BA MERCHANT SERVICES INC, S-1, 1996-10-11

BA MERCHANT SERVICES INC
S-1, 1996-10-11

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 11, 1996

REGISTRATION NO. 333-

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
BA MERCHANT SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 7374 94-3252840
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
ONE SOUTH VAN NESS AVENUE
SAN FRANCISCO, CALIFORNIA 94103
(415) 241-3390
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
CHERYL SOROKIN, ESQ.
CORPORATE SECRETARY
BA MERCHANT SERVICES, INC.
555 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94104
(415) 622-2091
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
JEFFREY R. LAPIC, ESQ. RODNEY R. PECK, ESQ. ALISON S. RESSLER, ESQ.
ASSISTANT GENERAL NATHANIEL M. CARTMELL III, SULLIVAN & CROMWELL
COUNSEL ESQ. 444 SOUTH FLOWER STREET
BANK OF AMERICA NT&SA JAMES C. OLSON, ESQ. LOS ANGELES, CALIFORNIA
555 CALIFORNIA STREET, PILLSBURY MADISON & SUTRO 90071-2901
8TH FLOOR LLP (213) 955-8000
SAN FRANCISCO, 235 MONTGOMERY STREET
CALIFORNIA 94104 SAN FRANCISCO, CALIFORNIA
(415) 622-2189 94104
(415) 983-1000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
---------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

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

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

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock,
$.01 par value........ 18,000,000 $18.00 $324,000,000 $98,182
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Includes shares to cover an over-allotment option granted by the
Registrant to the Underwriters. The securities are not being registered
for the purposes of sale outside the United States.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) of the Securities Act of 1933.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED OCTOBER 11, 1996

SHARES
BA MERCHANT SERVICES, INC.
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 shares of Class A Common Stock offered, shares
are being offered hereby in the United States and shares are being offered
in a concurrent international offering outside the United States. The initial
public offering price and the underwriting discount per share will be 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 % of the
outstanding Common Stock of the Company (or % if the Underwriters exercise
their over-allotment options in full). In addition, if the Company consummates
its proposed acquisition of certain Asian businesses presently owned by the
Bank, its ownership would increase to %. See "Relationship with BankAmerica"
and "Business--Asia."

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

Application will be made to have the Class A Common Stock 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............................. $ $ $
Total(3).............................. $ $ $
</TABLE>
- -----
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company has granted the U.S. Underwriters an option for 30 days to
purchase up to an additional 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 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 $ , $ and $ , 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 , 1996, against payment therefor in
immediately available funds.

GOLDMAN, SACHS & CO.

-----------

The date of this Prospectus is , 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. Shortly thereafter Bank
of America National Trust and Savings Association (together with its
subsidiaries, the "Bank") transferred to the Company its domestic and
Philippine merchant processing businesses 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. In addition, the Company is entering into definitive agreements with
the Bank providing for the acquisitions of each of the Bank's merchant
processing businesses in Taiwan and Thailand (the "Asian Acquisitions"), the
consummation of which is not expected until after the completion of the
Offerings. 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 and in the
Philippines and, assuming consummation of the Asian Acquisitions, Taiwan and
Thailand. 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
150,000 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 and that it generally experiences high customer
retention levels.

3
<PAGE>

Company increased from 201.3 million for the year ended December 31, 1993 to
321.1 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 six
months ended June 30, 1995 and the six months ended June 30, 1996, the number
of card transactions processed increased from 148.2 million to 170.6 million,
the Company's net revenue increased from $52.1 million to $59.7 million and the
Company's net income increased from $10.0 million to $12.2 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 1,935
retail banking branches in eleven states, the more than 850,000 small business
and middle market customers of BankAmerica, the approximately 10.6 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 June 30, 1996. See "Relationship with
BankAmerica."

The Company's principal strategic objectives are: (a) to continue 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); (b) to
maintain and improve profitability through careful attention to pricing and
cost controls; (c) to continue to provide a broad range of products that are
both responsive to customer needs and supported by excellent customer service;
and (d) 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
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
transaction processing system during the first quarter of 1997, and
expansion into check authorization and recovery services;

4
<PAGE>

. 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

. 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; (ii) the merchant processing business of
Seafirst, located principally in the state of Washington; and (iii) the Bank's
Philippine merchant processing business. 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.

The Company is entering into definitive agreements to acquire each of the
merchant processing businesses presently conducted by the Bank in Taiwan and
Thailand in consideration for the issuance by the Company of additional shares
of its Class B Common Stock. The definitive agreements are subject only to
local regulatory approval and provide for consummation immediately upon the
receipt of such approvals. The Bank's Taiwan merchant processing business
generated $6.2 million in net revenue in 1995 and $4.0 million in net revenue
during the six months ended June 30, 1996 and represented approximately 70% of
the net revenue of BankAmerica's Asian merchant processing businesses. The
Bank's Thailand merchant processing business generated $0.1 million in net
revenue during 1995 and $0.3 million in net revenue during the six months ended
June 30, 1996. See "Risk Factors--Non-Consummation of Asian Acquisitions."

Upon completion of the Offerings, BankAmerica will own 100% of the Company's
outstanding Class B Common Stock, which will represent approximately % of the
outstanding Common Stock of the Company (or % if the Underwriters exercise
their over-allotment options in full). In addition, assuming the consummation
of the Asian Acquisitions, BankAmerica's ownership would increase to %. 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.......................... shares
International Offering.......................... shares
Total....................................... shares(1)
Common Stock to be Outstanding after the Offerings:
Class A Common Stock............................ shares(1)(2)
Class B Common Stock(3)......................... shares
Total....................................... shares
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."
Proposed NYSE Symbol............................... BPI
</TABLE>
- --------
(1) Does not include 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 shares of Class A Common Stock issuable upon the
exercise of outstanding options granted or, in connection with the
Offerings, to be granted by the Company. See "Executive Compensation."
(3) Does not include an aggregate of up to shares of Class B Common Stock
issuable upon consummation of the Asian Acquisitions.

The offering of shares of Class A Common Stock initially being offered in
the United States (the "United States Offering") and the offering of 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 % of the outstanding
Common Stock of the Company (or % if the Underwriters' over-allotment options
are exercised in full). In addition, assuming the consummation of the Asian
Acquisitions, BankAmerica's ownership interest would increase to %.
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 June 30, 1996, BankAmerica operated 1,935 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 June 30, 1996, approximately 1,020 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 10.6 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 June 30,
1996). BankAmerica conducts its wholesale commercial banking businesses
throughout the United States and abroad.

At June 30, 1996, BankAmerica had consolidated total assets of approximately
$238.8 billion and total shareholders' equity of approximately $20.1 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 six
months ended June 30, 1996, BankAmerica had consolidated total revenues of
approximately $16.5 billion, $20.4 billion and $10.8 billion, respectively, and
during such periods, BankAmerica had consolidated total net income of
approximately $2.2 billion, $2.7 billion and $1.4 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.

7
<PAGE>

In connection with the Offerings, BankAmerica and the Company have also
entered into the Non-Competition and Corporate Opportunity Allocation Agreement
(the "Corporate Opportunities Agreement"), pursuant to which BankAmerica will
not compete with 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
electronic or telephonic media originating at the point of sale (the "Base
Business"), 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 Bank presently operates merchant processing businesses in four Asian
countries and is actively exploring opportunities in several other Asian
countries. The Company presently operates a merchant processing business in the
Philippines and is entering into definitive agreements to acquire each of the
merchant processing businesses presently conducted by the Bank in Taiwan and
Thailand. The Company and BankAmerica expect to work cooperatively to allow the
Company to acquire from the Bank in the future the Bank's other merchant
processing businesses in Asia.

See "Risk Factors--Control by BankAmerica and Potential Conflicts of
Interest," "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" and "Pro Forma Financial Information," included
elsewhere herein. Data may not sum to the indicated totals due to rounding.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------ -------------------------------
1993 1994 1995 1995 1995 1996 1996
------- ------- ------- ------------ ------ ----------- ------------
(UNAUDITED)
(IN MILLIONS EXCEPT PER SHARE AND PER TRANSACTION DATA)
ACTUAL PRO FORMA(1) ACTUAL PRO FORMA(1)
----------------------- ------------ ------------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net Revenue............. $ 88.9 $ 98.1 $ 109.9 $ 122.0 $ 52.1 $ 59.7 $ 66.1
Operating Expense:
Salaries and Employee
Benefits.............. 19.0 20.5 22.3 24.3 10.9 12.2 13.2
Data Processing and
Communications........ 28.0 24.6 27.2 29.2 12.6 13.2 13.9
Depreciation........... 3.7 4.4 6.3 6.5 2.9 4.0 4.2
Amortization of
Intangibles........... 1.5 1.3 1.2 1.2 0.6 0.6 0.6
General and
Administrative........ 9.8 11.3 13.9 15.4 5.6 6.5 7.8
Other.................. 7.6 4.4 3.6 6.0 2.6 2.3 3.0
------- ------- ------- ------- ------ ------- -------
Total Operating
Expense............... 69.5 66.6 74.7 82.6 35.0 38.8 42.7
------- ------- ------- ------- ------ ------- -------
Income from Operations.. 19.4 31.5 35.2 39.4 17.0 20.8 23.4
Provision for Income
Taxes.................. 8.0 13.0 14.6 16.0 7.0 8.6 9.5
------- ------- ------- ------- ------ ------- -------
Net Income.............. $ 11.5 $ 18.5 $ 20.7 $ 23.4 $ 10.0 $ 12.2 $ 13.9
======= ======= ======= ======= ====== ======= =======
Pro Forma Net Income per
Share(2)............... $ $ $ $ $ $ $
======= ======= ======= ======= ====== ======= =======
OTHER DATA:
Number of Credit Card
Transactions
Processed.............. 135.7 177.1 236.6 242.0 107.0 133.7 137.1
Number of Debit Card
Transactions
Processed.............. 65.6 74.6 84.5 84.5 41.2 36.9 36.9
Cost per Credit Card
Transaction(3)......... $ 0.51 $ 0.38 $ 0.32 $ 0.34 $ 0.33 $ 0.29 $ 0.31
Credit Card Sales Volume
Processed.............. $12,642 $14,903 $18,633 $19,681 $8,630 $10,371 $11,007
Debit Card Sales Volume
Processed.............. 1,861 2,076 2,334 2,334 1,138 1,035 1,035
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------
ACTUAL PRO FORMA(1)
------ ------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Total Assets..................................... $130.8 $
Total Liabilities................................ 19.2
Stockholders' Equity............................. 111.6(4)
</TABLE>
- -------
(1) See "Pro Forma Financial Information."
(2) 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
shares had been outstanding in all periods presented and for all pro
forma periods has been calculated as if additional shares had been
issued in the Asian Acquisitions, and shares had been outstanding in all
periods presented.
(3) Calculated as the ratio of total operating expense to number of credit card
transactions processed.
(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 competes 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.

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. 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. See "Business--Industry Overview" and "--
Competition."

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."

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

10
<PAGE>

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."

The Company is not exposed to card issuer credit losses unassociated with a
dispute between the card holder 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 % of the outstanding Common Stock of the Company (or % if the
Underwriters' over-allotment options are exercised in full). In addition,
assuming the consummation of the Asian Acquisitions, the Company's ownership
would increase to %. 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. It is anticipated that, upon completion of the Offerings, three of the
seven members of the Company's Board of Directors will be directors or
employees of BankAmerica or its affiliates other than 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 generally within certain
segments of the merchant processing business. 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" and "Description of Capital
Stock."

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

11
<PAGE>

disposition, have an adverse effect upon the market price of the shares of the
Company following the Offerings. Divestiture by BankAmerica may also
jeopardize the Company's ability to renew or to extend its contractual
arrangements with BankAmerica 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.

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 the
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.

NON-CONSUMMATION OF ASIAN ACQUISITIONS

In connection with the pursuit of its strategic objectives, the Company
intends to expand into the Taiwan and Thailand merchant processing markets by
consummating the Asian Acquisitions. Such expansion, however, is dependent as
to each country on approval of the local regulatory authorities. The Company
expects such approvals will be received during the first quarter of 1997,
although no assurance can be given that either or both regulatory approvals
will be obtained or as to the timing thereof.

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

12
<PAGE>

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.

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, Explore, Accel, Pulse and Cash Station 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, the provisions of
the Intercompany

13
<PAGE>

Agreements prohibit 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 its 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.

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 % of the outstanding Common Stock of the Company (or
% if the Underwriters' over-allotment options are exercised in full). In
addition, assuming consummation of the Asian Acquisitions, BankAmerica's
ownership interest would increase to %. 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").

14
<PAGE>

The shares of Class B Common Stock which are held indirectly by
BankAmerica through its subsidiaries and the 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 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 continue after the Offerings. The
initial public offering price per share of Class A Common Stock being offered
in the Offerings will be 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 June 30, 1996
was approximately $110.6 million or $ per share of Class A 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 June
30, 1996 would have been approximately $ per share. This represents an
immediate increase in net tangible book value of $ per share to existing
stockholders and an immediate dilution of $ per share to purchasers of the
Class A Common Stock in the Offerings. See "Dilution."

In the event that additional shares of Class B Common Stock are issued
to BankAmerica upon consummation of the Asian Acquisitions, and after giving
effect thereto, the net tangible book value of the Common Stock as of June 30,
1996 would have been approximately $ per share, representing an immediate
dilution of $ per share to purchasers of Class A Common Stock in the
Offerings.

15
<PAGE>

USE OF PROCEEDS

The net proceeds from the sale of shares of Class A Common Stock offered in
the Offerings, based on an assumed initial public offering price of $ per
share, are expected to be $ (approximately $ if the Underwriters' over-
allotment options are exercised in full). The Company intends to use an
aggregate of approximately $ 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. As of , 1996, such
indebtedness is payable on demand and has an interest rate of %. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

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 June 30, 1996 was
approximately $110.6 million, or $ 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
shares of Class A Common Stock offered in the Offerings (at an assumed initial
public offering price of $ per share), the pro forma net tangible book
value of the Company as of June 30, 1996 would have been approximately $ ,
or $ per share. This represents an immediate dilution of $ 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>
Initial public offering price per share..................................... $
Net tangible book value per share as of June 30, 1996.....................
Increase per share attributable to new investors..........................
Pro forma net tangible book value per share after the Offerings.............
----
Dilution per share to new investors......................................... $
====
</TABLE>

17
<PAGE>

CAPITALIZATION

The following table sets forth the consolidated short-term indebtedness and
capitalization of the Company (i) as of June 30, 1996, (ii) as adjusted to
give effect to the initial capitalization and incurrence of short-term debt
and (iii) as further adjusted 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>
JUNE 30, 1996
-----------------------------------
AS FURTHER
ACTUAL AS ADJUSTED ADJUSTED
-------- --------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term Debt............................ $ -- $107,711 $--
======== ======== ====
Stockholders' Equity
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;
shares issued and outstanding as
further adjusted(1).....................
Class B Common Stock, $.01 par value;
50,000,000 shares authorized; no shares
issued and outstanding; shares
issued and outstanding as adjusted and
as further adjusted.....................
Additional Paid-in Capital...............
Retained Earnings........................
-------- -------- ----
Total Stockholders' Equity............. 111,617
-------- -------- ----
Total Capitalization................... $111,617 $ $
======== ======== ====
</TABLE>
- --------
(1) Does not include a total of shares of Class A Common Stock which are
reserved for issuance pursuant to stock option plans. Options with respect
to 200,000 shares of Class A Common Stock have been awarded with an
effective grant date immediately prior to the Offerings at an exercise
price per share equal to the initial public offering price. See "Executive
Compensation--Compensation Pursuant to Employee Benefit Plans."

