit card settlement, accounting
and statement functions to a new system by mid-1997. When completed, the
Company will be able to offer direct processing of On-Us Visa(R) and
MasterCard(R) credit card transactions.

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<PAGE>

INTERNET GATEWAY

The Company recognizes the importance of the Internet as an emerging medium
for conducting electronic transactions. In recognition of the security issues
surrounding this medium, the Company is investing in the systems
infrastructure to support the SET (Secured Electronic Transaction) protocol
for Internet financial transactions as set forth by the Visa(R) and
MasterCard(R) associations in 1996. This technology will enable the Company
and its merchants to accept credit card transactions over the Internet without
compromising cardholder or merchant data. In addition to enabling merchants
and cardholders to securely conduct transactions on the Internet, the Company
plans to use the same technology to enable merchants to access their merchant
activity data from the Company through the Internet. The Company presently
expects that this technology will be operational in the first quarter of 1997,
but there is no assurance that this will be the case.

AUTOMATED CHARGEBACK SYSTEM

The Company's Automated Chargeback System automates the processing of
disputed transactions. Disputed transactions involve the receipt, processing
and tracking of retrieval requests and chargebacks. Retrieval requests are
requests from issuing banks for copies of sales drafts. Chargebacks are
transactions returned by issuing banks to merchant processors when customers
dispute the receipt of goods or services from merchants. If the merchant
processor is unable to collect the amount of the transaction from the
merchant, the merchant processor is liable. The imaging system automates many
of the time-consuming, labor-intensive processes normally associated with the
handling of retrieval requests and chargebacks. The system incorporates all
aspects of the transaction dispute process, including the receipt of
chargebacks from issuing banks, the distribution of chargeback notices to
merchants, the receipt of merchant rebuttals and the collection of transaction
dollar amounts. The system improves the timeliness of the dispute resolution
process and reduces operating costs and losses associated with the processing
of retrieval requests and chargebacks.

ACCOUNT SET-UP AUTOMATION PROGRAM

To improve the quality, control, timeliness and capacity of operations
related to the set-up and maintenance of merchant accounts, the Company
developed and implemented ASAP (Account Set-Up Automation Program). ASAP
consists of a series of applications and databases that perform account set-up
and maintenance functions, including the housing and tracking of sales leads,
the receipt and evaluation of applications, the assignment of unique data
entry elements and the tracking of equipment shipments and inventory. ASAP
also tracks the submission, approval and processing of account maintenance
requests and other account servicing functions.

INTEROFFICE INFORMATION SYSTEM

While the Company's primary domestic operations facilities are located in
San Francisco and Foster City, California and Spokane, Washington, additional
sales and account management offices are located in over 30 locations. While
local offices enable employees to be closer to their customer base, employees
in regional offices also need access to sufficient account information to
serve their customers. To accommodate the support needs of remote offices, as
well as the need of different operations units to share information, the
Company developed and installed an interoffice information system. Through the
system, Company personnel in diverse locations are able to access centralized
merchant account records and sales activity data.

RISK MANAGEMENT

As a result of its exposure to potential liability for merchant fraud,
employee fraud, chargebacks and other losses created by its business, the
Company views its risk management and fraud avoidance practices as integral to
its operations and overall success. Through its credit review policy, the
Company strives to minimize liabilities by employing various risk control
measures. The Company's risk management policies involve three key components:

48
<PAGE>

INDUSTRY SCREENING

The Company generally does not approve merchant applicants whose types of
businesses have traditionally resulted in higher-than-average financial
losses. These businesses are primarily in those industries involved in the
delivery of goods and services to customers at a future time from the date of
the purchase transaction. When customers in such industries are approved, they
generally have large well-established businesses and extensive banking
relationships with BankAmerica.

MERCHANT CREDIT REVIEWS

The Company conducts a thorough evaluation of the creditworthiness of each
applicant. Included in this evaluation is a review of the projected volumes,
credit history, financial statements, previous processor statements, on-site
inventory, checking account status and verification against the
Visa(R)/MasterCard(R) terminated merchant file. The Company requires the
establishment of a reserve account when a merchant's creditworthiness is below
the Company's normal credit standards. A reserve account contains a fixed
dollar amount deposited by the merchant. The Company may also reflect the
increased risk associated with such customers in pricing adjustments for its
services. Should the Company experience any losses while processing
transactions for a merchant, the Company has the right to debit funds from the
merchant's reserve account. For merchants with unsatisfactory, unverifiable or
otherwise impaired credit standing, the Company maintains several referral
relationships with other merchant processors to which such merchants are
referred.

EXCEPTION MONITORING

By compiling data from public records, industry sources and the more than
320 million transactions it processes annually, the Company captures
information about approved and declined transactions, closed accounts, credit
use history and other proprietary and publicly available information. This
database allows the Company to analyze transaction authorization requests for
fraudulent practices before funds are transferred to or on behalf of
customers. Sales activity is analyzed daily to detect unusually high deposit
volumes, keyed transactions (i.e., transactions not entered into a POS
terminal by "swiping" the card) and other types of activity that are
considered "exceptions" to normal activity. Keyed transactions pose a higher
degree of risk because the card and/or card holder may not be present at the
time of sale and there is a risk of error in keying in the number. When
monitoring daily exception activity, the Company has the ability, should
indicators warrant, to delay payment to merchants for their deposits. The
ability to delay payment provides an extra period of time during which the
Company can investigate the legitimacy of the unusual activity.

As a result of stringent credit evaluation and daily monitoring processes,
the Company has experienced significant drops in losses that result from
fraudulent or disputed transaction activity. During the years ended December
31, 1993, 1994 and 1995 and the nine months ended September 30, 1996, such
losses were approximately $5.2 million, $2.8 million, $2.2 million and
$0.7 million, respectively, representing in such periods .041%, .019%, .012%
and .004%, respectively, of the Company's total credit card sales volume.

COMPETITION

The United States markets in which the Company competes for credit, charge
and debit card payment processing for merchants are intensely competitive.
According to publicly available industry sources, the ten largest merchant
services processors in the United States processed approximately 71% of the
total Visa(R) and MasterCard(R) sales volume processed in 1995. Other
competitors include smaller vertically integrated processors, community and
regional banks and ISOs. The Company competes on the basis of price, the
availability of products and services, the quality of customer service and
support and transaction processing speed, quality and reliability. Merchant
processors also compete for business by building alliances with other banks to
gain access to their distribution systems, acquiring merchant portfolios and
enlisting ISOs. The majority of the Company's contracts

49
<PAGE>

with its merchant customers are cancelable at will or on short notice or
provide for renewal at frequent periodic intervals and, accordingly, the
Company and its competitors regularly 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.
Since 1991, price competition has caused the Company's net revenue in relation
to sales volume to decline, particularly with respect to high-volume retailer
customers. No assurance can be given that the Company will be able to maintain
acceptable profit margins, whether with respect to its high-volume retailer
customers or its small and middle market customers.

The merchant processing industry in general requires the use of advanced
computer hardware and software technology and has been characterized by the
development of new products and services to meet increasingly complex and
rapidly changing client and regulatory requirements. The success of any
competitor in this industry, including the Company, depends in part on the
ability to continue to adapt its technology in a timely and cost-effective
basis, to meet these requirements.

In recent years, there has been a trend toward consolidation in the merchant
processing industry. Further tightening of margins may result in banks and
other payment processors abandoning the transaction processing business, thus
accelerating the trend toward consolidation. Due to market demands requiring
processors to provide advanced and efficient technology, certain 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 other processors.

In Asia, where the Company plans to compete following consummation of the
Asian Acquisitions, due to language differences and variances in association
regulations and interchange fees, each country represents a separate market.
Competition is highly localized within country borders where local banks have
priced aggressively in order to preserve market share against various large
multi-national banks that compete for business in the region. The
MasterCard(R) interchange structure is designed to discourage banks from
operating only as processors and not as issuers in a particular market by
charging non-issuer processors higher fees which may affect the profitability
of operations in Asia.

REGULATION

As a result of BankAmerica's control of the Company and until the Bank no
longer has a controlling interest in the Company, the Company is subject to
all provisions of federal banking laws and regulations that are applicable to
the Bank unless specifically provided otherwise (collectively, the "Banking
Laws"). As a result, the Company's activities are generally limited to those
that are permissible for a national bank, i.e., those activities which are a
part of or incidental to the business of banking. In addition, the Company is
subject to the supervision and examination of the Office of the Comptroller of
the Currency ("OCC"), one of the principal regulatory bodies having
jurisdiction over the Bank, as well as the Board of Governors of the Federal
System ("Federal Reserve Board") with respect to foreign activities and
investments. The Company may not engage in any new activities until it first
obtains the written approval of the OCC and/or the Federal Reserve Board. The
OCC will only approve those activities legally permissible for a national bank
that are consistent with prudent banking principles and OCC policy. The
Federal Reserve Board applies similar requirements to the Company's foreign
activities and/or investments. All of the current activities of the Company
are permissible for national banks.

The Bank and Seafirst filed a notification with and an application to the
OCC to establish the Company as an operating subsidiary to hold and operate
the United States domestic merchant

50
<PAGE>

processing businesses of the Bank and Seafirst and have received the required
approvals therefor from the OCC.

Future acquisitions by the Company may also require the prior written
approval of the OCC and/or the Federal Reserve Board. In order to obtain such
approval for domestic acquisitions, the Bank must submit a letter to the OCC
detailing the proposed activities and stating whether any activity would be
conducted at some location other than the Bank's main office or a previously
approved branch of the Bank. The Company may consummate the acquisition after
30 days from the date the OCC receives the Bank's letter, unless otherwise
notified by the OCC, or in less than 30 days if so notified. The OCC may
extend the 30-day period if it determines that the Bank's letter raises issues
which require additional information or additional time for analysis. If the
30-day period is extended, the Company may consummate the acquisition only
upon written approval by the OCC. The OCC reserves the right to grant written
approval, subject to conditions where there are legal or supervisory concerns.

Federal Reserve Board approval may be needed for foreign acquisitions if the
consideration involved exceeds $25 million. In such circumstances, the Company
and the Bank must give the Federal Reserve Board 45 days' prior written
notice. The Company may consummate the acquisition at the end of such 45-day
period or sooner if the Federal Reserve Board waives the notice period. The
Federal Reserve Board may also elect not to allow consummation until it has
given its specific consent.

No assurance can be given that the Banking Laws will not be amended or
construed differently, or that new laws or regulations will not be adopted,
the effect of which could be to materially and adversely affect the operations
of the Company.

To facilitate BankAmerica's compliance with applicable Banking Laws and to
allow BankAmerica to obtain any required consents or approvals, the Company
and the Bank have entered into an agreement which prohibits the Company from
entering into any business activities prior to the receipt of any consents and
approvals required pursuant to the Banking Laws and, if such consents are not
received, prohibits the Company from engaging in such business activities.

Through the Bank, 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 credit card associations and debit card
networks or else risk suspension or termination of its designation and/or
status. There can be no assurance that: (i) the credit card associations or
debit card networks will maintain the Company's registrations; (ii) the rules
of the credit card associations or debit card networks allowing the Company
and other nonbank transaction processors to market and provide transaction
processing services will remain in effect; or (iii) the credit card
associations or debit card networks will continue to interpret their rules as
they have done in the past, which may have an impact on the Company's business
operations.

ASIAN ACQUISITIONS

The Company filed an application with the Federal Reserve Board for its
approval to consummate the acquisition of the Bank's merchant processing
businesses in various Asian countries and on December 9, 1996, the Federal
Reserve Board granted the approval of such application subject only to the
condition that the Bank and the Company shall engage only in activities
through the offices of the Company in such countries that are permissible to
the Bank directly.

Applications have been filed in the Philippines and Thailand and are
expected to be filed in Taiwan for local regulatory approval of the
acquisitions of the Bank's merchant processing business in such countries as
follows:

THE PHILIPPINES. The Company has filed an application with the Securities
and Exchange Commission in the Philippines for approval for the Company, as a
foreign corporation, to establish a

51
<PAGE>

branch office in the Philippines. In addition, application has been made for a
tax ruling from the Bureau of Internal Revenue in the Philippines. If the
applications are approved, the Company's branch will have the authority to
transact business in the Philippines so long as it retains its authority to
act as a corporation under the laws of the country of its incorporation and
will be regulated by the Securities and Exchange Commission in the
Philippines. The Company does not anticipate that any existing regulatory
restrictions in the Philippines will materially adversely impact its business.

THAILAND. The Company has filed an application with the Thai Ministry of
Commerce for approval to establish a branch office in Thailand. Upon approval,
the Company will register the Company's branch office pursuant to the U.S.-
Thai Treaty of Amity and Economic Relations. If the application is approved,
the Company will be subject to regulation by the Ministry of Commerce and the
Bank of Thailand. The Company does not anticipate that any existing regulatory
restrictions in Thailand will materially adversely impact its business.

The Company expects that the Philippines and Thailand decisions will be
received during the first half of 1997, although no assurance can be given
that any of these decisions will be favorable or as to the timing thereof.

