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