18
<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 six months
ended June 30, 1995 and June 30, 1996, and the balance sheet data as of
December 31, 1991, 1992 and 1993 and June 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 six-month period ended June 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
AS OF AND FOR THE SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
---------------- -------- -------- -------- ----------------
(IN MILLIONS, EXCEPT PER SHARE AND 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 $ 52.1 $ 59.7
Operating Expense:
Salaries and Employee
Benefits.............. 18.6 18.0 19.0 20.5 22.3 10.9 12.2
Data Processing and
Communications........ 26.4 28.2 28.0 24.6 27.2 12.6 13.2
Depreciation .......... 3.7 3.7 3.7 4.4 6.3 2.9 4.0
Amortization of
Intangibles........... -- 0.7 1.5 1.3 1.2 0.6 0.6
Occupancy.............. 1.2 1.3 2.3 2.3 1.9 1.0 0.9
General and
Administrative........ 10.2 9.6 9.8 11.3 13.9 5.6 6.5
Other.................. 1.5 1.6 5.3 2.1 1.7 1.6 1.4
------- -------- -------- -------- -------- ------- --------
Total Operating
Expense............... 61.6 63.1 69.5 66.6 74.7 35.0 38.8
------- -------- -------- -------- -------- ------- --------
Income from Operations.. 13.4 18.5 19.4 31.5 35.2 17.0 20.8
Provision for Income
Taxes.................. 5.4 7.4 8.0 13.0 14.6 7.0 8.6
------- -------- -------- -------- -------- ------- --------
Net Income.............. $ 8.0 $ 11.1 $ 11.5 $ 18.5 $ 20.7 $ 10.0 $ 12.2
======= ======== ======== ======== ======== ======= ========
Pro Forma Net Income per
Share(1)............... $ $ $ $ $ $ $
======= ======== ======== ======== ======== ======= ========
OTHER DATA:
Number of Credit Card
Transactions
Processed.............. 110.7 122.3 135.7 177.1 236.6 107.0 133.7
Number of Debit Card
Transactions
Processed.............. N.A. N.A. 65.6 74.6 84.5 41.2 36.9
Cost per Credit Card
Transaction(2)......... $ 0.56 $ 0.52 $ 0.51 $ 0.38 $ 0.32 $ 0.33 $ 0.29
Credit Card Sales Volume
Processed.............. $ 8,828 $ 11,976 $ 12,642 $ 14,903 $ 18,633 $ 8,630 $ 10,371
Debit Card Sales Volume
Processed.............. N.A. N.A. 1,861 2,076 2,334 1,138 1,035
BALANCE SHEET DATA (AT
PERIOD END):
Total Assets............ $ 83.3 $ 90.8 $ 90.2 $ 105.2 $ 116.0 $ 114.2 $ 130.8
Total Liabilities....... 6.8 18.9 19.1 21.2 16.8 20.1 19.2
BankAmerica's Equity
Interest............... 76.5 71.9 71.1 84.0 99.2 94.1 111.6
</TABLE>
- --------
(1) Pro forma net income per share for all periods has been calculated as if
the Offerings had been completed on January 1, 1993 and shares had
been outstanding in all periods presented.
(2) Calculated as the ratio of total operating expense to number of credit
card transactions processed.

19
<PAGE>

PRO FORMA FINANCIAL INFORMATION

The following Unaudited Pro Forma Combined Balance Sheet of the Company as
of June 30, 1996 has been prepared to reflect the: (i) initial capitalization
and incurrence of short-term debt, (ii) completion of the Offerings and (iii)
consummation of the Asian Acquisitions. These events are reflected as if each
had been consummated on June 30, 1996.

The following Unaudited Pro Forma Combined Statement of Operations for the
year ended December 31, 1995 and the six months ended June 30, 1996 have been
prepared to reflect the consummation of the Asian Acquisitions, reflected as
if they had been consummated as of January 1, 1995 and January 1, 1996,
respectively.

The pro forma earnings per share is based on the assumption that the shares
of Common Stock to be outstanding immediately after the Offerings and the
additional shares of Class B Common Stock to be issued in consideration of the
Asian Acquisitions were issued on January 1, 1995. Historical earnings per
share have not been presented because they would not be meaningful. There was
no Common Stock outstanding as of June 30, 1996, during the year ended
December 31, 1995 or during the six months ended June 30, 1996.

The unaudited pro forma financial information does not purport to represent
what the Company's financial position actually would have been if the
Offerings and the related transactions occurred on the dates indicated or to
project the Company's financial position for any future date. The unaudited
pro forma adjustments are based upon available information and certain
assumptions that the Company believes are reasonable. The unaudited pro forma
financial information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the combined financial statements and notes thereto appearing elsewhere
herein.

20
<PAGE>

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

<TABLE>
<CAPTION>
AT JUNE 30, 1996
----------------------------------------------------------------
INITIAL
CAPITALIZATION
JUNE 30, AND INCURRENCE
1996 OF SHORT- ASIAN
ACTUAL TERM DEBT OFFERINGS(3) ACQUISITIONS(5) PRO FORMA
-------- -------------- ------------ --------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and Cash
Equivalents........... $ 1,017 $ $ $ 619 $
Drafts in Transit...... 81,588 36,268 117,856
Accounts Receivable.... 26,123 -- 26,123
-------- ------- -------
Total Current
Assets................ 108,728 36,887
Property and Equipment,
net................... 16,757 1,659 18,416
Other Assets........... 5,341 91 5,432
-------- --------- ---- ------- -------
TOTAL ASSETS.......... $130,826 $ $ $38,638 $
======== ========= ==== ======= =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Accounts Payable....... $ -- $ $ $ 9,392 $ 9,392
Merchants Payable...... 8,441 1,890 10,331
Short-term Debt........ -- 107,711 (1) (4) -- --
-------- ------- -------
Total Current
Liabilities........... 8,441 11,282 19,723
Accrued Liabilities.... 7,274 -- 7,274
Other Liabilities...... 3,494 225 3,719
-------- ------- -------
Total Liabilities.... 19,209 11,507 10,993
BankAmerica's Equity
Interest.............. 111,617 (111,617)(2) --
Class A Common Stock... --
Class B Common Stock... (2) (6)
Additional Paid in
Capital............... 3,906 (2) 25,186(6)
-------- --------- ---- ------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
.................... $130,826 $ $ $38,638 $
======== ========= ==== ======= =======
</TABLE>

21
<PAGE>

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------------
ASIAN
ACTUAL ACQUISITIONS(5) PRO FORMA
-------- --------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Net Revenue.................................. $109,928 $12,050 $121,978
Operating Expense:
Salaries and Employee Benefits(7)........... 22,338 1,937 24,275
Data Processing and Communications.......... 27,219 1,981 29,200
Depreciation................................ 6,327 187 6,514
Amortization of Intangibles................. 1,201 -- 1,201
General and Administrative.................. 13,943 1,424 15,367
Other....................................... 3,671 2,290 5,961
-------- ------- --------
Total Operating Expense................... 74,699 7,819 82,518
-------- ------- --------
Income from Operations....................... 35,229 4,231 39,460
Provision for Income Taxes................... 14,573 1,443 16,016
-------- ------- --------
Net Income................................... $ 20,656 $ 2,788 $ 23,444
======== ======= ========
Weighted Average Number of Shares............
======== ======= ========
Net Income Per Share.........................
======== ======= ========
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
---------------------------------
ASIAN
ACTUAL ACQUISITIONS(5) PRO FORMA
------- --------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Net Revenue................................... $59,672 $6,452 $66,124
Operating Expense:
Salaries and Employee Benefits(7)............ 12,180 998 13,178
Data Processing and Communications........... 13,238 674 13,912
Depreciation................................. 4,037 193 4,230
Amortization of Intangibles.................. 570 -- 570
General and Administrative................... 6,472 1,370 7,842
Other........................................ 2,349 629 2,978
------- ------ -------
Total Operating Expense.................... 38,846 3,864 42,710
------- ------ -------
Income from Operations........................ 20,826 2,588 23,414
Provision for Income Taxes.................... 8,602 906 9,508
------- ------ -------
Net Income.................................... $12,224 $1,682 $13,906
======= ====== =======
Weighted Average Number of Shares.............
======= ====== =======
Net Income Per Share..........................
======= ====== =======
</TABLE>

22
<PAGE>

NOTES TO THE PRO FORMA FINANCIAL INFORMATION

The following adjustments are incorporated in the unaudited pro forma
financial information:

(1) At the time of the transfers to the Company of the merchant processing
business of the Bank and Seafirst, BankAmerica will retain
approximately $ million of drafts in transit and accounts receivable
related to the transferred businesses. The balances are expected to
return shortly thereafter to their recent historical levels and will be
funded through short-term debt from an affiliate.

(2) To reflect the transfer to the Company by BankAmerica of the assets and
liabilities of substantially all of BankAmerica's merchant processing
businesses in consideration for the issuance of shares of Class B
Common Stock. The number of shares of Class B Common Stock to be issued
to BankAmerica as part of the initial capitalization has not yet been
determined. Consequently, the equity balance has been reflected as
additional paid in capital.

(3) To reflect the issuance of shares of Class A Common Stock in the
Offerings at an estimated initial public offering price of $ per
share.

(4) To reflect the repayment of short-term debt to an affiliate of $
million using a portion of the proceeds from the Offerings. Because the
short-term debt is expected to be outstanding less than weeks,
interest expense is considered immaterial and has not been reflected on
the pro forma combined financial statements.

(5) To reflect the consummation of the Asian Acquisitions.

(6) The number of shares of Class B Common Stock to be issued to
BankAmerica as part of the Asian Acquisitions has not yet been
determined. Consequently, the equity balance has been reflected as
additional paid in capital.

(7) Certain employees of the Company have restricted stock and stock
options under BankAmerica's management stock plans. If those employees
elect to exchange their BankAmerica stock options for the Company's
options, the Company will incur compensation expense estimated to be
$2.6 million based on current stock prices. This expense is non-
recurring and therefore has not been reflected as a pro forma
adjustment.

23
<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; (ii) the merchant processing business of
Seafirst, conducted principally in Washington; and (iii) the Bank's Philippine
merchant processing business. 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. 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: (a) 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; (b) data processing and communication charges, which relate directly to
processing credit, charge and debit card transactions; (c) 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 (d) 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
during the first quarter 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.

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 telecommunications
services, tax and treasury services, regulatory and compliance, personnel and
human resources services, legal, accounting and audit services, advertising,
marketing and publicity services, purchasing, payroll, certain administrative,
data processing and computer services and insurance services. Pursuant to the
Administrative Services Agreement, BankAmerica will continue to perform many
of such services for the Company. See "Relationship with BankAmerica--
Intercompany Agreements and Arrangements." 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 arrangements
will not differ materially from historical costs. 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.

24
<PAGE>

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."

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>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 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 67.3 65.1
Income from Operations....................... 21.8 32.1 32.0 32.7 34.9
Net Income................................... 12.9 18.9 18.8 19.2 20.5
</TABLE>

SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995

NET REVENUE

Net revenue increased by $7.6 million, or 14.6%, to $59.7 million for the
six months ended June 30, 1996, compared to the year-earlier period. This
increase was primarily attributable to a 16.3% increase in credit, charge and
debit card sales volume from $9.8 billion to $11.4 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 $1.1
million to net revenue during the six months ended June 30, 1996. This price
increase was accomplished without any material customer attrition.

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 six months ended June 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 $3.8 million, or 10.8%, to $38.8 million for
the six months ended June 30, 1996, compared to the year-earlier period. Of
this increase, $1.3 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 $1.2 million is attributable to
increased depreciation primarily related to terminals added to support new
merchant locations. An additional $0.7 million is attributable to increased
data processing and communications costs and $0.9 million is attributable to
increased general and administrative expense (primarily expense associated
with merchant supplies) reflecting increased transaction volume. These
increases were partially offset by a reduction in other expense reflecting
reduced merchant fraud and credit losses.

Operating expense declined from $0.33 to $0.29 per credit card transaction.
This decline reflected greater economies of scale, expense reduction resulting
from the Company's performing in-house

25
<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 $3.8 million, or 22.3%, to $20.8 million
for the six months ended June 30, 1996, compared to $17.0 million for the six
months ended June 30, 1995. Operating income as a percentage of net revenue
increased from 32.7% for the six months ended June 30, 1995 to 34.9% for the
six months ended June 30, 1996.

INCOME TAXES

Income taxes were $8.6 million for the six months ended June 30, 1996
compared to $7.0 million for the same period in 1995, reflecting higher
operating income.

NET INCOME

Net income increased $2.2 million, or 22.4%, to $12.2 million for the six
months ended June 30, 1996, compared to $10.0 million for the six-month period
ended June 30, 1995. Net income as a percentage of net revenue increased to
20.5% from 19.2% 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 over 15% 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 $1.3 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, $2.6 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 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.

26
<PAGE>

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 $1.6 million to net revenue in 1994
and $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.

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 $3.1 million,
reflecting primarily a $2.0 million 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

27
<PAGE>

addition, general and administrative expense increased by $1.5 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 $6.8 million, $14.4
million, $12.8 million and $18.3 million for the six months ended June 30, 1996
and the years 1995, 1994 and 1993, respectively. The historical financial
statements reflect the remittance by the Company to BankAmerica of all such
cash flow not required to fund the investing activities of the Company.

At the time of the transfer to the Company of the merchant processing
businesses of the Bank and Seafirst, BankAmerica retained approximately $
million of certain drafts in transit and accounts receivable relating to the
transferred businesses. Following the contribution, the Company funded its
working capital requirements through borrowings from an affiliated entity. See
"Capitalization." The Company expects to repay such indebtedness in full out of
the proceeds of the Offerings. See "Use of Proceeds." The Company anticipates
that for the foreseeable future it 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 $6.3 million, $9.5 million, $7.7
million and $5.9 million for the six months ended June 30, 1996, and 1995,
1994, and 1993, respectively. The Company expects to spend approximately $1.5
million in the second half of 1996 and $5.0 million in 1997 on strategic
technology investments (including the Company's new 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. 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.

28
<PAGE>

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.

29
<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 and in the
Philippines and, assuming consummation of the Asian Acquisitions, Taiwan and
Thailand. 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
150,000 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 and that it generally experiences high customer retention levels.

The Company has experienced substantial growth in its transaction volume,
net revenue and net income during the three and one-half years ended June 30,
1996, principally through internally generated growth rather than through
acquisitions. The number of card transactions processed by the Company
increased from 201.3 million for the year ended December 31, 1993 to 321.1
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 six
month periods ended June 30, 1995 and June 30, 1996, the number of card
transactions processed increased from 148.2 million to 170.6 million, the
Company's net revenue increased from $52.1 million to $59.7 million and the
Company's net income increased from $10.0 million to $12.2 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 1,935 retail banking branches in eleven states,
the more than 850,000 small business and middle market customers of
BankAmerica, the approximately 10.6 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
June 30, 1996. See "Relationship with BankAmerica."

The Company provides merchant processing services to merchants located in
the Philippines, and, assuming consummation of the Asian Acquisitions, Taiwan
and Thailand. Consummation of the Asian Acquisitions is subject to regulatory
approval in Taiwan and Thailand, which the Company expects will be received
during the first quarter of 1997, and will occur immediately upon the receipt
of each such approval. However, there is no assurance that either or both
regulatory approvals will be

30
<PAGE>

obtained or as to the timing thereof. For the six months ended June 30, 1996,
the Bank's credit card sales volume in Asia was $776.7 million, representing
approximately 7% of BankAmerica's merchant processing business, with
approximately 70% of that volume in Taiwan. The Company believes that
significant opportunities exist for growth of its business in Asia following
consummation of the Asian Acquisitions.

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; (ii) the merchant processing business of
Seafirst, located principally in the state of Washington; and (iii) the Bank's
Philippine merchant processing business. Assuming consummation of the Asian
Acquisitions, the Company will also include the Bank's Taiwan and Thailand
merchant processing operations. 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.

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 chart set
forth below 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:

31
<PAGE>

RETAIL SALES VOLUME
(DOLLARS IN BILLIONS)

<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 continue 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);

. to maintain and improve profitability through careful attention to
pricing and cost controls;

. to continue 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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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 June 30, 1996,
the Company's direct sales force numbered over 120. 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 26-employee sales force in Chicago and New York.
The Company plans to continue this effort in 1997 and to add over 25
additional sales professionals in at least two new markets.

INTERNATIONAL. The Company intends to emphasize the Asian markets where it
believes that electronic payments media and related merchant processing volume
has strong growth potential. Assuming the consummation of the Asian
Acquisitions, the Company plans to build upon BankAmerica's initiatives in
Taiwan, including expanding the sales effort, by establishing an agent bank
program and expanding its field sales force to markets outside of Taipei. 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 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 17 new agent bank clients during the first six 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 teleservicing 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 19 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 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.