TAIWAN. The Company and the Bank expect to file applications with the
Ministry of Economic Affairs in Taiwan for "recognition" of the Company and
for registration of a branch of the Company, and with the Ministry of Finance
(the "MOF") for approval to establish a card center for the Company's merchant
processing business. In addition, the Company will also apply for a business
license in Taiwan to engage in a profit-seeking enterprise and for such
permits from the MOF and Taiwan's Central Bank as are needed to engage in
merchant processing activities (e.g., foreign exchange conversion). Based on
preliminary indications from the MOF, approval of the transfer of the Bank's
merchant processing business in Taiwan to the Company initially was regarded
by the Company as being unlikely. More recent indications received on an
informal basis from the MOF are that such approval may be possible. However, a
formal application has not yet been submitted and the matter remains at a
preliminary stage at the date of this Prospectus. Although the Company and
BankAmerica intend to pursue Taiwanese approval of such transfer, no
assurances can be given that it will ever be obtained. In addition, the
Company and BankAmerica have agreed to evaluate the possibility of entering
into an outsourcing or other arrangement that would permit the Company to
participate meaningfully in the Bank's merchant processing business in Taiwan
in the event that such regulatory approval cannot be obtained. No assurances
can be given, however, that any such arrangement will ultimately prove
practicable. See "Risk Factors--Proposed Asian Acquisitions and Operations"
and""--Regulation."

EMPLOYEES

During September 1996 the Company had 514 full-time and part-time employees.
Of these, 292 employees were engaged in marketing, sales and customer service,
183 were engaged in operations and systems development and 39 were corporate
and administrative employees. None of the Company's employees is represented
by a collective bargaining agreement nor has the Company ever experienced any
work stoppage. Certain personnel providing services to the Company at its
Seafirst operations and to the Bank at its Asian operations are employed by
affiliates of the Company that have collective bargaining agreements with
certain labor unions. Such personnel at Seafirst furnish services to the
Company pursuant to one of the Intercompany Agreements and a similar
arrangement is expected to be entered into with respect to such Asian
employees of the Bank upon consummation of the Asian Acquisitions. The Company
views current employee relations as satisfactory.

PROPERTIES

The Company leases its principal executive offices and processing facility
in San Francisco, California, consisting of approximately 58,000 square feet,
from BankAmerica. The Company also will

52
<PAGE>

lease from BankAmerica facilities located in Los Angeles, Azusa and Foster
City, California and Bellevue, Seattle and Spokane, Washington, consisting of
approximately 5,538 square feet, 7,935 square feet, 6,800 square feet, 10,698
square feet, 4,548 square feet and 7,702 square feet, respectively. See
"Relationship with BankAmerica--Lease Agreements and Facilities Arrangements."

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.

53
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

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

Sharif M. Bayyari.... Mr. Bayyari has been the President and Chief Executive
Officer and a member of the Board of Directors of the
Company since its formation. From 1993 until the
Company's formation, Mr. Bayyari has been responsible
for managing the merchant services businesses of the
Bank. From 1983 to 1993, Mr. Bayyari was with National
Data Corporation, most recently as Group Vice President
in charge of operations. National Data Corporation is a
merchant services business. Age 52.

James H. Williams.... Mr. Williams has been the Executive Vice President,
Chief Financial Officer and Treasurer of the Company
since its formation. Prior to joining the Company, Mr.
Williams was employed by the Bank, most recently as
Group Executive Vice President and its Chief Accounting
Officer, and by BankAmerica as Executive Vice
President. Prior to joining the Bank, starting in 1973,
Mr. Williams worked for Seafirst Corporation and was
named Chief Financial Officer of that organization in
1984 and Manager of Operations and Finance Groups in
June 1993. Age 53.

Le Tran-Thi.......... Ms. Tran-Thi has been the Company's Senior Vice
President and Director of Operations and Asia Merchant
Services since the Company's formation. Previously, Ms.
Tran-Thi was a Senior Vice President for the Bank
responsible for operations of the Bank's Asian merchant
processing businesses, joining the Bank in 1981, and
President of BA Card Services. Age 50.

James Aviles......... Mr. Aviles has been the Company's Senior Vice President
and Director of Product/Strategy/Technology Support
since the Company's formation. Mr. Aviles joined the
Bank's merchant services business in 1988 and worked in
several capacities until, in June 1993, he assumed
responsibility for the Bank's product development,
strategic planning and marketing function for its
merchant services businesses. Age 36.

Michael J. Sanders... Mr. Sanders has been the Company's Senior Vice
President and Director of Sales since the Company's
formation. Prior to joining the Company, Mr. Sanders
was a Senior Vice President and Sales Director for the
Bank since 1993, having previously served in various
operations, customer service, sales and sales
management roles with the Bank since 1967. Age 47.

Richard D. Gale...... Mr. Gale has been the Company's Senior Vice President
and Director of Account Management and Customer
Services since the Company's formation. Prior to
joining the Company, Mr. Gale was a Senior Vice
President of the Bank responsible for account
management and customer services, joining the Bank in
1973. Age 42.

Thomas E. Peterson... Mr. Peterson is Chairman of the Board of Directors and
has been a member of the Board of Directors of the
Company since its formation. He has been a Vice
Chairman of BankAmerica since 1987. Age 61.

54
<PAGE>

Barbara J. Desoer.... Ms. Desoer has served as a member of the Board of
Directors of the Company since November 1996. She is
presently Group Executive Vice President and head of
the California Retail Group of the Bank, having joined
the Bank initially in 1977. Age 44.

Donald R. Dixon...... Mr. Dixon has served as a member of the Board of
Directors of the Company since November 1996. Mr. Dixon
has been the President of Trident Capital, Inc., a
venture capital firm, since 1993. He was Co-President
of Partech International, a private equity fund manager
associated with Banque Paribas, from 1988 to 1993.
Prior to that time, Mr. Dixon was managing director of
Alex Brown & Sons, Incorporated and a Vice President of
Morgan Stanley. Mr. Dixon currently serves on the Board
of Directors of Platinum Software Corporation, Unison
Software, Inc., and several privately-owned
corporations. Age 49.

James G. Jones....... Mr. Jones has served as a member of the Board of
Directors of the Company since November 1996. He is
presently Group Executive Vice President and head of
Consumer Credit Administration for the Bank. Prior to
joining the Bank in 1992, Mr. Jones served as executive
vice president and head of Consumer Credit for nine
years at Wells Fargo Bank. Age 48.

William E. Fisher.... Mr. Fisher has served as a member of the Board of
Directors of the Company since November 1996. He has
been the President, Chief Executive Officer and
Chairman of Transaction Systems Architects, Inc., where
he has been employed since 1987. Age 49.

The size of the Board of Directors is presently fixed at seven (with one
vacancy). Two of the present members of the Board of Directors are independent
of BankAmerica. The Company intends to increase the number of incumbent
directors to seven, three of whom will be independent of BankAmerica, as soon
as practicable after completion of the Offerings. 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 STIP and LTIP (as
defined below) and considering such other matters as may from time to time be
referred to the Compensation Committee by the Board.

55
<PAGE>

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 three
other most highly compensated executive officers during 1995. None of the
Company's other executive officers during 1995 had total annual salary and
bonus that exceeded $100,000. The amounts shown represent payments made by the
Company to such individuals pursuant to BankAmerica long-term compensation
arrangements.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------- ----------------------
SECURITIES
OTHER RESTRICTED UNDERLYING
NAME AND ANNUAL STOCK OPTIONS/ ALL OTHER
PRINCIPAL POSITION SALARY(1) BONUS COMPENSATION AWARDS(2) SARS COMPENSATION(3)
------------------ --------- -------- ------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Sharif M. Bayyari
President & Chief
Executive Officer..... $168,750 $130,000 -- -- 10,000 $8,350
Le Tran-Thi
Senior Vice President
and Director,
Operations & Asia
Merchant Services..... 100,721 40,000 -- -- 4,000 5,932
Michael J. Sanders
Senior Vice President
and Director, Sales... 70,000 50,435 -- 8,081(4) -- 292
Richard D. Gale
Senior Vice President
and Director, Account
Management and
Customer Services..... 74,926 35,000 -- 8,081(4) -- 5,350
</TABLE>
- --------
(1) The amounts shown include amounts deferred under the BankAmerica 401(k)
Investment Plan.
(2) Represents shares of BankAmerica common stock. The number of shares and
their value (based on the closing price in the New York Stock Exchange
Composite Transactions of BankAmerica common stock at December 31, 1995 of
$64.75 per share) for each of the named officers was as follows:
Mr. Bayyari, 500 shares, $32,375; Ms. Tran-Thi, 400 shares, $25,900; Mr.
Sanders, 325 shares, $21,044; and Mr. Gale, 325 shares, $21,044. Dividends
are paid on all shares of BankAmerica restricted stock on the same basis
as BankAmerica common stock.
(3) The amounts shown consist of contributions made by BankAmerica to the
BankAmerica 401(k) Investment Plan and Supplemental Retirement Plan.
(4) One fourth of the 150 shares of BankAmerica common stock awarded to each
of Messrs. Sanders and Gale vest on each of the first, second, third and
fourth anniversaries of the date of award.

It is anticipated that following the completion of the Offerings, the
Company's Chief Executive Officer and other executive officers and their
respective annual salaries (excluding any bonuses) will be as follows: Mr.
Bayyari, $220,000; Mr. Williams, $175,000; Ms. Tran-Thi, $130,000; Mr. Aviles,
$120,000; Mr. Gale, $120,000; and Mr. Sanders, $110,000. See "Management."

56
<PAGE>

The following table provides information on options to purchase BankAmerica
common stock ("BankAmerica Common Stock") granted during 1995 to the named
executive officers.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
-------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR GRANT DATE
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(1) FISCAL YEAR(2) (PER SHARE) DATE VALUE(3)
---- ---------- --------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Sharif M.
Bayyari.......... 10,000 .194% $53.875 8/7/05 $116,500
Le Tran-Thi....... 4,000 .078% 53.875 8/7/05 46,600
</TABLE>
- --------
(1) One-third of the shares subject to each option become exercisable on each
of the first, second and third anniversaries of the date of grant.
(2) Percentage based on all options granted by BankAmerica during 1995.
(3) The estimated "grant date present values" of options granted in 1995 are
based on a variation of the Black-Scholes option pricing model, a model
that reflects certain arbitrary assumptions regarding variable factors
such as interest rates, stock price volatility and dividend yield. Stock
options have value only as a result of appreciation in the price of
BankAmerica Common Stock. If, at the time of exercise, the price of
BankAmerica Common Stock is the same as or lower than the option exercise
price, there will be no gain to the option holder. For the purposes of
establishing the "grant date present values" specified above, the model
assumed: a return volatility of 33.6%, which reflects the monthly stock
volatility for BankAmerica Common Stock and the 15 largest United States
bank holding companies by asset size (the "Peer Group") for the five
years prior to the grant date, and a dividend yield of 3.44%, which
reflects historical yields for BankAmerica and the Peer Group. For all of
the options, the expected option term calculation was based on the
historical distribution of options exercised and canceled for grants from
1982 through 1986. Option values were computed for each term, using the
zero coupon U.S. Treasury bond interest rate for that term, and a
weighted option value was computed based on the historical proportion of
options exercised and canceled for each term. For the options whose
expected term was based upon the 1982 to 1986 grant experience a
cancellation factor of 10.6% was then applied, which adjusts for the
proportion of options canceled prior to being fully vested. There is no
assurance that the value received by the executive officers will be at or
near the grant date present value.

57
<PAGE>

The following table sets forth the BankAmerica stock options exercised by
each of the named executive officers during 1995 and the December 31, 1995
value of all unexercised options to purchase BankAmerica Common Stock held by
the named executive officers.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED VALUE OF IN-THE-
OPTIONS AT MONEY OPTIONS AT
12/31/95 12/31/95
SHARES ------------- ----------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(1) REALIZED UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- ------------- ----------------
<S> <C> <C> <C> <C>
Sharif M. Bayyari........... 2,400 $28,349 4,601/16,999 $86,156/$237,296
Le Tran-Thi................. -- -- 0/4,000 $0/$44,000
</TABLE>
- --------
(1) Based on the closing stock price in The New York Stock Exchange Composite
Transactions of BankAmerica Common Stock at December 31, 1995 of $64.75
per share.

Mr. Bayyari and Mr. Williams have received stock option grants and
restricted stock grants under the BankAmerica Corporation 1992 Management
Stock Plan. These employees may elect, prior to January 1, 1997, to exchange
their unexercised options and unvested restricted stock awards for options and
restricted stock grants under the Company's Long Term Incentive Plan. See "--
Compensation Pursuant to Employee Benefit Plans." In the event these employees
were to exercise their election rights in full, the Company would incur
compensation expense of approximately $3.8 million based on recent stock
prices.

COMPENSATION PURSUANT TO EMPLOYEE BENEFIT PLANS

Described below are certain employee benefit plans pursuant to which cash or
noncash compensation is proposed to be paid or distributed to the Company's
executive officers after the completion of the Offerings.

