NATIONAL RESEARCH CORP, S-1, 1997-08-08

NATIONAL RESEARCH CORP
S-1, 1997-08-08

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As filed with the Securities and Exchange Commission on August 8, 1997

Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
___________________

National Research Corporation
(Exact name of registrant as specified in its charter)

Nebraska 8732 47-0634000
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Identification
organization) Classification Code No.)
Number)

1033 "O" Street
Lincoln, Nebraska 68508
(402) 475-2525
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)

_______________________

Michael D. Hays
President and Chief Executive Officer
National Research Corporation
1033 "O" Street
Lincoln, Nebraska 68508
(402) 475-2525
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

______________________________

Copies to:

Benjamin F. Garmer, III William N. Weaver, Jr.
Foley & Lardner Sachnoff & Weaver, Ltd.
777 East Wisconsin Avenue 30 South Wacker Drive
Milwaukee, Wisconsin 53202 Chicago, Illinois 60606
(414) 271-2400 (312) 207-1000

____________________________

Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration
Statement.
____________________________

If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [_]
If this Form if filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
____________________________

CALCULATION OF REGISTRATION FEE

Proposed Proposed
Amount to Maximum Maximum
Title of Each Class be Offering Aggregate Amount of
of Securities to be Registered Price Per Offering Registra-
Registered (1) Share(2) Price(2) tion Fee

Common Stock, $.001 2,415,000 $13.00 $31,395,000 $9,514
par value . . . . shares

(1) Includes 315,000 shares of Common Stock owned by the Selling
Shareholder that the Underwriters have the option to purchase to
cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Section 6(b) of, and Rule 457(a) under, the Securities
Act of 1933.
____________________________

The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.

<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 8, 1997
PROSPECTUS
2,100,000 Shares

[National Research Corporation Logo]

Common Stock

Of the 2,100,000 shares of Common Stock offered hereby, 1,250,000 are
being sold by National Research Corporation ("NRC" or the "Company") and
850,000 are being sold by the Selling Shareholder. See "Principal and
Selling Shareholders." The Company will not receive any of the proceeds
from the sale of shares by the Selling Shareholder. Prior to this
offering, there has been no public market for the Common Stock. It is
currently estimated that the initial public offering price for the Common
Stock will be between $11.00 and $13.00 per share. See "Underwriting" for
information relating to the determination of the initial public offering
price.

The Company has applied to have the Common Stock quoted on the Nasdaq
National Market under the symbol NRCI.

See "Risk Factors" beginning on page 6 for a discussion of certain
factors that should be considered by prospective purchasers of the shares
of Common Stock offered hereby.
____________________________

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.

Proceeds to
Price to Underwriting Proceeds to Selling
Public Discount(1) Company(2) Shareholder

Per Share . $ $ $ $
Total(3) . $ $ $ $

(1) The Company and the Selling Shareholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the offering payable by the Company
estimated at $500,000.
(3) The Selling Shareholder has granted the Underwriters a 30-day option
to purchase up to an additional 315,000 shares of Common Stock solely
to cover over-allotments, if any. See "Underwriting." If all such
shares are purchased, the total Price to Public, Underwriting
Discount and Proceeds to Selling Shareholder will be $ , $
and $ , respectively.

The Common Stock is offered by the several Underwriters when, as and if
delivered to and accepted by them and subject to their right to reject
orders in whole or in part. It is expected that delivery of the
certificates for the Common Stock will be made on or about , 1997.
____________________________

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 BY
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.
____________________________

William Blair & Company Robert W. Baird & Co.
Incorporated

The date of this Prospectus is , 1997

<PAGE>
ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-1 (of which this
Prospectus is a part) 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 and the exhibits and schedules thereto, certain
parts of which have been omitted in accordance with the rules and
regulations of the Commission. For further information with respect to
the Company and the Common Stock offered hereby, reference is made to the
Registration Statement and to the exhibits and schedules filed as part of
the Registration Statement. Statements contained in this Prospectus as to
the contents of any contract or any other document referred to are not
necessarily complete, and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. Copies of the Registration Statement and the exhibits and
schedules thereto may be inspected without charge at the public reference
facilities maintained by the Securities and Exchange Commission in Room
1024, 450 Fifth Street, N.W., Washington D.C. 20549, and at the regional
offices of the Commission located at 7 World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and copies of all or any part thereto may
be obtained from such office upon payment of prescribed fees. The
Registration Statement, including the exhibits and schedules thereto, is
also available on the Commission's Web site at http://www.sec.gov.
___________________

The Company intends to furnish its shareholders with annual reports
containing audited financial statements certified by its independent
auditors and quarterly reports containing interim unaudited financial
information for the first three quarters of each year.
___________________

The NRC logo, the NRC Healthcare Market Guide and map design, the NRC
Listening System and The Report Card are trademarks or registered
trademarks of the Company.
___________________

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
COMMON STOCK OF THE COMPANY. SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE
OF SHARES OF COMMON STOCK FOLLOWING THE OFFERING TO COVER A SYNDICATE
SHORT POSITION IN THE COMMON STOCK OR MAINTAIN THE PRICE OF THE COMMON
STOCK, AND THE IMPOSITION OF PENALTY BIDS. FOR A DISCUSSION OF THESE
ACTIVITIES, SEE "UNDERWRITING."

<PAGE>
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the financial statements and related notes thereto
appearing elsewhere in this Prospectus. Unless otherwise indicated, all
information contained in this Prospectus: (i) assumes that the
Underwriters' over-allotment option is not exercised and (ii) gives
retroactive effect to an approximately 240.5-for-1 stock split effective
August , 1997. This Prospectus contains certain forward-looking
statements that involve substantial risks and uncertainties. These
forward-looking statements can generally be identified as such because the
context of the statement includes words such as the Company "believes,"
"anticipates," "expects," "estimates," "intends" or other words of similar
import. Similarly, statements that describe the Company's future plans,
objectives and goals are also forward-looking statements. The Company's
actual results, performance or achievements could differ materially from
those expressed or implied in these forward-looking statements as a result
of certain factors, including those set forth under "Risk Factors" and
elsewhere in this Prospectus.

THE COMPANY

The Company is a leading provider of ongoing survey-based performance
measurement, analysis and tracking services and products to the healthcare
industry. The Company addresses the growing need of healthcare providers
and payers to measure the care outcomes, specifically satisfaction and
health status, of their patients and/or members. NRC has led the industry
in developing tools that enable healthcare organizations to obtain service
quality information necessary to comply with industry and regulatory
standards and to improve their business practices so that they can
maximize new member and/or patient attraction, member retention and
profitability.

Since its founding 16 years ago, NRC has focused on the information
needs of the healthcare industry. While performance data has always been
of interest to healthcare providers and payers, such information has
become increasingly important to these entities as a result of regulatory,
industry and competitive requirements. In recent years, the healthcare
industry has been under significant pressure from consumers, employers and
the government to reduce cost. Through the implementation of managed
care, which currently covers 61.2% of all Americans, the rate of growth in
healthcare costs has been substantially reduced. However, the same
parties that demanded cost reductions are now concerned that healthcare
service quality is being compromised under managed care. This concern has
created a demand for consistent, objective performance information by
which healthcare providers and payers can be measured and compared and on
which physicians' compensation can, in part, be based.

NRC offers three primary types of information services and products.
The NRC Listening System (the "Listening System"), which represented 75.9%
of the Company's total revenues in 1996, is a renewable performance
tracking tool for gathering and analyzing data from survey respondents,
which can include patients, health plan members, physicians and/or
employers. The surveys are customized according to the client's needs and
the level at which the client would like performance to be measured (from
enterprise-wide to physician/caregiver specific), and, in most cases, are
personalized to the services provided to each respondent. Survey results
are used by the Company's clients to (i) identify improvements that can be
made to business practices, (ii) establish physician and other employee
compensation, (iii) identify strengths that can be highlighted in
marketing and (iv) comply with industry and regulatory requirements. The
syndicated NRC Healthcare Market Guide (the "Market Guide"), which
represented 10.1% of the Company's total revenues in 1996, is a stand-
alone market information and competitive intelligence source as well as a
comparative performance database. The Market Guide allows the Company's
clients to assess their performance relative to the industry, access best
practice examples and utilize competitive information for marketing
purposes. Finally, NRC performs custom research for its clients,
assisting them in the identification of areas for improvement and the
measurement of market issues and opportunities. Custom research
represented 14.0% of the Company's total revenues in 1996.

During 1996, NRC provided services to more than 200 healthcare
organizations, including health maintenance organizations ("HMOs"),
integrated healthcare systems, medical groups and industry and government
regulatory bodies. The Company gathered and analyzed over 1,000,000
completed surveys for these clients in 1996. The Company's current
clients include Kaiser Permanente-Northern California Region ("Kaiser"),
the United States Department of Defense, HealthSouth Corporation, BJC
Health System and Mayo Clinic. NRC has benefited from a high rate of
renewable revenues. Specifically, over 80% of the Company's total
billings in each of the last two years was generated from clients billed
in the prior year.

NRC increased its revenues from $6.8 million in 1994 to $12.6 million
in 1996, a compound annual growth rate of 36.6%. Over this same period,
the Company increased its operating income from $1.7 million to $3.7
million, a compound annual growth rate of 49.0%. The Company believes
that it can continue to grow rapidly through: (i) expanding the depth and
breadth of its current clients' performance tracking programs, since
healthcare organizations are increasingly interested in gathering
performance information at deeper levels of their organizations and from
more of their constituencies, (ii) increasing the cross-selling of its
complementary services and products and (iii) adding new clients through
penetrating the sizeable portion of the healthcare industry that is not
yet conducting performance assessments beyond the enterprise-wide level or
is not yet outsourcing this function.

THE OFFERING

Shares Offered by the Company . . . 1,250,000

Shares Offered by the Selling
Shareholder . . . . . . . . . . . . 850,000

Shares Outstanding Immediately After
the Offering . . . . . . . . . . . . 7,305,000(1)

Use of Proceeds . . . . . . . . . . . For general corporate purposes,
including working capital and
possible acquisitions of, or
investments in, complementary
businesses, products, services
or technologies.

Nasdaq National Market Symbol . . . . NRCI
________________
(1) Excludes (i) 225,000 shares of Common Stock issuable upon exercise of
employee stock options to be granted under the National Research
Corporation 1997 Equity Incentive Plan (the "Equity Incentive Plan")
as of the consummation of this offering at an exercise price per
share equal to the initial public offering price and (ii) 505,000
additional shares of Common Stock reserved for future issuance under
the Equity Incentive Plan. See "Management -- Employee Benefit Plans
-- Equity Incentive Plan."

<PAGE>

<TABLE>
SUMMARY FINANCIAL DATA
(In thousands, except per share data)

<CAPTION>
Three Months
Ended
Year Ended December 31, March 31,
1992 1993 1994 1995 1996 1996 1997

<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Revenues:
Renewable performance
tracking services . . $ 454 $ 507 $4,420 $6,839 $9,569 $2,122 $2,871
Renewable syndicated
product . . . . . . . 415 435 652 493 1,276 82 341
Custom and other
research . . . . . . . 1,737 1,869 1,683 1,585 1,755 447 228
------- ------- ------- ------- ------- ------- -------
Total revenues . . . 2,606 2,811 6,755 8,917 12,600 2,651 3,440
Operating income . . . . 157 511 1,658 2,939 3,682 823 1,054
Pro forma net income(1) . $ 166 $ 514 $1,007 $1,828 $2,300 $ 516 $ 659
Pro forma net income per
share(1) . . . . . . . $ 0.03 $ 0.08 $ 0.16 $ 0.30 $ 0.38 $ 0.09 $ 0.11
Weighted average shares
outstanding . . . . . . 6,500 6,508 6,318 6,055 6,055 6,055 6,055

March 31, 1997
Pro Forma
Actual As Adjusted(2)
Balance Sheet Data:
Working capital . . . . . . . . . $3,029 $11,054
Total assets . . . . . . . . . . . 7,601 16,960
Total debt . . . . . . . . . . . . - -
Total shareholders' equity . . . . 3,178 11,203

_______________
(1) From 1984 through July 31, 1994, the Company was a C Corporation.
Since August 1, 1994, the Company has been an S Corporation and,
accordingly, was not subject to Federal and state income taxes for
the five months ended December 31, 1994, for the years ended
December 31, 1995 and 1996 or for the three months ended March 31,
1996 and 1997. Pro forma net income reflects a pro forma tax
provision at a combined Federal and state rate of 40% for the periods
the Company was an S Corporation as if it had been a C Corporation.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "S Corporation Termination."

(2) As adjusted to (i) give effect to special cash bonuses aggregating
$1,740,000 to be paid to certain executive officers of the Company
other than the Selling Shareholder and be recognized by the Company
as a compensation charge in its third quarter 1997 interim financial
statements; (ii) reflect S Corporation distributions subsequent to
March 31, 1997 estimated to be $3,905,000; (iii) reflect deferred tax
benefits that will arise upon adoption of Financial Accounting Standards
No. 109; and (iv) give effect to the sale of 1,250,000 shares of
Common Stock offered by the Company hereby at an assumed initial
public offering price of $12.00 per share and the application of the
estimated net proceeds therefrom. The special cash bonuses will reduce
the amount otherwise available for distribution to the Company's
shareholders prior to the termination of its S Corporation status.
The deferred tax benefits are estimated to be approximately $220,000
and will be reflected as a deferred tax asset and as a reduction to
income tax expense in the statement of income upon termination of the
Company's S Corporation status, which will occur upon the completion of
this offering. See "Use of Proceeds," "S Corporation Termination,"
"Management's Discussion and Analysis of Financial Condition and Results
Operations" and Notes 1 and 3 to the Company's Financial Statements.
</TABLE>
* * *

The Company was incorporated in Nebraska on March 24, 1981. The
principal office of the Company is located at 1033 "O" Street, Lincoln,
Nebraska 68508, and its telephone number is (402) 475-2525.

<PAGE>
RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
shares of Common Stock offered hereby. This Prospectus contains certain
forward-looking statements which involve substantial risks and
uncertainties. These forward-looking statements can generally be
identified as such because the context of the statement includes words
such as the Company "believes," "anticipates," "expects," "estimates,"
"intends" or other words of similar import. Similarly, statements that
describe the Company's future plans, objectives and goals are also
forward-looking statements. The Company's actual results, performance or
achievements could differ materially from those expressed or implied in
these forward-looking statements as a result of certain factors, including
those set forth below and elsewhere in this Prospectus.

Reliance on Key Clients

The Company has relied on a limited number of key clients for the
majority of its revenues. In 1996 and the first quarter of 1997, the
Company's largest client, Kaiser, accounted for 40.4% and 40.1%,
respectively, of the Company's total revenues. The Company expects that
this client will account for approximately 30% of total revenues for all
of 1997. The Company also expects that another client, United Healthcare
Corporation, which is a primary contractor (while the Company is a
subcontractor) with the United States Department of Defense (hereinafter
referred to collectively as the "Department of Defense"), will account for
approximately 15% of the Company's total revenues in 1997. The Company's
ten largest clients in 1995, 1996 and the first quarter of 1997 generated
71.1%, 63.9% and 69.5%, respectively, of the Company's revenues in each of
those periods. No assurances can be given that the Company will maintain
its existing client base, maintain or increase the level of revenue or
profits generated by its existing clients or be able to attract new
clients. Furthermore, the healthcare industry is undergoing significant
consolidation and no assurances can be given that such consolidation will
not cause the Company to lose clients. The loss of one or more of the
Company's large clients or a significant reduction in business from such
clients, regardless of the reason, would have a material adverse effect on
the Company. See "Business -- Clients" and "Risk Factors -- Healthcare
Industry Concentration."