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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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 new transaction processing system during the first quarter
of 1997 will further reduce its processing costs and improve its operating
leverage.

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.

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.

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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 TRANSACTION PROCESSING SYSTEM. During the first quarter of
1997, the Company expects to begin operating its new 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.

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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.

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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

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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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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 Authorization Provider

8 - Authorization Provider approves transaction and notifies Merchant

9 - Merchant transmits transaction 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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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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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 June 30, 1996,
BankAmerica had 10.6 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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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." The Company
attempts to convert merchants currently billed on a weekly or monthly basis,
usually due to their long-term relationships with the Company, to a daily
billing cycle upon the renewal of its contracts with such merchants. Each step
in the settlement process involves a number of procedures that must be
completed in accordance with Visa(R), MasterCard(R) and various card issuers'
requirements. See "--Regulation." From the time of closing a batch of
transactions, the Company is generally able to credit the merchant's account
within 24 to 72 hours. When making

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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 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.

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<PAGE>

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.

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 and Asian customers, both of 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. The
Company presently anticipates that its Asian customers will continue to be
processed in-house.

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.

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%

44
<PAGE>

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
and in Asia through its own sales force of over 120 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. In Asia, where the sales organizations are managed
separately for each country, the Company markets both through direct sales
professionals and through agent banks.

BANKAMERICA MARKETS. The Company has over 90 professionals who are
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 11 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 13 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 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 five sales
personnel who concentrate on these specialty markets.

45
<PAGE>

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 19
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 three 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 88 agent
banks at June 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 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.

46
<PAGE>

ASIA

ASIAN OPERATIONS

The Company presently operates a merchant processing business in the
Philippines. The Philippine operations generated $97.6 million in sales volume
during 1995 and $56.4 million during the six months ended June 30, 1996. Based
on industry data, the Company estimates that it is the second-largest merchant
processor in the country. The Company has 26 employees in the Philippines
including a direct sales force of ten employees.

ASIAN ACQUISITIONS

The Bank presently operates merchant processing businesses in four Asian
countries: Taiwan, Thailand, South Korea and India. 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 Company is entering into definitive agreements to acquire
each of the merchant processing businesses presently conducted by the Bank in
Taiwan and Thailand in consideration for the issuance by the Company of
and additional shares, respectively, of Class B Common Stock. The
definitive agreements will be subject only to, and will close as soon as
possible after receipt of, applicable local regulatory approvals. The Company
expects such approvals will be received during the first quarter of 1997,
although no assurance can be given that either or both such approvals will be
obtained or the timing thereof.

TAIWAN. The Taiwan merchant processing business generated $1.0 billion in
sales volume in 1995 and $602.3 million for the six months ended June 30,
1996. Based on industry data, the Company estimates that the Bank is the
largest merchant processor in Taiwan with a market share (based on 1995 sales
volume) in excess of 25%. The Taiwan operations are comprised of over 59
employees including a 15-employee direct sales force. The direct sales force
works closely with BankAmerica's four full-service branches in the country.
The Bank also has recently established an agent bank program in Taiwan. The
Bank's merchant processing sales resources are presently being expanded
significantly in coordination with the expansion of BankAmerica's retail
operations. The Company estimates that Taiwan represents approximately 70% of
the net revenue of BankAmerica's Asian merchant processing businesses.

THAILAND. The Company's operations in Thailand generated $51.4 million in
sales volume during 1995 and $33.7 million during the six months ended June
30, 1996. Based on industry data, the Company estimates that it has a market
share (based on 1995 sales volume) in excess of 10%. The Bank has 12 employees
in Thailand including a direct sales force of 3 employees.

POTENTIAL FUTURE ASIAN MARKETS

Following the Offerings, the Company expects to explore opportunities to
expand its business to other Asian markets. The Company and BankAmerica expect
to work cooperatively to allow the Company to acquire in the future the Bank's
merchant processing businesses which are conducted in other Asian markets.
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 assurances 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 in the
Philippines (and assuming consummation of the Asian Acquisitions, Taiwan and
Thailand) that range from large multi-regional chains to small

47
<PAGE>

merchants. At June 30, 1996, the Company provided merchant processing services
to over 130,000 merchant locations directly, over 9,000 merchant locations
through 88 agent banks not affiliated with the Company, and over 11,000
merchant locations through ISOs.

The Company's merchant accounts by type of merchant at June 30, 1996
measured on a credit card sales volume basis were as follows:

<TABLE>
<CAPTION>
INDUSTRY PERCENTAGE
-------- ----------
<S> <C>
General Retailers............................................. 26%
Supermarkets.................................................. 24
Restaurants................................................... 15
Lodging....................................................... 7
Mail Order.................................................... 4
Gasoline Retailers............................................ 2
Airlines...................................................... 1
Travel Agencies............................................... --
Other......................................................... 21
---
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.

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

<TABLE>
<CAPTION>
TOTAL
SALES
SALES VOLUME VOLUME PERCENTAGE
------------ -------- ----------
(IN MILLIONS)
<S> <C> <C>
Less than $250,000................................... $ 1,800 16%
$250,000 to $20 million.............................. 5,007 44
More than $20 million................................ 4,503 40
-------- ---
Total............................................ $ 11,310 100%
======== ===
</TABLE>

The above table demonstrates that a significant percentage of the Company's
business is with merchants with less than $20 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 "--Company's 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:

TRANSACTION PROCESSING SYSTEM

The Company's new 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

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<PAGE>

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 that results 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 bank subsidiaries.
The Company understands that this consolidation will 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 will have
completed 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.

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

49
<PAGE>

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. 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:

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

50
<PAGE>

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 six months ended June 30, 1996, such losses
were approximately $5.1 million, $2.8 million, $2.2 million and $0.6 million,
respectively, representing in such periods .040%, .019%, .012% and .006%,
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 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.

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, 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

51
<PAGE>

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") 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. 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
applies similar requirements to the Company's foreign activities and/or
investments. All the current activities of the Company are permissible for
national banks and have been approved by the OCC and/or the Federal Reserve.

Future acquisitions by the Company may also require the prior written
approval of the OCC and/or the Federal Reserve. 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 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 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 waives the notice period. The Federal Reserve
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
Intercompany Agreements prohibit 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, prohibit
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

52
<PAGE>

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.

To the extent the Company conducts its 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 restrict or limit the operations
of the Company or its ability to conduct a merchant processing business.

Applications have been filed in Taiwan and Thailand for local regulatory
approval of the Asian Acquisitions. In Taiwan, a merchant processing business
must operate within its own "card center" or join an existing card center
established by a third party. The Company has submitted an application to the
Ministry of Finance to form its own card center. If the application is denied,
the Company would need to rely on the Bank to perform many of the business
functions necessary to conduct its merchant processing business in Taiwan. In
Thailand, following completion of a local registration process, the Company
will be permitted to conduct a merchant processing business and the Bank will
be permitted to transfer its merchant processing business to the Company. The
Company expects that the Taiwan and Thailand approvals will be received during
the first quarter of 1997, although no assurance can be given that either
approval will be obtained or as to the timing thereof.

EMPLOYEES

During August 1996 the Company had 504 full-time and part-time employees. Of
these, 286 employees were engaged in marketing, sales and customer service,
179 were engaged in operations and systems development and 39 were corporate
and administrative employees. None of the Company's employees represented by a
collective bargaining agreement nor has the Company ever experienced any work
stoppage. Certain personnel providing services to the Company of a clerical or
operational nature at its Seafirst operations and in the Philippines are
employed by affiliates of the Company which have collective bargaining
agreements with certain labor unions. Such personnel furnish services to the
Company pursuant to service agreements between the Company and such
affiliates. 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 leases 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."

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 Chief Financial Officer 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 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 services
businesses, joining the Bank in 1981, and President of
BA Card Services. Age 50.

James Aviles......... Mr. Aviles has been the Company's Director of
Product/Strategy/Technology Support since its
formation. Prior to joining the Bank's merchant
services businesses in 1988, Mr. Aviles 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.

Richard D. Gale...... Mr. Gale has been the Company's Director of Account
Management and Customer Services since its 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.

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

Thomas E. Peterson... Mr. Peterson has been a member of the Board of
Directors of the Company since its formation. He has
been the Vice Chairman of BankAmerica since 1990. Age
61.

Doyle L. Arnold...... Mr. Arnold has been a member of the Board of Directors
of the Company since its formation. Mr. Arnold has been
an Executive Vice President of BankAmerica, responsible
for Corporate Development, since 1993. Age 48.

54
<PAGE>

The Company intends to expand the size of the Board of Directors to seven,
three of whom will be independent, prior to completion of the Offerings. The
size of the Board of Directors is presently fixed at three, but upon expansion
will be fixed at not less than five nor more than nine members. The Board of
Directors will establish a standing Audit Committee and Compensation
Committee. The functions of the Audit Committee will include recommending to
the Board of Directors the retention of independent auditors, reviewing the
scope of the annual audit undertaken by the Company's independent auditors and
the progress and results of their work, and reviewing the financial statements
of the Company, its internal accounting and auditing procedures, as well as
its corporate program to ensure compliance with all applicable laws. The
functions of the Compensation Committee will include reviewing and approving
executive compensation policies and practices, reviewing salaries and bonuses
for certain officers of the Company, administering the Company's 1996 Stock
Option Plan 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
UNDERLYING
NAME AND OTHER ANNUAL RESTRICTED STOCK OPTIONS/ ALL OTHER
PRINCIPAL POSITION SALARY(1) BONUS COMPENSATION AWARDS(2) SARS COMPENSATION(3)
------------------ --------- -------- ------------ ---------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Sharif Bayyari
President & Chief
Executive Officer...... $168,750 $130,000 -- -- 10,000 $8,350
Le Tran-Thi
Director, Operations &
Asia Merchant
Services............... 100,721 40,000 -- -- 4,000 5,932
Michael J. Sanders Di-
rector, Sales.......... 70,000 50,435 -- $8,081(4) -- 292
Richard D. Gale
Director, 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 will be as follows: Mr. Bayyari, $ ; Mr.
Williams, $ ; Ms. Tran-Thi, $ ; Mr. Aviles, $ ; Mr. Sanders, $ ; and
Mr. Gale, $ . See "Management."

56
<PAGE>

The following table provides information on options to purchase of
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 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.

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 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.

57
<PAGE>

It is expected that following the completion of the Offerings, the
unexercised options to purchase BankAmerica Common Stock held by the Company's
executive officers will be replaced by options to purchase the Company's Class
A Common Stock. Such options will be granted pursuant to the Company's Long
Term Incentive Plan. See "--Compensation Pursuant to Employee Benefit Plans."

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 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.

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 key 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 shares of the Company's
Class A Common Stock, are authorized for issuance through the LTIP.

The Compensation Committee will have discretion to award incentive stock
options ("ISOs"), 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. 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 will have discretion to
set such additional limitations on option grants (including vesting and
expiration or termination provisions) as it deems appropriate. It is expected
that

58
<PAGE>

following the completion of the Offerings, unexercised options to purchase
shares of BankAmerica Common Stock will be replaced by options issued
pursuant to the LTIP to purchase shares of the Company's Class A Common
Stock on the terms and conditions described above.

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 will also be 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, restrictions based upon achievement of specific performance
objectives, continued employment with the Company, and/or restrictions under
applicable federal or state securities laws. 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 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.

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 and for any purpose which the Board of Directors deems appropriate.
However, no such amendment 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 satisfied or terminated pursuant to the terms of the
plan, and all performance periods for performance-based awards granted
thereunder have been completed. However, in no event will awards be granted
under the LTIP after ten years from its effective date.

59
<PAGE>

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 LEVEL
NAME AGE 65 ANNUITY
---- ------------- ------------
<S> <C> <C>
Sharif 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>

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.

ANTICIPATED AWARDS TO EXECUTIVE OFFICERS

On the date of the completion of the Offerings, the Company will make one-
time grants to the named executive officers in connection with the Offerings
and annual grants as part of their annual compensation. The grants will
comprise (i) options to purchase Class A Common Stock, and (ii) restricted
stock.

The Company anticipates that, upon completion of the Offerings: (i) options
to purchase shares of Class A Common Stock and shares of restricted
stock will be granted to Mr. Bayyari; (ii) options to purchase shares of
Class A Common Stock and shares of restricted stock will be granted to Mr.
Williams; (iii) options to purchase shares of Class A Common Stock and
shares of restricted stock will be granted to Ms. Tran-Thi; (iv) options to
purchase shares of Class A Common Stock and shares of restricted stock
will be granted to Mr. Aviles; (v) options to purchase shares of Class A
Common Stock and shares of restricted stock will be granted to Mr.
Sanders; and (vi) options to purchase shares of Class A Common Stock and
shares of restricted stock will be granted to Mr. Gale.

EMPLOYMENT CONTRACTS

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

OTHER COMPENSATION AND 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.

60
<PAGE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee will consist of persons, none 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
will be granted an option to purchase shares of the Company's Class A
Common Stock upon his or her election to the Board and an option to purchase
shares of the Company's Class A Common 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 $ for each board meeting
attended and $ for each committee meeting attended, whether or not held on
the same day as a board meeting. Committee chairpersons will receive an
additional $ 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.

61
<PAGE>

PRINCIPAL STOCKHOLDER

As of the date of this Prospectus, no shares of Class A Common Stock are
outstanding. 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, which will represent approximately % of the outstanding Common
Stock of the Company (or % if the Underwriters exercise their over-allotment
options in full). In addition, assuming consummation of the Asian
Acquisitions, the Company's ownership interest would increase to %.

For a description of certain transactions and arrangements between the
Company and BankAmerica, see "Relationship with BankAmerica." The principal
executive offices of BankAmerica are located at 555 California Street, San
Francisco, California 94104.

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 June 30, 1996, BankAmerica operated 1,935 retail banking branches and a
proprietary network of approximately 6,900 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 June 30, 1996, approximately 1,020 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 10.6 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 June 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 June 30, 1996, BankAmerica had consolidated total assets of
approximately $238.8 billion and total shareholders' equity of approximately
$20.1 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 six months ended June 30, 1996, BankAmerica had consolidated total
revenues of approximately $16.5 billion, $20.4 billion and $10.8 billion,
respectively, and during such periods, BankAmerica had consolidated total net
income of approximately $2.2 billion, $2.7 billion and $1.4 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.

62
<PAGE>

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 % of the combined voting power of the Company's
outstanding Common Stock (approximately % if the Underwriters' over-
allotment options are exercised in full). In addition, if the Company
consummates the Asian Acquisitions, its aggregate economic interest in the
Company will be increased to %.

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 transaction or will realize any premium with respect to
their shares of Class A Common Stock.

The Company was incorporated in October 1996, and shortly thereafter the
Bank transferred its domestic and Philippine merchant processing businesses
and Seafirst transferred its merchant processing business (in each case other
than short-term drafts in transit and accounts receivable) to the Company in
exchange for an aggregate of shares of Class B Common Stock of the
Company. Prior thereto, such businesses were conducted as divisions of the
Bank and Seafirst.

NON-COMPETITION AND CORPORATE OPPORTUNITY ALLOCATION AGREEMENT

In connection with the Offerings, BankAmerica and the Company have agreed to
allocate corporate business opportunities between (i) BankAmerica on the one
hand and (ii) the Company on the other hand. 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, during the
life of the Marketing Services and Support Agreement will not compete with the
Company 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"). Notwithstanding
the foregoing, BankAmerica will not be precluded from (i) engaging in a Base
Business conducted primarily in a country where the Company does not presently
conduct a Base Business, (ii) subject to clauses (iii) and (iv) below,
independently pursuing and acquiring a Base Business, (iii) 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 in the manner described in clause (iv) below, or (iv) 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 independent directors of Company of the Company shall
not have determined that the Company shall so acquire such business. For
purposes of clause (iv) 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 directors must not have
determined that the Company shall exercise such right to acquire such Base
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 certified financial appraisal firm mutually selected by
BankAmerica and the Company's independent directors.