SHORT-TERM INCENTIVE PLAN

The Company has adopted the BA Merchant Services, Inc. Short-Term Incentive
Plan (the "STIP") effective as of the completion of the Offerings to encourage
superior performance of senior management through targeted annual incentive
awards. The STIP contains a formula for calculating the maximum amount of
annual incentive awards payable to members of senior management under the
STIP. The formula establishes a fixed percentage of adjusted pre-tax income as
the maximum aggregate amount available to be paid to the named executive
officers and other executive officers as annual incentive awards under the
STIP. The formula in the STIP also sets a maximum annual award payable to any
one executive officer at $1,000,000. The Executive Personnel and Compensation
Committee of the Board of Directors (the "Compensation Committee") has
discretion to grant awards under the STIP which are less (on an aggregate or
individual basis) than the amounts called for by the formula, based on
qualitative and quantitative factors which the Compensation Committee
determines are appropriate. To the extent the Company achieves superior
performance, the benefits paid under this plan could significantly increase
the compensation payable to participating members of senior management.

The STIP may be modified, amended or terminated by the Board of Directors at
any time.

58
<PAGE>

LONG-TERM INCENTIVE PLAN

The Company has adopted the BA Merchant Services, Inc. Long-Term Incentive
Plan (the "LTIP") effective as of the completion of the Offerings. The LTIP
will be administered by the Compensation Committee. Officers and employees of
the Company and its subsidiaries are eligible to participate in the LTIP.
Directors who are not employees of the Company are not eligible.

Stock-based compensation will typically be issued in consideration for the
performance of services to the Company. The Compensation Committee may grant
awards subject to satisfaction of specific performance goals.

The LTIP provides for a number of forms of stock-based compensation. The
Compensation Committee may award to eligible employees incentive and
nonqualified stock options, stock appreciation rights, restricted stock,
performance units, and performance shares. Up to 6,000,000 shares of the
Company's Class A Common Stock are authorized for issuance through the LTIP.

The Compensation Committee has discretion to award incentive stock options,
which are intended to comply with Section 422 of the Internal Revenue Code, or
nonqualified stock options ("NQSOs"), which are not intended to comply with
Section 422 of the Internal Revenue Code. Each option issued under the LTIP
must be exercised within a period of ten years from the date of grant, and the
exercise price of an option may not be less than the fair market value of the
underlying shares of the Company's Class A Common Stock on the date of grant
(except in the case of options granted to Mr. Bayyari or Mr. Williams in
substitution for outstanding unexercised options granted under the BankAmerica
Corporation 1992 Management Stock Plan). At the time of exercise, the full
exercise price for a stock option must be paid in cash or, if the Compensation
Committee so provides, in shares of the Company's Class A Common Stock.
Subject to the specific terms of the LTIP, the Compensation Committee has
discretion to set such additional limitations on option grants (including
vesting and expiration or termination provisions) as it deems appropriate. The
Company has adopted a program within the LTIP called Ownership Counts!
pursuant to which certain employees of the Company (as defined in the LTIP and
determined by the Compensation Committee) receive periodic stock option grants
for not more than 400 shares of the Company's Class A Common Stock annually.
The first of such grants will occur in connection with the Offerings.

The Compensation Committee may also award stock appreciation rights ("SARs")
upon such terms and conditions as it will establish. The grant price of a
freestanding SAR (an SAR not granted in connection with a stock option) will
equal the fair market value of a share of Class A Common Stock while the grant
price of a tandem SAR issued in connection with a stock option will equal the
exercise price of the related option.

The Compensation Committee is also authorized to award shares of restricted
Class A Common Stock upon such terms and conditions as it will establish. The
participants may be required to pay a purchase price for each share of
restricted stock granted equal to the par value of a share of the Company's
Class A Common Stock. The award agreement will specify the period(s) of
restriction, the number of shares of restricted Class A Common Stock granted,
the restrictions applicable to the award (such as restrictions based upon
achievement of specific performance objectives or continued employment with
the Company) and such other provisions as the Compensation Committee shall
determine. Although recipients will have the right to vote these shares from
the date of grant, they will not have the right to sell or otherwise transfer
the shares during the applicable period of restriction or until earlier
satisfaction of other conditions imposed by the Compensation Committee in its
sole discretion. Participants will receive dividends on their shares of
restricted stock and the Compensation Committee, in its discretion, will
determine how dividends on restricted shares are to be paid.

The Compensation Committee may also award performance units and performance
shares upon such terms and conditions as it will establish. Performance units
will have an initial value as

59
<PAGE>

determined by the Compensation Committee, while performance shares will have
an initial value equal to the fair market value of a share of Class A Common
Stock. Performance units and shares will be paid upon the satisfaction of
performance goals specified by the Compensation Committee at the time of
grant.

The performance measures upon which certain of the LTIP awards may be based
are revenues, profits, economic profit, net income, operating expense
reductions, share price, earnings per share, total stockholder return, return
on assets, return on equity, return on gross sales, operating income, return
on capital or investments or economic value added. Following the end of a
performance period, the Compensation Committee will determine the value of the
performance-based awards granted for the period based on the attainment of the
preestablished objective performance goals. The Compensation Committee will
also have discretion to reduce (but not to increase) the value of a
performance-based award.

Individual awards under the LTIP are subject to annual aggregate limits as
follows: stock options, 500,000 shares; SARs, 500,000 shares; restricted
stock, 250,000 shares; performance shares/units, 250,000 shares, in each case
of Class A Common Stock.

The LTIP provides for appropriate adjustments in the number of shares of the
Company's Class A Common Stock subject to awards and available for future
awards in the event of changes in outstanding Class A Common Stock by reason
of a merger, stock split or certain other events.

The LTIP may be modified, amended or terminated by the Board of Directors at
any time. However, no such action will adversely affect any outstanding awards
without the affected holder's consent. Stockholder approval of an amendment
will be sought if necessary under Internal Revenue Service or Securities and
Exchange Commission regulations, the rules of the NYSE or any applicable law.

Subject to the right of the Board of Directors to modify, amend or terminate
the LTIP, the LTIP will remain in effect until all options and rights granted
thereunder have been exercised or expired in accordance with the terms of the
plan. However, in no event will awards be granted under the LTIP after ten
years from its effective date.

PENSION PLANS

The named executive officers of the Company received pension benefits for
1995 through the BankAmerica Pension Plan, a "cash balance" defined benefit
pension plan, and the BankAmerica Supplemental Retirement Plan, which provides
additional benefits equal to the employer-provided benefits that plan
participants do not receive under the BankAmerica Pension Plan because of
Internal Revenue Code limits. Effective January 1, 1996, participants in the
plans accrue benefits equal to seven percent of qualified earnings in excess
of one-half of the Social Security wage base each year. (Participants receive
contributions to the BankAmerica 401(k) Investment Plan on qualified earnings
up to one-half of the Social Security wage base each year.) Qualified earnings
include salary and most cash incentive and bonus payments. Participants'
benefits are adjusted each year by an interest factor. Employees who accrued
benefits under final average pay defined benefit plans that were converted to
the cash balance plan also receive transition benefits. Estimated annual
retirement benefits under the BankAmerica Pension and Supplemental Retirement
Plans for the named executive officers of the Company at age 65 are as
follows:

<TABLE>
<CAPTION>
YEAR REACHING AMOUNT OF
NAME AGE 65 ANNUITY
---- ------------- ----------
<S> <C> <C>
Sharif M. Bayyari................................... 2010 $41,727.37
Le Tran-Thi......................................... 2011 29,003.09
Michael J. Sanders.................................. 2014 39,029.28
Richard D. Gale..................................... 2019 45,898.14
</TABLE>

60
<PAGE>

The estimated annual retirement benefits shown assume bonuses equal to the
average percentage bonus (as a percentage of year-end salary) received for the
last three years, a 5% interest factor, retirement at age 65 and no increases
in salary.

The Company will be a participating employer in the BankAmerica Pension Plan
and Supplemental Retirement Plan described above and the Company's executive
officers will continue to accrue benefits under these plans.

AWARDS TO EXECUTIVE OFFICERS

Effective upon completion of the Offerings, the Company has made one-time
grants to the named executive officers in connection with the Offerings and
also will make annual grants as part of their annual compensation. The grants
will comprise (i) options to purchase Class A Common Stock, and (ii) Class A
Common Stock subject to restrictions on transfer ("Restricted Stock").

The Company has awarded, effective upon completion of the Offerings the
following grants: (i) options to purchase 55,000 shares of Class A Common
Stock and 25,000 shares of Restricted Stock to Mr. Bayyari; (ii) options to
purchase 50,000 shares of Class A Common Stock and 21,000 shares of Restricted
Stock to Mr. Williams; (iii) options to purchase 28,000 shares of Class A
Common Stock and 12,000 shares of Restricted Stock to Ms. Tran-Thi; (iv)
options to purchase 28,000 shares of Class A Common Stock and 12,000 shares of
Restricted Stock to Mr. Aviles; (v) options to purchase 28,000 shares of Class
A Common Stock and 12,000 shares of Restricted Stock to Mr. Sanders; and (vi)
options to purchase 28,000 shares of Class A Common Stock and 12,000 shares of
Restricted Stock to Mr. Gale.

EMPLOYMENT CONTRACTS

None of the named executive officers has an employment or other agreement
with the Company regarding compensation.

OTHER BENEFIT PLANS

The Company also will be a participating employer in the other benefit
programs sponsored by BankAmerica for its subsidiaries, including the
BankAmerica 401(k) Investment Plan with matching employer contributions, group
health, life, accident and disability coverage and preferred rates on certain
loans and banking services. These programs will be made available to executive
officers of the Company on terms not more favorable than those offered to
other employees. The participation of the Company in BankAmerica-sponsored
benefit programs is subject to the continued authorization of BankAmerica and
election by the Company of such participation.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee will consist of two persons, neither of whom is
an officer of the Company.

COMPENSATION OF DIRECTORS

Directors of the Company who are not also employees of the Company or
BankAmerica ("Nonemployee Directors") will receive an annual retainer to be
paid in the form of stock options to be granted pursuant to the Nonemployee
Director Stock Plan. The value of stock options paid as an annual retainer
(determined using the Black-Scholes option pricing model) will be equal at
issuance to $20,000. In addition, under the plan, each Nonemployee Director
has been granted an option to purchase 5,000 shares of the Company's Class A
Common Stock upon his or her election to the Board and also will be granted an
option to purchase 2,500 shares of the Company's Class A Common

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<PAGE>

Stock on the day following each annual meeting of the Company's stockholders.
These options will vest on the day before the day of the annual meeting of the
Company's stockholders following the date of grant. These options will have a
ten-year term and an exercise price equal to the fair market value of a share
of the Company's Class A Common Stock on the date of grant.

In addition, Nonemployee Directors will receive $1,000 for each board
meeting attended and $1,000 for each committee meeting attended, whether or
not held on the same day as a board meeting. Committee chairpersons will
receive an additional $3,000 annual retainer. No other director will receive
cash compensation for services as a director. All directors, however, will be
reimbursed for the expenses of attending meetings.

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<PAGE>

SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDER AND MANAGEMENT

OWNERSHIP OF COMPANY COMMON STOCK BY PRINCIPAL STOCKHOLDER

As of the date of this Prospectus, no shares of Class A Common Stock are
outstanding and 30,200,000 shares of Class B Common Stock are outstanding, all
of which are owned by BankAmerica as described in the table below. After
completion of the Offerings, the only shares of Class A Common Stock that will
be outstanding are those that will be issued in the Offerings (including any
shares issued if the Underwriters' over- allotment options are exercised) and
those issued under the Company's employee and director plans. See "Executive
Compensation." Upon completion of the Offerings, BankAmerica will own 100% of
the Company's outstanding Class B Common Stock (30,200,000 shares), which will
represent approximately 68.3% of the outstanding Common Stock of the Company
(or 65.2% if the Underwriters exercise their over-allotment options in full).
In addition, assuming consummation of the Asian Acquisitions, BankAmerica's
ownership interest would increase to 30,900,000 shares of Class B Common Stock
or 68.8% of the outstanding Common Stock of the Company (or 65.7% if the
Underwriters exercise their over-allotment options in full).

The following table sets forth information with respect to the beneficial
ownership of the Company's Class B Common Stock as of the date of this
Prospectus.

<TABLE>
<CAPTION>
SHARES OF
CLASS B
COMMON
STOCK
BENEFICIALLY PERCENTAGE
NAME AND ADDRESS(1) OWNED OF CLASS
- ------------------- ------------ ----------
<S> <C> <C>
Bank of America National Trust and Savings
Association.......................................... 25,670,000 85%
Bank of America NW, National Association.............. 4,530,000 15
</TABLE>
- --------
(1) The address of Bank of America National Trust and Savings Association is:
555 California Street, 6th Floor, San Francisco, California 94104,
Attention: Secretary. The address of Bank of America NW, National
Association is: 701 Fifth Avenue, Seattle, Washington 98124, Attention:
Secretary. Seafirst is expected to merge into the Bank on January 1, 1997.

For a description of certain transactions and arrangements between the
Company and BankAmerica, see "Relationship with BankAmerica."

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<PAGE>

OWNERSHIP OF BANKAMERICA AND COMPANY COMMON STOCK BY MANAGEMENT

The following table sets forth information with respect to the beneficial
ownership of BankAmerica Common Stock as of November 30, 1996 by (i) directors
of the Company; (ii) each of the named executive officers; and (iii) all of
the Company's directors and executive officers as a group. Except as indicated
in the footnotes below, the persons named in this table have sole voting and
investment power with respect to all shares beneficially owned by them. None
of such persons owned any shares of the Company's Class A Common Stock or
Class B Common Stock as of such date. Options and restricted stock grants with
respect to approximately 321,000 shares of Class A Common Stock of the Company
have been awarded by the Company to its executive officers and nonemployee
directors effective upon completion of the Offerings. See "Executive
Compensation."