Dependence on Performance Tracking Contract Renewals

In 1996, 75.9% of the Company's total revenues was generated from
contracts for the NRC Listening System, a renewable performance tracking
service. The Company expects that a substantial portion of its revenues
for the foreseeable future will continue to be derived from such
contracts. Substantially all such contracts are renewable annually at the
option of the Company's clients, although a client generally has no
minimum purchase commitments thereunder and the contracts are generally
cancelable on short or no notice without penalty. To the extent that
clients fail to renew or defer their renewals from the quarter anticipated
by the Company, the Company's quarterly results may be materially
adversely affected. The Company's ability to secure renewals is dependent
upon, among other things, its ability to gather and analyze performance
data in a consistent, high-quality and timely fashion. In addition, the
performance tracking and market research activities of the Company's
clients are affected by accreditation requirements, enrollment in managed
care plans, the level of use of satisfaction measures in healthcare
organizations' overall management and compensation programs, the size of
operating budgets, clients' operating performance, industry and economic
conditions and changes in management or ownership. As these factors are
beyond the Company's control, there can be no assurance that the Company
will be able to maintain its renewal rates. Any material decline in
renewal rates from existing levels would have a material adverse effect on
the Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Fluctuations in Operating Results

The Company's operating results have fluctuated from period to period
in the past and will likely fluctuate significantly in the future due to
various factors. There has historically been, and the Company expects
that there will continue to be, fluctuation in the financial results
related to the Market Guide, a product which accounted for 10.1% of the
Company's total revenues in 1996. Upon initial delivery of the new
edition of the Market Guide in a particular year, which usually occurs in
the third quarter, the Company recognizes all revenues realized for that
new edition through the delivery date, as well as all related direct
expenses of producing the new edition. A delay in completing and
delivering the Market Guide in a given year, the timing of which is
dependent upon the ability of the Company to access a supplier's
respondent panel on a timely basis, could delay recognition of such
revenues and expenses, which could materially affect operating results for
the interim periods. After initial delivery of a new edition of the
Market Guide, revenues and any marginal expenses related to additional
orders of that edition of the Market Guide are recognized upon delivery.
The Company has historically continued to receive orders for the Market
Guide over the two quarters following initial delivery. Because the
marginal expenses associated with these follow-on revenues are very low,
the profit margin earned on such revenues is generally higher than that
earned on the revenues recorded upon initial delivery of a new edition of
the Market Guide. In addition, the Company's operating results may
fluctuate as a result of a variety of other factors, including the size
and timing of orders from clients, client demand for the Company's
services and products (which, in turn, is affected by factors such as
accreditation requirements, enrollment in managed care plans, operating
budgets and clients' operating performance), the hiring and training of
additional staff, postal rate changes and industry and general economic
conditions. Because a significant portion of the Company's overhead,
particularly rent and full-time personnel expenses, is fixed in the short-
term, the Company's results of operations may be materially adversely
affected in any particular quarter if revenues fall below the Company's
expectations. These factors, among others, make it possible that in some
future quarter the Company's operating results may be below the
expectations of securities analysts and investors, which would have a
material adverse effect on the market price of the Company's Common Stock.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

Competition

The healthcare information and market research industry is highly
competitive. The Company has traditionally competed both with healthcare
organizations' internal marketing, market research and/or quality
improvement departments which create their own performance measurement
tools and with relatively small specialty research firms which provide
survey-based healthcare market research and/or performance assessment.
The Company anticipates that in the future it may increasingly compete
with (i) traditional market research firms which are significant providers
of survey-based, general market research and (ii) firms which provide
services or products that complement healthcare performance assessments,
such as healthcare software or information systems. Although only a few
of these competitors have to date offered survey-based, healthcare
performance measurement and/or market research that competes directly with
the Company's services and products, many of these competitors have
substantially greater financial, information gathering and marketing
resources than the Company and could decide to increase their resource
commitments to the Company's market. There are relatively few barriers to
entry into the Company's market, and the Company expects increased
competition in its market, which could adversely affect the Company's
operating results through pricing pressure, increased client service and
marketing expenditures and market share losses, among other factors.
There can be no assurance that the Company will continue to compete
successfully against existing or new competitors. See "Business --
Competition."

Healthcare Industry Concentration

Substantially all of the Company's revenues are derived from clients in
the healthcare industry. As a result, the Company's business, financial
condition and results of operations are influenced by conditions affecting
this industry, including changing political, economic, competitive and
regulatory influences that may affect the procurement practices and
operation of healthcare providers and payers. Many Federal and state
legislators have announced that they intend to propose programs to reform
the United States healthcare system. These programs could result in lower
reimbursement rates and otherwise change the environment in which
providers and payers operate. In addition, large private purchasers of
healthcare services are placing increasing cost pressure on providers.
Healthcare providers may react to these cost pressures and other
uncertainties by curtailing or deferring purchases, including purchases of
the Company's services and products. Moreover, there has been significant
consolidation of companies in the healthcare industry, a trend which the
Company believes will continue. Consolidation in this industry, including
the potential acquisition of certain of the Company's clients, could
adversely affect aggregate client budgets for the Company's services and
products or could result in the termination of a client's relationship
with the Company. The impact of these developments on the healthcare
industry is difficult to predict and could have a material adverse effect
on the Company.

Management of Growth; Possible Acquisitions

Since inception, the Company's growth has placed significant demands on
the Company's management, administrative, operational and financial
resources. In order to manage its growth, the Company will need to
continue to implement and improve its operational, financial and
management information systems and continue to expand, motivate and
effectively manage an evolving workforce. If the Company's management is
unable to effectively manage under such circumstances, the quality of the
Company's services and products, its ability to retain key personnel and
its results of operations could be materially adversely affected.
Furthermore, there can be no assurance that the Company's business will
continue to expand. The Company's growth could be adversely affected by
reductions in clients' spending on performance tracking and market
research, increased competition, pricing pressures and other general
economic and industry trends.

The Company may achieve a portion of its future revenue growth, if any,
through acquisitions of complementary businesses, products, services or
technologies, although the Company currently has no commitments or
agreements with respect to any such acquisition. The Company's management
has no experience dealing with the issues of product and service, systems,
personnel and business strategy integration posed by acquisitions, and no
assurance can be given that the integration of any possible future
acquisitions will be managed without a material adverse effect on the
Company. In addition, there can be no assurance that any possible future
acquisition will not dilute the Company's earnings per share. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Business -- Growth Strategy."

Control by Principal Shareholder

Upon the closing of this offering, the Company's President and Chief
Executive Officer will beneficially own approximately 70.7% (66.4% if the
Underwriters' over-allotment option is exercised in full) of the
outstanding Common Stock. As a result, he will be able to control matters
requiring shareholder approval, including the election of directors and
the approval of significant corporate matters such as change of control
transactions. The effects of such influence could be to delay or prevent
a change of control of the Company unless the terms are approved by such
shareholder. See "Management" and "Principal and Selling Shareholders."

Dependence on Key Personnel

The Company's future performance will depend to a significant extent
upon the efforts and ability of its key personnel who have expertise in
gathering, interpreting and marketing survey-based performance information
for healthcare markets. Although client relationships are managed at many
levels in the Company, the loss of the services of Michael D. Hays,
President and Chief Executive Officer, or one or more of the Company's
other senior managers could have a material adverse effect on the Company.
The Company's success will also depend on its ability to hire, train and
retain skilled personnel in all areas of its business. Competition for
qualified personnel in the Company's industry is intense, and many of the
companies with which the Company competes for qualified personnel have
substantially greater financial and other resources than the Company.
Furthermore, competition for qualified personnel can be expected to become
more intense as competition in the Company's industry increases. There
can be no assurance that the Company will be able to recruit, retain and
motivate a sufficient number of qualified personnel to compete
successfully.

Expansion of Direct Sales Force

As of March 31, 1997, the Company had three sales associates, however,
it recently hired two new sales associates and is in the process of
searching for additional sales associates. The Company's plans for future
growth depend in part on its unproven ability to hire, train, deploy,
manage and retain an increasingly large direct sales force. There can be
no assurance that the Company will be able to develop or manage such a
sales force. See "Business -- Sales and Marketing."

Data Collection Risks

The Company's ability to provide timely and accurate performance
tracking and market research to its clients depends on its ability to
collect large quantities of high quality data through surveys and
interviews. If receptivity to the Company's survey and interview methods
by respondents declines, or for some other reason their willingness to
complete and return surveys declines, or if the Company for any reason
cannot rely on the integrity of the data it receives, the Company could be
adversely affected. In addition, in the operation of its business the
Company has access to or gathers certain confidential information such as
medical histories on its respondents. As a result, the Company could be
subject to future regulation or potential liability for any inappropriate
disclosure or use of such information. The Company also relies on a
third-party panel of pre-recruited consumer households to produce in a
timely manner annual editions of its Market Guide. If the Company was not
able to continue to use this panel, or the time period in which the
Company uses this panel was altered, and the Company could not find an
alternative panel on a timely, cost competitive basis it could have a
material adverse effect on the Company. See "Business -- Services and
Products."

Limited Protection of the Company's Systems and Procedures

The Company's success is in part dependent upon its data collection
process, research methods, data analysis techniques and internal systems
and procedures that it has developed specifically to serve clients in the
healthcare industry. The Company has no patents; consequently, it relies
on a combination of copyright, trademark and trade secret laws and
employee nondisclosure agreements to protect its systems and procedures.
There can be no assurance that the steps taken by the Company to protect
its rights will be adequate to prevent misappropriation of such rights or
that third parties will not independently develop functionally equivalent
or superior systems or procedures. The Company believes that its systems
and procedures and other proprietary rights do not infringe upon the
proprietary rights of third parties. There can be no assurance, however,
that third parties will not assert infringement claims against the Company
in the future or that any such claims will not result in protracted and
costly litigation, regardless of the merits of such claims. See "Business
-- Intellectual Property and Other Proprietary Rights."

Risks Relating to Performance Tracking and Other Surveys

Many healthcare providers, payers and other entities or individuals use
the Company's renewable performance tracking and other healthcare surveys
in promoting and/or operating their businesses and as a factor in
determining physician or employee compensation. Consequently, any errors
in the data received or in the final surveys, as well as the actual
results of such surveys, can have a significant impact on such providers',
payers' or other entities' businesses and on any such individual's
compensation. In addition, parties who have not performed well in the
Company's surveys may be dissatisfied with the results of the surveys or
the manner in which the results may be used by competitors or others.
Although any such errors or dissatisfaction with the results of the
surveys or the manner in which the surveys have been used has not resulted
in litigation against the Company, there can be no assurance that the
Company will not face future litigation as a result of a healthcare
provider's, payer's or other entity's or individual's allegation of errors
in NRC's surveys or dissatisfaction with the results thereof.

Unspecified Use of Proceeds

The principal purposes of the offering of shares by the Company are to
obtain additional capital, facilitate the Company's access to public
equity markets and enhance the Company's ability to use its Common Stock
as consideration for possible acquisitions and as a means of attracting
and retaining key employees. The Company will not receive any proceeds
from the sale of shares by the Selling Shareholder. A significant portion
of the net proceeds the Company will receive from this offering has not
been designated for any specific purpose. As a consequence, the Company's
management will have broad discretion with respect to the use of such
proceeds. See "Use of Proceeds."

Effect of Anti-Takeover Provisions

The Company's Restated Articles of Incorporation and Restated By-Laws
contain provisions that, among other things, establish staggered terms for
members of the Company's Board of Directors, place certain restrictions on
the removal of directors, authorize the Board of Directors to issue
preferred stock in one or more series without shareholder approval and
require advance notice for director nominations and certain other matters
to be considered at meetings of shareholders. In addition, the Nebraska
Business Corporation Act mandates supermajority voting requirements on
certain extraordinary transactions (such as a merger or sale of
substantially all of the Company's assets) and the Nebraska Revised
Statutes prohibit certain business combinations with "interested
shareholders" and may eliminate the voting power (other than with respect
to elections of directors) of shares of the Company acquired by any person
who would own 20% or more of the total voting power. These provisions
could have the effect of delaying, deferring or preventing a change in
control or the removal of existing management of the Company, which could
adversely affect the market price of the Company's Common Stock. See
"Description of Capital Stock."

Shares Eligible for Future Sales

Sales of a substantial number of shares of Common Stock in the public
market following this offering could adversely affect the market price for
the Company's Common Stock. The number of shares of Common Stock
available for sale in the public market is limited by restrictions under
the Securities Act and lock-up agreements entered into by the Company and
its executive officers and directors, including all current shareholders,
under which the holders of such shares have agreed not to sell or
otherwise dispose of any of their shares for a period of 180 days after
the date of this Prospectus without the prior written consent of William
Blair & Company, L.L.C. However, William Blair & Company, L.L.C. may, in
its sole discretion and at any time without notice, release all or any
portion of the securities subject to such lock-up agreements. As a result
of these restrictions, only the 2,100,000 shares of Common Stock offered
hereby will be freely tradeable on the date of this Prospectus, unless
purchased by affiliates of the Company; an additional 5,205,000 shares
will be eligible for sale 180 days after the date of this Prospectus, in
accordance with Rule 144 under the Securities Act. The Company also
intends, not earlier than 180 days after the effective date of this
offering, to register on a registration statement on Form S-8 730,000
shares of Common Stock reserved for issuance under the Equity Incentive
Plan. See "Shares Eligible for Future Sale."

No Prior Public Market; Possible Volatility of Stock Price; Immediate and
Substantial Dilution

Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial offering price for the Common Stock was
determined by agreement among the Company, the Selling Shareholder,
William Blair & Company, L.L.C. and Robert W. Baird & Co. Incorporated,
and may not be indicative of future market prices. See "Underwriting" for
factors considered in determining such offering price. The Company has
applied to have the Common Stock quoted on the Nasdaq National Market, but
there can be no assurance that there will be an active market following
the offering. In addition, broad market trading and valuation
fluctuations have adversely affected the valuation of healthcare
information and market research focused companies (often unrelated to the
operating performance of such companies) and may adversely affect the
market price of the Company's Common Stock. The Common Stock may be
subject to wide fluctuations in price in response to variations in
quarterly operating results and other factors, including the evolving
business prospects of the Company, its clients and competitors, changes in
the financial estimates by securities analysts, possible acquisitions,
general economic or market conditions and other events or factors. There
can be no assurance that the market price of the Common Stock will not
decline below the initial public offering price. Investors participating
in this offering will incur immediate and substantial dilution of book
value. See "Dilution."