The Corporate Opportunities Agreement will further provide 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 the BankAmerica as to the scope of the Base Business, the
applicability of any

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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.

INTERCOMPANY AGREEMENTS AND ARRANGEMENTS

As an operating division of BankAmerica, prior to its incorporation, the
Company received certain services from BankAmerica. At the time of 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 various services to the Company pursuant to a License and Intellectual
Property Agreement (the "License Agreement"), an Administrative Services
Agreement (the "Administrative Services Agreement"), a Marketing and Support
Agreement (the "Marketing Agreement") and a Sponsorship and Processing
Agreement (the "Sponsorship Agreement") among BankAmerica, the Bank and the
Company. 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."

The License Agreement will provide, among other things, for the grant to the
Company by the Bank of a non-exclusive license to use the Bank of America name
and the Marks in connection with the Company's business. Under the License
Agreement, BankAmerica will have the right to revoke the license to use the
Marks under certain circumstances relating to advertising, promotion or use of
the Marks in a fashion contrary to the guidelines, if BankAmerica no longer
owns a controlling interest in the Company or, as to any subsidiary of the
Company licensed to use the Marks, if there is a change of control of such
subsidiary. 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. In the License Agreement, the Company will indemnify BankAmerica,
the Bank and their affiliates against certain liabilities in respect of the
use of the Marks and other activities relating to the business of the Company.
The term of the License Agreement and the license fee are still under
consideration.

Under the Marketing Agreement, the Company and BankAmerica will agree 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 BankAmerica and (b) to market, promote and sell BankAmerica's
products and services to prospective customers of the Company. The Marketing
Agreement provides access to the Company for purposes of distribution of its
merchant card services products to the retail branches, regional commercial
banking offices, corporate offices, telemarketing systems and interactive
banking systems of BankAmerica. In connection therewith, the Company's
products are included in a wide range of marketing programs conducted by
BankAmerica. The Company will provide sales training and related support for
services for BankAmerica sales personnel. The Company will have direct access
to the authorization systems for all consumer and business card products,
including BankAmericard(R), VERSATEL(R) on-line debit, VERSATEL(R) check card
and the BankAmerica corporate card. The Company will also receive direct
access to certain account information of BankAmerica customers. The term of
the Marketing Agreement is still under consideration. The Marketing Agreement
prohibits the Company from entering into any business activities prior to the
receipt of any consents and approvals required pursuant to the Banking Laws.

Pursuant to the Administrative Services Agreement, BankAmerica will provide
certain administrative, support and consultation services to the Company,
including telecommunications services, tax and treasury services, regulatory
and compliance, personnel and human resources services, legal, accounting and
audit services, advertising and publicity services, purchasing, payroll,
certain administrative data processing and computer services and insurance
services. The Administrative Services Agreement will have a term of 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

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services. The Administrative Services Agreement also covers certain facilities
arrangements. See "Lease Agreements and Facilities Agreements."

Pursuant to the Sponsorship Agreement, the Bank will appoint 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), Star(R) and ACCEL(R), as well as any networks or associations
established in the future. The Company, along with other nonbank transaction
processors, must be sponsored by a financial institution that is a member of
the Visa(R) and MasterCard(R) and other credit card associations. The Bank,
being a member of such associations, will be the Company's sole sponsor under
the terms of the Sponsorship Agreement. 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. In addition, the Company has agreed to indemnify the
Bank against losses for the amount of the refund paid to the card holder and
not reimbursed by the merchant.

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),
MasterCard(R) and other association or network 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 such networks or
associations with respect to merchant card services or to the Company as a
third party processor, (ii) all 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
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 or due to the gross negligence 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 and 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 , and the Company has
the option to renew the lease in -year increments for up to years. The
Bank owns the property on which such facility of the Company is located.

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

In addition to formal leasing arrangements, under the Administrative
Services Agreement BankAmerica provides the Company with office space,
facilities and supplies in certain locations for use by the Company in the
administration and operation of its business.

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<PAGE>

REGISTRATION RIGHTS AGREEMENT

In connection with the Offerings, BankAmerica and the Company will enter
into a Registration Rights Agreement (the "Registration Rights Agreement").
Pursuant to the Registration Rights Agreement, BankAmerica will have the right
to require the Company to use its best efforts to register under the
Securities Act all or a portion of the issued and outstanding Common Stock
indirectly owned by BankAmerica (the "Registrable Shares"). Such demand rights
would be subject to the condition that the Company would not be required to
effect more than two demand registrations. BankAmerica will also have the
right to participate, or "piggy-back," in equity offerings initiated by the
Company, subject to reduction of the size of the offering on the advice of the
managing underwriter. BankAmerica 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, BankAmerica 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. BankAmerica's rights under the
Registration Rights Agreement shall be fully assignable.

TAX ALLOCATION AGREEMENT

In connection with the Offerings, the Company will enter 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 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 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.

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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, issuable in series. 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, are being offered
in the Offerings ( shares if the Underwriters' over-allotment options are
exercised in full), shares will be reserved for issuance upon conversion
of Class B Common Stock into Class A Common Stock and shares have been
reserved for issuance pursuant to certain employee benefits plans. See
"Executive Compensation." Of the 50 million shares of Class B Common Stock
authorized, shares, or 100% of the outstanding shares, are held by
BankAmerica. 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 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.

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<PAGE>

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. 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 the transferor 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.

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

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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, Section 203 of the Delaware General Corporation Law ("Section 203")
regulates certain transactions incident to or following large accumulations of
shares, 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 a corporation's board of
directors. In general, Section 203 prevents an "Interested Stockholder"
(defined generally as a person with 15% or more of a corporation's outstanding
voting stock) from engaging in a "Business Combination" (defined below) with a
Delaware corporation for three years following the date such person became an
Interested Stockholder. For purposes of Section 203, the term "Business
Combination" includes, without limitation: (i) mergers with the Interested
Stockholder; (ii) sales or other dispositions to the Interested Stockholder
(except proportionately with the corporation's other stockholders) of assets
of the corporation or a subsidiary having a market value equal to 10% or more
of the aggregate market value of the corporation's consolidated assets or its
outstanding stock; (iii) the issuance or transfer by the corporation or a
subsidiary of stock of the corporation or such subsidiary to the Interested
Stockholder (except for certain transfers in a conversion or exchange or a pro
rata distribution or certain other transactions, none of which increase the
Interested Stockholder's proportionate ownership of any class or series of the
corporation's or such subsidiary's stock); or (iv) receipt by the Interested
Stockholder (except proportionately as a stockholder), directly or indirectly,
of any loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation or a subsidiary.

The three-year moratorium imposed on Business Combinations by Section 203
does not apply if, among other things: (i) prior to the date on which such
stockholder becomes an Interested Stockholder the board of directors approves
either the Business Combination or the transaction which resulted in the
person becoming an Interested Stockholder; (ii) the Interested Stockholder
owns 85% of the corporation's voting stock upon consummation of the
transaction which made him or her an Interested Stockholder (excluding from
the 85% calculation shares owned by directors who are also officers of the
target corporation and shares held by employee stock plans which do not permit
employees to decide "confidentially" (e.g., by giving confidential
instructions to a plan's trustee) whether to accept a tender or exchange
offer); or (iii) on or after the date such person becomes an Interested
Stockholder, the board approves the Business Combination and it is also
approved at a stockholder meeting by holders of 66 2/3% of the voting stock
not owned by the Interested Stockholder.

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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's fees,
judgments, fines, ERISA excise taxes or penalties and amounts to be paid in
settlement) actually incurred or suffered by such person by reason of the fact
that he 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 Company intends to apply to have the
Class A Common Stock approved for trading 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.

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SHARES AVAILABLE FOR FUTURE SALE

Upon completion of the Offerings, the Company will have shares of Class
A Common Stock outstanding ( shares if the Underwriters' over-allotment
options are exercised in full). The shares sold in the Offerings (
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. In
connection with the Offerings, the Company has granted options to key
employees and directors to purchase shares of Class A Common Stock under
the Company's stock option plans. Such plans authorize up to shares of
Class A Common Stock to be issuable upon the grant of stock options under such
plans. See "Executive Compensation--Compensation Pursuant to Employee Benefit
Plans."

The shares of Class B Common Stock which are owned indirectly by
BankAmerica though its subsidiaries and the 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. See "Underwriting." Shares of
Common Stock held by Restricted Persons 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.

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.

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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.

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INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors......................... F-2
Combined Balance Sheet as of December 31, 1994 and 1995 and June 30, 1995
and 1996 (unaudited)..................................................... F-3
Combined Statement of Operations for the three years ended December 31,
1995, and for the six months ended June 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 six months ended June
30, 1995 and 1996 (unaudited)............................................ F-5
Combined Statement of Cash Flows for three years ended December 31, 1995,
and for the six months ended June 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, JUNE 30,
----------------- -----------------
1994 1995 1995 1996
-------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash..................................... $ 906 $ 345 $ 252 $ 1,017
Drafts in transit........................ 63,722 71,368 72,115 81,588
Accounts receivable...................... 20,593 24,565 22,930 26,123
-------- -------- -------- --------
Total current assets................... 85,221 96,278 95,297 108,728
Property and equipment, net................ 11,346 14,478 12,790 16,757
Other assets............................... 8,677 5,247 6,134 5,341
-------- -------- -------- --------
Total Assets........................... $105,244 $116,003 $114,221 $130,826
======== ======== ======== ========
LIABILITIES AND BANKAMERICA'S EQUITY
INTEREST
Current liabilities:
Accounts payable......................... $ 1,003 $ 134 $ -- $ --
Merchants payable........................ 5,363 5,906 7,842 8,441
-------- -------- -------- --------
Total current liabilities.............. 6,366 6,040 7,842 8,441
Accrued liabilities........................ 8,313 7,903 8,339 7,274
Other liabilities.......................... 6,535 2,892 3,967 3,494
-------- -------- -------- --------
Total liabilities...................... 21,214 16,835 20,148 19,209
BankAmerica's equity interest.............. 84,030 99,168 94,073 111,617
-------- -------- -------- --------
Total Liabilities and BankAmerica's
Equity Interest....................... $105,244 $116,003 $114,221 $130,826
======== ======== ======== ========
</TABLE>

See notes to financial statements.

F-3
<PAGE>

BA MERCHANT SERVICES

COMBINED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------ ---------------
1993 1994 1995 1995 1996
------- ------- -------- ------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net Revenue............................ $88,919 $98,143 $109,928 $52,078 $59,672
Operating Expense:
Salaries and employee benefits....... 18,974 20,517 22,338 10,854 12,180
Data processing and communications... 27,994 24,570 27,219 12,576 13,238
Depreciation......................... 3,652 4,444 6,327 2,879 4,037
Amortization of intangibles.......... 1,493 1,280 1,201 611 570
Occupancy............................ 2,313 2,270 1,923 963 936
General and administrative........... 9,809 11,335 13,943 5,586 6,472
Other................................ 5,267 2,178 1,748 1,575 1,413
------- ------- -------- ------- -------
Total Operating Expense............ 69,502 66,594 74,699 35,044 38,846
Income from Operations................. 19,417 31,549 35,229 17,034 20,826
Provision for income taxes............. 7,953 13,016 14,573 7,046 8,602
------- ------- -------- ------- -------
Net Income............................. $11,464 $18,533 $ 20,656 $ 9,988 $12,224
======= ======= ======== ======= =======
</TABLE>

See notes to financial statements.

F-4
<PAGE>

BA MERCHANT SERVICES

COMBINED STATEMENT OF CHANGES IN BANKAMERICA'S EQUITY INTEREST

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 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) 55 225
Net income........................ 11,464 18,533 20,656 9,988 12,224
------- ------- ------- ------- --------
Balance, end of period.............. $70,992 $84,030 $99,168 $94,073 $111,617
======= ======= ======= ======= ========
</TABLE>

See notes to financial statements.

F-5
<PAGE>

BA MERCHANT SERVICES

COMBINED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 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 $ 9,988 $12,224
Adjustments to net income to
arrive at cash provided by
operating activities:
Depreciation.................... 3,652 4,444 6,327 2,879 4,037
Amortization of intangibles..... 1,493 1,280 1,201 611 570
Provision for (benefit from)
deferred income taxes.......... (205) (332) (268) (130) 671
Changes in operating assets and
liabilities:
(Increase) in drafts in
transit...................... (1,236) (12,969) (7,646) (8,393) (8,948)
(Increase) decrease in
accounts receivable.......... 4,748 (4,340) (3,972) (2,337) (1,558)
Increase (decrease) in
accounts payable............. -- 867 (869) (1,003) (134)
Increase in merchants
payable...................... 652 2,701 543 2,479 2,535
Increase (decrease) in accrued
liabilities.................. 3,206 151 (410) 26 (629)
Other, net.................... (5,476) 2,466 (1,146) (506) (2,005)
------- ------- ------- ------- -------
Net cash provided by operating
activities..................... 18,298 12,801 14,416 3,614 6,763
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchases of property and
equipment....................... (5,944) (7,741) (9,459) (4,323) (6,316)
------- ------- ------- ------- -------
Net cash used by investing
activities..................... (5,944) (7,741) (9,459) (4,323) (6,316)
CASH FLOWS FROM FINANCING
ACTIVITIES
BankAmerica's change in funding.. (12,370) (5,495) (5,518) 55 225
------- ------- ------- ------- -------
Net cash provided by (used for)
financing activities........... (12,370) (5,495) (5,518) 55 225
Increase (decrease) in cash...... (16) (435) (561) (654) 672
Cash at beginning of period...... 1,357 1,341 906 906 345
------- ------- ------- ------- -------
CASH AT END OF PERIOD............ $ 1,341 $ 906 $ 345 $ 252 $ 1,017
======= ======= ======= ======= =======
Supplemental Disclosure:
Cash paid to BankAmerica for
income taxes................... $ 8,158 $13,348 $14,841 $ 7,176 $ 7,931
======= ======= ======= ======= =======
</TABLE>

See notes to financial statements.

F-6
<PAGE>

BA MERCHANT SERVICES

NOTES TO COMBINED FINANCIAL STATEMENTS

(INFORMATION RELATING TO JUNE 30, 1995 AND 1996 AND THE SIX MONTHS ENDED JUNE
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 the assets
and liabilities of the United States merchant processing businesses to the
Company in consideration for shares of Class B Common Stock. (See Note 10.)
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. BankAmerica will also transfer to the
Company the assets and liabilities of the Philippine merchant processing
business. These financial statements do not include the assets, liabilities or
operating results of the Philippine merchant processing business which
represent less than 2% of the assets, liabilities and net income of BAMS.

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 plus 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 June 30, 1995 and 1996 and for
the six months ended June 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 six months ended June 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 JUNE 30, 1995 AND 1996 AND THE
SIX MONTHS ENDED JUNE 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 150,000
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 June 30, 1996,
merchant deposits were approximately $8.0 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 JUNE 30, 1995 AND 1996 AND THE
SIX MONTHS ENDED JUNE 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 has no common stock
outstanding as of June 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 JUNE 30, 1995 AND 1996 AND THE
SIX MONTHS ENDED JUNE 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 any 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, JUNE 30,
--------------- ---------------
1994 1995 1995 1996
------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Furniture and equipment........................ $ 2,892 $ 3,180 $ 2,884 $ 3,671
Payment processing terminals................... 25,570 34,174 29,873 39,532
------- ------- ------- -------
28,462 37,354 32,757 43,203
Less: Accumulated depreciation................. 17,116 22,876 19,967 26,446
------- ------- ------- -------
$11,346 $14,478 $12,790 $16,757
======= ======= ======= =======
</TABLE>

5. INCOME TAXES

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

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------- ----------------
1993 1994 1995 1995 1996
------- -------- -------- ------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current:
Federal........................ $ 6,325 $ 10,376 $ 11,431 $ 5,527 $ 5,977
State and local................ 1,833 2,972 3,410 1,649 1,954
------- -------- -------- ------- -------
8,158 13,348 14,841 7,176 7,931
Deferred:
Federal........................ (190) (345) (240) (116) 633
State and local................ (15) 13 (28) (14) 38
------- -------- -------- ------- -------
(205) (332) (268) (130) 671
------- -------- -------- ------- -------
Total............................ $ 7,953 $ 13,016 $ 14,573 $ 7,046 $ 8,602
======= ======== ======== ======= =======
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 JUNE 30, 1995 AND 1996 AND THE
SIX MONTHS ENDED JUNE 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, JUNE 30,
-------------- -------------
1994 1995 1995 1996
------ ------ ------ -----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Deferred income tax assets:
Accrued expenses............................... $1,624 $1,217 $1,430 $ 789
State taxes.................................... 1,012 1,155 1,080 659
------ ------ ------ -----
Total deferred income tax assets................. 2,636 2,372 2,510 1,448
Deferred income tax liabilities:
Identifiable intangible assets................... (1,243) (711) (987) (458)
------ ------ ------ -----
Total deferred income tax liabilities............ (1,243) (711) (987) (458)
------ ------ ------ -----
Net deferred income tax assets................... $1,393 $1,661 $1,523 $ 990
====== ====== ====== =====
</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 postemployment and postretirement plans
sponsored by BankAmerica which cover substantially all 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 years ended December 31, 1993, 1994, and 1995, and the six
months ended June 30, 1995 and 1996, BAMS incurred a total expense of
$2,423,000, $2,598,000, $2,846,000, $1,346,000, and $1,840,000, respectively,
for its share of retirement and welfare plan expenses.