<TABLE>
<CAPTION>
SHARES OF
BANKAMERICA
COMMON
STOCK
BENEFICIALLY PERCENTAGE
NAME AND ADDRESS(1) OWNED(2)(3) OF CLASS
- ------------------- ------------ ----------
<S> <C> <C>
Sharif M. Bayyari
President and
Chief Executive Officer................................ 13,213 *
Le Tran-Thi
Senior Vice President
and Director, Operations and
Asian Merchant Services................................ 2,297 *
Michael J. Sanders
Senior Vice President
and Director, Sales.................................... 173 *
Richard D. Gale
Senior Vice President
and Director, Account Management
and Customer Services.................................. 1,903 *
Thomas E. Peterson
Chairman of the Board.................................. 192,001 *
Barbara J. Desoer
Director............................................... 3,346 *
Donald R. Dixon
Director............................................... 0 *
James G. Jones
Director............................................... 966 *
William E. Fisher
Director............................................... 0 *
Directors and executive officers
as a group (9 persons)................................. 213,899 *
</TABLE>
- --------
* Less than 1% of outstanding shares.
(1) The address for the directors and named executive officers of the Company
is: c/o BA Merchant Services, Inc., One South Van Ness Avenue, San
Francisco, California 94103.
(2) Percentage ownership is based on the number of shares outstanding as of
November 30, 1996. Share amounts are stated and the percentages calculated
in accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), which requires that shares that may be
acquired upon the exercise of stock options that will become exercisable
within 60 days be considered beneficially owned.
(3) Includes 251,937 shares for which options are exercisable or will become
exercisable within 60 days.

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<PAGE>

RELATIONSHIP WITH BANKAMERICA

GENERAL

The Company is wholly owned by the Bank and Seafirst, which are wholly owned
subsidiaries of BankAmerica, a registered bank holding company. BankAmerica
provides retail and wholesale commercial banking and financial services
throughout the United States and in selected international markets to
consumers and business customers, including corporations, governments and
other institutions.

At September 30, 1996, BankAmerica operated 1,997 retail banking branches
and a proprietary network of approximately 6,795 ATMs in the following states:
California, Oregon, Nevada, Arizona, Washington, Alaska, Idaho, Texas, New
Mexico, Hawaii and Illinois. In California, BankAmerica's most significant
market, BankAmerica is the largest provider of retail banking services,
maintaining at September 30, 1996, approximately 1,007 branches and at least
one banking relationship with approximately one-half of the households. At
December 31, 1995, BankAmerica was the eighth largest issuer of credit cards
in the United States with 8.9 million credit card holders and the largest
issuer of on-line debit cards in the United States with 10.9 million debit
card holders at such date. BankAmerica is a leader in providing banking
services to small business and middle market merchants (with approximately
850,000 such customers at September 30, 1996). BankAmerica conducts its
wholesale commercial banking businesses throughout the United States and
abroad. A majority of the merchant customers of the Company currently have
commercial banking relationships of various types with BankAmerica.

As of September 30, 1996, BankAmerica had consolidated total assets of
approximately $243.0 billion and total shareholders' equity of approximately
$20.5 billion and was the third largest bank holding company in the United
States, based on total assets. For the years ended December 31, 1994 and 1995
and for the nine months ended September 30, 1996, BankAmerica had consolidated
total revenues of approximately $16.5 billion, $20.4 billion and $16.3
billion, respectively, and during such periods, BankAmerica had consolidated
total net income of approximately $2.2 billion, $2.7 billion and $2.1 billion,
respectively.

The Bank has been a pioneer and leader in the bank credit and debit card
industry. The Bank developed and distributed the first bank-issued, nationally
licensed credit cards, known as BankAmericard(R), and established the first
licensing arrangements that enabled other banks to issue and process bank
credit card transactions. These arrangements evolved into the world-wide
association known today as Visa U.S.A. Inc. and Visa International, Inc., of
which the Bank was a founding member. The Bank's VERSATEL(R) Card was one of
the first point-of-sale debit cards introduced to the payments industry.

BankAmerica through its subsidiaries currently owns all of the outstanding
capital stock of the Company. Upon completion of the Offerings, BankAmerica
will own 100% of the Company's outstanding Class B Common Stock, which will
represent approximately 68.3% of the Company's outstanding Common Stock (or
65.2% if the Underwriters' over-allotment options are exercised in full). Such
economic ownership will represent approximately 95.6% of the combined voting
power of the Company's outstanding Common Stock (94.9% if the Underwriters'
over-allotment options are exercised in full).

BankAmerica could decide to sell or otherwise dispose of all or a portion of
its holdings of the Company's Class B Common Stock. Furthermore, there can be
no assurance that, in any transfer by BankAmerica of a controlling interest in
the Company, any holders of Class A Common Stock will be allowed to
participate in such a transaction or will realize any premium with respect to
their shares of Class A Common Stock. BankAmerica may also at some future time
transfer some or all of its shares

65
<PAGE>

of Class B Common Stock from the Bank or Seafirst to other affiliates of the
Company, including BankAmerica Corporation.

The Company was incorporated in October 1996 to combine the domestic
merchant processing businesses of the Bank and Seafirst. The Bank has
transfered its domestic merchant processing business and Seafirst has
transfered its merchant processing business (in each case other than drafts in
transit) to the Company in exchange for an aggregate of 30,200,000 shares of
Class B Common Stock of the Company. Prior thereto, such businesses were
conducted as divisions of the Bank and Seafirst. The Bank and Seafirst are
expected to merge on January 1, 1997.

The Company and BankAmerica engage in various intercompany transactions and
arrangements including the provision by BankAmerica of various services to the
Company. Fees paid for these services were approximately $7.5 million, $7.5
million, $7.7 million, $4.3 million and $5.6 million for the years ended
December 31, 1993, 1994 and 1995, and the nine months ended September 30, 1995
and 1996, respectively. As part of the intercompany arrangements, the Company,
paid BankAmerica total rental expense of $2.3 million, $2.3 million, and $1.9
million, for the years ended December 31, 1993, 1994, and 1995, and
$1.4 million and $1.3 million for the nine months ended September 30, 1995 and
1996, respectively. In addition, the Company paid BankAmerica $8.2 million,
$13.3 million and $14.8 million for the years ended December 31, 1993, 1994
and 1995, and $10.9 million and $12.9 million for the nine months ended
September 30, 1995 and 1996 under tax allocation arrangements. The Company
expects that the Intercompany Agreements and the Corporate Opportunities
Agreement described below will govern the relationship between the Company and
BankAmerica, the provision of services and the payments therefor following the
Offerings. Because these agreements have been entered into at a time when the
Company was a wholly-owned subsidiary of BankAmerica, they are not the result
of arm's length negotiations between the parties, and the Company has not been
represented by separate counsel.

NON-COMPETITION AND CORPORATE OPPORTUNITIES ALLOCATION AGREEMENT

Pursuant to the Corporate Opportunities Agreement, and in consideration of
the transactions contemplated by the Intercompany Agreements and to preserve
and enhance the goodwill of the assets and business being transferred to the
Company, BankAmerica, will not compete with the Company in the United States
(and the following countries upon the transfer of BankAmerica's Base Business
(as defined below) in each such country to the Company: Taiwan, the
Philippines, Thailand, South Korea, India, Indonesia, Vietnam and the People's
Republic of China (each, an "Additional Asian Country")) with respect to
payment processing for merchants to the extent that such payments arise in the
use of credit or charge cards or debit cards for the purchase of goods and
services and are authorized through an electronic medium originating at the
point of sale (the "Base Business") for a term of five years, subject to
earlier termination in the event BankAmerica owns shares representing less
than a majority of the voting power of the outstanding Common Stock of the
Company. Notwithstanding the foregoing, BankAmerica will not be precluded from
(i) subject to clauses (ii) and (iii) below, independently pursuing and
acquiring a Base Business, (ii) engaging, after any direct or indirect
acquisition thereof, in a Base Business the annual net revenue which is less
than 10% of the Company's annual net revenue for the equivalent period;
provided, however, that if such a Base Business shall experience net revenue
growth such that its annual net revenue equals or exceeds 10% of the Company's
annual net revenue in any year, then BankAmerica shall cause such business to
be offered to the Company for purchase at fair market value, or (iii)
engaging, after any direct or indirect acquisition thereof, in a Base Business
where the Company has been offered by BankAmerica the right to acquire such
business at fair market value and the independent outside directors of the
Company shall not have determined that the Company shall so acquire such
business. For purposes of clause (iii) of the preceding sentence, BankAmerica
must have offered the right to so acquire such Base Business within six months
after the acquisition thereof and the Company's independent outside directors
must not have determined that the Company shall exercise such right to acquire
such Base

66
<PAGE>

Business during the three month period after being so offered such
opportunity, and "fair market value" shall be the value determined as such by
an independent firm mutually selected by BankAmerica and the Company's
independent outside directors. BankAmerica has also agreed that it will not,
during the term of the Corporate Opportunities Agreement, acquire any
corporation, partnership or other business entity (or all or substantially all
of the assets thereof) where the Base Business of such entity is conducted
primarily in the United States or an Additional Asian Country and the Base
Business of such entity, for the fiscal year of such entity most recently
ended, generated more from 66 2/3% of the consolidated total revenue of such
entity.

The Corporate Opportunities Agreement further provides that BankAmerica will
have the right, as to any future business opportunities outside the scope of
the Base Business, to determine the allocation thereof based solely upon
BankAmerica's evaluation of what is in the best interests of the BankAmerica
stockholders under the circumstances. Under the agreement, the good faith
determination of BankAmerica as to the scope of the Base Business, the
applicability of any exceptions discussed above to its agreement not to
compete, or the allocation of any corporate opportunities outside the scope of
the Base Business, shall be conclusive and binding. The Corporate
Opportunities Agreement has a term of five years subject to renewal by mutual
agreement of the parties.

INTERCOMPANY AGREEMENTS AND ARRANGEMENTS

As an operating division of BankAmerica prior to its incorporation, the
Company received certain services from BankAmerica. Following the transfer of
the merchant processing businesses of the Bank and Seafirst to the Company,
BankAmerica, the Bank, Seafirst and other of their affiliates will provide to
and receive from the Company various services pursuant to a Trademark License
Agreement (the "License Agreement"), an Administrative Services and Support
Agreement (the "Administrative Services Agreement"), a Marketing Agreement
(the "Marketing Agreement"), a Sponsorship and Processing Agreement (the
"Sponsorship Agreement") and various processing agreements (the "Processing
Services Agreements"). The provision of these services will be priced on a
mutually agreeable competitive market basis. The Company believes that the
cost of the foregoing arrangements will not differ materially from its
historical costs. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 9 of Notes to Combined Financial
Statements.

The License Agreement provides, among other things, for the grant to the
Company by BankAmerica of a non-exclusive license to use the Bank of America
name and Marks in connection with the Company's business. Under the License
Agreement, BankAmerica has the right to revoke the license to use the Marks in
a fashion contrary to the terms of the License Agreement. A revocation of the
license to use the Marks could have a material adverse effect on the business,
financial condition or results of operation of the Company. Under the terms of
the License Agreement, the Company will indemnify BankAmerica and its
affiliates against certain liabilities in respect of the use of the Marks and
other activities relating to the business of the Company. The Company has also
granted to BankAmerica a non-exclusive license to use the Company's trademarks
and tradenames on terms similar to those granted by BankAmerica to the Company
for the Marks. The License Agreement has a term of five years subject to
renewal by mutual agreement of the parties.

Under the Marketing Agreement, the Company, the Bank and Seafirst have
agreed to cooperate and work together (a) to market, promote and sell the
Company's merchant processing services to existing and prospective merchant
services customers of the Bank and Seafirst and (b) to market, promote and
sell the Bank's and Seafirst's products and services to prospective customers
of the Company. The Marketing Agreement provides access, to the extent legally
permissible, to the Company for purposes of distribution of its merchant
processing products to the solicitation and distribution channels and
resources, which include direct mail, statement inserts, telemarketing,
Internet and other on-line media and cross-selling databases of the Bank and
Seafirst. In connection

67
<PAGE>

therewith, the Company's products are included in a wide range of marketing
programs conducted by the Bank and Seafirst. The Company will provide sales
training and related support services for the Bank and Seafirst sales
personnel. The Company will receive access, to the extent legally permissible,
to all account and related information of the Bank and Seafirst customers
including checking account balances and information needed for payment
authorization services. The Company will maintain the confidentiality of all
such information. The Marketing Agreement has a term of five years subject to
renewal for successive one-year terms.

Pursuant to the Administrative Services Agreement, the Bank will make
available and provide certain administrative, support and consultation
services to the Company, including purchasing, advertising, publicity,
marketing, data processing (including procurement, maintenance and support),
personnel and human resources (including hiring), training, legal services,
regulatory and compliance services, payroll services, accounting, appraisal
and audit services, treasury and tax services, insurance, corporate security,
credit review and analysis, credit bureau services, and facilities (including
lease administration). The Administrative Services Agreement has a term of
five years subject to renewal for successive one-year terms. At any time
during the term of the Administrative Services Agreement, the Company may
elect to receive any or all of these services, accept additional or new
services and terminate existing services.