<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,250,000 shares
of Common Stock being offered by the Company hereby are estimated to be
approximately $13,450,000 based upon an assumed initial public offering
price of $12.00 per share after deducting the underwriting discount and
estimated offering expenses. The principal purposes of the offering of
shares by the Company are to obtain additional capital, facilitate the
Company's access to public equity markets and enhance the Company's
ability to use its Common Stock as consideration for possible acquisitions
and as a means of attracting and retaining key employees. Net proceeds
from this offering will be available for general corporate purposes,
including the replenishment of working capital used to distribute S
Corporation income to the Company's existing shareholders in connection
with the termination of the Company's S Corporation status and to pay
special cash bonuses to certain executive officers of the Company other
than the Selling Shareholder. See "S Corporation Termination" and Note 8
to the Company's Financial Statements. A portion of the proceeds may also
be used to acquire or invest in complementary businesses, products,
services or technologies; however, there are no commitments or agreements
with respect to any such transactions at the present time. Pending use of
the net proceeds for the above purposes, the Company intends to invest
such funds in short-term, interest-bearing, investment-grade obligations.

The Company will not receive any proceeds from the sale of Common Stock
by the Selling Shareholder.

S CORPORATION TERMINATION

From 1984 through July 31, 1994, the Company was a C Corporation.
Since August 1, 1994, the Company has been treated as an S Corporation for
Federal and state income tax purposes under Subchapter S of the Internal
Revenue Code of 1986, as amended (the "Code"). As a result, the income of
the Company has been taxed directly to its shareholders rather than to the
Company. Concurrent with the completion of this offering, the Company's S
Corporation election will be terminated and the Company will be subject to
corporate income taxation as a C Corporation.

In connection with the termination of the Company's S Corporation
status, the Company will record a deferred income tax benefit of
approximately $220,000 in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." This amount
will be reflected as a deferred tax asset and a reduction to income tax
expense otherwise incurred in such quarter and will be recorded upon
termination of the Company's S Corporation status, which will occur upon
the completion of this offering. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Notes 1 and
3 to the Financial Statements.

Subsequent to March 31, 1997, the Company made S Corporation
distributions of $1,609,000 to its shareholders. In connection with the
termination of the Company's S Corporation status, the Company will also
distribute to its shareholders approximately $2,296,000, which represents
all previously taxed but undistributed S Corporation income of the Company
through December 31, 1996 and an estimate as to the additional taxable and
undistributed income of the Company generated from January 1, 1997 until
completion of this offering.

DIVIDEND POLICY

The Company does not intend to pay any cash dividends on its Common
Stock in the foreseeable future. The Company intends to retain all of its
future earnings for use in the expansion and operation of its business.
Any future determination to pay cash dividends will be at the discretion
of the Company's Board of Directors and will depend upon, among other
things, the Company's results of operations, financial condition,
contractual restrictions and such other factors deemed relevant by the
Board of Directors.

Since its S Corporation election in 1994, the Company has made cash
distributions to its shareholders in amounts necessary to allow the
shareholders to at least pay the Federal and state income taxes on their
proportionate shares of the Company's net income. In connection with the
termination of the Company's S Corporation status, the Company will also
make distributions estimated to be $2,296,000 to its existing
shareholders. The Company will not make any additional distributions of
this kind in the future. See "S Corporation Termination."

CAPITALIZATION

The following table sets forth as of March 31, 1997: (i) the actual
total short-term debt and total capitalization of the Company and (ii)
such short-term debt and capitalization on a pro forma basis as adjusted
to give effect to (a) the distribution estimated to be $3,905,000 to
shareholders upon termination of the Company's S Corporation status
subsequent to March 31, 1997, (b) the special cash bonuses aggregating
$1,740,000 to be paid prior to the termination of the Company's S
Corporation status to certain executive officers of the Company other than
the Selling Shareholder, (c) the recognition of a $220,000 deferred tax
asset and (d) the sale of 1,250,000 shares of Common Stock offered by the
Company hereby (assuming an initial public offering price of $12.00 per
share and after deducting the underwriting discount and estimated offering
expenses) and the application of the estimated net proceeds therefrom.
See "Use of Proceeds," "S Corporation Termination," "Dividend Policy" and
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."

March 31, 1997
Pro Forma As
Actual Adjusted
(in thousands)
Total short-term debt . . . . . . . . . . . $ - $ -
======== ========
Total long-term debt . . . . . . . . . . . $ - $ -
Shareholders' equity: -------- --------
Preferred Stock, par value $.01 per share;
2,000,000 shares authorized; no shares
issued and outstanding actual and pro
forma as adjusted . . . . . . . . . . . - -
Common Stock, par value $.001 per share;
20,000,000 shares authorized; 6,055,000
shares issued and outstanding actual;
7,305,000 shares issued and outstanding
pro forma as adjusted(1) . . . . . . . . 6 7
Additional paid-in capital . . . . . . . - 13,449
Retained earnings (accumulated deficit) . 3,172 (2,253)
------- -------
Total shareholders' equity . . . . . . 3,178 11,203
------ -------
Total capitalization . . . . . . . . . $ 3,178 $11,203
====== =======
_________________

(1) Excludes (i) 225,000 shares of Common Stock issuable upon exercise of
employee stock options to be outstanding immediately after the
offering at an exercise price equal to the initial public offering
price and (ii) 505,000 additional shares of Common Stock reserved for
future issuance under the Equity Incentive Plan.

<PAGE>
DILUTION

The pro forma net tangible book deficit of the Company as of March 31,
1997 was $2.5 million, or $.41 per outstanding share of Common Stock
(after giving effect to the S Corporation distribution estimated to be
$3,905,000 subsequent to March 31, 1997 and the special cash bonuses
aggregating $1,740,000 to be paid to certain executive officers other than
the Selling Shareholder). See "S Corporation Termination" and Note 8 to
the Company's Financial Statements. Pro forma net tangible book deficit
per share represents the amount of the Company's pro forma tangible net
deficit (total liabilities less total tangible assets) divided by the
total number of shares of Common Stock outstanding. After giving effect
to (i) the sale of 1,250,000 shares of Common Stock by the Company in this
offering at an assumed initial public offering price of $12.00 per share
and the application of the net proceeds therefrom (after deducting the
underwriting discount and estimated offering expenses) and (ii) a pro
forma adjustment to recognize an estimated $220,000 of deferred income tax
benefit upon termination of the Company's S Corporation election, the pro
forma net tangible book value as of March 31, 1997 would have been $11.2
million or $1.53 per share. This represents an immediate increase in net
tangible book value of $1.94 per share to existing shareholders of the
Company and an immediate dilution of $10.47 per share to new investors
purchasing shares in this offering.

Since July 1992, the Company has issued only 18,520 shares of Common
Stock to one officer of the Company, at a weighted average price per share
of approximately $.08.

The following table illustrates the per share dilution:

Initial public offering price per share $12.00
Net tangible book deficit per share
before the offering . . . . . . . . . . $(0.41)
Increase attributable to new investors 1.94
-----
Pro forma net tangible book value per
share after the offering . . . . . . . 1.53
-----
Dilution per share to new investors(1) . $10.47
=====

____________________
(1) Dilution is determined by subtracting pro forma net tangible book
value per share of Common Stock after this offering from the assumed
initial public offering price per share.

<PAGE>
SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and with the Financial Statements and the Notes
thereto and other financial information included elsewhere in this
Prospectus. The selected statement of income data for the years ended
December 31, 1994, 1995, and 1996 and the balance sheet data at
December 31, 1995 and 1996 are derived from, and are qualified by
reference to, the audited financial statements of the Company included
elsewhere in this Prospectus. The selected statement of income data for
the years ended December 31, 1992 and 1993 and the balance sheet data at
December 31, 1992, 1993 and 1994 are derived from financial statements not
included herein. The selected statement of income data for the three
month periods ended March 31, 1996 and 1997 and the balance sheet data at
March 31, 1996 and 1997 are derived from the Company's unaudited financial
statements, which have been prepared on the same basis as the Company's
audited financial statements and, in the opinion of management, contain
all adjustments, consisting of only normal recurring adjustments,
necessary for a fair presentation of the financial position and results of
operations of the Company. The results of operations for the period ended
March 31, 1997 are not necessarily indicative of results for the full
fiscal year.

<TABLE>
<CAPTION>
Three Months
Ended
Year Ended December 31, March 31,
1992 1993 1994 1995 1996 1996 1997
(In thousands, except per share data)

<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Revenues:
Renewable performance
tracking services . . . $ 454 $ 507 $4,420 $6,839 $9,569 $2,122 $2,871
Renewable syndicated
product . . . . . . . . 415 435 652 493 1,276 82 341
Custom and other research 1,737 1,869 1,683 1,585 1,755 447 228
------- ------- ------- ------- ------- ------- -------
Total revenues . . . . 2,606 2,811 6,755 8,917 12,600 2,651 3,440
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Direct expenses . . . . . 1,264 1,083 2,967 3,495 5,685 1,132 1,393
Selling, general and
administrative . . . . . 1,149 1,167 2,044 2,364 3,060 660 951
Depreciation and
amortization . . . . . . 36 50 86 119 173 36 42
------- ------- ------- ------- ------- ------- -------
Total operating expenses 2,449 2,300 5,097 5,978 8,918 1,828 2,386
------- ------- ------- ------- ------- ------- -------
Operating income . . . . . 157 511 1,658 2,939 3,682 823 1,054
Other income and expenses,
net . . . . . . . . . . . 9 12 46 108 152 37 45
------- ------- ------- ------- ------- ------- -------
Income before income taxes 166 523 1,704 3,047 3,834 860 1,099
Provision for income taxes - 9 114 - - - -
Pro forma income taxes(1) . - - 583 1,219 1,534 344 440
------- ------- ------- ------- ------- ------ -------
Pro forma net income(1) . . $ 166 $ 514 $1,007 $1,828 $2,300 $ 516 $ 659
======= ======= ======= ======= ======= ====== =======
Pro forma net income per
share(1) . . . . . . . . $ 0.03 $ 0.08 $ 0.16 $ 0.30 $ 0.38 $ 0.09 $ 0.11
Weighted average shares
outstanding . . . . . . . 6,500 6,508 6,318 6,055 6,055 6,055 6,055

<CAPTION>
December 31, March 31,
1992 1993 1994 1995 1996 1996 1997(2)
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital . . . . $(361) $ 54 $1,358 $1,534 $2,018 $2,441 $3,029
Total assets . . . . . . 912 1,368 3,539 4,996 6,153 6,149 7,601
Total debt . . . . . . . 117 54 9 - - - -
Total shareholders'
equity . . . . . . . . (223) 290 1,623 1,830 2,079 2,729 3,178

(2) Does not reflect (i) special cash bonuses aggregating $1,740,000 to be
paid to certain executive officers of the Company other than the Selling
Shareholder and be recognized by the Company as a compensation charge
in its third quarter 1997 interim financial statements, (ii) S
Corporation distributions subsequent to March 31, 1997 estimated to be
$3,905,000 and (iii) deferred tax benefits that will arise upon adoption
of Financial Accounting Standards No. 109. The special cash bonuses
will reduce the amount otherwise available for distribution to the
Company's shareholders prior to the termination of its S Corporation
status. The deferred tax benefits are estimated to be approximately
$220,000 and will be reflected as a deferred tax asset and as a
reduction to income tax expense in the statement of income upon
termination of the Company's S Corporation status, which will occur
upon completion of this offering. See "S Corporation Termination,"
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Notes 1 and 3 to the Company's Financial
Statements.

</TABLE>

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains trend analysis and other
forward-looking statements that involve substantial risks and
uncertainties. The Company's actual results could differ materially from
those expressed or implied in the forward-looking statements as a result
of certain factors, including those set forth under "Risk Factors" and
elsewhere in this Prospectus.

Overview

The Company's historical revenue growth has been primarily the result
of increasing the scope of existing performance tracking projects,
undertaking new projects for existing clients and adding new clients. In
each of the last two years, the Company's billings to clients served in
the prior year were at least 80% of total billings. The number of clients
billed per year has increased to 210 in 1996 from 155 in 1994. The
Company believes substantial opportunities exist to increase revenues by
expanding the depth and breadth of existing clients' performance tracking
programs, increasing the cross selling of the Company's services and
products and adding new clients.

The Company offers three primary types of information services and
products: renewable performance tracking services, a renewable syndicated
product and custom research. In 1996, these categories accounted for
75.9%, 10.1% and 14.0%, respectively, of the Company's total revenues.
The Company expects that revenues from its custom research activities will
increase on an annual basis, but at a lower rate than revenues from its
renewable services and product because of the Company's increasing focus
on its renewable services and product.

The Company's most significant expense is direct expenses, which are
primarily composed of data collection costs such as postage and printing,
direct labor costs (of which the majority are associated with part-time
personnel) and other costs directly attributable to projects.

The Company's renewable performance tracking service, the NRC Listening
System, is a performance tracking tool for gathering and analyzing data
from survey respondents. Such services are provided pursuant to contracts
which are generally renewable annually. Typically, a portion of the
project fee is billed in advance and the remainder is billed periodically
over the duration of the project. Revenues and direct expenses are
recognized on a percentage of completion basis.

The Company's renewable nationally syndicated product, the NRC
Healthcare Market Guide, serves as a stand-alone market information and
competitive intelligence source as well as a comparative performance
database. Published by NRC bi-annually from 1988 to 1996 and annually
since 1996, this survey is a comprehensive consumer-based healthcare
assessment. Amounts due for the Market Guide are billed prior to or at
delivery. A pre-publication discount price is available prior to the
public release of each edition. Upon initial delivery of the new edition
of the Market Guide in a particular year, which typically occurs in the
third quarter, the Company recognizes all revenues realized for that new
edition through the delivery date, as well as all related direct expenses
of producing the new edition. After initial delivery of a new edition of
the Market Guide, revenues and any marginal expenses related to additional
orders of that edition of the Market Guide are recognized upon delivery.
The Company has historically continued to receive orders for the Market
Guide over the two quarters following initial delivery. Because the
marginal expenses associated with these follow-on revenues are very low,
the profit margin earned on such revenues is generally higher than that
earned on the revenues recorded upon initial delivery of a new edition of
the Market Guide. As a result, the Company's margins vary throughout the
year.

The Company conducts custom research which measures and monitors market
issues specific to individual healthcare organizations. The majority of
the Company's custom research is performed under contracts which provide
for billing in advance 65% of the total project fee with the remainder due
upon delivery. Revenues and direct expenses are recognized on a
percentage of completion basis.

Prior to termination of its S Corporation status, the Company intends
to pay special cash bonuses aggregating $1,740,000 to certain of its
executive officers other than the Selling Shareholder. The related
compensation charge will be recognized by the Company in its third quarter
1997 interim financial statements. These special cash bonuses will reduce
the amount otherwise available for distribution to the Company's
shareholders prior to the termination of its S Corporation status.

Selling, general and administrative expenses consist primarily of
personnel and other costs associated with sales, marketing,
administration, finance, information systems, human resources and general
management. Selling, general and administrative expenses as a percentage
of total revenues have decreased as the Company has spread its
infrastructure expenses across its expanding revenue base. The Company
recently hired two new sales associates and plans to hire additional sales
associates in the coming years. The Company anticipates that its selling,
general and administrative expenses as a percentage of total revenues
might increase slightly in the periods immediately following the hiring of
such new sales associates as they build their books of business. The
Company plans to move to a new leased facility in the fourth quarter of
1997 to accommodate its growth. The Company anticipates increased rent
and certain one-time costs associated with such move but does not expect
this to significantly increase the annual selling, general and
administrative expenses as a percentage of total revenues. Depreciation
and amortization expenses currently consist of expenses related to
equipment and furniture.