DEFINED BENEFIT PLANS. Eligible salaried employees of BAMS have been covered
under either the BankAmeraccount Plan or the Seafirst Corporation Retirement
Plan of BankAmerica. The BankAmeraccount Plan is a defined benefit cash
balance plan while the Seafirst Plan was a defined benefit final average pay
plan. Effective December 31, 1995, the Seafirst Plan was merged into the
BankAmeraccount Plan, however, the Seafirst Plan benefits 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 JUNE 30, 1995 AND 1996 AND THE
SIX MONTHS ENDED JUNE 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, $125,000
and $393,000 for contributions to the plans for the years ended December 31,
1993, 1994, and 1995, and the six months ended June 30, 1995, and 1996,
respectively.

DEFINED CONTRIBUTION PLANS. The majority of salaried employees of BAMS
participate in either the BankAmerishare Plan or the Seafirst Corporation
Matching Savings Plan of BankAmerica. These defined contribution plans provide
tax-deferred investment opportunities to salaried employees who have completed
the required length of service. Employees may contribute to the plans 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. Effective April 1, 1995, the Seafirst Corporation Matching
Savings 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, $282,000 and $301,000 for the years ended December 31,
1993, 1994 and 1995, and the six months ended June 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. The name of the BankAmeraccount Plan was changed to BankAmerishare
Pension Plan while the name of the BankAmerishare Plan was changed to
BankAmerica 401(k) Investment Plan. Management estimates that these amendments
could increase BAMS' benefit expense in future periods by approximately
$290,000 to $360,000 per year.

POSTRETIREMENT 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 a fixed dollar
amount to BAMS for contribution to the plans. That amount 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, $206,000 and $207,000 for the years ended December 31,
1993, 1994 and 1995, and the six months ended June 30, 1995 and 1996,
respectively.

F-12
<PAGE>

BA MERCHANT SERVICES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION RELATING TO JUNE 30, 1995 AND 1996 AND THE
SIX MONTHS ENDED JUNE 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 current stock prices. 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 1996 Stock Option Plan to be adopted in conjunction with
incorporation of the Company. 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 $7,487,000, $7,528,000, $7,735,000, $3,794,000 and $4,016,000,
for the years ended December 31, 1993, 1994, and 1995, and the six months
ended June 30, 1995 and 1996, respectively.

F-13
<PAGE>

BA MERCHANT SERVICES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONCLUDED)

(INFORMATION RELATING TO JUNE 30, 1995 AND 1996 AND THE
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

As part of the intercompany arrangements, BAMS 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 $1.0 million and $.9 million for the
six months ended June 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 $7.2 million and $7.9 million for the
six months ended June 30, 1995 and 1996 under the tax allocation arrangements.

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 18 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. and 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
COMMON
UNDERWRITER STOCK
----------- ---------
<S> <C>
Goldman, Sachs & Co. ..............................................
----
Total............................................................
====
</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 $ per share. The U.S. Underwriters may
allow, and such dealers may reallow, a concession not in excess of $ per
share to certain brokers and dealers. After the shares of 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 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 and .

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.

U-1
<PAGE>

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
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
shares of Class A Common Stock offered. The Company has granted the
International Underwriters an option exercisable for 30 days to purchase up to
an aggregate of additional shares of Class A Common Stock, solely to cover
over-allotments, if any.

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 stock option
plans existing, or on the conversion or exchange of convertible or
exchangeable securities outstanding, on the date of this Prospectus) 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 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 will be negotiated
among the Company and the representatives. Among the factors to be considered
in determining the initial public offering price of the Common Stock, in
addition to prevailing market conditions, will be 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.

Application will be made to list the Class A Common Stock 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.

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

U-2
<PAGE>

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

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS 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 INFOR-
MATION 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
Selected Combined Financial and Other Data............................... 19
Pro Forma Financial Information.......................................... 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 24
Business................................................................. 30
Management............................................................... 54
Executive Compensation................................................... 56
Principal Stockholder.................................................... 62
Relationship with BankAmerica............................................ 62
Description of Capital Stock............................................. 67
Shares Available for Future Sale......................................... 71
Validity of Class A Common Stock......................................... 71
Experts.................................................................. 72
Additional Information................................................... 72
Index to Financial Statements............................................ F-1
Underwriting............................................................. U-1
</TABLE>

THROUGH AND INCLUDING , 1996 (THE 25TH DAY AFTER THE DATE OF THIS PROSPEC-
TUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPEC-TUS.
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.

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

BA MERCHANT SERVICES, INC.

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

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

PROSPECTUS

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

GOLDMAN, SACHS & CO.

REPRESENTATIVES OF THE UNDERWRITERS

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

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

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $98,182
National Association of Securities Dealers, Inc. filing fee...... 30,500
New York Stock Exchange application fee.......................... *
Transfer Agent's and Registrar's fees............................ *
Printing costs................................................... *
Accounting fees and expenses..................................... *
Legal fees and expenses (not including Blue Sky)................. *
Blue Sky fees and expenses....................................... *
Miscellaneous expenses........................................... *
-------
Total.......................................................... $ *
=======
</TABLE>
- --------
*To be supplied by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporation Law provides that a Delaware
corporation may indemnify any person against expenses, judgments, fines and
settlements actually and reasonably incurred by any such person in connection
with a threatened, pending or completed action, suit or proceeding to which
such person is a party or is threatened to be made a party by reason of the
fact that he is or was a director, officer, employee or agent of such
corporation, provided, that (i) he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and (ii) with respect to any criminal action or proceeding, he had
no reasonable cause to believe his conduct was unlawful. If the action or suit
is by or in the right of the corporation, the corporation may indemnify any
such person against expenses actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation, except that no indemnification may
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation for negligence or
misconduct in the performance of his duty to the corporation, unless and only
to the extent that the Delaware Court of Chancery or the court in which the
action or suit is brought determines upon application that, despite the
adjudication of liability but in view of all of the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
as the court deems proper.

As permitted under the Delaware General Corporation Law, the Registrant's
Certificate of Incorporation and Bylaws limit the personal liability of its
directors for violations of their fiduciary duty.

Under certain circumstances provided in Article VIII of the Registrant's
Bylaws, the Registrant will indemnify any director or officer or any former
director or officer of the Registrant or any other corporation or enterprise
(if serving at the request of the Registrant) against expenses, liability and
loss (including attorney's fees, judgments, fines, ERISA excise taxes or
penalties and amounts to be paid in settlement) actually incurred or suffered
by such person by reason of the fact that he 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. A
copy of the Registrant's Bylaws is included herein as Exhibit 3.1(ii).

II-1
<PAGE>

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

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

None.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

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

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
*1.1 Form of Underwriting Agreement.
3.1(i) Certificate of Incorporation of the Registrant.
3.1(ii) Bylaws of the Registrant.
*4.1 Specimen Certificate for the Class A Common Stock, par value $.01
per share, of the Registrant.
*4.2 Registration Rights Agreement between the Registrant and BankAmerica
Corporation dated , 1996.
*5.1 Form of Opinion of Pillsbury Madison & Sutro LLP as to the validity
of the securities being offered.
*10.1 Form of Lease Agreement between the Registrant and Bank of America
NT&SA.
*10.2 Form of Sponsorship and Processing Agreement among the Registrant,
BankAmerica Corporation and Bank of America NT&SA.
*10.3 Form of License and Intellectual Property Agreement among the
Registrant, BankAmerica Corporation and Bank of America NT&SA.
*10.4 Form of Administrative Services Agreement among the Registrant,
BankAmerica Corporation and Bank of America NT&SA.
*10.5 Form of Marketing and Support Agreement among the Registrant,
BankAmerica Corporation and Bank of America NT&SA.
*10.6 Form of Tax Allocation Agreement between the Registrant and
BankAmerica Corporation.
*10.7 Merchant Card Services Agreement dated June 29, 1994 between the
Registrant and Total System Services, Inc.
*10.8 Transfer and Assumption Agreements between the Registrant and Bank
of America
NT&SA and Bank of America NW, National Association.
*10.9 The Registrant's 1996 Stock Option Plan.
*10.10 The Registrant's Nonemployee Director Stock Plan.
*10.11 The Registrant's Short-Term Incentive Plan.
*10.12 The Registrant's Long-Term Incentive Plan.
*21.1 Subsidiaries of the Registrant.
*23.1 Consent of Pillsbury Madison & Sutro LLP (included in Exhibit 5.1).
23.3 Consent of Ernst & Young LLP, independent auditors.
24.1 Powers of Attorney (see Page II-4).
</TABLE>
- --------
* To be filed by amendment.

II-2
<PAGE>

(b) FINANCIAL STATEMENT SCHEDULES.

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

ITEM 17. UNDERTAKINGS

(a) EQUITY OFFERINGS OF NONREPORTING REGISTRANTS. The undersigned Registrant
hereby undertakes to provide to the Underwriters at the closing specified in
the Underwriting Agreement, certificates in such denominations and registered
in such names as required by the Underwriters to permit prompt delivery to
each purchaser.

(b) INDEMNIFICATION. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other that the payment by
the Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.

(1) For the purpose of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-3
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY HAS
DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SAN FRANCISCO,
CALIFORNIA, ON OCTOBER 11, 1996.

BA Merchant Services, Inc.

By: /s/ Sharif M. Bayyari
---------------------------------
SHARIF M. BAYYARI
PRESIDENT AND CHIEF EXECUTIVE
OFFICER

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned Directors and Officers
of BA Merchant Services, Inc., a Delaware corporation, hereby constitute and
appoint Sharif M. Bayyari, James H. Williams, Cheryl Sorokin, Jeffrey R.
Lapic, and Benjamin M. Vandegrift, each with full power of substitution and
resubstitution, their true and lawful attorneys and agents to sign the names
of the undersigned Directors and Officers in the capacities indicated below to
the registration statement to which this Power of Attorney is filed as an
exhibit, and all amendments (including post-effective amendments) and
supplements thereto, and all instruments or documents filed as a part thereof
or in connection therewith and any related Rule 462(b) registration statement
or amendment thereto, and to file the same, with all exhibits thereto, and all
other instruments and documents in connection therewith, with the Securities
and Exchange Commission; and each of the undersigned hereby ratifies and
confirms all that said attorneys, agents, or any of them, shall do or cause to
be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ Sharif M. Bayyari President, Chief October 11, 1996
- ------------------------------------- Executive Officer
SHARIF M. BAYYARI and Director
(Principal
Executive Officer)

/s/ James H. Williams Chief Financial October 11, 1996
- ------------------------------------- Officer (Principal
JAMES H. WILLIAMS Financial Officer
and Principal
Accounting Officer)

/s/ Doyle L. Arnold Director October 11, 1996
- -------------------------------------
DOYLE L. ARNOLD

Director October 11, 1996
- -------------------------------------
THOMAS E. PETERSON

II-4
<PAGE>

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
-------- ----------- ----
<C> <S> <C>
*1.1 Form of Underwriting Agreement.
3.1(i) Certificate of Incorporation of the Registrant.
3.1(ii) Bylaws of the Registrant.
*4.1 Specimen Certificate for the Class A Common Stock, par value
$.01 per share, of the Registrant.
*4.2 Registration Rights Agreement between the Registrant and
BankAmerica Corporation dated , 1996.
*5.1 Form of Opinion of Pillsbury Madison & Sutro LLP as to the
validity of the securities being offered.
*10.1 Form of Lease Agreement between the Registrant and Bank of
America NT&SA.
*10.2 Form of Sponsorship and Processing Agreement among the
Registrant, BankAmerica Corporation and Bank of America
NT&SA.
*10.3 Form of License and Intellectual Property Agreement among the
Registrant, BankAmerica Corporation and Bank of America
NT&SA.
*10.4 Form of Administrative Services Agreement among the
Registrant, BankAmerica Corporation and Bank of America
NT&SA.
*10.5 Form of Marketing and Support Agreement among the Registrant,
BankAmerica Corporation and Bank of America NT&SA.
*10.6 Form of Tax Allocation Agreement between the Registrant and
BankAmerica Corporation.
*10.7 Merchant Card Services Agreement dated June 29, 1994 between
the Registrant and Total System Services, Inc.
*10.8 Transfer and Assumption Agreements between the Registrant and
Bank of America
NT&SA and Bank of America NW, National Association.
*10.9 The Registrant's 1996 Stock Option Plan.
*10.10 The Registrant's Nonemployee Director Stock Plan.
*10.11 The Registrant's Short-Term Incentive Plan.
*10.12 The Registrant's Long-Term Incentive Plan.
*21.1 Subsidiaries of the Registrant.
*23.1 Consent of Pillsbury Madison & Sutro LLP (included in Exhibit
5.1).
23.3 Consent of Ernst & Young LLP, independent auditors.
24.1 Powers of Attorney (see Page II-4).
</TABLE>
- --------
* To be filed by amendment.

<PAGE>

EXHIBIT 3.1(i)

CERTIFICATE OF INCORPORATION
----------------------------

OF
--

BA MERCHANT SERVICES, INC.
--------------------------

FIRST: The name of the corporation is: BA Merchant Services, Inc.
-----
(hereinafter, the "Corporation").

SECOND: The address of the registered office of the Corporation in the
------
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of its registered agent at such
address is:

The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801

THIRD: The nature of the business or purposes to be conducted or promoted
-----
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware (the
"GCL").

FOURTH: A. The total number of shares of stock that the Corporation shall
------
have authority to issue is Two-Hundred Sixty Million (260,000,000) of which (i)
Two-Hundred Million (200,000,000) shares shall be shares of Class A Common
Stock, $.01 par value per share (the "Class A Common Stock"), and Fifty Million
(50,000,000) shares shall be shares of Class B Common Stock, $.01 par value per
share (the "Class B Common Stock") (the Class A Common Stock and the Class B
Common Stock being collectively referred to herein as the "Common Stock"), and
(ii) Ten Million (10,000,000) shares shall be shares of Preferred Stock, $.01
par value per share (the "Preferred Stock").

B. The number of authorized shares of any class or classes of stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the votes
entitled to be cast by the holders of the Common Stock of the Corporation,
voting together as a single class, irrespective of the provisions of Section
242(b)(2) of the GCL or any corresponding provision hereinafter enacted.

C. The following is a statement of the powers, preferences, and relative
participating, optional or other special rights and qualifications, limitations
and restrictions of the Class A Common Stock and Class B Common Stock of the
Corporation:

1. Except as otherwise set forth below in this ARTICLE FOURTH, the
powers, preferences and relative participating, optional or other special
rights and

-1-
<PAGE>

qualifications, limitations or restrictions of the Class A
Common Stock and Class B Common Stock shall be identical in all respects.