Pursuant to the Sponsorship Agreement, the Bank has appointed the Company as
the Bank'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) and other credit
and charge card association programs and debit card networks such as
Interlink(R) and to enter into contracts with merchants for the provision of
merchant services. The Company, along with other nonbank transaction
processors, may be required to be sponsored by a financial institution that is
a member of the Visa(R) and MasterCard(R) and other credit card associations.
The Company expects that the Bank, being a member of such associations, will
be the Company's sole sponsor. Pursuant to the Sponsorship Agreement, the
Company will provide credit, charge and debit card processing, cash advance
processing and related services to merchant customers of the Bank. The Company
utilizes the Bank's automated clearing house and wire transfer products to
settle all of its processed transactions and uses the Bank's Customer On-Line
Information Network to post adjustments and perform accounting inquiries.

The Company will retain full responsibility for performance of merchant
processing services, except for certain obligations or responsibilities that
the Bank 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 the
Bank 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) any agreements
between merchants and the Bank 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. In
addition, the Company will be responsible for the payment of all interchange
fees and penalties, association and network fees and related costs. The
Sponsorship Agreement has a term of five years, subject to renewal for
successive one-year terms. Certain indemnification provisions are also
contained in the Sponsorship Agreement, under which the Company will indemnify
the Bank against losses, claims and other amounts arising out of the Company's
failure to perform in accordance with the terms of the Sponsorship Agreement.

Pursuant to the Processing Services Agreements, the Company will provide
merchant processing services to customers of the Bank and other banking
subsidiaries of BankAmerica Corporation, including transaction authorization,
data capture, funds collection, settlement and funds remittance,

68
<PAGE>

merchant implementation, customer service, management reporting,
market/product development and processing of chargebacks. Each of the
Processing Services Agreements is terminable upon 90 days' written notice.
Certain indemnification provisions are also contained in the Processing
Services Agreements, under which the Company will indemnify the Bank or
banking subsidiary, as the case may be, against losses, claims and other
amounts arising out of the Company's failure to perform in accordance with the
terms of the Processing Services Agreements.

All of the Intercompany Agreements may be terminated by BankAmerica if it
beneficially owns shares representing less than a majority of the voting power
of the outstanding Common Stock of the Company.

For additional information concerning the relationship, and certain areas of
competition or potential competition, between the Company and BankAmerica, see
"Risk Factors," "Description of Capital Stock" and "Executive Compensation--
Compensation Pursuant to Employee Benefit Plans."

LEASE AGREEMENTS AND FACILITIES ARRANGEMENTS

The Company is party to a lease agreement with the Bank for its facility in
San Francisco, California, which serves as the Company's principal executive
offices and one of its main processing facilities and comprises approximately
58,000 square feet. The term of this lease ends on December 3, 2001, and is
automatically renewable at such time for an additional five years unless a
notice not to extend has been provided at least six months prior to such
termination. The Bank owns the property on which such facility of the Company
is located.

The Company also will lease space from BankAmerica for its locations in Los
Angeles, Azusa and Foster City, California, and Bellevue, Seattle, and
Spokane, Washington.

REGISTRATION RIGHTS AGREEMENT

In connection with the Offerings, the Bank, Seafirst and the Company have
entered into a Registration Rights Agreement (the "Registration Rights
Agreement"). Pursuant to the Registration Rights Agreement, the Bank and
Seafirst have the right to require the Company to use its best efforts to
register under the Securities Act all or a portion of the shares of Class A
Common Stock which would result upon the conversion of the shares of Class B
Common Stock owned by the Bank and Seafirst or a transferee from the Bank or
Seafirst (the "Registrable Shares"). Such demand rights are subject to the
condition that the Company would not be required to effect more than two
demand registrations. The Bank and Seafirst 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. The Bank and Seafirst 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, the Bank and
Seafirst 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. The Bank's and
Seafirst's rights under the Registration Rights Agreement are fully assignable
to affiliates of the Bank and Seafirst and to transferees of Registrable
Shares.

TAX ALLOCATION AGREEMENT

In connection with the Offerings, the Company has entered into a Tax
Allocation Agreement with BankAmerica (the "Tax Allocation Agreement"), which
will govern certain tax related matters affecting taxable periods ending prior
to and subsequent to the Offerings, including preparation and filing of
certain tax returns, payment of taxes and indemnification for tax liabilities.
In general, under the Tax

69
<PAGE>

Allocation 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 BankAmerica (in the event that
the Company becomes required to file any such return in the future), in which
case the Company will be responsible for its proportionate share of such
taxes, determined as if the Company and its subsidiaries were a separate
consolidated or combined group. The Tax Allocation Agreement provides that
BankAmerica will retain control of audits affecting its consolidated, combined
or unitary returns, which include the Company and its subsidiaries.

ASIAN ACQUISITION AGREEMENT

The Company has entered into a definitive agreement with BankAmerica to
acquire the merchant processing businesses presently conducted by the Bank in
the Philippines and Thailand in consideration for the issuance by the Company
of 550,000 and 150,000 additional shares, respectively, of Class B Common
Stock. In the definitive agreement with respect to the Asian Acquisitions, the
Company and BankAmerica have also agreed to evaluate the possibility of
entering into an outsourcing or other arrangement that would permit the
Company to participate meaningfully in the Bank's merchant processing business
in Taiwan and work cooperatively during the term of the agreement to allow the
Company to acquire from the Bank the Bank's merchant processing businesses in
Taiwan, South Korea, India, the People's Republic China and Vietnam. Any such
acquisitions will be subject to local regulatory approval in the subject
countries. There is no assurance that any of such regulatory approvals will be
obtained or as to the timing thereof or that any such other arrangement will
ultimately prove practicable. The agreement will terminate on December 31,
1997 unless mutually extended. See "Risk Factors--Proposed Asian Acquisitions
and Operations" and "Business--Asia."

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<PAGE>

DESCRIPTION OF CAPITAL STOCK

AUTHORIZED CAPITAL STOCK

The authorized capital stock of the Company consists of 200 million shares
of Class A Common Stock, par value $.01 per share, 50 million shares of Class
B Common Stock, par value $.01 per share, and 10 million shares of Preferred
Stock, par value $.01 per share. None of the Class A Common Stock and
Preferred Stock is outstanding as of the date hereof. Of the 200 million
shares of Class A Common Stock authorized, 14,000,000 are being offered in the
Offerings (16,100,000 shares if the Underwriters' over-allotment options are
exercised in full), 30,900,000 shares will be reserved for issuance upon
conversion of Class B Common Stock into Class A Common Stock and
7,000,000 shares have been reserved for issuance pursuant to certain employee
and nonemployee director benefit and option plans. See "Executive
Compensation." Of the 50 million shares of Class B Common Stock authorized,
30,200,000 shares, or 100% of the outstanding shares, are held by BankAmerica.
700,000 additional shares of Class B Common Stock are subject to issuance to
BankAmerica upon consummation of the Asian Acquisitions. The following summary
description of the capital stock of the Company is qualified in its entirety
by reference to the form of Certificate of Incorporation of the Company and
the Bylaws 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

VOTING RIGHTS. The holders of Class A Common Stock and Class B Common Stock
generally have identical rights except that holders of Class A Common Stock
are entitled to one vote per share while holders of Class B Common Stock are
entitled to ten votes per share on all matters to be voted on by stockholders.
The holders of Common Stock are not entitled to cumulative voting rights.
Generally, all matters to be voted on by stockholders must be approved by a
majority (or, in the case of election of directors, by a plurality) of the
votes entitled to be cast by all shares of Class A Common Stock and Class B
Common Stock present in person or represented by proxy, voting together as a
single class, subject to any voting rights granted to holders of any Preferred
Stock. 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 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.

DIVIDENDS. Holders of Class A Common Stock and Class B Common Stock will
share in an equal amount per share in any dividend declared by the Board of
Directors, subject to any preferential rights of any outstanding Preferred
Stock. Dividends consisting of shares of Class A Common Stock and Class B
Common Stock may be paid only as follows: (i) shares of Class A Common Stock
may be paid only to holders of Class A Common Stock and shares of Class B
Common Stock may be paid only to holders of Class B Common Stock and (ii)
shares shall be paid proportionally with respect to each outstanding share of
Class A Common Stock and Class B Common Stock.

CONVERSION. Prior to a Tax-Free Spin-Off (as hereinafter defined), each
outstanding share of Class B Common Stock is convertible at the holder's
option into one share of Class A Common Stock. Additionally, each share of
Class B Common Stock shall automatically convert into one share of Class A
Common Stock if at any time prior to a Tax-Free Spin-Off the number of
outstanding shares of Class B Common Stock owned by BankAmerica or any of its
subsidiaries (or a Class B Transferee or any of its subsidiaries) represents
less than 30% of the economic ownership represented by the aggregate

71
<PAGE>

number of shares of Common Stock then outstanding. Following the occurrence of
a Tax-Free Spin-Off, if any, shares of Class B Common Stock shall not be
convertible into shares of Class A Common Stock at the option of the holder
thereof.

Except as provided below, any shares of Class B Common Stock transferred to
a person other than BankAmerica or any of its subsidiaries shall automatically
convert to shares of Class A Common Stock upon such disposition. Prior to a
Tax-Free Spin-Off, shares of Class B Common Stock representing more than a 50%
economic interest in the Company transferred in a single transaction to one
unrelated person (a "Class B Transferee") or among such Class B Transferee and
its subsidiaries shall not automatically convert to shares of Class A Common
Stock upon such disposition. Any shares of Class B Common Stock retained by
BankAmerica following any such transfer of shares of Class B Common Stock to a
Class B Transferee shall automatically convert into shares of Class A Common
Stock upon such transfer. Shares of Class B Common Stock transferred to
stockholders of BankAmerica or of a Class B Transferee in a transaction
intended to be on a tax-free basis (a "Tax-Free Spin-Off") under the Internal
Revenue Code of 1986 shall not convert to shares of Class A Common Stock upon
the occurrence of such Tax-Free Spin-Off.

Following a Tax-Free Spin-Off, shares of Class B Common Stock shall be
transferred as Class B Common Stock; provided, however, that shares of Class B
Common Stock shall automatically convert into shares of Class A Common Stock
on the fifth anniversary of the Tax-Free Spin-Off, unless prior to such Tax-
Free Spin-Off, BankAmerica, or the Class B Transferee, as the case may be,
delivers to the Company written advice of counsel reasonably satisfactory to
the Company (which shall include BankAmerica's General Tax Counsel) to the
effect that (i) such conversion could adversely affect the ability of
BankAmerica or the Class B Transferee, as the case may be, to obtain a
favorable ruling from the Internal Revenue Service that the distribution would
be a Tax-Free Spin-Off or (ii) the Internal Revenue Service has adopted a
general non-ruling policy on tax-free spinoffs and that such conversion could
adversely affect the status of the transaction as a Tax-Free Spin-Off. If such
written advice is received, approval of such conversion shall be submitted to
a vote of the holders of the Common Stock as soon as practicable after the
fifth anniversary of the Tax-Free Spin-Off, unless BankAmerica or the Class B
Transferee, as the case may be, delivers to the Company written advice of
counsel reasonably satisfactory to the Company (which shall include
BankAmerica's General Tax Counsel) prior to such anniversary that such vote
could adversely affect the status of the distribution as a Tax-Free Spin-Off,
including the ability to obtain a favorable ruling from the Internal Revenue
Service; if such written advice is delivered, such vote shall not be held.
Approval of such conversion will require the affirmative vote of the holders
of a majority of the shares of both Class A Common Stock and Class B Common
Stock present and voting, voting together as a single class, with each share
entitled to one vote for such purpose. No assurance can be given that such
conversion would be consummated. The foregoing requirements are intended to
ensure that tax-free treatment of the Tax-Free Spin-Off is preserved should
the Internal Revenue Service challenge such automatic conversion as violating
the 80% vote requirement currently required by the Code for a tax-free spin-
off.

OTHER RIGHTS. Upon consummation of the Offerings, all the outstanding shares
of Class A Common Stock and Class B Common Stock will be legally issued, fully
paid and nonassessable.

PREFERRED STOCK

The Board of Directors has the authority, without further action by the
stockholders, to issue Preferred Stock in one or more series and to fix the
rights, designation, preferences, privileges, limitations, 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, without stockholder 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.

72
<PAGE>

DELAWARE LAW AND CERTAIN CHARTER PROVISIONS

Control of the Company by BankAmerica, as well as certain statutory
provisions of Delaware law and the Company's Certificate of Incorporation and
Bylaws, 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 stockholders of the Company might otherwise
receive a premium over the then current market price for their shares. These
provisions include (i) the right of the Board of Directors to issue unissued
and unreserved shares of Common Stock without stockholder approval, (ii) the
right of the Board of Directors to issue shares of Preferred Stock 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 (in
addition to the voting rights provided by law), whether such shares shall be
redeemable and, if so, the terms of redemption without further stockholder
approval, and (iii) provisions restricting the ability of stockholders to call
a special meeting except upon the request of stockholders representing a
majority of the voting power of the entire capital stock of the Company issued
and outstanding and entitled to vote at such meeting.