From 1984 through July 31, 1994, the Company was a C Corporation.
Since August 1, 1994, the Company has been treated as an S Corporation for
Federal and state income tax purposes. As a result, the Company's income
has been taxed directly to its shareholders rather than to the Company.
Concurrent with the completion of this offering, the Company's S
Corporation election will be terminated and the Company will be subject to
corporate income taxation as a C Corporation. For each of the periods in
which the Company was an S Corporation, the statement of income data
reflects a provision for income taxes on a pro forma basis at a combined
Federal and state rate of 40% as if the Company had been operating as a C
Corporation during such periods.

In connection with the termination of the Company's S Corporation
status, the Company will record a deferred income tax benefit of
approximately $220,000 in accordance with Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes." This amount
will be reflected as a deferred tax asset and a reduction to income tax
expense otherwise incurred in such quarter and will be recorded upon
termination of the Company's S Corporation status, which will occur upon
completion of this offering. See "S Corporation Termination."

Results of Operations

The following table sets forth, for the periods indicated, selected
statement of operations data expressed as a percentage of total revenues
and the percentage change in such items versus the prior comparable
period. The trends illustrated in the following table may not necessarily
be indicative of future results.

<TABLE>
<CAPTION>
Percentage of Total Revenues Percentage Increase (Decrease)
Year Ended Three Months Ended Three Months
December 31, March 31, 1997 over
1995 over 1996 over Three Months
1994 1995 1996 1996 1997 1994 1995 1996

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Renewable performance
tracking services . . . 65.4% 76.7% 75.9% 80.0% 83.5% 54.8% 39.9% 35.3%
Renewable syndicated
product . . . . . . . . 9.7 5.5 10.1 3.1 9.9 (24.3) 158.7 313.9
Custom and other research 24.9 17.8 14.0 16.9 6.6 (5.9) 10.8 (49.0)
----- ----- ----- ----- -----
Total revenues . . . . . 100.0 100.0 100.0 100.0 100.0 32.0 41.3 29.7
----- ----- ----- ----- -----
Operating expenses:
Direct expenses . . . . . 43.9 39.2 45.1 42.7 40.5 17.8 62.7 23.0
Selling, general and
administrative . . . . . 30.3 26.5 24.3 24.9 27.6 15.7 29.4 44.1
Depreciation and
amortization . . . . . . 1.3 1.3 1.4 1.4 1.2 39.1 45.4 15.6
----- ----- ----- ----- -----
Total operating
expenses . . . . . . . 75.5 67.0 70.8 69.0 69.3 17.3 49.2 30.5
----- ----- ----- ----- -----
Operating income . . . . . 24.5% 33.0% 29.2% 31.0% 30.7% 77.3 25.3 28.1
===== ===== ===== ===== =====
</TABLE>

Three Months Ended March 31, 1997 Compared to Three Months Ended March 31,
1996

Total revenues. Total revenues increased 29.7% in the first three
months of 1997 to $3.4 million from $2.7 million in the first three months
of 1996. Revenues from the Company's renewable performance tracking
services increased 35.3% to $2.9 million in the first three months of 1997
from $2.1 million in the first three months of 1996 primarily due to an
increase in the scope of existing tracking projects and the number of new
projects for existing clients, as well as the addition of new clients.
Revenues from the Company's renewable syndicated product increased 313.9%
to $341,000 in the first three months of 1997 from $82,000 in the first
three months of 1996. Such increase reflects the timing of releases of
new editions of the Market Guide. In the first three months of 1997 the
Company was selling its 1996 edition of the Market Guide whereas in the
first three months of 1996 the Company was selling its 1994 edition of the
Market Guide. The Company's custom research revenue decreased 49.0% to
$228,000 in the first three months of 1997 from $447,000 in the first
three months of 1996 primarily due to the start and completion of one
large project during the first quarter of 1996.

Direct expenses. Direct expenses increased 23.0% to $1.4 million in
the first three months of 1997 from $1.1 million in the first three months
of 1996. Direct expenses decreased as a percentage of total revenues to
40.5% in the first three months of 1997 from 42.7% in the first three
months of 1996. The decrease in direct expenses as a percentage of total
revenues was due primarily to increased sales of the 1996 edition of the
Market Guide in the first quarter of 1997 while the majority of the direct
expenses related to this edition of the Market Guide were expensed upon
its completion in the third quarter of 1996.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased 44.1% to $951,000 for the first three
months of 1997 from $660,000 for the first three months of 1996. This
increase was primarily due to expansion of the Company's sales and
marketing infrastructure and higher expenses related to enhancements to
the Company's dynamic questionnaire production software. Selling, general
and administrative expenses increased as a percentage of total revenues to
27.6% for the first three months of 1997 from 24.9% for the first three
months of 1996.

Depreciation and amortization. Depreciation and amortization expense
increased 15.6% to $42,000 in the first three months of 1997 from $36,000
in the first three months of 1996. Depreciation and amortization expenses
decreased as a percentage of total revenues to 1.2% in the first three
months of 1997 from 1.4% in the first three months of 1996.

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

Total revenues. Total revenues increased 41.3% in 1996 to $12.6
million from $8.9 million in 1995. Revenues from the Company's renewable
performance tracking services increased 39.9% in 1996 to $9.6 million from
$6.8 million in 1995 due primarily to an increase in the scope of existing
tracking projects and the number of new projects for existing clients, as
well as the addition of new clients. Revenues from the Company's
renewable syndicated product increased 158.7% to $1.3 million in 1996 from
$493,000 in 1995 due to the timing of releases of new editions of the
Market Guide. A new edition of the Market Guide was published in 1996 but
not in 1995 since the Market Guide was published on a bi-annual basis
prior to 1996. Revenues from the Company's custom research increased
10.8% to $1.8 million in 1996 from $1.6 million in 1995.

Direct expenses. Direct expenses increased 62.7% to $5.7 million in
1996 from $3.5 million in 1995. Direct expenses increased as a percentage
of total revenues to 45.1% in 1996 from 39.2% in 1995. The increase in
direct expenses as a percentage of total revenues was due to higher
staffing levels in 1996, sales of the Market Guide in 1996 at lower gross
margins than sales in 1995 since a new edition of the Market Guide was
published in 1996 (and, thereby, substantially all direct expenses of
producing the 1996 edition were recognized in 1996) but not in 1995, and
one-time costs associated with converting the internal processing of
certain surveys to a new image scanning and editing system.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased 29.4% to $3.1 million in 1996 from $2.4
million in 1995. Selling, general and administrative expenses decreased
as a percentage of total revenues to 24.3% in 1996 from 26.5% in 1995.
The decrease in these expenses as a percentage of total revenues reflects
the Company's efforts to spread its general and administrative costs over
a higher revenue base, which were partially offset by an increase in
selling and marketing expenses.

Depreciation and amortization. Depreciation and amortization expense
increased 45.4% to $173,000 in 1996 from $119,000 in 1995 but remained
relatively constant as a percentage of total revenues at 1.4% and 1.3% in
1996 and 1995, respectively. The aggregate increase was principally due
to computer equipment purchases to improve internal systems to support
business growth.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Total revenues. Total revenues increased 32.0% in 1995 to $8.9
million from $6.8 million in 1994. Revenues from the Company's renewable
performance tracking services increased 54.8% in 1995 to $6.8 million from
$4.4 million in 1994 due primarily to an increase in the scope of existing
tracking projects and the number of new projects for existing clients, as
well as the addition of new clients. Revenues from the Company's
renewable syndicated product decreased 24.3% to $493,000 in 1995 from
$652,000 in 1994 due to the timing of releases of new editions of the
Market Guide. A new edition of the Market Guide was produced in 1994 but
not in 1995. Revenues from the Company's custom research decreased 5.9%
to $1.6 million in 1995 from $1.7 million in 1994.

Direct expenses. Direct expenses increased 17.8% to $3.5 million in
1995 from $3.0 million in 1994. Direct expenses decreased as a percentage
of total revenues to 39.2% in 1995 from 43.9% in 1994. The decrease in
direct expenses as a percentage of total revenues was primarily due to
sales of the Market Guide in 1995 at higher gross margins than sales in
1994 since a new edition of the Market Guide was not published in 1995 but
was in 1994 (and, thereby, substantially all direct expenses of producing
the 1994 edition were recognized in 1994).

Selling, general and administrative expenses. Selling, general and
administrative expenses increased 15.7% to $2.4 million in 1995 from $2.0
million in 1994. Selling, general and administrative expenses decreased
as a percentage of total revenues to 26.5% in 1995 from 30.3% in 1994.
The decrease in these expenses as a percentage of total revenues reflects
the Company's efforts to leverage its general and administrative costs
over a higher revenue base. Selling, general and administrative expenses
were unusually high in 1994 due to certain one-time compensation and
lease-related charges.

Depreciation and amortization. Depreciation and amortization expense
increased 39.1% to $119,000 in 1995 from $86,000 in 1994 but remained
relatively constant as a percentage of total revenues at 1.3% in both 1995
and 1994. The aggregate increase was principally due to computer, printer
and mail room production equipment purchases to improve internal systems
to support business growth.

Selected Quarterly Results

The following tables set forth unaudited statement of income data for
each of the last eight quarters, as well as the percentage of the
Company's total revenues represented by each item. In management's
opinion, this unaudited information has been prepared on the same basis as
the annual financial statements and includes all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of
the information for the quarters presented, when read in conjunction with
the Company's Financial Statements and Notes thereto included elsewhere in
this Prospectus. The operating results for any quarter are not
necessarily indicative of results for the full year or for any future
quarter.

<TABLE>
<CAPTION>
Quarter Ended
June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31, March 31,
1995 1995 1995 1996 1996 1996 1996 1997
(In thousands, except per share data)

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Renewable performance
tracking services . . $1,450 $1,753 $2,409 $2,122 $2,191 $2,320 $2,936 $2,871
Renewable syndicated
product . . . . . . . 110 80 18 82 19 923 252 341
Custom and other
research . . . . . . . 331 407 392 447 452 397 459 228
----- ----- ----- ----- ----- ----- ----- -----
Total revenues . . . . 1,891 2,240 2,819 2,651 2,662 3,640 3,647 3,440
Direct expenses . . . . . 747 899 1,226 1,132 1,195 1,926 1,432 1,393
Selling, general and
administrative . . . . 536 539 704 660 659 677 1,064 951
Depreciation and
amortization . . . . . 24 24 45 36 36 41 60 42
----- ----- ----- ----- ----- ----- ----- -----
Operating income . . . . 584 778 844 823 772 996 1,091 1,054
Other income and
expenses, net . . . . . 18 25 20 37 38 32 45 45
Pro forma income
taxes(1) . . . . . . . 241 321 346 344 324 411 455 440
----- ----- ----- ----- ----- ----- ----- -----
Pro forma net income(1) . $ 361 $ 482 $ 518 $ 516 $ 486 $ 617 $ 681 $ 659
===== ===== ===== ===== ===== ===== ===== =====
Pro forma net income
per share(1) . . . . . $ .06 $ .08 $ .09 $ .09 $ .08 $ .10 $ .11 $ .11
Weighted average
shares outstanding . . 6,055 6,055 6,055 6,055 6,055 6,055 6,055 6,055
<FN>
_______________
(1) From 1984 through July 31, 1994, the Company was a C Corporation. Since August 1, 1994, the Company has been an S
Corporation and, accordingly, was not subject to Federal and state income taxes for the five months ended December 31,
1994, for the years ended December 31, 1995 and 1996 or for the three months ended March 31, 1996 and 1997. Pro forma
net income reflects a pro forma tax provision at a combined Federal and state rate of 40% for the periods the Company was
an S Corporation as if it had been a C Corporation. See "S Corporation Termination."

<CAPTION>
As a Percentage of Total Revenues
June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31, March 31,
1995 1995 1995 1996 1996 1996 1996 1997

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Renewable performance
tracking services . . 76.7% 78.3% 85.5% 80.0% 82.3% 63.7% 80.5% 83.5%
Renewable syndicated
product . . . . . . . 5.8 3.6 0.6 3.1 0.7 25.4 6.9 9.9
Custom and other
research . . . . . . . 17.5 18.1 13.9 16.9 17.0 10.9 12.6 6.6
----- ----- ----- ----- ----- ----- ----- -----
Total revenues . . . . 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Direct expenses . . . . . 39.5 40.1 43.5 42.7 44.9 52.9 39.3 40.5
Selling, general and
administrative . . . . 28.3 24.1 25.0 24.9 24.8 18.6 29.2 27.6
Depreciation and
amortization . . . . . 1.3 1.1 1.5 1.4 1.3 1.1 1.6 1.2
----- ----- ----- ----- ----- ----- ----- -----
Operating income . . . . 30.9% 34.7% 30.0% 31.0% 29.0% 27.4% 29.9% 30.7%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>

Liquidity and Capital Resources

The Company's principal source of funds has been cash flow from its
operations. The Company's cash flow has been sufficient to provide funds
for working capital and capital expenditures.

As of March 31, 1997, the Company had cash and cash equivalents of
$4.3 million and working capital of $3.0 million. Subsequent to March 31,
1997, the Company made S Corporation distributions of $1.6 million to its
shareholders and, in connection with the termination of the Company's S
Corporation status, the Company will also distribute approximately $2.3
million to its existing shareholders. In addition, the Company intends to
pay special cash bonuses aggregating $1.7 million to certain of its
executive officers other than the Selling Shareholder in the third quarter
of 1997 and prior to the termination of the Company's S Corporation
status. See "Use of Proceeds," "S Corporation Termination" and Note 8 to
the Company's Financial Statements.

During the three months ended March 31, 1997, the Company generated
$597,000 of net cash from operating activities while it generated $2.4
million of net cash during the same period in the prior year. The
decrease in cash flow was mainly due to the timing of the collection of a
$1.3 million account receivable in January 1996 and the timing of costs
incurred in advance of billings on certain projects, combined with growth
in accounts receivable, unbilled revenues and deferred revenues.

The Company generated $6.3 million of net cash from operating
activities for the year ended December 31, 1996 as compared to $1.8
million from operating activities for the year ended December 31, 1995.
This increase in cash generated was a result of an increase in the
Company's business and, in part, the collection in January 1996 of a $1.3
million receivable.

For the three months ended March 31, 1997 and 1996, net cash provided
by investing activities was $1.3 million and $314,000, respectively. The
increase in cash provided was primarily due to the maturing of investments
available for sale, which was partially offset by an investment of
$185,000 in furniture, computer equipment and production equipment to meet
the expansion of the Company's business. The Company's investments
available-for-sale consist principally of United States government
agencies securities with maturities of twelve months or less.

Net cash used in investing activities increased to $1.2 million from
$15,000 for the years ended December 31, 1996 and December 31, 1995,
respectively, primarily as a result of an increase in investments
available for sale. Furniture, computer equipment and production
equipment purchases in these years were $272,000 and $161,000,
respectively. The Company expects to make additional purchases of
equipment as necessary to accommodate any future growth.

Net cash used in financing activities was $359,000 and $274,000 for
the three months ended March 31, 1997 and 1996, respectively, and was $3.3
million and $2.8 million for the years ended December 31, 1996 and
December 31, 1995, respectively. Net cash used in financing activities
for these periods was primarily the result of S Corporation distributions
to shareholders. Subsequent to March 31, 1997, the Company made S
Corporation distributions of $1.6 million to its shareholders and expects
to make a final S Corporation distribution of approximately $2.3 million
in connection with the termination of its S Corporation status. See "S
Corporation Termination."