2. Subject to the rights of the holders of Preferred Stock, and
subject to any other provisions of this Certificate of Incorporation,
holders of Class A Common Stock and Class B Common Stock shall be entitled
to receive such dividends and other distributions in cash, stock or
property of the Corporation as may be declared thereon by the Board of
Directors of the Corporation from time to time out of assets or funds of
the Corporation legally available therefor. If any dividend or other
distribution in cash or other property is paid with respect to Class A
Common Stock or with respect to Class B Common Stock (other than dividends
or other distributions payable in shares of Common Stock), a like dividend
or other distribution in cash or other property shall also be paid with
respect to shares of the other class of Common Stock, in an amount equal
per share. In the case of dividends or other distributions payable in
Common Stock, including distributions pursuant to stock splits or divisions
of Common Stock of the Corporation, only shares of Class A Common Stock
shall be paid or distributed with respect to Class A Common Stock and only
shares of Class B Common Stock shall be paid or distributed with respect to
Class B Common Stock. The number of shares of Class A Common Stock and
Class B Common Stock so distributed shall be equal in number on a per share
basis. Neither the shares of Class A Common Stock nor the shares of Class B
Common Stock may be reclassified, subdivided or combined unless such
reclassification, subdivision or combination occurs simultaneously and in
the same proportion for each class.

3. (a) At every meeting of the stockholders of the Corporation, every
holder of Class A Common Stock shall be entitled to one vote in person or
by proxy for each share of Class A Common Stock standing in his or her name
on the transfer books of the Corporation, and every holder of Class B
Common Stock shall be entitled to ten votes in person or by proxy for each
share of Class B Common Stock standing in his or her name on the transfer
books of the Corporation in connection with the election of directors and
all other matters submitted to a vote of the stockholders; provided,
however, that with respect to any proposed conversion subsequent to a
Tax-Free Spin-Off (as defined in paragraph (C)(6)(b) below) of the shares
ofClass B Common Stock into shares of Class A Common Stock pursuant to
paragraph (C)(6)(b) below, each holder of a share of Common Stock,
irrespective of class, shall have one vote in person or by proxy for each
share of Common Stock standing in his or her name

-2-
<PAGE>

on the transfer books of the Corporation. Except as may be otherwise
required by this ARTICLE FOURTH, the holders of Class A Common Stock and
Class B Common Stock shall vote together as a single class, subject to any
voting rights which may be granted to holders of Preferred Stock, on all
matters submitted to a vote of the holders of Common Stock.

(b) Subject to any rights of the holders of Preferred Stock, the
provisions of this Certificate of Incorporation shall not be modified,
revised, altered or amended, repealed or rescinded in whole or in part,
without the approval of a majority of the votes entitled to be cast by the
holders of the Class A Common Stock and the Class B Common Stock, voting
together as a single class; provided, however, that with respect to any
proposed amendment of this Certificate of Incorporation which would alter
or change the powers, preferences or special rights of the shares of Class
A Common Stock or Class B Common Stock so as to affect them adversely, the
approval of a majority of the votes entitled to be cast by the holders of
the shares affected by the proposed amendment, voting separately as a
class, shall be obtained in addition to the approval of a majority of the
votes entitled to be cast by the holders of the Class A Common Stock and
the Class B Common Stock voting together as a single class as hereinbefore
provided. Any increase in the authorized number of shares of any class or
classes of stock of the Corporation or creation, authorization or issuance
of any securities convertible into, or warrants, options or similar rights
to purchase, acquire or receive, shares of any such class or classes of
stock shall be deemed not to affect adversely the powers, preferences or
special rights of the shares of Class A Common Stock or Class B Common
Stock. Neither the outcome of any vote with respect to any proposed
conversion subsequent to a Tax-Free Spin-Off (as defined in paragraph
(C)(6)(b) below) of the shares of Class B Common Stock into shares of Class
A Common Stock pursuant to paragraph (C)(6)(b) below nor the occurrence of
the events described in the third sentence of the third discrete paragraph
of paragraph (C)(6)(b) below shall be deemed to be a modification,
revision, alteration, amendment, repeal or rescission of the provisions of
this Certificate of Incorporation.

(c) Every reference in this Certificate of Incorporation to a
majority or other proportion of shares of Common Stock, Class A Common
Stock or Class B Common Stock shall refer to such majority or other
proportion of the votes to which such shares of Common Stock, Class A
Common Stock or Class B Common Stock, as applicable, are entitled.

-3-
<PAGE>

4. In the event of any dissolution, liquidation or winding up of the
affairs of the Corporation, whether voluntary or involuntary, after payment
in full of the amounts required to be paid to the holders of Preferred
Stock, the remaining assets and funds of the Corporation shall be
distributed pro rata to the holders of Class A Common Stock and Class B
Common Stock. For the purposes of this paragraph (C)(4), the voluntary
sale, conveyance, lease, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the
assets of the Corporation or a consolidation or merger of the Corporation
with one or more other corporations (whether or not the Corporation is the
corporation surviving such consolidation or merger) shall not be deemed to
be a liquidation, dissolution or winding up, voluntary or involuntary.

5. In the event of (i) any reorganization or any consolidation of the
Corporation with one or more other corporations or a merger of the
Corporation with another corporation unless (ii) immediately following such
event, and based solely on the securities issued in connection therewith, a
majority of the total voting power of the successor corporation is held by
Persons that were stockholders of the Corporation immediately prior to such
event, each holder of a share of Class A Common Stock shall be entitled to
receive with respect to such share the same kind and amount of shares of
stock and other securities and property (including cash) receivable upon
such reorganization, consolidation or merger by a holder of a share of
Class B Common Stock and each holder of a share of Class B Common Stock
shall be entitled to receive with respect to such share the same kind and
amount of shares of stock and other securities and property (including
cash) receivable upon such reorganization, consolidation or merger by a
holder of a share of Class A Common Stock.

6. (a) Prior to the date on which shares of Class B Common Stock are
distributed to stockholders of BankAmerica (as defined in paragraph
(C)(6)(b) below), or to stockholders of the Class B Transferee (as defined
in paragraph (C)(6)(b) below) in a Tax-Free Spin-Off (as defined in
paragraph (C)(6)(b) below), each record holder of shares of Class B Common
Stock may convert from time to time any or all of such shares into an equal
number of shares of Class A Common Stock by surrendering the certificates
for such shares, accompanied by any required tax transfer stamps and by a
written notice by such record holder to the Corporation stating that such
record holder desires to convert such shares of Class B Common Stock into
the same number of shares of Class A Common Stock and requesting that the
Corporation issue all of such

-4-
<PAGE>

shares of Class A Common Stock to Persons named therein, setting forth the
number of shares of Class A Common Stock to be issued to each such Person
and the denominations in which the certificates therefor are to be issued.
To the extent permitted by law, such voluntary conversion shall be deemed
to have been effected at the close of business on the date of such
surrender. Following a Tax-Free Spin-Off, shares of Class B Common Stock
shall no longer be convertible into shares of Class A Common Stock except
as set forth in paragraph (C)(6)(b) below.

(b) Prior to a Tax-Free Spin-Off, each share of Class B Common Stock
shall automatically convert into one share of Class A Common Stock
immediately prior to the transfer of such share if, after such transfer,
such share is not Beneficially Owned (as defined below) by BankAmerica or,
as set forth below in this paragraph (C)(6)(b), by the Class B Transferee
or any subsidiary of the Class B Transferee. Shares of Class B Common Stock
shall not convert into shares of Class A Common Stock (i) in any transfer
effected in connection with a distribution of Class B Common Stock as a
spin-off, split-up or split-off to stockholders of Bankamerica or
stockholders of the Class B Transferee intended to be on a tax-free basis
under the Internal Revenue Code of 1986, as amended from time to time (the
"Code") (a "Tax-Free Spin-Off") or (ii) except as otherwise set forth below
in this paragraph (C)(6)(b), in any transfer after a Tax-Free Spin-Off. For
purposes of this paragraph (C)(6), a Tax-Free Spin-Off shall be deemed to
have occurred at the time shares are first transferred to stockholders of
BankAmerica or stockholders of the Class B Transferee, as the case may be,
following receipt of an affidavit described in clauses (vi) or (vii) of the
first sentence of paragraph (C)(6)(d) below. For purposes of this paragraph
(C)(6), "BankAmerica" shall mean BankAmerica Corporation, a Delaware
corporation, all successors to BankAmerica Corporation by way of merger,
consolidation or sale of all or substantially all its assets, and all
corporations, partnerships, joint ventures, associations and other entities
in which BankAmerica Corporation Beneficially Owns (as defined below),
directly or indirectly, 50% or more of the outstanding voting stock, voting
power or similar voting interests ("Voting Interests") (each, a "Subsidiary
Entity"), but which shall not include the Corporation or any Subsidiary
Entity in which the Corporation Beneficially Owns (as defined below),
directly or indirectly, 50% or more of the outstanding Voting Interest. For
purposes of this paragraph (C)(6), the terms "Beneficially Own,"
"Beneficially Owns" and "Beneficially Owned" shall have the meanings
ascribed to such terms in Rule 13d-3 of the General Rules and Regulations
of the Securities Exchange Act

-5-
<PAGE>

of 1934, as in effect on October 11, 1996.

Prior to a Tax-Free Spin-Off, shares of Class B Common Stock
representing more than a 50% equity interest in the then outstanding shares
of Common Stock taken as a whole transferred in a single transaction to one
Person who is not an affiliate of BankAmerica (together with its
successors, the "Class B Transferee") or to the Class B Transferee and any
Subsidiary Entity of the Class B Transferee, and shares of Class B Common
Stock transferred among a Class B Transferee and any Subsidiary Entity
thereof, shall not automatically convert to Class A Common Stock upon the
transfer of such shares. Any shares of Class B Common Stock retained by
BankAmerica following any such transfer of shares of Class B Common Stock
to the Class B Transferee shall automatically convert into shares of Class
A Common Stock upon such transfer. For purposes of this paragraph (C)(6),
the term "Person" shall mean any individual, firm, corporation or other
entity; each reference to an "individual" (or to a "record holder" of
shares, if an individual) shall be deemed to include in his or her
representative capacity a guardian, committee, executor, administrator or
other legal representative of such individual or record holder.

In the event of a Tax-Free Spin-Off, shares of Class B Common Stock
shall automatically convert into shares of Class A Common Stock on the
fifth anniversary of the date on which shares of Class B Common Stock are
first transferred to stockholders of BankAmerica or the stockholders of the
Class B Transferee, as the case may be, in a 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 Corporation the written advice of counsel,
reasonably satisfactory to the Corporation, 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
under the Code 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 Spinoff. If
such written advice of counsel 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
Corporation prior to such anniversary the written advice of counsel,
reasonably satisfactory to the Corporation, to the effect that such vote
could adversely affect the status of the

-6-
<PAGE>

transaction as a Tax-Free Spin-Off (including without limitation the
ability to obtain a favorable ruling from the Internal Revenue Service); if
such written advice of counsel is so delivered, such vote shall not be held
and no such conversion shall take place. Upon delivery of such written
advice of counsel as to such vote, and the further advice that the
continued existence of this discrete paragraph of this paragraph (C)(6)(b)
itself could adversely affect the status of the transaction as a Tax-Free
Spin-Off (including without limitation the ability to obtain a favorable
ruling from the Internal Revenue Service), then this discrete paragraph of
this paragraph (C)(6)(b) shall thereafter be null and void. At the meeting
of stockholders called for such purpose, every holder of Common Stock shall
be entitled to one vote (irrespective of the voting rights provided for
such shares under paragraph (C)(3)(a)) in person or by proxy for each share
of Common Stock standing in his or her name on the transfer books of the
Corporation. Approval of such conversion shall require the approval of a
majority of the votes, on the per share voting basis provided in the
preceding sentence, entitled to be cast by the holders of the Class A
Common Stock and Class B Common Stock present and voting, voting together
as a single class, and the holders of the Class B Common Stock shall not be
entitled to a separate class vote. Such conversion shall be effective on
the date on which such approval is given at a meeting of stockholders
called for such purpose.

If at any time prior to a Tax-Free Spin-Off BankAmerica or a Class B
Transferee shall cease respectively to Beneficially Own a number of
outstanding shares of Class B Common Stock at least equal to 30% of the
economic ownership represented by the aggregate number of shares of Common
Stock then outstanding, then each share of Class B Common Stock
Beneficially Owned by such less than 30% owner shallautomatically convert
into one share of Class A Common Stock.

The Corporation will provide notice of any automatic conversion of all
outstanding shares of Class B Common Stock to holders of record as soon as
practicable after the conversion; provided, however, that the Corporation
may satisfy such notice requirement by providing such notice prior to
conversion. Such notice shall be provided by mailing notice of such
conversion first class postage prepaid, to each holder of record of the
Common Stock, at such holder's address as it appears on the transfer books
of the Corporation; provided, however, that no failure to give such notice
nor any defect therein shall affect the validity of the automatic
conversion of any shares

-7-
<PAGE>

of Class B Common Stock. Each such notice shall state, as appropriate, the
following:

(i) the automatic conversion date;

(ii) that all outstanding shares of Class B
Common Stock are automatically converted;

(iii) the place or places where certificates for
such shares are to be surrendered for conversion; and

(iv) that no dividends will be declared on the shares of Class
B Common Stock converted after such conversion date.

Immediately upon such conversion, the rights of the holders of shares
of Class B Common Stock as such shall cease and such holders shall be
treated for all purposes as having become the record owners of the shares
of Class A Common Stock issuable upon such conversion; provided, however,
that such Persons shall be entitled to receive when paid any dividends
declared on the Class B Common Stock as of a record date preceding the time
of such conversion and unpaid as of the time of such conversion, subject to
paragraph (C)(6)(f) below.

(c) Prior to a Tax-Free Spin-Off, holders of shares of Class B Common
Stock may (i) sell or otherwise dispose of or transfer any or all of such
shares held by them, respectively, only in connection with a transfer which
meets the qualifications of paragraph (C)(6)(d) below, and under no other
circumstances, or (ii) convert any or all of such shares into shares of
Class A Common Stock as provided in paragraph (C)(6)(a) above. Prior to a
Tax-Free Spin-Off, no one other than those Persons in whose names shares of
Class B Common Stock originally are registered on the stock ledger of the
Corporation, or transferees or successive transferees who receive shares of
Class B Common Stock in connection with a transfer which meets the
qualifications set forth in paragraph (C)(6)(d) below, shall by virtue of
the acquisition of a certificate for shares of Class B Common Stock have
the status of an owner or holder of shares of Class B Common Stock or be
recognized as such by the Corporation or be otherwise entitled to enjoy for
his or her own benefit the special rights and powers of a holder of shares
of Class B Common Stock.

Holders of shares of Class B Common Stock may at any and all times
transfer to any Person the shares of Class A Common Stock issuable upon
conversion of such shares of Class B Common Stock.

-8-
<PAGE>

(d) Prior to a Tax-Free Spin-Off, shares of Class B Common Stock
shall be transferred on the books of the Corporation and a new certificate
therefor issued, upon presentation at the office of the Secretary of the
Corporation (or at such additional place or places as may from time to time
be designated by the Secretary of the Corporation) of the certificate for
such shares, in proper form for transfer and accompanied by all requisite
stock transfer tax stamps, only if such certificate when so presented shall
also be accompanied by any one of the following:

(i) an affidavit from BankAmerica stating that such certificate is
being presented to effect a transfer by BankAmerica of such shares to a
Subsidiary Entity of BankAmerica; or

(ii) an affidavit from BankAmerica stating that such certificate is
being presented to effect a transfer by any Subsidiary Entity of
BankAmerica of such shares to BankAmerica or another Subsidiary Entity of
BankAmerica; or

(iii) an affidavit from BankAmerica (or a Class B Transferee) stating
that such certificate is being presented to effect a transfer by
BankAmerica (or such Class B Transferee) or any of its (or such Class B
Transferee's) Subsidiary Entities of such shares to a Class B Transferee or
a Subsidiary Entity of such Class B Transferee as contemplated by paragraph
(C)(6)(b); or

(iv) an affidavit from the Class B Transferee stating that such
certificate is being presented to effect a transfer by the Class B
Transferee of such shares to a Subsidiary Entity of the Class B Transferee;
or

(v) an affidavit from the Class B Transferee stating that such
certificate is being presented to effect a transfer by any Subsidiary
Entity of the Class B Transferee of such shares to the Class B Transferee
or another Subsidiary Entity of the Class B Transferee; or

(vi) an affidavit from BankAmerica stating that such certificate is
being presented to effect a transfer by BankAmerica of such shares to the
stockholders of BankAmerica in connection with a Tax-Free Spin-Off; or

(vii) an affidavit from the Class B Transferee stating that such
certificate is being presented to effect a transfer by the Class B
Transferee of such shares to the stockholders of the Class B Transferee

-9-
<PAGE>

in connection with a Tax-Free Spin-Off.