The Company's Bylaws also contain 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 Board of Directors and (ii) business to
be conducted at the Company's annual meeting of stockholders (other than such
business as may be brought by or at the direction of the Board of Directors).
Without compliance with these provisions, any such nominations or business may
not be considered by the stockholders.

Further, unless otherwise provided in the certification of incorporation,
Section 203 of the Delaware General Corporation Law ("Section 203") regulates
certain transactions incident to or following large accumulations of shares of
a Delaware corporation, including those made by tender offers. Section 203 may
have the effect of significantly delaying a purchaser's ability to acquire the
entire interest sought if such acquisition is not approved by the
corporation's board of directors. Pursuant to Section 203, the Company's
Certificate of Incorporation contains a provision making such section
inapplicable to the Company.

DIRECTOR AND OFFICER LIABILITY AND INDEMNIFICATION

The Company's Certificate of Incorporation provides that directors of the
Company will not be liable for monetary damages in connection with any breach
of their fiduciary duties (with certain exceptions).

Under certain circumstances provided in the Bylaws, the Company will
indemnify any director or officer or any former director or officer of the
Company or any other corporation or enterprise (if serving at the request of
the Company) against expenses, liability and loss (including attorney fees,
judgments, fines, ERISA excise taxes or penalties and amounts to be paid in
settlement) reasonably incurred or suffered by such person by reason of the
fact that he or she is or was such director or officer in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.

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 Class A Common Stock has been
approved for listing on the New York Stock Exchange under the symbol "BPI."

TRANSFER AGENT AND REGISTRAR

The Company presently intends to use ChaseMellon Shareholder Services,
L.L.C. as the Transfer Agent and Registrar for the Class A Common Stock.

73
<PAGE>

SHARES AVAILABLE FOR FUTURE SALE

Upon completion of the Offerings, the Company will have 14,000,000 shares of
Class A Common Stock outstanding (16,100,000 shares if the Underwriters' over-
allotment options are exercised in full). The 14,000,000 shares sold in the
Offerings (16,100,000 shares if the Underwriters' over-allotment options are
exercised in full) will be freely tradable without restriction or further
registration under the Securities Act, except for any such shares acquired by
a Restricted Person. Options and restricted stock grants with respect to
approximately 321,000 shares of Class A Common Stock have been awarded by the
Company to its executive officers and nonemployee directors effective upon
completion of the Offerings. See "Executive Compensation."

The 30,200,000 shares of Class B Common Stock which are owned indirectly by
BankAmerica though its subsidiaries and the 700,000 shares of Class B Common
Stock that may be issued in the Asian Acquisitions are subject to a "lock-up"
agreement under which BankAmerica has agreed, subject to certain exceptions,
not to offer, sell, contract to sell, or otherwise dispose of any shares of
Common Stock without the prior written consent of Goldman, Sachs & Co. for a
period of 180 days after the date of this Prospectus. See "Underwriting."
Shares of Common Stock held by Restricted Persons who are executive officers
or directors of the Company are subject to a similar "lock-up" agreement for a
period of 180 days after the date of this Prospectus. Following such times,
BankAmerica 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 or
pursuant to an effective registration statement under the Securities Act.
Furthermore, the shares held by BankAmerica 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 two 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.

Since no shares of Common Stock were issued prior to October 1996, none of
the currently outstanding shares of Common Stock will have been held for two
years, or be available for sale under Rule 144, at the date of this
Prospectus. However, the Company and BankAmerica have entered into a
registration rights agreement which requires the Company to effect a
registration statement covering some of all of the shares of Class A Common
Stock owned indirectly by BankAmerica, subject to certain terms and
conditions. See "Relationship with BankAmerica--Registration Rights
Agreement." BankAmerica has informed the Company that it does not currently
intend to dispose of any shares of Common Stock held by it. However, sales of
substantial amounts of shares in the public market, or the perception that
such sales may occur through a registration statement or Rule 144, could
adversely affect prevailing market prices for the Class A Common Stock or the
Company's ability to raise equity in the future.

74
<PAGE>

VALIDITY OF CLASS A COMMON STOCK

The validity of the Class A Common Stock offered hereby will be passed upon
for the Company by Pillsbury Madison & Sutro LLP, San Francisco, California
and for the Underwriters by Sullivan & Cromwell, Los Angeles, California.

EXPERTS

The combined financial statements of BA Merchant Services (predecessor to
the Company) at December 31, 1995 and 1994, and for each of the three years
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.

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 Offerings,
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 Offerings, 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. Such material may also be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov.

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

75
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
BA MERCHANT SERVICES, INC.
Report of Ernst & Young LLP, Independent Auditors........................ F-2
Combined Balance Sheet as of December 31, 1994 and 1995 and September 30,
1995 and 1996 (unaudited)............................................... F-3
Combined Statement of Operations for the three years ended December 31,
1995, and for the nine months ended September 30, 1995 and 1996
(unaudited)............................................................. F-4
Combined Statement of Changes in BankAmerica's Equity Interest for the
three years ended December 31, 1995, and for the nine months ended
September 30, 1995 and 1996 (unaudited)................................. F-5
Combined Statement of Cash Flows for the three years ended December 31,
1995, and for the nine months ended September 30, 1995 and 1996
(unaudited)............................................................. F-6
Notes to Combined Financial Statements................................... F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
BA Merchant Services, Inc.

We have audited the accompanying combined balance sheets as of December 31,
1994 and 1995, of the merchant processing businesses of BankAmerica
Corporation (BA Merchant Services, as predecessor to BA Merchant Services,
Inc.) as described in Note 1, and the related combined statements of
operations, changes in BankAmerica's equity interest, and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of BA Merchant Services, Inc.'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 combined financial position at December 31, 1994
and 1995, of BA Merchant Services, and the combined 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.

/s/ Ernst & Young LLP

San Francisco, California
October 11, 1996

F-2
<PAGE>

BA MERCHANT SERVICES

COMBINED BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
----------------- -----------------
1994 1995 1995 1996
-------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash..................................... $ 906 $ 345 $ -- $ 1
Drafts in transit........................ 63,722 71,368 65,261 82,667
Accounts receivable...................... 20,593 24,565 22,443 28,967
-------- -------- -------- --------
Total current assets................... 85,221 96,278 87,704 111,635
Property and equipment, net................ 11,346 14,478 13,844 17,066
Other assets............................... 8,677 5,247 6,488 7,141
-------- -------- -------- --------
Total assets........................... $105,244 $116,003 $108,036 $135,842
======== ======== ======== ========
LIABILITIES AND BANKAMERICA'S EQUITY
INTEREST
Current liabilities:
Accounts payable......................... $ 1,003 $ 134 $ -- $ --
Merchants payable........................ 5,363 5,906 4,616 15,312
-------- -------- -------- --------
Total current liabilities.............. 6,366 6,040 4,616 15,312
Accrued liabilities........................ 4,589 4,019 4,060 3,639
Accrued credit card association and
interchange fees.......................... 3,724 3,884 4,463 5,824
Other liabilities.......................... 6,535 2,892 6,389 7,995
-------- -------- -------- --------
Total liabilities...................... 21,214 16,835 19,528 32,770
BankAmerica's equity interest.............. 84,030 99,168 88,508 103,072
-------- -------- -------- --------
Total liabilities and BankAmerica's
equity interest....................... $105,244 $116,003 $108,036 $135,842
======== ======== ======== ========
</TABLE>

See notes to financial statements.

F-3
<PAGE>

BA MERCHANT SERVICES

COMBINED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------ -------------------
1993 1994 1995 1995 1996
------- ------- -------- --------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net revenue....................... $88,919 $98,143 $109,928 $ 80,634 $ 92,289
Operating expense (Note 9):
Salaries and employee benefits.. 18,974 20,517 22,338 16,365 18,587
Data processing and
communications................. 27,994 24,570 27,815 19,587 20,454
Depreciation.................... 3,652 4,444 6,327 4,564 6,224
Amortization of intangibles..... 1,493 1,280 1,201 908 820
Occupancy....................... 2,313 2,270 1,923 1,440 1,413
General and administrative...... 9,809 10,598 12,319 10,077 11,092
Other........................... 5,267 2,915 2,776 1,727 2,054
------- ------- -------- --------- ---------
Total operating expense....... 69,502 66,594 74,699 54,668 60,644
Income from operations............ 19,417 31,549 35,229 25,966 31,645
Provision for income taxes........ 7,953 13,016 14,573 10,740 13,070
------- ------- -------- --------- ---------
Net income........................ $11,464 $18,533 $ 20,656 $ 15,226 $ 18,575
======= ======= ======== ========= =========
</TABLE>

See notes to financial statements.

F-4
<PAGE>

BA MERCHANT SERVICES

COMBINED STATEMENT OF CHANGES IN BANKAMERICA'S EQUITY INTEREST

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------- ---------------------
1993 1994 1995 1995 1996
------- ------- ------- --------- ----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, beginning of
period...................... $71,898 $70,992 $84,030 $ 84,030 $ 99,168
BankAmerica's change in
funding................... (12,370) (5,495) (5,518) (10,748) (14,671)
Net income................. 11,464 18,533 20,656 15,226 18,575
------- ------- ------- --------- ----------
Balance, end of period....... $70,992 $84,030 $99,168 $ 88,508 $ 103,072
======= ======= ======= ========= ==========
</TABLE>

See notes to financial statements.

F-5
<PAGE>

BA MERCHANT SERVICES

COMBINED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------- --------------------
1993 1994 1995 1995 1996
-------- -------- ------- --------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income................. $ 11,464 $ 18,533 $20,656 $ 15,226 $ 18,575
Adjustments to net income
to arrive at cash provided
by operating activities:
Depreciation.............. 3,652 4,444 6,327 4,564 6,224
Amortization of
intangibles.............. 1,493 1,280 1,201 908 820
Provision for (benefit
from) deferred income
taxes.................... (205) (332) (268) (197) 173
Changes in operating
assets and liabilities:
(Increase) in drafts in
transit................ (1,236) (12,969) (7,646) (1,539) (11,299)
(Increase) decrease in
accounts receivable.... 4,748 (4,340) (3,972) (1,850) (4,402)
Increase (decrease) in
accounts payable....... -- 867 (869) (1,003) (134)
Increase (decrease) in
merchants payable...... 652 2,701 543 (747) 9,406
Increase (decrease) in
accrued liabilities.... 1,974 193 (570) (529) (380)
Increase (decrease) in
accrued
credit card association
and
interchange fees....... 1,232 (42) 160 739 1,940
Other, net.............. (5,476) 2,466 (1,146) 1,332 2,216
-------- -------- ------- --------- ---------
Net cash provided by
operating activities..... 18,298 12,801 14,416 16,904 23,139
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchases of property and
equipment................. (5,944) (7,741) (9,459) (7,062) (8,812)
-------- -------- ------- --------- ---------
Net cash used by investing
activities............... (5,944) (7,741) (9,459) (7,062) (8,812)
CASH FLOWS FROM FINANCING
ACTIVITIES
BankAmerica's change in
funding................... (12,370) (5,495) (5,518) (10,748) (14,671)
-------- -------- ------- --------- ---------
Net cash provided by (used
for) financing
activities............... (12,370) (5,495) (5,518) (10,748) (14,671)
Increase (decrease) in
cash...................... (16) (435) (561) (906) (344)
Cash at beginning of
period.................... 1,357 1,341 906 906 345
-------- -------- ------- --------- ---------
CASH AT END OF PERIOD...... $ 1,341 $ 906 $ 345 $ 0 $ 1
======== ======== ======= ========= =========
Supplemental disclosure:
Cash paid to BankAmerica
for income taxes......... $ 8,158 $ 13,348 $14,841 $ 10,937 $ 12,897
======== ======== ======= ========= =========
</TABLE>

See notes to financial statements.

F-6
<PAGE>

BA MERCHANT SERVICES

NOTES TO COMBINED FINANCIAL STATEMENTS

(INFORMATION RELATING TO SEPTEMBER 30, 1995 AND 1996 AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)

1. BACKGROUND AND BASIS OF PRESENTATION

The combined financial statements include the operations and associated
assets and liabilities of the United States merchant processing businesses of
Bank of America National Trust and Savings Association (the "Bank") and the
Seafirst Bank Division of Bank of America NW, National Association
("Seafirst") as if the processing businesses were a separate entity (herein
referred to as BA Merchant Services or "BAMS"). The Bank and Seafirst are
wholly owned subsidiaries of BankAmerica Corporation ("BankAmerica"). Subject
to the approval of various banking regulatory agencies and prior to a proposed
initial public offering of shares of Class A Common Stock of BA Merchant
Services, Inc. (the "Company"), the Bank and Seafirst will transfer certain
assets and liabilities of the United States merchant processing businesses to
the Company in consideration for shares of Class B Common Stock. The Company,
prior to the public offering, will be a wholly owned subsidiary of the Bank
and Seafirst. Prior to October 11, 1996 the Company had no separate legal
status or existence.

References in the Notes to the combined financial statements to BankAmerica
shall be deemed to be references to BankAmerica Corporation and its
subsidiaries and affiliates, including the Bank and Seafirst, unless the
context requires otherwise. The financial statements refer to BankAmerica
instead of the Bank or Seafirst as the parent and ultimate owner of the
Company.