The Company has budgeted approximately $850,000 for capital
expenditures in 1997, to be funded through cash generated from operations.
Through March 31, 1997, the Company's capital expenditures were $185,000.
The Company expects that capital expenditures during the remainder of 1997
will be primarily for leasehold improvements, telecommunications
equipment, computer hardware, production equipment and furniture.

The Company typically bills clients for projects before they have
been completed. Billed amounts are recorded as billings in excess of
costs or deferred revenue on the Company's financial statements and are
recognized as income when earned. As of March 31, 1997 and December 31,
1996, the Company had $2.5 million and $2.2 million of deferred revenues,
respectively. In addition, when work is performed in advance of billing,
the Company will record this work as a cost in excess of billings or
unbilled revenue. At March 31, 1997 and December 31, 1996, the Company
had $338,000 and $282,000 of unbilled revenues, respectively.
Substantially all deferred and unbilled revenues will be earned and
billed, respectively, within 12 months of the respective period ends.

The Company believes that the net proceeds from the sale of the
Common Stock by the Company in this offering, together with cash flows
from operations and existing cash balances will be sufficient to meet its
working capital and capital expenditure requirements for at least the next
12 months. Beyond that time, if the net proceeds from this offering,
together with cash flows from operations and existing cash balances are
not sufficient to satisfy its capital needs, the Company may seek debt or
additional equity financing. There can be no assurance that such
financing can be obtained on favorable terms, if at all.

Recently Issued Accounting Pronouncements

In October 1995, the Financial Accounting Standards Board ("FASB")
issued Statement No. 123, Accounting for Stock-Based Compensation.
Statement No. 123 establishes a fair value based method of recognizing
compensation expense for stock-based compensation. As permitted by
Statement No. 123, the Company expects to continue to use the intrinsic
value based method of recognizing compensation expense for stock-based
compensation to employees. Therefore, for those options granted with
exercise prices equal to the anticipated offering price, no compensation
charge will be recognized by the Company in its financial statements.
However, the Company will be required to disclose the pro forma effects of
the fair value based method of measuring compensation expenses on the
Company's net income and net income per share as if that method were
adopted in the 1997 annual financial statements. The Company has not
determined the effects its recent stock option grants will have on the
annual disclosures required under Statement No. 123.

In February 1997, the FASB issued Statement No. 128, Earnings per
Share, which revises the calculation and presentation provisions of
Accounting Principles Board Opinion No. 15 and related interpretations.
Statement No. 128 is effective for the Company's fiscal year ending
December 31, 1997. Retroactive application will be required. The Company
believes the adoption of Statement No. 128 will not have a significant
effect on its reported earnings per share.

<PAGE>
BUSINESS

The following Business section contains forward-looking statements
that involve substantial risks and uncertainties. The Company's actual
results could differ materially from those expressed or implied in the
forward-looking statements as a result of certain factors, including those
set forth under "Risk Factors" and elsewhere in this Prospectus.

Since its founding 16 years ago, NRC has focused on the information
needs of the healthcare industry. The Company offers three primary types
of information services and products: renewable performance tracking
services, a renewable syndicated product and custom research. During
1996, NRC provided services to more than 200 healthcare organizations,
including HMOs, integrated healthcare systems, medical groups and industry
regulatory bodies. The Company gathered and analyzed over 1,000,000
completed surveys for these clients in 1996. The Company's clients
include Kaiser, the Department of Defense, HealthSouth Corporation, BJC
Health System and Mayo Clinic. NRC has benefited from a high rate of
renewable revenues. Specifically, over 80% of the Company's total
billings in each of the last two years was generated from clients billed
in the prior year.

Industry Background

Managed Care

The United States healthcare industry continues to undergo
significant change. During the past decade, escalating costs and the rise
in the number of uninsured Americans brought healthcare reform to the
forefront of public debate, culminating in the Federal government's failed
attempt to legislate broad change in 1994. As a result of consumer,
employer and governmental scrutiny, however, the healthcare industry
continues to shift towards a managed care model.

Managed care redefines payment structures and relationships between
healthcare payers and providers. In recent years, governmental and
market-driven reform initiatives have produced significant pressures on
healthcare providers to control costs. In the past, the financial risk of
healthcare delivery was principally absorbed by third-party payers, and
providers were not focused on cost containment. Through managed care and
provider capitation arrangements, the economic risk of healthcare delivery
is shifting from payers to providers. In order to manage this risk,
providers are being forced to change the way that they operate and are
increasingly focused on measuring and controlling the cost of delivery
care. As managed care's tight rein on costs has kept premium increases to
a minimum, employee benefit managers are gravitating from traditional fee-
for-service plans to managed care plans.

Managed care enrollment has been increasing rapidly and, according to
the American Association of Health Plans (the "AAHP"), as of December 31,
1995 represented approximately 61.2% of Americans. This was comprised of
approximately 47.5 million members of HMOs, approximately 91.8 million
people who are being serviced by preferred provider organizations ("PPOs")
and approximately 13.9 million people who are being serviced by point-of-
service ("POS") plans. In total, there are approximately 700 HMOs, 1,000
PPOs and 500 POS plans in the United States. According to the AAHP and
Sanford C. Bernstein Co., Inc., HMO and POS plan enrollment grew at a
compound annual rate of 10.9% from 1990 to 1995 and enrollment is
projected to be 112.5 million by 2000, representing a compound annual
growth rate of 12.0% from 1996 to 2000. Part of the reason for the expected
growth in HMO enrollment is the increasing enrollment of Medicare and
Medicaid beneficiaries in HMOs.

These changes in healthcare payment arrangements have caused
modifications in the organizational structures of healthcare providers.
Specifically, physicians, many of whom are financially challenged under a
managed care environment to sustain solo or small group practices, are
banding together and forming medical groups in order to provide more cost-
effective service. According to the American Medical Association, more
than 850 medical groups with at least 25 physicians have been formed to
date nationwide. Similarly, in order to compete for patients while
reducing cost structures, many hospitals have formed integrated healthcare
systems that provide services across the care continuum (in-patient,
outpatient, emergency care, home health, rehabilitation, long-term care,
hospice, pharmacy, etc.). Totaling more than 630 in 1996, according to
the St. Anthony's Integrated Health Care 100 Directory, integrated
healthcare systems drive market consolidation to more efficiently manage
care and services. In addition, this source indicates that the number of
organizations affiliated with these integrated healthcare systems has
increased from 5,000 in 1996 to more than 7,300 in 1997.

Due to intensified media coverage and lawmaker attention to possible
managed care abuses, the public has come to recognize that managed care's
reduction in healthcare costs often comes at the "expense" of less patient
choice and potentially lowered healthcare quality. In response, an
increasing amount of healthcare legislation has been proposed and
healthcare "watch dog" organizations have been formed to establish
performance standards. Sharing similar concerns, employers increasingly
demand that the health plans with which they contract deliver high-quality
medical care, evidenced by contractual performance guarantees. Facing
this quality-minded environment, a growing number of health plans, health
systems and medical groups are soliciting their customers for feedback on
the care and service provided. As a result, healthcare organizations are
increasingly retaining independent performance tracking firms who serve as
credible "scorekeepers."

Performance Tracking

Industry accrediting bodies, employers and the government are
increasingly demanding ongoing enterprise-wide performance tracking. In
order to implement performance standards, however, healthcare quality must
first be defined and quantified in a consistent and objective manner. The
two primary constituencies in a position to opine on healthcare quality
are healthcare practitioners, who have a clinical orientation, and
patients, who have a service orientation. Because of difficulty in
obtaining consistent, comparable clinical data across physician and
patient bases, the healthcare industry has not been able to develop a
uniform approach to measuring clinical outcomes. The industry has,
however, recognized that patient satisfaction can be quantified and
therefore currently represents the most effective means of measuring and
comparing healthcare service quality.

The National Committee for Quality Assurance ("NCQA") began
accrediting managed care organizations in 1991 in response to the need for
standardized, objective information about the healthcare quality these
organizations provided. The NCQA, which has accredited more managed care
organizations than any other accrediting body, requires health plans to
contract with an independent third party to conduct a standardized member
satisfaction survey on an annual basis. Data collected from the surveys
is then reported as part of the Health Plan Employer Data and Information
Set ("HEDIS"), a collection of performance indicators created to support
employers' review of health plan options. One of the nation's longest-
standing healthcare organization accrediting bodies, The Joint Commission
on Accreditation of Healthcare Organizations (the "Joint Commission"),
also broadened the performance measurement requirements in its
accreditation process in 1997 with its ORYX initiative. In addition, the
Health Care Financing Administration ("HCFA"), the government
administrator of Medicare benefits, mandates that all HMOs providing
Medicare benefits evaluate their senior population's health plan
satisfaction and health/functional status on an annual basis. Finally,
during 1997 state legislators across the country have introduced several
hundred managed care bills so far and 16 states have passed comprehensive
consumer-rights bills covering a number of managed-care issues.

Influenced by consumers, employers, accrediting bodies, competitive
factors and the government, 99% of HMOs, 96% of hospitals and 80% of PPOs
currently measure satisfaction according to the AAHP and the American
Hospital Association. The Company believes that most of these
organizations are measuring satisfaction only at the enterprise-wide
level. Due to competitive pressures, however, healthcare organizations
are increasingly seeking ways to affect positive change in their
organizations by "drilling down" their performance tracking from
enterprise-wide levels to more discreet levels. To identify where change
and quality improvements are needed, healthcare organizations must go
beyond enterprise-wide level performance tracking to narrower performance
tracking at the departmental level and ultimately at the individual
physician/caregiver level. Departmental level measurement reflects the
historical practice of hospitals, in particular, using static, mass
produced questionnaires for each service point (inpatient, emergency room,
outpatient, etc.). This approach shows how each department is doing and
may support quality improvement but, given the merging of services within
integrated healthcare systems, most industry departmental measurement does
not provide a uniform means to gather data and then apply information to
effect system-wide improvements.

In contrast, physician/caregiver level performance tracking is
critical to learning where improvements are needed and what service
issues, when addressed, will effect the greatest positive change. Since
patients' or members' relationships with their primary care physicians
strongly influence satisfaction and retention, healthcare organizations
are increasingly using performance tracking in physicians' compensation
packages to incentivize physicians to maintain and/or improve patient
relationships. According to a 1995 survey in the New England Journal of
Medicine, 36% of managed care plans use patient satisfaction as a
component in their physician compensation packages. Finally, other
healthcare information providers are measuring outcomes of care measures
such as cost, utilization and appropriateness of care at the
physician/caregiver level, perpetuating the trend toward more
physician/caregiver level measurement. While the Company believes that
less than one-half of healthcare organizations are currently tracking
patient satisfaction at the physician/caregiver level, the Company
believes that the healthcare organizations that are not tracking
satisfaction at this level are currently considering the potential
benefits of doing so.

The NRC Solution

The Company addresses healthcare organizations' growing need to
track their performance at the enterprise-wide, departmental and
physician/caregiver levels. The Company has led the industry in
developing tools that enable its clients to collect, in an unobtrusive
manner, a substantial amount of comparative service quality information in
order to analyze and improve their practices to maximize member additions,
member retention and profitability. NRC's performance assessments offer
the tangible measurement of health service quality currently demanded by
consumers, employers, industry accreditation organizations and lawmakers.

The Company's innovative solutions respond to managed care's
redefined relationships among consumers, employers, payers and providers.
While many vendors exclusively use static, mass produced questionnaires,
NRC also utilizes its dynamic data collection process to create a
personalized questionnaire that evaluates service issues specific to each
respondent's specific healthcare experience. The flexibility of the
Company's data collection process allows healthcare organizations to add
timely, market driven questions relevant to matters such as industry
performance mandates, employer performance guarantees and internal quality
improvement initiatives. In addition, the Company's dynamic data
collection process is used to assess core service factors relevant to all
healthcare respondent groups (patients, members, employers, employees,
physicians, etc.) and to all service points of a healthcare system
(inpatient, emergency room, outpatient, home health, rehabilitation, long-
term care, hospice, pharmacy, etc.). As differentiated from others in the
marketplace, the Company can gather data through fewer, more efficient
questionnaires as opposed to other firms' multiple questionnaires that
often bombard the same respondents.

NRC offers three primary types of information services and products.
The NRC Listening System is a renewable performance tracking tool for
gathering and analyzing data from survey respondents. The Company has the
capacity to measure performance beyond the enterprise-wide level and has
the ability and experience to determine key performance indicators at the
department and individual physician/caregiver measurement levels, where
the Company's services can best guide the efforts of its clients to
improve quality and enhance their market position. The syndicated Market
Guide, a stand-alone market information and competitive intelligence
source as well as a comparative performance database, allows the Company's
clients to assess their performance relative to the industry, to access
best practice examples and to utilize competitive information for
marketing purposes. The Company's custom research enables NRC's clients
to conduct specific studies in order to identify areas of improvement and
measure market issues and opportunities. Recognizing the increasing
applications for self-reported healthcare assessments, NRC works with its
clients to integrate satisfaction measurement into various areas of their
businesses, including physician compensation. As the Company partners
with its clients, it seeks to enhance relationships throughout the
healthcare organization and thereby both broaden and deepen the scope of
its projects.

Business Strengths

The Company believes the following factors have been of principal
importance in achieving its current position as a leading provider of
ongoing survey-based performance, analysis and tracking services and
products to the healthcare industry.

Leadership Position. The Company, over its 16-year history, has
established its position as an innovative leader of survey-based,
renewable healthcare performance tracking. NRC's client partnerships with
leading healthcare payers and providers exemplify the Company's leadership
position. NRC's client base includes Kaiser, the Department of Defense,
HealthSouth Corporation, BJC Health System and Mayo Clinic. In addition,
industry bodies shaping the direction of healthcare performance tracking
have sought NRC's expertise. For example, the Company served as a
technical advisor to the NCQA during its development of a standardized
satisfaction measurement process and also tracks the Joint Commission's
own service performance by measuring satisfaction levels of those
healthcare organizations undergoing the Joint Commission's accreditation
process.

Healthcare Focus. The Company devotes all of its resources to the
healthcare industry and that industry's evolving performance information
needs. This focus allows NRC to deliver high quality, survey-based
performance information through its staff of 63 full-time professionals
who understand the complex competitive and industry issues facing
healthcare organizations. The Company believes that its healthcare
expertise and experience enhance its competitive position relative to
those market research firms that serve multiple industries.

Service and Product Renewability. The Company has benefited from
high renewal rates. Specifically, in each of the last two years over 80%
of the Company's total billings were generated from clients served in the
prior year. This renewal rate reflects, in part, competitive factors and
industry mandates which necessitate periodic performance tracking as well
as the use of performance information, which must be updated regularly and
which must be consistent, as a component of physician compensation. The
Company believes its dynamic data collection process, multi-level
measurement (enterprise-wide, departmental and physician/caregiver level)
and multi-year comparative data foster project renewability as healthcare
organizations rely on these capabilities to monitor and improve their
performance.