Each affidavit of a record holder furnished pursuant to this paragraph
(C)(6)(d) shall be verified as of a date not earlier than five days prior
to the date of delivery thereof, and, where such record holder is a
corporation or partnership, shall be verified by an officer of the
corporation or by a general partner of the partnership, as the case may be.

(e) Prior to the occurrence of a Tax-Free Spin-Off, each certificate
for shares of Class B Common Stock shall bear a legend on the face thereof
reading as follows:

"The shares of Class B Common Stock represented by this certificate
may not be transferred to any person or entity in connection with a
transfer that does not meet the qualifications set forth in paragraph
(C)(6)(d) of ARTICLE FOURTH of the Certificate of Incorporation of this
Corporation and no person who receives such shares in connection with a
transfer which does not meet the qualifications prescribed by paragraph
(C)(6)(d) of said ARTICLE FOURTH is entitled to own or to be registered as
the record holder of such shares of Class B Common Stock and such shares
will have been automatically converted into Class A Common Stock upon any
such purported transfer. The record holder of this certificate may at any
time convert such shares of Class B Common Stock into the same number of
shares of Class A Common Stock. Each holder of this certificate, by
accepting the same, accepts and agrees to all of the foregoing."

Upon and after the transfer of shares in a Tax-Free Spin-Off, shares
of Class B Common Stock shall no longer bear the legend set forth above in
this paragraph (C)(6)(e).

(f) Upon any conversion of shares of Class B Common Stock into shares
of Class A Common Stock pursuant to the provisions of this paragraph
(C)(6), any dividend, for which the payment date shall be subsequent to
such conversion, which may have been declared on the shares of Class B
Common Stock so converted shall be deemed to have been declared, and shall
be payable, with respect to the shares of Class A Common Stock into or for
which such shares of Class B Common Stock shall have been so converted, and
any such dividend payable in Common Stock shall be deemed to have been
declared, and shall be payable, in shares of Class A Common Stock.

(g) The Corporation shall not reissue or resell any shares of Class B
Common Stock which shall have

-10-
<PAGE>

been converted into shares of Class A Common Stock pursuant to or as
permitted by the provisions of this paragraph (C)(6), or any shares of
Class B Common Stock which shall have been acquired by the Corporation in
any other manner. The Corporation shall, from time to time, take such
appropriate action as may be necessary to retire such shares and to reduce
the authorized amount of Class B Common Stock accordingly.

The Corporation shall at all times reserve and keep available, out of
its authorized but unissued Common Stock, such number of shares of Class A
Common Stock as would become issuable upon the conversion of all shares of
Class B Common Stock then outstanding.

(h) In connection with any transfer or conversion of any stock of the
Corporation pursuant to or as permitted by the provisions of this paragraph
(C)(6) or in connection with the making of any determination referred to in
this paragraph (C)(6):

(1) the Corporation shall be under no obligation to make any
investigation of facts unless an officer, employee or agent of the
Corporation responsible for making such transfer or determination or
issuing Class A Common Stock pursuant to such conversion has substantial
reason believe, or unless the Board of Directors (or a committee of the
Board of Directors designated for such purpose) determines that there is
substantial reason to believe, that any affidavit or other document is
incomplete or incorrect in a material respect or that an investigation
would disclose facts upon which any determination referred to in paragraph
(6)(C)(f) above should be made, in either of which events the Corporation
shall make or cause to be made such investigation as it may deem necessary
or desirable in the circumstances and have a reasonable time to complete
such investigation; and

(2) neither the Corporation nor any director, officer, employee or
agent of the Corporation shall be liable in any manner for any action taken
or omitted in good faith.

(i) The Corporation will not be required to pay any documentary,
stamp or similar issue or transfer taxes payable in respect of the issue or
delivery of shares of Class A Common Stock on the conversion of shares of
Class B Common Stock pursuant to this paragraph (6)(C), and no such issue
or delivery shall be made unless and until the Person requesting such issue
has paid to the Corporation the amount of any such tax or has established,
to the satisfaction of the Corporation, that such tax has been paid.

-11-
<PAGE>

7. All rights to vote and all voting power (including, without
limitation thereto, the right to elect directors) shall be vested
exclusively in the holders of Common Stock, voting together as a single
class, except as otherwise expressly provided in this Certificate of
Incorporation, in a Preferred Stock Designation or as otherwise expressly
required by applicable law.

D. Subject to the limitations and in the manner provided by law, shares of
the Preferred Stock may be issued from time to time in series, and the Board of
Directors of the Corporation or a duly-authorized committee of the Board of
Directors of the Corporation, in accordance with the laws of the State of
Delaware, is hereby authorized to determine or alter the relative rights, powers
(including voting powers), preferences, privileges and restrictions granted to
or imposed upon Preferred Stock or any wholly unissued series of shares of
Preferred Stock, and to increase or decrease (but not below the number of shares
of any series of Preferred Stock then outstanding) the number of shares of any
such series subsequent to the issue of shares of that series. In case the number
of shares of any series shall be so decreased, the shares constituting such
decrease shall upon the taking of any action required by applicable law resume
the status which they had prior to the adoption of the resolution originally
fixing the number of shares of such series.

FIFTH: The name and mailing address of the incorporator is:
------

Matthew D. Disco
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94104

SIXTH: The books and records of the Corporation may be kept (subject to any
------
mandatory requirement of law) outside the State of Delaware at such place or
places as may be designated from time to time by the Board of Directors or by
the Bylaws of the Corporation.

SEVENTH: Special meetings of stockholders of the Corporation, for any
-------
purpose or purposes, unless otherwise prescribed by statute or by this
Certificate of Incorporation, may be called by the Chairman of the Board or the
President and shall be called by the Chairman of the Board or the President or
Secretary at the request in writing of a majority of the Board of Directors, or
at the request in writing of stockholders owning a majority in amount of the
total voting power of the entire capital stock of the Corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.

EIGHTH: In furtherance and not in limitation of the powers conferred upon
------
it by the laws of the State of Delaware, the Board of Directors shall have the
power to adopt, amend, alter

-12-
<PAGE>

or repeal the Corporation's Bylaws.

NINTH: No director of the Corporation shall be liable to the Corporation or
------
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the GCL, or (iv) for any transaction from which
the director derived an improper personal benefit.

If the GCL hereafter is amended to further eliminate or limit the liability
of directors, then the liability of a director of the Corporation, in addition
to the limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the amended GCL. Any repeal or modification of this
paragraph by the stockholders of the Corporation shall be prospective only, and
shall not adversely affect any limitation on the personal liability of a
director of the Corporation existing at the time of such repeal or modification.

I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Laws of the
State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 11th day of October, 1996.

/s/ Matthew D. Disco
----------------------------------
Matthew D. Disco

-13-

<PAGE>

EXHIBIT 3.1(ii)

BYLAWS

BA MERCHANT SERVICES, INC.

October 11, 1996
<PAGE>

TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>

Page
----
<S> <C> <C>
ARTICLE I Offices.................................................. 1
Section 1. Registered Office............................. 1
Section 2. Other Offices................................. 1

ARTICLE II Meetings of Stockholders................................ 1
Section 1. Place of Meetings............................. 1
Section 2. Annual Meeting................................ 1
Section 3. Notice of Annual Meeting...................... 1
Section 4. Stockholders List............................. 1
Section 5. Special Meetings.............................. 2
Section 6. Notice of Special Meetings.................... 2
Section 7. Business...................................... 2
Section 8. Quorum and Adjournment........................ 2
Section 9. Organization.................................. 2
Section 10. Voting........................................ 3
Section 11. Action by Written Consent..................... 3
Section 12. Inspectors of Election........................ 3
Section 13. Notice of Stockholder Business at Annual
Meeting..................................... 3
Section 14. Notice of Stockholder Nominees................ 4

ARTICLE III Directors.............................................. 5
Section 1. Number, Election and Term..................... 5
Section 2. Vacancies and Newly Created Directorships..... 5
Section 3. Resignations.................................. 5
Section 4. General Powers................................ 5
Section 5. Compensation of Directors..................... 5
Section 6. Advisory Directors............................ 5

ARTICLE IV Meetings of the Board of Directors...................... 6
Section 1. Place of Meetings............................. 6
Section 2. First Meeting................................. 6
Section 3. Regular Meetings.............................. 6
Section 4. Special Meetings.............................. 6
Section 5. Quorum........................................ 6
Section 6. Action by Written Consent..................... 6
Section 7. Telephone Participation....................... 7

ARTICLE V Committees............................................... 7
Section 1. Committees of Directors....................... 7
Section 2. Other Committees.............................. 7
Section 3. Committee Procedures.......................... 7
</TABLE>

-i-
<PAGE>

<TABLE>
<S> <C> <C>
ARTICLE VI Officers................................................ 8
Section 1. Number and Titles............................. 8
Section 2. Appointment................................... 8
Section 3. Compensation.................................. 8
Section 4. Term of Office................................ 8
Section 5. President..................................... 8
Section 6. Chairman of the Board......................... 8
Section 7. Vice Presidents............................... 8
Section 8. Secretary..................................... 8
Section 9. Treasurer..................................... 9

ARTICLE VII Capital Stock.......................................... 9
Section 1. Certificates.................................. 9
Section 2. Registrars and Transfer Agents................ 9
Section 3. Lost Certificates............................. 10
Section 4. Transfers of Stock............................ 10
Section 5. Fixing Record Date............................ 10
Section 6. Registered Stockholders....................... 10
Section 7. Dividends..................................... 10
Section 8. Reserves...................................... 10

ARTICLE VIII Indemnification....................................... 11
Section 1. Right to Indemnification...................... 11
Section 2. Right of Claimant to Bring Suit............... 11
Section 3. Non-Exclusivity of Rights..................... 12
Section 4. Insurance..................................... 12

ARTICLE IX Notices................................................. 12
Section 1. Form of Notices............................... 12
Section 2. Waiver of Notice.............................. 13

ARTICLE X Miscellaneous............................................ 13
Section 1. Annual Statements............................. 13
Section 2. Checks........................................ 13
Section 3. Fiscal Year................................... 13
Section 4. Seal.......................................... 13
</TABLE>

-ii-
<PAGE>

BA MERCHANT SERVICES, INC.
--------------------------

BYLAWS
------

ARTICLE I
---------

Offices
-------

Section 1. Registered Office. The registered office shall be in the
-----------------
City of Wilmington, County of New Castle, State of Delaware.

Section 2. Other Offices. The corporation may also have offices at
-------------
such other places both within and without the State of Delaware as the board of
directors may from time to time determine or the business of the corporation may
require.

ARTICLE II
----------

Meetings of Stockholders
------------------------

Section 1. Place of Meetings. All meetings of the stockholders for
-----------------
the election of directors shall be held in the City and County of San Francisco,
State of California, at such place as may be fixed from time to time by the
board of directors, or at such other place either within or without the State of
Delaware as shall be designated from time to time by the board of directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.

Section 2. Annual Meeting. Annual meetings of stockholders shall be
--------------
held at such date and time as shall be designated from time to time by the board
of directors and stated in the notice of meeting, at which time the stockholders
shall elect by a majority vote a board of directors, and transact such other
business as may properly be brought before the meeting.

Section 3. Notice of Annual Meeting. Written notice of the annual
------------------------
meeting stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten (10) nor more
than fifty (50) days before the date of the meeting.

Section 4. Stockholders List. The officer who has charge of the
-----------------
stock ledger of the corporation shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in

-1-
<PAGE>

alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.

Section 5. Special Meetings. Special meetings of the stockholders,
----------------
for any purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the chairman of the board or the
president and shall be called by the chairman of the board or the president or
secretary at the request in writing of a majority of the board of directors, or
at the request in writing of stockholders owning a majority in amount of the
entire capital stock of the corporation issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the proposed meeting.

Section 6. Notice of Special Meetings. Written notice of a special
--------------------------
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called, shall be given not less than ten (10)
nor more than fifty (50) days before the date of the meeting to each stockholder
entitled to vote at such meeting.

Section 7. Business. Business transacted at any special meeting of
--------
stockholders shall be limited to the purposes stated in the notice.

Section 8. Quorum and Adjournment. The holders of a majority of the
----------------------
stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute or by the certificate of incorporation. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.

Section 9. Organization. At every meeting of the stockholders the
------------
chairman of the board or, in his or her absence, the president, shall preside.
In the absence of said officers, any other officer of the rank of vice president
present shall call such meeting to order and preside. The secretary or, in the
secretary's absence, the appointee of the presiding officer of the meeting shall
act as secretary of the meeting.

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<PAGE>

Section 10. Voting. When a quorum is present or represented at any
------
meeting, the vote of the holders of a majority of the stock having voting power
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of the statutes or of the certificate of incorporation, a different vote is
required in which case such express provision shall govern and control the
decision of such question.

Unless otherwise provided in the certificate of incorporation each
stockholder shall at every meeting of the stockholders be entitled to one vote
in person or by proxy for each share of the capital stock having voting power
held by such stockholder. No proxy shall be voted on after three (3) years from
its date, unless the proxy provides for a longer period.

Section 11. Action by Written Consent. Unless otherwise provided in
-------------------------
the certificate of incorporation, any action required or permitted to be taken
at any annual or special meeting of stockholders of the corporation may be taken
without a meeting, without prior notice except as otherwise provided by
applicable law, and without a vote, if a consent in writing setting forth the
action so taken shall be signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.

Section 12. Inspectors of Election. The board of directors may at
----------------------
any time appoint one or more persons to serve as inspectors of election at any
meeting of stockholders with respect to the votes of stockholders at such
meeting. If any inspector appointed is absent or refuses to act, a majority of
the inspectors, if such be present, may act. If a majority of the inspectors is
not present, the presiding officer of the meeting may appoint one or more
persons to serve as inspectors for the meeting. The inspectors appointed to act
at any meeting of the stockholders shall perform their duties faithfully and
impartially, and shall notify the secretary of the corporation in writing of the
votes cast at such meeting by the stockholders.

Section 13. Notice of Stockholder Business at Annual Meeting. At an
------------------------------------------------
annual meeting of the stockholders only such business shall be conducted as
shall have been brought before the meeting (a) by or at the direction of the
board of directors or (b) by any stockholder of the corporation entitled to vote
at the meeting who complies with the notice procedures set forth in this
Section. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the secretary of the corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
corporation not less than thirty (30) days nor more than sixty (60) days prior
to the meeting; provided, however, that if less than forty (40) days' notice of
-------- -------
the date of the meeting is given to stockholders, notice by the stockholder to
be timely must be received not later than the close of business on the tenth day
following the day on which such notice of the date of the annual meeting was
mailed. A stockholder's notice to the secretary shall set forth as to each
matter the

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<PAGE>

stockholder proposes to bring before the annual meeting (a) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (b) the name and address, as
they appear on the corporation's books, of the stockholder proposing such
business, (c) the class and number of shares of the corporation's stock which
are owned by the stockholder and (d) any material interest of the stockholder in
such business. Notwithstanding anything in these bylaws to the contrary, no
business shall be conducted at an annual meeting except in accordance with the
procedures set forth in this Section. The chairman of an annual meeting shall,
if the facts warrant, determine and declare to the meeting that any business
proposed at the meeting was not properly brought before the meeting in
accordance with the provisions of this Section, and if he or she should so
determine and declare, such business shall not be transacted.