The combined financial statements were prepared using BankAmerica's
historical basis in assets and liabilities and the historical results of
operations. Changes in BankAmerica's equity interest represent the net income
of BAMS adjusted for net cash transfers to and from BankAmerica. Additionally,
the financial statements include allocations of certain assets (including
primarily property and equipment) and expenses relating to the merchant
processing businesses to be transferred from BankAmerica. Management believes
these allocations are reasonable. Certain of the expenses transferred to BAMS
are not necessarily indicative of the costs that would have been incurred if
BAMS had performed these functions as a stand-alone entity. Subsequent to the
transfer, the Company will perform these functions using its own resources or
purchased services (from BankAmerica or other companies) and will be
responsible for the costs and expenses associated with the management of a
public corporation.

The combined financial statements included herein may not necessarily
reflect the combined results of operations, financial position, changes in
BankAmerica's equity interest and cash flows of BAMS in the future or what
they would have been as a separate, stand-alone entity during the periods
presented. The interim financial information at September 30, 1995 and 1996
and for the nine months ended September 30, 1995 and 1996 is unaudited but, in
the opinion of management, includes all adjustments, consisting only of normal
recurring accruals, which BAMS considers necessary for a fair presentation of
the financial position and results of operations for the interim period. The
results of operations for the nine months ended September 30, 1996 are not
necessarily indicative of results for the full year.

NATURE OF OPERATIONS. BAMS provides an array of payment processing and
related information products and services to merchants who accept credit,
charge and debit cards as payment for goods and services throughout the United
States. BAMS is one of the largest processors of merchant credit card
transactions and the largest processor of debit card transactions in the
United States. BAMS' products and services include the processing of a wide
variety of credit, charge and debit card transactions and the provision to
merchants of other related information, services and product support.

F-7
<PAGE>

BA MERCHANT SERVICES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION RELATING TO SEPTEMBER 30, 1995 AND 1996 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)

BAMS provides its products and services to a merchant customer base in a
wide variety of industries, including general retailers, restaurants and
supermarkets. BAMS' customers are large multi- regional chains, middle market
merchants and small merchants that collectively operate from more than 126,000
locations. BAMS' sales force markets its products and services to merchants
directly and through the BankAmerica branch network and product distribution
system. In addition, BAMS uses agent banks and independent sales organizations
("ISOs") that obtain customers on behalf of BAMS.

At December 31, 1995, approximately 61% of the merchant locations served by
BAMS were located in the State of California and BAMS estimates that
approximately 40% of its charge volume processed for the year ended December
31, 1995 was derived from merchant locations in California.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DRAFTS IN TRANSIT. Drafts in Transit represent those transactions for which
merchants have been paid by BAMS, but for which payment has not yet been
received from the credit card associations or debit card network. Payment from
those entities is generally received within one to three days.

ACCOUNTS RECEIVABLE. Receivables primarily represent fee income earned under
processing agreements with merchants, agent banks, and ISOs.

PROPERTY AND EQUIPMENT. Property and equipment are carried at cost, net of
accumulated depreciation. Depreciation is provided on a straight-line basis
over periods ranging from two to seven years for furniture and equipment and
three to five years for point of sale terminals.

MERCHANTS PAYABLE. Merchants payable represents those transactions for which
BAMS has been paid, but for which amounts have not yet been remitted to
merchants.

MERCHANT DEPOSITS. Merchant deposits are restricted deposit accounts held at
BankAmerica branches whose balances may be used by BAMS to satisfy chargebacks
and other disputes. When a credit card is used to initiate a transaction which
is disputed by the cardholder, it is the responsibility of the card-accepting
processor to see that the merchant resolves the dispute. If the merchant is
unable or unwilling to do so, the processor may have to refund the cardholder
the purchase price of the disputed transaction. As protection against such
liability, BAMS requires certain merchants to maintain restricted deposit
accounts in which BAMS has a security interest. Because these deposits are
assets and legal liabilities of the respective BankAmerica branches, such
deposits do not appear on the balance sheet of BAMS. At September 30, 1996,
merchant deposits were approximately $8.7 million.

NET REVENUE. Net revenue is primarily fees received from merchants related
to the processing of transactions (including merchant discount fees), offset
by interchange fees payable to credit card issuers and fees payable to credit
card associations and debit card networks, and is recorded as services are
performed. Net revenue also includes fees earned from the deployment of point
of sale terminals.

PROVISION FOR INCOME TAXES. Historically, BAMS has been included in the
consolidated federal, and in certain combined state and local returns filed by
BankAmerica. BAMS settled its consolidated and combined tax liabilities by
making payments to BankAmerica.

F-8
<PAGE>

BA MERCHANT SERVICES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION RELATING TO SEPTEMBER 30, 1995 AND 1996 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)

Prospectively, the Company will file a separate federal and certain state
and local tax returns according to the taxable activity of its operations. The
Company will be included in certain state consolidated and combined tax
returns filed by BankAmerica.

In accordance with BankAmerica's tax allocation policy, income tax provision
and related tax liabilities and assets for BAMS have been, and, for the
Company, will continue to be determined as though BAMS (or, prospectively, the
Company) had filed separate tax returns. If BAMS (or, prospectively, the
Company) cannot fully recognize all of its deferred tax assets on a separate
return basis, BAMS (or, prospectively, the Company) will recognize additional
deferred tax assets to the extent they are expected to be realized by the
consolidated or combined group. Tax payments related to excess losses or tax
credits will be received by BAMS (or, prospectively, the Company) if these
deductions and credits are utilized in the consolidated and combined returns.

BAMS adopted SFAS No. 109, "Accounting for Income Taxes" on January 1, 1993.
SFAS No. 109 mandates the use of the liability method of accounting for income
taxes. Under the liability method, deferred tax assets and liabilities are
recognized for the expected future tax consequences of existing differences
between financial reporting and tax reporting bases of assets and liabilities,
as well as for operating losses and tax credit carryforwards, using enacted
tax laws and rates. Deferred tax expense represents the net change in the
deferred tax asset or liability balance during the year. This amount, together
with income taxes currently payable or refundable for the current year,
represents the total income tax expense for the year.

CONCENTRATION OF CREDIT RISK. Financial instruments that potentially subject
BAMS to concentrations of credit risk consist primarily of drafts in transit
and accounts receivable.

IDENTIFIABLE INTANGIBLE ASSETS. Included in other assets are certain
identifiable intangible assets related to customer base acquisitions and a
1992 buyout of a noncompete agreement. These assets are being amortized on a
straight-line basis over a five to eight year period corresponding to the life
of the buyout agreement and the estimated period of benefit related to the
customer bases acquired.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS. The preparation
of the combined financial statements of BAMS requires management to make
estimates and assumptions that affect reported amounts. These estimates are
based on information available as of the date of the financial statements.
Therefore, actual results could differ from those estimates.

EARNINGS PER COMMON SHARE. Historical earnings per share have not been
presented because they would not be meaningful. BAMS had no common stock
outstanding as of September 30, 1995 and 1996 and December 31, 1993, 1994 or
1995.

3. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

IMPAIRMENT OF LONG-LIVED ASSETS. Effective January 1, 1996, BAMS adopted
SFAS 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 held and used by an

F-9
<PAGE>

BA MERCHANT SERVICES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION RELATING TO SEPTEMBER 30, 1995 AND 1996 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)

entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
adoption of the standard did not materially impact BAMS' combined results of
operations, financial condition or cash flows because this was essentially the
method BAMS used in the past to measure and record asset impairments.

STOCK-BASED COMPENSATION. In 1995, the Financial Accounting Standards Board
released SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS 123).
This standard provides an alternative to APB Opinion No. 25 and is effective
for fiscal years beginning after December 15, 1995. BAMS expects to account
for its employee stock plans in accordance with the provisions of APB Opinion
No. 25, and follow the pro forma net income and earnings per share disclosure
requirements set forth in SFAS 123. Accordingly, SFAS 123 is not expected to
have a material impact on BAMS' combined financial position, results of
operations or cash flows.

4. PROPERTY AND EQUIPMENT

The following is a summary of property and equipment:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------- ---------------
1994 1995 1995 1996
------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Furniture and equipment........................ $ 2,892 $ 3,180 $ 3,078 $ 3,656
Payment processing terminals................... 25,570 34,174 32,202 41,759
------- ------- ------- -------
28,462 37,354 35,280 45,415
Less: Accumulated depreciation................. 17,116 22,876 21,436 28,349
------- ------- ------- -------
$11,346 $14,478 $13,844 $17,066
======= ======= ======= =======
</TABLE>

5. INCOME TAXES

The significant components of the provision for (benefit from) income taxes
are as follows:

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------- --------------------
1993 1994 1995 1995 1996
------- -------- -------- --------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current:
Federal.................... $ 6,325 $ 10,376 $ 11,431 $ 8,424 $ 9,879
State and local............ 1,833 2,972 3,410 2,513 3,018
------- -------- -------- --------- ---------
8,158 13,348 14,841 10,937 12,897
Deferred:
Federal.................... (190) (345) (240) (177) 164
State and local............ (15) 13 (28) (20) 9
------- -------- -------- --------- ---------
(205) (332) (268) (197) 173
------- -------- -------- --------- ---------
Total........................ $ 7,953 $ 13,016 $ 14,573 $ 10,740 $ 13,070
======= ======== ======== ========= =========
Effective tax rate........... 41.0% 41.3% 41.4% 41.4% 41.3%
======= ======== ======== ========= =========
</TABLE>

F-10
<PAGE>

BA MERCHANT SERVICES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION RELATING TO SEPTEMBER 30, 1995 AND 1996 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)

BAMS' provision for income taxes differs from amounts computed by applying
the federal statutory tax rate of 35% due to state income taxes.

The significant components of BAMS' deferred income tax assets and
liabilities are shown below:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------------- --------------
1994 1995 1995 1996
------ ------ ------ ------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Deferred income tax assets:
Accrued expenses.............................. $1,624 $1,217 $1,325 $ 805
State taxes................................... 1,012 1,155 1,118 1,021
------ ------ ------ ------
Total deferred income tax assets................ 2,636 2,372 2,443 1,826
Deferred income tax liabilities:
Identifiable intangible assets................ (1,243) (711) (852) (338)
------ ------ ------ ------
Total deferred income tax liabilities........... (1,243) (711) (852) (338)
------ ------ ------ ------
Net deferred income tax assets.................. $1,393 $1,661 $1,591 $1,488
====== ====== ====== ======
</TABLE>

Management believes that BAMS will fully realize its total deferred income
tax assets based upon its total deferred income tax liabilities and its
current level of operating income. Accordingly, no valuation allowance was
established for any reporting period presented.

6. EMPLOYEE BENEFIT PLANS

BAMS has participated in defined benefit pension plans, defined contribution
plans, welfare benefit plans, and post-retirement and post-employment plans
sponsored by BankAmerica which cover substantially all salaried employees of
BAMS. BAMS receives a monthly allocated charge from BankAmerica for its share
of pension costs in an amount equivalent to the employer expense of the
employee benefit plans, health and dental insurance plans, workers'
compensation insurance, and other compensation-related expenses for its
employees participating in the plan. Employee benefits costs incurred by BAMS
are calculated by applying a benefit factor percentage, as determined by
BankAmerica, against employee base salaries for the defined benefit pension
plan and defined contribution plans and as a per employee charge for welfare
benefits. For the years ended December 31, 1993, 1994, and 1995, and the nine
months ended September 30, 1995 and 1996, BAMS incurred a total expense of
$2,423,000, $2,598,000, $2,846,000, $2,083,000, and $2,831,000, respectively,
for its share of retirement and welfare plan expenses.

DEFINED BENEFIT PLANS. Eligible salaried employees of BAMS are covered under
the BankAmeraccount Plan, which is a defined benefit cash balance plan. Prior
to January 1, 1996, certain BAMS employees were covered by the Seafirst
Corporation Retirement Plan, a final average pay defined benefit plan.
Effective December 31, 1995, the Seafirst Plan was merged into the
BankAmeraccount Plan; however, the Seafirst plan benefit formula continued to
apply to employees covered by that plan until April 1, 1996.

F-11
<PAGE>

BA MERCHANT SERVICES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION RELATING TO SEPTEMBER 30, 1995 AND 1996 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)

Benefits are based on the employees' length of service, level of
compensation and, in the case of the BankAmeraccount Plan, a specified
interest rate (7.25%, 8.5% and 6.5% for the years ending December 31, 1993,
1994 and 1995, respectively). Contributions are made by BAMS to BankAmerica
based on actuarial computations of the amount sufficient to fund the current
service cost plus amortization of the unfunded actuarial accrued liability.
Contributions are determined in accordance with Internal Revenue Service
funding requirements and are invested in diversified portfolios, including
fixed income and equity investments.

The statement of operations includes $155,000, $269,000, $261,000, $192,000
and $613,000 for contributions to the plans for the years ended December 31,
1993, 1994, and 1995, and the nine months ended September 30, 1995, and 1996,
respectively.