NRC's Dynamic Data Collection Process. The Company believes that its
dynamic performance data collection process represents an important
competitive advantage over those performance tracking firms that only use
static, mass produced questionnaires focusing on one point of care
(inpatient, outpatient, emergency room, etc.) regardless of whether they
are personalized to each respondent and his or her unique experience. The
Company's dynamic data collection process offers questionnaire
personalization such as patient name, treating caregiver name, encounter
date and, in some cases, exact services received. This level of
personalization enables the Company to realize increased response rates
and identify client service issues needing improvement. NRC's dynamic
data collection process also allows healthcare organizations to add
questions relevant to time, market or organization specific issues. This
approach allows NRC's dynamic data collection process to evolve with
healthcare organizations as they grow and as their performance objectives
change as a result of competitive conditions, industry mandates, employer
performance guarantees and quality improvement initiatives.

Healthcare Market Database and Complementary Services. Over the last
11 years, NRC has developed the healthcare industry's most comprehensive
syndicated database of performance tracking data. The Market Guide
enables the Company's clients to compare their performance results against
national and local benchmarks and thereby facilitate the identification of
competitive strengths, weaknesses and opportunities. Representing the
views of one in every 650 households across the 48 continental states, the
Market Guide provides name specific performance data on 600 managed care
plans and 2,500 hospitals nationwide and addresses more than 100 industry
issues relevant to healthcare payers, providers and purchasers. The
Company gives its clients "point and click" access to NRC's syndicated
assessments, comparative performance data and industry mandated
requirements via its proprietary NRC Report Card System. Finally, in
order to provide its clients with a full-service performance tracking and
market research capability, NRC also offers its clients custom research
services.

Growth Strategy

The Company's growth strategy includes the following key elements:

Leverage Existing Client Base. The Company believes substantial
opportunities exist to expand the depth and breadth of current clients'
performance tracking programs. During 1996, the Company provided services
to more than 200 healthcare organizations, for which the Company completed
more than 1,000,000 survey assessments. The Company believes that since a
majority of its clients do not yet measure performance at either the
department or physician/caregiver level, the average number of surveys per
client will continue to grow as more healthcare organizations take
performance tracking deeper to these levels. This natural measurement
progression is emerging as healthcare organizations seek to affect change
that will solidify or improve their competitive market position and
enhance member retention rates. Furthermore, NRC believes its clients'
programs can be broadened through the addition of comprehensive
satisfaction surveys of all the constituencies of a healthcare plan or
provider, including employers, employees, physicians, patients and/or
members. Finally, the Company believes it has the opportunity to cross-
sell complementary services and products to its existing clients because
the Company's comparative database, competitor intelligence and best
practice information can provide added value to its existing clients'
current performance tracking programs.

Expand Client Base. From 1994 to 1996, the number of clients billed
has increased from 155 to 210. The Company believes that its industry
experience and reputation as a high quality, cost effective performance
tracking provider serving the nation's leading healthcare organizations
will enable it to continue to attract new clients for its services and
products. For example, the Company believes a substantial opportunity
exists to penetrate those healthcare organizations which do not currently
measure performance beyond the enterprise-wide level required by industry
mandates or which do not outsource performance tracking. In addition, NRC
believes there is also an opportunity to sell its renewable syndicated
product to healthcare providers and payers not previously served by the
Company but whose members' satisfaction is already tracked as part of the
Company's syndicated Market Guide. This database of performance
information on prospective clients and their competitors has historically
been an important point of initial contact for NRC's direct sales force.
At the end of 1996, the Company maintained a small direct sales force of
only three people. However, NRC added a new sales associate at the end of
the second quarter of 1997 and another in the third quarter of 1997 and
plans to hire one or more additional sales associates within the next 12
months. The Company believes this sales force growth will allow each
sales associate to develop more aggressively new clients in more
manageable geographic territories.

Pursue Strategic Acquisitions and Alliances. The Company believes
the fragmented nature of the healthcare performance tracking industry
presents strategic opportunities for the Company to acquire or align with
other performance information providers. The Company currently intends to
explore the acquisition of, or alliances with, firms providing
complementary products, services or technologies. The Company sees this
strategy as a means to expand its market position, increase its client
base and geographic presence and obtain additional personnel with industry
experience. NRC may also pursue possible industry partnerships or
alliances with firms such as financial or clinical healthcare information
companies interested in integrating the Company's syndicated performance
information into their own product portfolios.

Services and Products

The Company is a leading provider of ongoing survey-based performance
measurement, analysis and tracking services and products to the healthcare
industry, specializing in survey-based assessments designed to monitor
care outcomes including satisfaction and health status. NRC's three
primary types of information services and products are as follows:

Renewable Performance Tracking Services. The Listening System is
NRC's state-of-the-art data collection process which provides ongoing,
renewable performance tracking. The Listening System represented 75.9%
and 83.5% of the Company's total revenue in 1996 and the first quarter of
1997, respectively. This performance tracking program efficiently
coordinates and centralizes an organizations' satisfaction monitoring,
thereby establishing a uniform methodology and survey instrument needed to
obtain valid performance information and improve quality. Using the
industry mandated method of mail-based data collection, this assessment
process monitors satisfaction across healthcare respondent groups
(patients, members, physicians, employers, employees, etc.) and service
settings (inpatient, outpatient, health plan administration, etc.).
Rather than be limited to only static, mass produced questionnaires that
provide limited flexibility and performance insights, NRC's proprietary
software generates individualized questionnaires, which include
personalization such as patient name, treating caregiver name, encounter
date and, in most cases, the services received. This personalization
enhances the response rates and the relevance of performance data.
Flexible and responsive to healthcare organizations changing information
needs, NRC creates personalized questionnaires that evaluate service
issues specific to each respondent's specific healthcare experience and
include questions that address core service factors throughout a
healthcare organization.

As differentiated from other competitors, the Company gathers data
through one efficient questionnaire as opposed to multiple questionnaires
that often bombard the same respondents. As a result, the Company's
renewable performance tracking programs and data collection process (i)
realize higher response rates, obtain data more efficiently, and thereby
provide healthcare organizations with more feedback, (ii) eliminate
oversurveying (where one respondent receives multiple surveys) and (iii)
allow healthcare organizations to adapt questionnaire content to address
management objectives and to assess implemented quality improvement
programs or other timely marketplace issues. Recognizing that performance
programs must do more than just measure satisfaction, NRC has developed a
one-page reporting format called the NRC Action Plan that provides a basis
on which to make improvements. NRC Action Plans show healthcare
organizations which service factors their customer groups value, which
have the greatest impact on satisfaction levels and how their performance
in relationship to these key indicators changes over time.

Renewable Syndicated Product. The Company's renewable nationally
syndicated product, the NRC Healthcare Market Guide, serves as a stand-
alone market information and competitive intelligence source as well as a
comparative performance database. This product accounted for 10.1% and
9.9% of the Company's revenue in 1996 and the first quarter of 1997,
respectively. Since the Company currently sells this product to less than
5% of the nation's healthcare providers, the Company believes there is
substantial opportunity to further penetrate this market. Published by
NRC bi-annually from 1988 to 1996 and annually since 1996, this survey,
which is the largest of its kind, asks consumers via a third-party panel
to evaluate their health plans, health systems, physicians/caregivers and
personal health status. Representing the views of one in every 650
households across every county in the continental United States, the
Market Guide provides name specific performance data on 600 managed care
plans and 2,500 hospitals nationwide and addresses more than 100 data
items relevant to healthcare payers, providers and purchasers. Among the
data featured are benchmarks specific to the NCQA standardized HEDIS
Member Satisfaction Survey that compare health plans on a local, state
and/or national level. Similarly, the product's national name search
feature allows a healthcare organization with a national or regional
presence to simultaneously compare the performance of all its sites and
pinpoint where strengths and weaknesses exist. The product's trending
capacity details how the performance of healthcare organizations changes
over time. Other data collected in the Market Guide profile health plan
market share, consumers' health plan decision making factors,
physician/caregiver accessibility, hospital/healthcare system quality and
chronic patient populations. The Company gives clients easy access to the
Market Guide via its CD-ROM-based desktop delivery system - the Report
Card System. This delivery system allows healthcare professionals to
generate reports in numerous formats to support their decision making.

Custom Research. In order to be a sole source provider to its
clients, the Company also conducts custom research that measures and
monitors market characteristics or issues specific to individual
healthcare organizations. NRC's custom research includes consumer recall
of promotional and branding campaigns, consumer response to new service
offerings and provider perception of health plans and healthcare
organizations. The Company generally utilizes phone interviews to collect
relevant data for these custom studies. Custom research accounted for
14.0% and 6.6% of the Company's total revenues in 1996 and the first
quarter of 1997, respectively.

Clients

The Company's ten largest clients in 1995, 1996 and the first quarter
of 1997 accounted for 71.1%, 63.9% and 69.5%, respectively, of the
Company's total revenues in each of those periods. The Company's largest
client, Kaiser, accounted for 43.7%, 40.4% and 40.1% of the Company's
total revenues in 1995, 1996 and the first quarter of 1997, respectively,
and the Company expects that this client will account for approximately
30% of its total revenues for all of 1997. The Company also expects that
the Department of Defense will account for more than 10% of total revenues
in 1997. Overall, the Company served more than 150 and 200 healthcare
organizations in 1994 and 1996, respectively, and the Company believes
substantial opportunities exist to further penetrate its existing clients
as well as to expand its client base. The Company's clients include the
following:

Integrated
Healthcare
Health Plans Systems Medical Groups Other

Aetna Dental BJC Health System Healthcare American
Empire Blue Cross HealthSouth Partners Hospital
and Blue Shield Corporation Medical Group Association
Kaiser Jewish Hospital Mayo Clinic Department of
Healthcare Ochsner Medical Defense
Services Institutions Joint
Commission

Examples of the Company's client relationships, which represent the
nature of the Company's services and performance measurement solutions,
are set forth below:

Health Plan Multi-Level Measurement. One of the nation's largest
HMOs began working with the Company four years ago to assess the
satisfaction of its members and patients. The project's first phase
approached this measurement from an enterprise-wide level -- how the HMO
is performing in its West Coast marketplace -- and at the department level
-- examining the performance of each of its owned medical centers and
medical practices. From its original contract, the Company has
substantially expanded the scope of services provided to this client by
drilling down to the physician level. As a result, the number of
questionnaires processed by the Company on behalf of this client in 1996
was 150% greater than the number processed in 1994. This continuous
measurement allows the HMO to monitor the physician-patient relationship
in terms of key market issues such as access (including wait time, days to
appointment and doctor choice) and care dynamics (including familiarity
with health history, listens to patient concerns, explains procedures in
terms the patient understands, etc.) With the aid of the Company, the HMO
is able to internally disseminate detailed physician "report cards" or
performance reports that provide feedback to physicians and management,
allowing them to improve the physician-patient relationship. This HMO
uses the individual physician's scores in its physician compensation and
bonus structures.

Integrated Healthcare System Measurement. More than seven years ago,
the Company began a performance measurement program for a Midwestern
hospital covering inpatient, outpatient and emergency room services. The
Company's dynamic data collection process facilitated expanded client
surveying as the hospital led local market consolidation, culminating in
its current status as a 16 hospital health system. The Company utilizes a
survey instrument assessing performance not only of acute care services
historically measured for the system but also of services added to the
healthcare system such as long-term care, home health, occupational
medicine, mental health and hospice. The Company's ability to measure
simultaneously issues specific to each service point as well as core
service factors (also found on employee and physician surveys) pertinent
throughout the organization enable the health system to monitor
performance and identify improvement opportunities at the department and
enterprise-wide levels. The Company's long-term relationship with the
health system has fostered a highly valued measurement system championed
by top management and used in conjunction with continuous quality
improvement processes. To create enterprise-wide accountability,
satisfaction results are used as a component within executives' incentive
programs and staff performance appraisals. Data collected specific to
organizational objectives, such as improved care outcomes and service
quality, are directly aligned with incentives to influence positive
behavior modification. The Company's tracking program continues to
respond to the health system's organization, time and market specific
information needs through adaptable question blocks, added service points
assessed, and reporting formats tracking management objectives and quality
initiatives.

Medical Group Performance Measurement Leveraging Market Position.
The Company's physician/caregiver level performance measurement and
database of industry comparables provided the information solution a
Southern-based medical group needed to efficiently address performance
improvement opportunities and enhance its market position. The medical
group, prior to its nine-year relationship with the Company, used an
internally created tool to analyze physician and practice performance.
However, because other local medical groups used different satisfaction
instruments, the medical group could not fulfill its need to compare its
scores with those of other local physicians. The Company's solution
involved questionnaires tailored to the unique information needs of the
group's practices and also included "core" questions represented in the
Company's comparative database. Implemented across the group's more than
450 physicians in 45 specialties and subspecialties, the Company's
performance system allowed physicians and clinics to determine if their
performance was worse than, the same as or better than colleagues in
similar specialities locally, as well as nationwide. These benchmarks and
best-practice examples have allowed the group to capitalize on strengths
and address weaknesses identified by the Company's measurement system.
The Company's data supported a marketing campaign emphasizing the group's
very high "overall quality of care" score compared to other physicians in
its market. This marketing effort increased the group's negotiating power
with payers and providers, as well as its current patient retention and
new patient growth. In addition, the Company assisted the group in
leveraging their access scores by conducting a custom community study that
quantified patients' access expectations (how long was an acceptable
office wait time, days to appointment, etc.). Knowing what patients
wanted and how the group compared to other local practices, the Company
helped the group identify where resources should be allocated to improve
patient experiences and service ratings.

Sales and Marketing

The Company has generated the majority of its revenues from client
renewals, supplemented by its internal marketing efforts and a limited
sales force. In order to increase geographic penetration, NRC added one
additional sales associate to its existing three person sales force at the
end of the second quarter of 1997 and another in the third quarter. These
new sales associates will direct NRC's sales efforts from Nashville and
Atlanta. The Company is also in the process of searching for additional
sales associates. As compared to the typical industry practice of
compensating sales forces with relatively high base pay and a relatively
small sales commission, NRC compensates its sales associates with a
relatively low base pay and a relatively high, per sale commission. The
Company believes this compensation structure provides incentives to its
sales associates to surpass sales goals and increases the Company's
ability to attract top quality sales associates. The average
healthcare/market research industry experience of the Company's sales
associates is 8.75 years.

Numerous marketing efforts support the direct sales force's new
business generation and project renewal initiatives. NRC conducts an
annual direct marketing campaign around scheduled trade shows, including
leading industry conferences such as the National Managed Healthcare
Congress and American Association of Health Plans' Institute. NRC uses
this lead generation mechanism to track the effectiveness of marketing
efforts and add generated leads to its database of current and potential
client contacts. In addition, NRC plans to implement a telemarketing
sales strategy to qualify the highest quality potential leads. Finally,
the Company's public relations program includes (i) an ongoing presence in
leading industry trade press and in the mainstream press; (ii) public
speaking at strategic industry conferences; (iii) monthly "Perspectives on
Performance" articles (which are in-depth discussions of performance
tracking applications, trends and policies) sent to current clients and
top prospects; (iv) fostering relationships with key industry
constituencies (HCFA, Joint Commission and NCQA); and (v) an annual
Quality Leaders award program to top-ranking HMOs and health systems in
approximately 100 markets. The Company is also coauthoring an industry
manual with renowned researcher John E. Ware, Ph.D., of the New England
Medical Center's Health Institute.