Section 14. Notice of Stockholder Nominees. Only persons who are
------------------------------
nominated in accordance with the procedures set forth in this Section shall be
eligible for election as directors. Nominations of persons for election to the
board of directors of the corporation may be made at a meeting of stockholders
(a) by or at the direction of the board of directors or (b) by any stockholder
of the corporation entitled to vote for the election of directors at the meeting
who has complied with the notice procedures set forth in this Section. Such
nominations, other than those made by or at the direction of the board of
directors, shall be made pursuant to timely notice in writing to the secretary
of the corporation. To be timely, a stockholder's notice shall be delivered to
or mailed and received at the principal executive offices of the corporation not
less than thirty (30) days nor more than sixty (60) days prior to the meeting;
provided, however, that if less than forty (40) days' notice of the date of the
- -------- -------
meeting is given to stockholders, notice by the stockholder to be timely must be
so received not later than the close of business on the tenth day following the
day on which such notice of the date of the meeting was mailed. A stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or re-election as a director, all information relating to
such person that is required to be disclosed in solicitations or proxies for
election of directors pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including such person's written consent to being named
in the proxy statement as a nominee and to serving as a director if elected);
and (b) as to the stockholder giving the notice (i) the name and address, as
they appear on the corporation's books, of such stockholder and (ii) the class
and number of shares of the corporation's stock which are owned by such
stockholder. At the request of the board of directors, any person nominated by
the board of directors for election as a director shall furnish to the secretary
of the corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a director of the corporation unless nominated in accordance
with the procedures set forth in this Section. The chairman of the meeting
shall, if the facts warrant, determine and declare to the meeting that a
nomination made at the meeting was not made in accordance with the provisions of
this Section, and if he or she should so determine and declare, the nomination
shall be disregarded.

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<PAGE>

ARTICLE III
-----------

Directors
---------

Section 1. Number, Election and Term. The number of directors which
-------------------------
shall constitute the whole board shall be not less than five (5) and not more
than nine (9). The first board shall consist of three (3) directors until,
within the limits above specified, the number of directors shall be determined
by resolution of the board of directors or the stockholders. The directors shall
be elected at the annual meeting of the stockholders, except as provided in
Section 2 of this Article, and each director elected shall hold office until
such director's successor is elected and qualified or until such director's
earlier resignation or removal. Any director or the entire board of directors
may be removed at any time, with or without cause, by the holders of a majority
of shares then entitled to vote at an election of directors. Directors need not
be stockholders.

Section 2. Vacancies and Newly Created Directorships. Vacancies and
-----------------------------------------
newly created directorships resulting from any increase in the authorized number
of directors may be filled by a majority of the directors then in office, though
less than a quorum, or by a sole remaining director, and the directors so chosen
shall hold office until the next annual election and until their successors are
elected and qualified, or until their earlier resignations or removals. If
there are no directors in office, then an election of directors may be held in
the manner provided by statute.

Section 3. Resignations. Any director of the corporation may resign
------------
at any time by giving written notice to the chairman of the board, or to the
president, or to the secretary of the corporation. The resignation of any
director shall take effect at the date of receipt of such notice or at any later
date specified therein; and unless otherwise specified therein the acceptance of
such resignation by the board of directors shall not be necessary to make it
effective.

Section 4. General Powers. The business of the corporation shall be
--------------
managed by or under the direction of its board of directors which may exercise
all such powers of the corporation and do all such lawful acts and things as are
not by statute or by the certificate of incorporation or by these bylaws
directed or required to be exercised or done by the stockholders.

Section 5. Compensation of Directors. The directors may be paid
-------------------------
their expenses, if any, of attendance at each meeting of the board of directors
and may be paid a fixed sum for attendance at each meeting of the board of
directors and/or a stated salary as director. No such payment shall preclude
any director from serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
compensation as determined by the board for attending committee meetings.

Section 6. Advisory Directors. The board of directors may, from time
------------------
to time, appoint one or more advisory directors, the number to be determined by
the board of directors. Such advisory directors shall serve at the pleasure of
the board and shall attend

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<PAGE>

the meetings of the board for the purposes of providing general policy advice.
Advisory directors shall receive the same fees and expenses as may be paid to
the members of the board of directors.

ARTICLE IV
----------

Meetings of the Board of Directors
----------------------------------

Section 1. Place of Meetings. The board of directors of the
-----------------
corporation may hold meetings, both regular and special, either within or
without the State of Delaware.

Section 2. First Meeting. The first meeting of each newly elected
-------------
board of directors shall be held at such time and place as shall be fixed by the
vote of the stockholders at the annual meeting and no notice of such meeting
shall be necessary to the newly elected directors in order legally to constitute
the meeting, provided a quorum shall be present. In the event of the failure of
the stockholders to fix the time or place of such first meeting of the newly
elected board of directors, or in the event such meeting is not held at the time
and place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.

Section 3. Regular Meetings. Regular meetings of the board of
----------------
directors may be held without notice at such time and at such place as shall
from time to time be determined by the board.

Section 4. Special Meetings. Special meetings of the board may be
----------------
called by the chairman of the board or the president on at least two (2) days'
notice to each director, either personally or by mail, telegram, facsimile or
other electronic transmission; special meetings shall be called by the president
or secretary in like manner and on like notice on the written request of any two
directors.

Section 5. Quorum. At all meetings of the board a majority of the
------
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the board of directors the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.

Section 6. Action by Written Consent. Unless otherwise restricted by
-------------------------
the certificate of incorporation or these bylaws, any action required or
permitted to be taken at any meeting of the board of directors may be taken
without a meeting, if all members of the board consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the board.

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<PAGE>

Section 7. Telephone Participation. Unless otherwise restricted by
-----------------------
the certificate of incorporation or these bylaws, members of the board of
directors may participate in a meeting of the board of directors by means of
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
shall constitute presence in person at the meeting.

ARTICLE V
---------

Committees
----------

Section 1. Committees of Directors. The board of directors may, by
-----------------------
resolution passed by a majority of the whole board, designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. Any such committee, to the extent provided in the
resolution of the board of directors, shall have and may exercise all the powers
and authority of the board of directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority to amend the certificate of incorporation or these bylaws, to
adopt an agreement of merger or consolidation, to recommend to the stockholders
the sale, lease or exchange of all or substantially all of the corporation's
property and assets, to recommend to the stockholders a dissolution of the
corporation or a revocation of a dissolution, to declare a dividend, to
authorize the issuance of stock (unless specifically authorized to do so in a
resolution of the board of directors), or to appoint or remove the president or
the chairman of the board, all such powers and authorities being reserved to the
board of directors.

Section 2. Other Committees. The board of directors may from time to
----------------
time by resolution create such other committee or committees of directors,
officers, employees, or other persons designated by it for the purpose, and with
such functions, powers and responsibilities, as the board shall by resolution
prescribe. None of the powers and authorities reserved to the board of
directors by Section I of this Article V may be delegated to any such committee.

Section 3. Committee Procedures. Each committee created by the board
--------------------
of directors shall have such name as may be determined from time to time by
resolution adopted by the board of directors. The board of directors shall have
power to change the members of any such committee at any time, to fill
vacancies, and to dissolve any such committee at any time. Unless specifically
provided to the contrary in or otherwise restricted by the certificate of
incorporation, these bylaws or a resolution adopted by the board of directors,
the procedures set forth in Sections 1, 3, 4, 5, 6 and 7 of Article IV apply to
each committee created by the board of directors in the same manner as those
Sections apply to the board of directors, as though references therein to
directors were to members of the committee. Each such committee shall keep
regular minutes of its meetings and report the same to the board of directors
when required.

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<PAGE>

ARTICLE VI
----------

Officers
--------

Section 1. Number and Titles. The officers of the corporation shall
-----------------
be appointed by the board of directors and shall be a chairman of the board, a
president, a secretary and a treasurer. The board of directors may also appoint
one or more vice presidents, one or more assistant secretaries and assistant
treasurers, and such other officers as the board may by resolution create, or as
may be appointed in accordance with Section 2 of this Article. Any one or more
vice presidents may be designated executive vice president or senior vice
president. One person may hold any number of offices, unless the certificate of
incorporation or these bylaws otherwise provide.

Section 2. Appointment. The board of directors at its first meeting
-----------
after each annual meeting of stockholders shall choose a chairman of the board,
a president, a secretary and a treasurer. The board of directors may appoint
such other officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the board.

Section 3. Compensation. The compensation of all officers and agents
------------
of the corporation shall be fixed by the board of directors or by a committee
created or officers designated for that purpose.

Section 4. Term of Office. The officers of the corporation shall
--------------
hold office until their successors are chosen and qualify or until their earlier
resignation or removal. Any officer elected or appointed by the board of
directors may be removed at any time by the affirmative vote of a majority of
the board of directors. Any vacancy occurring in any office of the corporation
shall be filled by the board of directors.

Section 5. President. The president shall be the chief executive
---------
officer of the corporation, shall have general and active management of the
business of the corporation and shall see that all orders and resolutions of the
board of directors are carried into effect.

Section 6. Chairman of the Board. The chairman of the board shall
---------------------
preside at all meetings of the stockholders and the board of directors and shall
exercise and perform such other powers and duties as may from time to time be
assigned by the board of directors or prescribed by these bylaws.

Section 7. Vice Presidents. Vice presidents shall perform such
---------------
duties and have such powers as the board of directors may from time to time
prescribe. The executive vice presidents shall be senior in rank to all other
vice presidents, including senior vice presidents, unless specifically provided
otherwise in a resolution of the board of directors.

Section 8. Secretary. The secretary shall have charge and custody of
---------
the corporate seal, records and minute books of the corporation, shall keep
correct written minutes of all

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<PAGE>

meetings of stockholders and of the board of directors, and shall give or cause
to be given notice of all meetings of the stockholders and of the board of
directors in accordance with these bylaws and as required by law. The duties of
the secretary may be performed by any assistant secretary.

Section 9. Treasurer. The treasurer shall have the custody of the
---------
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors. The treasurer shall also disburse the funds of the corporation as
may be ordered by the board of directors, at its regular meetings, or when the
board of directors so requires. The treasurer shall give an account of all
transactions as treasurer and of the financial condition of the corporation.
The duties of the treasurer may be performed by any assistant treasurer.

ARTICLE VII
-----------

Capital Stock
-------------

Section 1. Certificates. Every holder of stock in the corporation
------------
shall be entitled to have a certificate, signed by or in the name of the
corporation by the chairman of the board of directors, or the president or a
vice president and the treasurer or an assistant treasurer, or the secretary or
an assistant secretary of the corporation, certifying the number of shares owned
by such holder in the corporation. If the corporation shall be authorized to
issue more than one class of stock or more than one series of any class, the
powers, designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualification,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in Section 202 of the General Corporation Law
of Delaware, in lieu of the foregoing requirements, there may be set forth on
the face or back of the certificate which the corporation shall issue to
represent such class or series of stock a statement that the corporation will
furnish without charge to each stockholder who so requests, the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.

Section 2. Registrars and Transfer Agents. Where a certificate is
------------------------------
countersigned (1) by a transfer agent other than the corporation or its
employee, or, (2) by a registrar other than the corporation or its employee, any
other signature on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if such person were such officer, transfer
agent or registrar at the date of issue.

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<PAGE>

Section 3. Lost Certificates. The board of directors may direct a
-----------------
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or such owner's legal representative, to advertise the same in
such manner as it shall require and/or to give the corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.

Section 4. Transfers of Stock. Upon surrender to the corporation or
------------------
the transfer agent of the corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, including evidence of approval of such transfer by the corporation as
required by the certificate of incorporation, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.

Section 5. Fixing Record Date. In order that the corporation may
------------------
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any right in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the board of directors may fix, in
advance, a record date, which shall not be more than sixty (60) days nor less
than five (5) days prior to the date of such meeting, nor more than sixty (60)
days prior to any other action. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the board of directors may
fix a new record date for the adjourned meeting.

Section 6. Registered Stockholders. The corporation shall be
-----------------------
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.

Section 7. Dividends. Dividends upon the capital stock of the
---------
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation.

Section 8. Reserves. Before payment of any dividend, there may be
--------
set aside out of any funds of the corporation available for dividends such sum
or sums as the directors from

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<PAGE>

time to time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the corporation, or for such other purpose as the
directors shall think conducive to the interest of the corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.

ARTICLE VIII

Indemnification
---------------

Section 1. Right to Indemnification. Each person who was or is made
------------------------
a party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that such person, or another
person of whom such person is the legal representative, is or was a director,
officer, or employee of the corporation or is or was serving at the request of
the corporation as a director, officer, or employee of, or in some other
representative capacity for, another corporation or a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, or employee or in any other capacity
while serving as a director, officer, or employee, shall be indemnified and held
harmless by the corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended, against
all expense, liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, or employee and shall inure to the benefit of such person's heirs,
executors and administrators; provided, however, that except as provided in
Section 2 hereof with respect to proceedings seeking to enforce rights to
indemnification, the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
board of directors of the corporation. The right to indemnification conferred
in this Article shall be a contract right and shall include the right to be paid
by the corporation the expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that, if the Delaware
General Corporation Law so requires, the payment of such expenses incurred by a
director, officer, employee or representative in such person's capacity as a
director, officer, employee or representative (and not in any other capacity in
which service was or is rendered by such person while a director, officer,
employee or representative, including, without limitation, service to an
employee benefit plan) in advance of the final disposition of a proceeding,
shall be made only upon delivery to the corporation of an undertaking, by or on
behalf of such person, to repay all amounts so advanced if it shall ultimately
be determined that such director or officer is not entitled to be indemnified
under this Article or otherwise.

Section 2. Right of Claimant to Bring Suit. If a claim under Section
-------------------------------
1 of this Article is not paid in full by the corporation within ninety days
after a written claim has

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<PAGE>

been received by the corporation, the claimant may at any time thereafter bring
suit against the corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the corporation) that the
claimant has not met the standards of conduct which make it permissible under
the Delaware General Corporation Law for the corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the corporation. Neither the failure of the corporation (including its board
of directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because the claimant has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the corporation (including its board of
directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.

Section 3. Non-Exclusivity of Rights. The right to indemnification
-------------------------
and the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.

Section 4. Insurance. The corporation may maintain insurance, at its
---------
expense, to protect itself and any director, officer, or employee of the
corporation serving in any capacity on behalf of the corporation or at its
request for any other entity to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended, whether
or not the corporation would have the power to indemnify such person against
such expense, liability or loss under the Delaware General Corporation Law.

ARTICLE IX
----------

Notices
-------

Section 1. Form of Notices. Whenever, under the provisions of the
---------------
statutes or of the certificate of incorporation or of these bylaws, notice is
required to be given to any director or stockholder, it shall not be construed
to mean personal notice, but such notice may be given in writing, by mail,
addressed to such director or stockholder, at his or her address as it appears
on the records of the corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail. Notice to directors may also be given by telegram or by
facsimile or other electronic transmission.

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<PAGE>

Section 2. Waiver of Notice. Whenever any notice is required to be
----------------
given under the provisions of the statutes or of the certificate of
incorporation or of these bylaws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, subject to any
exceptions provided in the Delaware corporation law.

ARTICLE X
---------

Miscellaneous
-------------

Section 1. Annual Statements. The board of directors may present at
-----------------
any annual meeting, or at any special meeting of the stockholders when called
for by vote of the stockholders, a full and clear statement of the business and
condition of the corporation.

Section 2. Checks. All checks or demands for money and notes of the
------
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.

Section 3. Fiscal Year. The fiscal year of the corporation shall end
-----------
on December 31 of each year.

Section 4. Seal. The corporate seal shall be in such form as may be
----
approved from time to time by the board of directors, and said seal, or a
facsimile thereof, may be imprinted or affixed by any process or in any manner
reproduced. Affixing the seal is not necessary to make the execution of any
document effective or binding.

ARTICLE XI
----------

Amendments
----------

These bylaws may be altered, amended or repealed or new bylaws may be
adopted by the stockholders or by the board of directors at any regular or
special meeting of the stockholders or of the board of directors.

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EXHIBIT 23.3

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Experts" and
"Selected Combined Financial and Other Data" and to the use of our report
dated October 11, 1996, in the Registration Statement (Form S-1) and related
Prospectus of BA Merchant Services, Inc. for the registration of 18,000,000
shares of its Class A Common Stock.

/s/ Ernst & Young LLP

San Francisco, California
October 11, 1996