DEFINED CONTRIBUTION PLANS. The majority of salaried employees of BAMS
participate in the BankAmerishare Plan. This defined contribution plan
provides tax-deferred investment opportunities to salaried employees who have
completed the required length of service. Employees may contribute to the plan
up to certain limits prescribed by the Internal Revenue Service. A portion of
these contributions is matched by BAMS. Contributions are invested at the
direction of the participant. Prior to April 1, 1996, certain BAMS employees
participated in the Seafirst Corporation Employee Matched Savings Plan, also a
defined contribution plan with matching employer contributions. Effective
April 1, 1996, the Seafirst plan was merged into and replaced by the
BankAmerishare Plan.

The statement of operations includes contributions to the plans of $451,000,
$470,000, $581,000, $429,000 and $485,000 for the years ended December 31,
1993, 1994 and 1995, and the nine months ended September 30, 1995 and 1996,
respectively.

AMENDMENTS TO THE BANKAMERACCOUNT PLAN AND THE BANKAMERISHARE
PLAN. Effective January 1, 1996, the BankAmeraccount Plan and the
BankAmerishare Plan were amended to provide an enhanced level of benefits to
employees. Management estimates that these amendments could increase BAMS'
benefit expense in future periods by approximately $290,000 to $360,000 per
year. Also effective January 1, 1996, the name of the BankAmeraccount Plan was
changed to BankAmerica Pension Plan while the name of the BankAmerishare Plan
was changed to BankAmerica 401(k) Investment Plan.

POST-RETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS. Currently, BAMS
provides certain defined health care and life insurance benefits under plans
for certain retired employees sponsored by BankAmerica. Retiree health care
benefits are offered under self-insured arrangements, as well as through
various health maintenance organizations. Retiree life insurance benefits are
provided through an insurance company. BankAmerica allocates the cost of post-
retirement benefits to BAMS as part of a per employee charge for welfare
benefits. That charge is periodically reviewed and evaluated. The retiree's
share is the remainder of the cost for the given coverage. BankAmerica's
policy is to fund the cost of medical benefits in amounts determined at the
discretion of management. Employer contributions are invested in diversified
portfolios, including fixed income and equity investments.

The statement of operations includes contributions to the plans of $398,000,
$411,000, $426,000, $314,000 and $309,000 for the years ended December 31,
1993, 1994 and 1995, and the nine months ended September 30, 1995 and 1996,
respectively.

F-12
<PAGE>

BA MERCHANT SERVICES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION RELATING TO SEPTEMBER 30, 1995 AND 1996 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)

MANAGEMENT STOCK PLANS. Certain employees of BAMS have received restricted
stock and stock options under BankAmerica's management stock plans. Those
employees may elect to exchange their BankAmerica stock options for the
Company's options at a future date. If such an exchange occurs, the Company
will incur compensation expense estimated to be approximately $2.6 million
based on stock prices at September 30, 1996. Company employees will not be
included in future grants under the BankAmerica management stock plans. The
Company will offer shares of its Class A Common Stock to certain key employees
under the Company's Long-Term Incentive Plan. The Company also intends to
develop stock plans for participation by other employees.

7. COMMITMENTS

BAMS has contractual agreements with third parties to receive merchant data
processing services and data processing and card transactions services.
Included in these contracts is a third party providing the primary processing
service to BAMS and with whom BAMS has a long-term contract which expires in
2001. Future commitments under this contract are unknown as payment amounts
vary with volumes processed.

8. LEGAL CONTINGENCIES

Due to the nature of its business, BAMS is subject to various threatened or
filed legal actions. Although the amount of the ultimate exposure, if any,
cannot be determined at this time, BAMS, based upon the advice of counsel,
does not expect the final outcome of threatened or filed suits to have a
material adverse effect on its financial position or results of operations.

9. RELATED PARTIES

BAMS and BankAmerica engage in various intercompany transactions and
arrangements including the provision by BankAmerica of various services to
BAMS. Such services are currently provided pursuant to various intercompany
arrangements which, among other things, grant to BAMS a license to use the
Bank of America name and certain trademarks and services marks in connection
with BAMS' business.

Other services provided under the intercompany arrangements are certain
product distribution services, direct access processing services, direct
access marketing services, system support services, association and network
sponsorship and representation in the Visa(R) and MasterCard(R) associations,
telecommunications services, tax and treasury services, regulatory and
corporate, legal, accounting and audit services and other miscellaneous
support and administrative services. Fees paid for these services were
approximately $7.5 million, $7.5 million, $7.7 million, $4.3 million and
$5.6 million, for the years ended December 31, 1993, 1994, and 1995, and the
nine months ended September 30, 1995 and 1996, respectively.

As part of the intercompany arrangements, BAMS paid BankAmerica total rental
expense of approximately $2.3 million, $2.3 million, and $1.9 million, for the
years ended December 31, 1993, 1994, and 1995, and $1.4 million and $1.3
million for the nine months ended September 30, 1995 and 1996, respectively.
In addition, BAMS paid BankAmerica $8.2 million, $13.3 million and $14.8
million for the years ended December 31, 1993, 1994 and 1995, and $10.9
million and $12.9 million for the nine months ended September 30, 1995 and
1996 under the tax allocation arrangements.

F-13
<PAGE>

BA MERCHANT SERVICES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONCLUDED)

(INFORMATION RELATING TO SEPTEMBER 30, 1995 AND 1996 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)

BAMS believes that the cost of services provided under the intercompany
arrangements are not materially different from the costs that would have been
incurred if BAMS was unaffiliated with BankAmerica. In connection with the
initial public offering, the Company intends to enter into certain
intercompany agreements with BankAmerica for the provision of services
previously described. BAMS believes the cost of these services under the
intercompany agreements will not result in materially different costs from
those that were incurred historically.

10. POTENTIAL SALE OF COMMON STOCK

At October 11, 1996, the authorized capital stock of the Company consists of
200 million shares of Class A Common Stock, 50 million shares of Class B
Common Stock and 10 million shares of Preferred Stock, each of which has a par
value of $.01 per share. None of the Class A Common Stock and Preferred Stock
is outstanding at October 11, 1996.

The Company has announced that it intends to offer for sale up to
16.1 million shares of its Class A Common Stock in an underwritten public
offering.

F-14
<PAGE>

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the U.S. Underwriters named below, and
each of such U.S. Underwriters, for whom Goldman, Sachs & Co., Montgomery
Securities and Salomon Brothers Inc are acting as representatives, has
severally agreed to purchase from the Company, the respective number of shares
of Class A Common Stock set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF CLASS A
UNDERWRITER COMMON STOCK
----------- -----------------
<S> <C>
Goldman, Sachs & Co. ...................................... 2,728,334
Montgomery Securities...................................... 2,728,333
Salomon Brothers Inc ...................................... 2,728,333
Robert W. Baird & Co. Incorporated......................... 115,000
Sanford C. Bernstein & Co., Inc. .......................... 220,000
Alex, Brown & Sons Incorporated............................ 220,000
Chase Securities Inc. ..................................... 220,000
Cowen & Company............................................ 115,000
Dain Bosworth Incorporated................................. 115,000
Dean Witter Reynolds Inc. ................................. 220,000
A.G. Edwards & Sons, Inc. ................................. 220,000
Furman Selz LLC............................................ 115,000
Gerard Klauer Mattison & Co., LLC.......................... 115,000
Janney Montgomery Scott Inc. .............................. 115,000
Edward D. Jones & Co., L.P. ............................... 115,000
Legg Mason Wood Walker Incorporated........................ 115,000
J.P. Morgan Securities Inc. ............................... 220,000
Morgan Stanley & Co. Incorporated.......................... 220,000
Robertson, Stephens & Company LLC.......................... 220,000
Wasserstein Perella Securities, Inc. ...................... 220,000
Wheat First Butcher Singer................................. 115,000
----------
Total.................................................... 11,200,000
==========
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered
hereby, if any are taken.

The U.S. Underwriters propose to offer the shares of Class A Common Stock in
part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus and in part to certain securities dealers at
such price less a concession of $0.53 per share. The U.S. Underwriters may
allow, and such dealers may reallow, a concession not in excess of $0.10 per
share to certain brokers and dealers. After the shares of Class A Common Stock
are released for sale to the public, the offering price and other selling
terms may from time to time be varied by the representatives.

The Company and BankAmerica have entered into an underwriting agreement (the
"International Underwriting Agreement") with the underwriters of the
International Offering (the "International Underwriters") providing for the
concurrent offer and sale of 2,800,000 shares of Class A Common Stock in an
international offering outside the United States. The initial public offering
price and underwriting discount per share are identical for both Offerings.
The closing of the offering made hereby is a condition to the closing of the
International Offering, and vice versa. The managers of the International
Underwriters are Goldman Sachs International, Montgomery Securities and
Salomon Brothers International Limited.

U-1
<PAGE>

Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two Offerings, each of
the U.S. Underwriters named herein has agreed that, as a part of the U.S.
Offering and subject to certain exceptions, it will offer, sell or deliver the
shares of Class A Common Stock, directly or indirectly, only in the United
States and to U.S. persons. Each of the International Underwriters has agreed
pursuant to the Agreement Between that, as a part of the distribution of the
shares offered hereby and subject to certain exceptions, it will (i) not,
directly or indirectly, offer, sell or deliver shares of Class A Common Stock
(a) in the United States of America (including the States and the District of
Columbia), its territories, its possessions and other areas subject to its
jurisdiction (the "United States") or to any U.S. persons, which term shall
mean, for purposes of this paragraph; (x) any individual who is a resident of
the United States or (y) any corporation, partnership or other entity
organized in or under the laws of the United States of any political
subdivision thereof and whose office most directly involved with the purchase
is located in the United States, or (b) to any person whom it believes intends
to reoffer, resell or deliver the shares in the United States or to any U.S.
persons, and (ii) cause any dealer to whom it may sell such shares at any
concession to agree to observe a similar restriction.

Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Class A Common Stock as may be mutually agreed. The price of any shares so
sold shall be the initial public offering price, less than an amount not
greater than the selling concession.

The Company has granted the U.S. Underwriters an option exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of
1,680,000 additional shares of Class A Common Stock solely to cover over-
allotments, if any. If the U.S. Underwriters exercise their over-allotment
option, the Underwriters have severally agreed, subject to certain conditions,
to purchase approximately the same percentage thereof that the number of
shares to be purchased by each of them, as shown in the foregoing table, bears
to the 11,200,000 shares of Class A Common Stock offered. The Company has
granted the International Underwriters a similar option to purchase up to an
aggregate of 420,000 additional shares of Class A Common Stock.

The Company, BankAmerica and certain officers and directors of the Company
have agreed that, during the period beginning from the date of this Prospectus
and continuing to and including the date 180 days after the date of this
Prospectus, they will not offer, sell, contract to sell or otherwise dispose
of any securities of the Company (other than pursuant to employee or director
stock option or benefit plans existing, or on the conversion or exchange of
convertible or exchangeable securities outstanding, on the date of this
Prospectus or pursuant to one or more business combinations where the
aggregate value of the securities issued does not exceed $20 million) which
are substantially similar to the shares of Common Stock or which are
convertible or exchangeable into securities which are substantially similar to
the shares of the Common Stock without the prior written consent of Goldman,
Sachs & Co., except for the shares of Class A Common Stock offered in
connection with the Offerings.

The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares
of Class A Common Stock offered by them.

Prior to the Offerings, there has been no public market for the shares of
Class A Common Stock. The initial public offering price was negotiated among
the Company and the representatives. Among the factors considered in
determining the initial public offering price of the Common Stock, in addition
to prevailing market conditions, were the Company's historical performance,
estimates of the business potential and earnings prospects of the Company, an
assessment of the Company's management and the consideration of the above
factors in relation to market valuation of companies in related businesses.

U-2
<PAGE>

The Class A Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "BPI." In order to meet one of the requirements for
listing the Class A Common Stock on the New York Stock Exchange, the
Underwriters have undertaken to sell lots of 100 or more shares to a minimum
of 2,000 beneficial holders.

This Prospectus may be used by underwriters and dealers in connection with
offers and sales of the Class A Common Stock, including shares initially sold
in the International Offering, to persons located in the United States.

The Company and BankAmerica have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.

U-3
<PAGE>

[RECYCLE LOGO APPEARS HERE]
<PAGE>

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

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 10
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Dilution................................................................. 17
Capitalization........................................................... 18
Pro Forma Combined Balance Sheet......................................... 19
Selected Combined Financial and Other Data............................... 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 21
Business................................................................. 28
Management............................................................... 54
Executive Compensation................................................... 56
Security Ownership of Principal Stockholder and Management............... 63
Relationship with BankAmerica............................................ 65
Description of Capital Stock............................................. 71
Shares Available for Future Sale......................................... 74
Validity of Class A Common Stock......................................... 75
Experts.................................................................. 75
Additional Information................................................... 75
Index to Financial Statements............................................ F-1
Underwriting............................................................. U-1
</TABLE>

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

THROUGH AND INCLUDING JANUARY 12, 1997 (THE 25TH DAY 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.

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

14,000,000 SHARES

[BA MERCHANT SERVICES, INC. LOGO APPEARS HERE]

CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)

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

PROSPECTUS

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

GOLDMAN, SACHS & CO.

MONTGOMERY SECURITIES

SALOMON BROTHERS INC

REPRESENTATIVES OF THE UNDERWRITERS

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