The Company's integrated marketing activities facilitate its ongoing
receipt of project requests-for-proposals as well as direct sales force
initiated prospect contact. The sales process typically spans a 90-day
period encompassing the identification of a healthcare organization's
information needs, the education of prospects on NRC solutions (via
proposals, in-person sales presentations and on-line product
demonstrations) and the closing of the sale. The Company's sales cycle
varies depending on the particular product or service being marketed and
the size of the potential project.

Competition

The healthcare information and market research industry is highly
competitive. The Company has traditionally competed both with healthcare
organizations' internal marketing, market research and/or quality
improvement departments which create their own performance measurement
tools and with relatively small specialty research firms which provide
survey-based healthcare market research and/or performance assessment.
The Company anticipates that in the future it may increasingly compete
with (i) traditional market research firms which are significant providers
of survey-based, general market research and (ii) firms which provide
services or products that complement healthcare performance assessments,
such as healthcare software or information systems. Although only a few
of these competitors have to date offered survey-based, healthcare market
research that competes directly with the Company's services and products,
many of these competitors have substantially greater financial,
information gathering and marketing resources than the Company and could
decide to increase their resource commitments to the Company's market.
There are relatively few barriers to entry into the Company's market, and
the Company expects increased competition in its market, which could
adversely affect the Company's operating results through pricing pressure,
increased marketing expenditures and market share losses, among other
factors. There can be no assurance that the Company will continue to
compete successfully against existing or new competitors. See "Risk
Factors -- Competition."

The Company believes the primary competitive factors within its
market include quality of service, timeliness of delivery, service
uniqueness, credibility of provider, industry experience and price. NRC
believes that its industry leadership position, exclusive focus on the
healthcare industry, dynamic questionnaire, syndicated Market Guide and
comparative performance database, and its relationships with leading
healthcare payers and providers position the Company to compete in this
market.

Intellectual Property and Other Proprietary Rights

The Company's success is in part dependent upon its data collection
process, research methods, data analysis techniques and internal systems
and procedures that it has developed specifically to serve clients in the
healthcare industry. The Company has no patents; consequently, it relies
on a combination of copyright, trademark and trade secret laws and
employee nondisclosure agreements to protect its systems and procedures.
There can be no assurance that the steps taken by the Company to protect
its rights will be adequate to prevent misappropriation of such rights or
that third parties will not independently develop functionally equivalent
or superior systems or procedures. The Company believes that its systems
and procedures and other proprietary rights do not infringe upon the
proprietary rights of third parties. There can be no assurance, however,
that third parties will not assert infringement claims against the Company
in the future or that any such claims will not result in protracted and
costly litigation, regardless of the merits of such claims. See "Risk
Factors -- Limited Protection of the Company's Systems and Procedures."

Employees

As of July 1, 1997, the Company employed a total of 63 persons on a
full-time basis. In addition, as of such date the Company had part-time
associates primarily in its survey operations, representing approximately
102 full-time equivalent employees. None of the Company's employees are
represented by a collective bargaining agreement. The Company considers
its relationship with its employees to be excellent.

Facilities

The Company's headquarters is located in approximately 25,000 square
feet of leased office space in Lincoln, Nebraska. This facility houses
all the capabilities necessary for NRC's survey programming, printing and
distribution; telephone interviewing; data processing, analysis and report
generation; marketing; and corporate administration. The lease on this
facility is on a month to month basis. The Company plans to move to a new
leased facility in the fourth quarter of 1997 to accommodate its growth.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

Legal Proceedings

The Company is not subject to any material pending litigation.

<PAGE>
MANAGEMENT

Executive Officers and Directors

The following table sets forth information, as of August 1, 1997,
regarding the executive officers and directors of the Company.

Name Age Positions

Michael D. Hays . . . . . . 42 President, Chief Executive
Officer and Director
Jona S. Raasch . . . . . . . 38 Vice President-Operations

Patrick E. Beans . . . . . . 39 Vice President, Treasurer and
Chief Financial Officer

Sharon Flaherty . . . . . . . 49 Vice President-Sales, Marketing
and Client Services

Michael D. Hays has served as President and Chief Executive Officer
and as a director since he founded the Company in 1981. Mr. Hays has more
than 23 years of experience in the healthcare and survey-based research
industries.

Jona S. Raasch has served as Vice President-Operations since
September 1988 and served as Secretary from October 1994 until August
1997.

Patrick E. Beans has served as the principal financial officer since
he joined the Company in August 1994. In August 1997, Mr. Beans was
elected Vice President, Treasurer and Chief Financial Officer. From June
1993 until joining the Company, Mr. Beans was the finance director for the
Central Interstate Low-Level Radioactive Waste Commission, a five-state
compact developing a low-level radioactive waste disposal plan, and from
June 1992 to June 1993, he practiced as a certified public accountant.

Sharon Flaherty joined the Company in December 1996 and serves as
Vice President-Sales, Marketing and Client Services. From 1972 until
joining the Company, Ms. Flaherty held various positions with Kaiser
Foundation Health Plan, Inc. and its affiliates, an HMO, including the
last three years (from May 1993 to June 1996) as President of Kaiser
Foundation Health Plan of Texas.

Executive officers of the Company are elected by, and serve at the
discretion of, the Board of Directors. The Board of Directors currently
consists of one director. The Company intends to name at least three
additional directors, two of which will be independent directors, within
60 days of the completion of this offering to serve with Mr. Hays. The
Company's Restated Articles of Incorporation and Restated By-Laws divide
the Board of Directors into three classes. The directors serve staggered
terms of three years, with the members of one class being elected in any
year, as follows: (i) directors designated as Class I Directors will
serve until the 1998 annual meeting; (ii) directors designated as Class II
Directors will serve until the 1999 annual meeting; (iii) Michael D. Hays
has been designated as a Class III Director and will serve until the 2000
annual meeting; and in each case until their respective successors are
duly elected and qualified. There are no family relationships between any
directors or executive officers of the Company.

Director Compensation

Directors who are executive officers of the Company receive no
compensation for service as members of either the Board of Directors or
committees thereof. Directors who are not executive officers of the
Company will be paid an annual retainer and a fee for each committee
meeting attended, the amounts of which will be determined within 60 days
of the completion of this offering. Additionally, directors will be
reimbursed for out-of-pocket expenses associated with attending meetings
of the Board of Directors and committees thereof.

Board Committees

The Board of Directors established standing Audit and Compensation
Committees in August 1997. The Audit Committee is responsible for
recommending to the Board of Directors the appointment of independent
auditors, approving the scope of the annual audit activities of the
auditors, approving the audit fee payable to the auditors and reviewing
audit results. It is expected that within 60 days of the completion of
this offering the Board of Directors will appoint the members of the Audit
Committee, which will consist of three directors, including two
independent directors. The Compensation Committee reviews and recommends
to the Board of Directors the compensation structure for the Company's
directors, officers and other managerial personnel, including salary
rates, participation in any incentive compensation and benefit plans,
fringe benefits, non-cash perquisites and other forms of compensation, and
administers the Equity Incentive Plan. It is expected that within 60 days
of the completion of this offering the Board of Directors will appoint the
members of the Compensation Committee, which will consist of two
independent directors.

Compensation Committee Interlocks and Insider Participation

The Company did not have a Compensation Committee of the Board of
Directors prior to August 1997. As a result, Michael D. Hays was
responsible for fixing the compensation to be paid to the executive
officers of the Company.

Executive Compensation

The following table sets forth certain information concerning the
compensation paid to, earned by or awarded to the Company's Chief
Executive Officer and the Company's only other executive officers whose
total cash compensation exceeded $100,000 in the fiscal year ended
December 31, 1996. The persons named in the table are sometimes referred
to herein as the "named executive officers."

<TABLE>
Summary Compensation Table
<CAPTION>
Annual Compensation All Other
Name and Principal Position Year Salary($) Bonus($) Compensation($)

<S> <C> <C> <C> <C>
Michael D. Hays
President and Chief Executive
Officer . . . . . . . . . . 1996 $140,000 $ 70,000(1) $1,523(2)

Jona S. Raasch
Vice President-Operations . 1996 72,472 117,290(3) 1,167(4)

Patrick E. Beans
Vice President, Treasurer and
Chief Financial Officer . . 1996 72,472 117,290(3) 1,167(4)

________________________
(1) Discretionary bonus.

(2) Premiums for disability insurance paid by the Company for the benefit
of Mr. Hays.

(3) Includes $77,036 awarded in 1996 under the Company's prior annual
incentive plan, $21,627 paid in 1996 under the Company's prior annual
incentive plan as a result of awards made in earlier years, $15,407
awarded in 1996 under the Company's prior quarterly incentive plan
and $3,220 paid in 1996 under the Company's prior quarterly incentive
plan as a result of an award made in 1995. Subject to potential
forfeiture on termination of employment, awards made under the
Company's prior annual incentive plan vest and become payable in 20%
increments following the end of each fiscal year over a five-year
period. In August 1997, the Company terminated its prior annual and
quarterly incentive plans and currently intends to replace them with
a new incentive plan, the terms of which have not been established.

(4) Additional wages paid by the Company when professional development
programs were attended.
</TABLE>

Employment Agreements

On July 15, 1994, the Company set forth the terms and conditions of
Patrick E. Beans' employment with the Company in an employment memorandum.
Pursuant to this memorandum, Mr. Beans is entitled to an annual base
salary of $70,000 and is entitled to participate in the Company's
incentive plan, the National Research Corporation 401(k) Savings Plan and
a stock option pool or similar benefit plan (which will be the Equity
Incentive Plan). Under this memorandum, the Company agreed to employ Mr.
Beans as its Chief Financial Officer.

Employee Benefit Plans

Equity Incentive Plan. In August 1997, the Board of Directors adopted,
and the Company's shareholders approved, the Equity Incentive Plan. The
purpose of the Equity Incentive Plan is to promote the best interests of
the Company and its shareholders by providing employees of the Company
with an opportunity to acquire an interest in the Company. The Equity
Incentive Plan is intended to promote continuity of management and to
provide increased incentive and personal interest in the welfare of the
Company by employees upon whose judgment, interest and special effort the
successful conduct of the Company's business is dependent.

The Equity Incentive Plan may be administered by a committee of the
Board of Directors consisting of two or more directors or by the entire
Board of Directors. Once the members of the Compensation Committee of the
Board of Directors (the "Committee") are appointed, the Committee will
administer the Equity Incentive Plan and will have the authority to
establish rules for the administration of the Equity Incentive Plan; to
select the employees of the Company to whom awards will be granted; to
determine the types of awards to be granted to employees and the number of
shares covered by such awards; and to set the terms and conditions of such
awards. Prior to such time, the entire Board of Directors shall perform
the functions of the Committee with respect to the Equity Incentive Plan.

Any employee of the Company or of any of its future affiliates,
including any officer or employee-director of the Company or of any of its
future affiliates, is eligible to be granted awards by the Committee under
the Equity Incentive Plan. The Equity Incentive Plan authorizes the
granting to employees of: (i) stock options, which may be either
incentive stock options meeting the requirements of Section 442 of Code or
non-qualified stock options, (ii) stock appreciation rights, (iii)
restricted stock, (iv) performance shares and (v) other stock-based awards
and benefits. No awards may be granted under the Equity Incentive Plan
after the date of the Company's annual meeting of shareholders in the year
2001.

The maximum number of shares of Common Stock which may be issued and
sold under the Equity Incentive Plan is 730,000 shares. The Company
expects to grant options to purchase approximately 225,000 shares of
Common Stock in connection with this offering at an exercise price per
share equal to the initial public offering price, of which none are
expected to be granted to the named executive officers. The Company
anticipates that options granted to other executive officers will vest in
equal increments over a three-year period and that each of the other
options granted will vest in equal increments over a two-year period.
Consequently, none of such options will be exercisable until one year
after the date of this Prospectus. If any dividend or other distribution,
recapitalization, stock split, reorganization, merger, consolidation,
combination, repurchase or exchange of shares of Common Stock, issuance of
warrants or other rights to purchase shares of Common Stock or other
similar corporate transaction or event effects the shares of Common Stock
so that an adjustment is appropriate in order to prevent dilution or
enlargement of the benefits intended to be made available under the Equity
Incentive Plan, then the Committee will have the authority to adjust (i)
the number and type of shares subject to the Equity Incentive Plan and
which thereafter may be made the subject of awards, (ii) the number and
type of shares subject to outstanding awards, and (iii) the grant,
purchase or exercise price with respect to an award or may make provision
for a cash payment to the holder of an outstanding award.

Profit Sharing Plan. The Company maintains the National Research
Corporation Profit Sharing Plan (the "Profit Sharing Plan"). The Profit
Sharing Plan permits employee before-tax contributions, employee after-tax
contributions and provides for employer incentive matching contributions
and employer discretionary contributions. Substantially all of the
Company's associates who have completed one year of service and attained
age 21 become participants in the Profit Sharing Plan on the first day
coinciding with or following the date on which they satisfy the
eligibility criteria. Employee contributions to the Profit Sharing Plan
are 100% vested at the time of contribution. A participant becomes 20%
vested in Company contributions after two years of service and vests
thereafter at a rate of 20% per year of service, becoming fully vested
after six years of service. Vested accounts are distributable upon a
participant's retirement.

401(k) Savings Plan. The Company maintains the National Research
Corporation 401(k) Savings Plan, a defined contribution retirement plan
with a cash or deferred arrangement as described in Section 401(k) of the
Code (the "401(k) Savings Plan"). The 401(k) Savings Plan is intended to
be qualified under Section 401(a) of the Code. All employees of the
Company who have completed one year of service and attained age 21 are
eligible to participate in the 401(k) Savings Plan on the first day of the
month coinciding with or following the date on which they satisfy the
eligibility criteria. The 401(k) Savings Plan provides that each
participant may make elective contributions from 1% to 15% of his or her
compensation, subject to statutory limits. The 401(k) Savings Plan also
provides for matching contributions and discretionary contributions,
subject to statutory limits.

Indemnification of Directors and Officers

Under the Nebraska Business Corporation Act and the Company's
Restated By-Laws, directors and officers of the Company are entitled to
mandatory indemnification from the Company against certain liabilities and
expenses (i) to the extent such directors or officers are successful in
the defense of a proceeding and (ii) in proceedings in which the director
or officer is not successful in the defense thereof, if it is determined
that such person acted in good faith and in a manner reasonably believed
to be in, or not opposed to, the best interests of the Company, and, with
respect to any criminal action or proceedings, it must be further
determined that such a person had a reasonable cause to believe his or her
conduct was not unlawful. The Nebraska Business Corporation Act and the
Company's Restated By-Laws also permit the Company to secure insurance on
behalf of any officer, director, employee or other agent and for any
liability arising out of his or her actions in such capacity.

CERTAIN TRANSACTIONS

Prior to joining the Company in 1996, Sharon Flaherty, Vice President-
Sales, Marketing and Client Services, served as President of Kaiser
Foundation Health Plan of Texas and as a Vice President of Kaiser
Foundation Health Plan, Inc., the parent of Kaiser. Kaiser, the Company's
largest client, accounted for 40.4% of the Company's total revenues in
1996. The contract between the Company and Kaiser was entered into in
1994 and was negotiated on an arms-length basis.

<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of August , 1997, and as
adjusted to reflect the sale of the shares offered hereby, by: (i) the
Company's sole director; (ii) each of the named executive officers; (iii)
the sole director and all executive officers as a group; and (iv) each
person or other entity known by the Company to own beneficially more than
5% of the Common Stock. Except as otherwise indicated in the footnotes,
each of the holders has an address in care of the Company's principal
executive offices and has sole voting and investment power over the shares
beneficially owned, subject to any applicable community or marital
property laws.

<TABLE>
<CAPTION>
Number of Shares Shares Shares Beneficially
Beneficially Owned Being Owned After
Prior to Offering(1) Offered(2) Offering(1)(2)
Name Number Percent Number Percent

<S> <C> <C> <C> <C> <C>
Michael D. Hays . . . . . . 6,012,910 99.3% 850,000 5,162,910 70.7%

Jona S. Raasch . . . . . . . 42,090 * - 42,090 *

Patrick E. Beans . . . . . . 0 - - 0 -
The sole director and all
executive officers as a
group (4 persons) . . . . . 6,055,000 100% 850,000 5,205,000 71.3%

* Less than 1%

(1) Based on 6,055,000 shares of Common Stock outstanding as of August
, 1997 and 7,305,000 shares of Common Stock outstanding immediately
after this offering. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission.

(2) Assumes no exercise of the Underwriters' over-allotment option to
purchase 315,000 shares of Common Stock from the Selling Shareholder.
If the Underwriters' over-allotment option is exercised in full, upon
completion of this offering Mr. Hays would beneficially own 4,847,910
shares (or 66.4%).

</TABLE>

<PAGE>
DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 20,000,000
shares of Common Stock, par value $.001, and 2,000,000 shares of Preferred
Stock, par value $.01.

The following summary of certain provisions of the Common Stock and
Preferred Stock does not purport to be complete and is subject to, and
qualified in its entirety by, the provisions of the Company's Restated
Articles of Incorporation, which is included as an exhibit to the
Registration Statement of which this Prospectus is a part, and by the
provisions of applicable law.

Common Stock

There will be 7,305,000 shares of Common Stock outstanding after giving
effect to the sale of Common Stock offered by the Company hereby.

After all cumulative dividends have been paid or declared and set apart
for payment on any shares of Preferred Stock that are outstanding, the
Common Stock is entitled to such dividends as may be declared from time to
time by the Board of Directors in accordance with applicable law.

Except as provided under Nebraska law and except as may be determined
by the Board of Directors of the Company with respect to any series of
Preferred Stock, only the holders of Common Stock shall be entitled to
vote for the election of directors of the Company and on all other
matters. Subject to the limitations imposed by Nebraska law as described
below, the holders of Common Stock shall be entitled to one vote for each
share of Common Stock held by them. Under Nebraska law, holders of Common
Stock are entitled to cumulative voting rights in the election of
directors. Cumulative voting allows a shareholder to vote the number of
shares owned by such shareholder for as many persons as there are
directors to be elected, or to cumulate such votes and give one person as
many votes as the number of directors to be elected multiplied by the
number of such shareholder's shares, or to distribute such votes among as
many directors to be elected as such shareholder sees fit.

All shares of Common Stock are entitled to participate equally in
distributions in liquidation, subject to the prior rights of any Preferred
Stock which may be outstanding. Except as the Board of Directors may in
its discretion otherwise determine, holders of Common Stock have no
preemptive rights to subscribe for or purchase shares of the Company.
There are no conversion rights, sinking fund or redemption provisions
applicable to the Common Stock. The shares of Common Stock offered hereby
are fully paid and nonassessable.

The transfer agent for the Common Stock is Firstar Trust Company,
Milwaukee, Wisconsin.

Preferred Stock

Pursuant to the Company's Restated Articles of Incorporation, the Board
of Directors has the authority, without further action by the
shareholders, to issue up to 2,000,000 shares of Preferred Stock in one or
more series and to fix the designations, powers, preferences, privileges
and relative participating, optional or special rights and the
qualifications, limitations or restrictions thereof, including dividend
rights, conversion rights, voting rights, terms of redemption and
liquidation preferences, any or all of which may be greater than the
rights of the Common Stock. The Board of Directors, without shareholder
approval, can issue Preferred Stock with voting, conversion or other
rights that could adversely affect the voting power and other rights of
the holders of Common Stock. Preferred Stock could thus be issued quickly
with terms calculated to delay or prevent a change in control of the
Company or make removal of management more difficult. Additionally, the
issuance of Preferred Stock may have the effect of decreasing the market
price of the Common Stock, and may adversely affect the voting and other
rights of the holders of Common Stock. At present, there are no shares of
Preferred Stock outstanding and the Company has no plans to issue any of
the Preferred Stock.

Certain Statutory and Other Provisions

Statutory Provisions. The Nebraska Revised Statutes provide that the
voting power of the shares of a Nebraska corporation such as the Company
acquired by any person or persons acting as a group who would own, as a
result of such acquisition, 20% or more of the total voting power is
eliminated with respect to all matters other than the election of
directors, unless the acquisition is approved by a vote of the
disinterested shareholders at a special or annual meeting pursuant to
certain provisions of the Nebraska Revised Statutes. To the extent so
approved, such shares shall have the same voting rights as other shares of
the same class or series. This restriction does not apply to shares
acquired in certain specified transactions.

The Nebraska Revised Statutes provide that a Nebraska corporation such
as the Company may not engage in a business combination with a beneficial
owner of 10% or more of the voting shares of the corporation (or an
affiliate of such a beneficial owner) unless, before such shares were
acquired, the board of directors of the corporation approved the business
combination or the shareholder's acquisition of those shares which causes
such shareholder's beneficial ownership to equal or exceed 10% of the
voting shares.

Under the Nebraska Business Corporation Act, certain mergers or share
exchanges and a sale or other disposition of all or substantially all of
the Company's assets not in the ordinary course of business require
approval by the Board of Directors and by holders of two-thirds of all the
votes entitled to be cast on the transaction.

Restated Articles of Incorporation and Restated By-Laws of the Company.
Under the Company's Restated Articles of Incorporation and Restated By-
Laws, the Board of Directors of the Company is divided into three classes,
with staggered terms of three years each. Each year the term of one class
expires. The Restated Articles provide that any vacancies on the Board of
Directors shall be filled only by the affirmative vote of a majority of
the directors in office, even if less than quorum. Any director so
elected will serve until the next election of the class for which such
director is chosen and until his or her successor is duly elected and
qualified. See "Management -- Executive Officers and Directors."

The Restated Articles of Incorporation of the Company provide that any
director may be removed from office, but only for cause by the affirmative
vote of at least 66-2/3% of all outstanding shares entitled to vote in the
election of directors. However, if at least two-thirds of the Board of
Directors plus one director vote to remove a director, such director may
be removed without cause by a majority of the outstanding shares of the
Company entitled to vote thereon.

In addition, the Restated By-Laws of the Company establish a procedure
which shareholders seeking to call a special meeting of shareholders must
satisfy. This procedure involves notice to the Company, the receipt by
the Company of written demands for a special meeting from holders of 10%
or more of the issued and outstanding shares of Common Stock, a review of
the validity of such demands by an independent inspector appointed by the
Company and the fixing of the record and meeting dates by the Board of
Directors. In addition, shareholders demanding such a special meeting
must deliver to the Company a written agreement to pay the costs incurred
by the Company in holding a special meeting, including the costs of
preparing and mailing the notice of meeting and the proxy materials for
the solicitation by the Company of proxies for use at such meeting, in the
event such shareholders are unsuccessful in their proxy solicitation.

The Restated By-Laws of the Company also provide the Board of Directors
of the Company with discretion in postponing shareholder meetings,
including, within certain limits, special meetings of shareholders.
Additionally, the President or the Board of Directors (acting by
resolution) may adjourn a shareholder meeting at any time prior to the
transaction of business at such meeting. The Restated By-Laws of the
Company also contain strict time deadlines and procedures applicable to
shareholders seeking to nominate a person for election as a director or to
otherwise bring business before a meeting.

The foregoing provisions of the Company's Restated Articles of
Incorporation and Restated By-Laws and the Nebraska Revised Statutes and
the Nebraska Business Corporation Act could have the effect of delaying,
deferring or preventing a change in control of the Company. See "Risk
Factors -- Effect of Anti-Takeover Provisions."

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have outstanding an
aggregate of 7,305,000 shares of Common Stock. Of these outstanding
shares of Common Stock, the 2,100,000 shares sold in this offering will be
freely tradeable without restriction or further registration under the
Securities Act, unless purchased by "affiliates" of the Company as that
term is defined in Rule 144 under the Securities Act. The remaining
5,205,000 shares of Common Stock held by existing shareholders are
"restricted securities" as that term is defined in Rule 144 under the
Securities Act ("Restricted Shares") and will be subject to the lock-up
arrangements described below. Restricted Shares may be sold in the public
market only if registered or if they qualify for an exemption from
registration under Rules 144 or 144(k) promulgated under the Securities
Act, which are summarized below. All of such Restricted Shares have been
held in excess of one year. Sales of the Restricted Shares in the public
market, or the availability of such shares for sale, could adversely
affect the market price of the Common Stock.

The Company and its directors and executive officers, including all
current shareholders, have entered into contractual "lock-up" agreements
providing that they will not offer, sell, contract to sell or grant any
option to purchase or otherwise dispose of the shares of Common Stock
owned by them or that could be purchased by them through the exercise of
options to purchase Common Stock of the Company for a period of 180 days
after the date of this Prospectus without the prior written consent of
William Blair & Company, L.L.C. As a result of these contractual
restrictions, notwithstanding possible earlier eligibility for sale under
the provisions of Rules 144 and 144(k), the shares subject to lock-up
agreements will not be saleable until 180 days after the date of this
Prospectus. William Blair & Company, L.L.C., in its discretion, may waive
the foregoing restrictions in whole or in part, with or without a public
announcement of such action.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares
for at least one year (including the holding period of any prior owner
except an affiliate of the Company) would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
(i) one percent of the number of shares of Common Stock then outstanding
(which will equal 73,050 shares immediately after this offering); or (ii)
the average weekly trading volume of the Common Stock during the four
calendar weeks preceding the filing of a Form 144 with respect to such
sale. Sales under Rule 144 are also subject to certain manner of sale
provisions and notice requirements and to the availability of current
public information about the Company. Under Rule 144(k), a person who is
not deemed to have been an affiliate of the Company at any time during the
90 days preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least two years (including the holding period
of any prior owner except an affiliate of the Company), is entitled to
sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144;
therefore, unless otherwise restricted, "144(k) shares" may be sold
immediately upon the completion of this offering.

The preceding description does not give effect to the shares of Common
Stock which may be offered and sold pursuant to the Equity Incentive Plan.
See "Management -- Employee Benefit Plans -- Equity Incentive Plan." The
Company intends to file a registration statement under the Securities Act
not earlier than 180 days after the date of this Prospectus to register
the shares of Common Stock issuable under the Equity Incentive Plan, which
shares will be available for sale in the public market, subject to the
volume and other limitations of Rule 144 for shares held by affiliates of
the Company. In connection with this offering, options to purchase
225,000 shares of Common Stock will be granted under the Equity Incentive
Plan at an exercise price equal to the offering price.

Since there has been no public market for the Common Stock prior to
this offering, no predictions can be made as to the effect, if any, that
market sales of shares or the availability of shares for sale will have on
the market price prevailing from time to time. Nevertheless, sales of
substantial amounts of the Common Stock, or the perception that such sales
could occur, could adversely affect the prevailing market price of the
Common Stock.

UNDERWRITING

The several Underwriters named below (the "Underwriters"), for whom
William Blair & Company, L.L.C. and Robert W. Baird & Co. Incorporated are
acting as Representatives (the "Representatives"), have severally agreed,
subject to the terms and conditions set forth in the Underwriting
Agreement by and among the Company, the Selling Shareholder and the
Underwriters (the "Underwriting Agreement"), to purchase from the Company
and the Selling Shareholder, and the Company and the Selling Shareholder
have agreed to sell to the Underwriters, the respective number of shares
of Common Stock set forth opposite each Underwriter's name in the table
below.

Underwriters Number of Shares

William Blair & Company, L.L.C. . . .
Robert W. Baird & Co. Incorporated . .

---------
Total . . . . . . . . . . . . . . . 2,100,000
=========

In the Underwriting Agreement, the Underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all of the Common
Stock offered hereby if any is purchased (excluding shares covered by the
over-allotment option granted therein). In the event of a default by any
Underwriter, the Underwriting Agreement provides that, in certain
circumstances, purchase commitments of the non-defaulting Underwriters
shall be increased or the Underwriting Agreement may be terminated.

The Representatives have advised the Company and the Selling
Shareholder that the Underwriters propose to offer the Common Stock to the
public initially at the public offering price set forth on the cover page
of this Prospectus and to selected dealers at such price less a concession
of not more than $ per share. The Underwriters may allow, and
such dealers may re-allow, a concession not in excess of $ per
share to certain other dealers. After the public offering, the public
offering price and other selling terms may be changed by the Underwriters.

The Selling Shareholder has granted to the Underwriters an option,
exercisable within 30 days after the date of this Prospectus, to purchase
up to an additional 315,000 shares of Common Stock at the same price per
share to be paid by the Underwriters for the other shares offered hereby.
If the Underwriters purchase any such additional shares pursuant to this
option, the Underwriters will be committed to purchase such additional
shares in approximately the same proportion as set forth in the table
above. The Underwriters may exercise the option only for the purpose of
covering over-allotments, if any, made in connection with the distribution
of the Common Stock offered hereby.

The Company and its directors and executive officers, including all
current shareholders, have agreed that they will not sell, contract to
sell or otherwise dispose of any Common Stock or any interest therein for
a period of 180 days after the date of this Prospectus without the prior
written consent of William Blair & Company, L.L.C., except for the Common
Stock offered hereby. William Blair & Company, L.L.C., in its discretion,
may waive the foregoing restrictions in whole or in part, with or without
a public announcement of such action. See "Shares Eligible for Future
Sale."

The Company and the Selling Shareholder have agreed to indemnify the
Underwriters and their controlling persons against certain liabilities,
including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof.

Prior to this offering, there has been no public market for the Common
Stock of the Company. Consequently, the initial public offering price for
the Common Stock will be determined by negotiations among the Company and
the Representatives. Among the factors which will be considered in such
negotiations will be the prevailing market conditions, the results of
operations of the Company in recent periods, the market capitalizations
and stages of development of other companies which the Company, the
Selling Shareholder and the Representatives believe to be comparable to
the Company, estimates of the business potential of the Company, the
present state of the Company's development and other factors which may be
deemed relevant.

The Representatives have informed the Company that the Underwriters
will not confirm, without client authorization, sales to their client
accounts as to which they have discretionary authority.

Until the distribution of the shares is completed, the rules of the
Commission may limit the ability of the Underwriters and certain selling
group members to bid for and purchase shares of Common Stock. As an
exception to these rules, the Representatives are permitted to engage in
certain transactions that stabilize the price of the Common Stock. Such
transactions may consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Common Stock. In addition, if the
Representatives over-allot (i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus), and thereby
create a short position in the Common Stock in connection with this
offering, the Representatives may reduce that short position by purchasing
Common Stock in the open market. The Representatives may also elect to
reduce any short position by exercising all or part of the over-allotment
option described herein.

The Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the
Representatives purchase shares of the Common Stock in the open market to
reduce the Underwriters' short position or to stabilize the price of the
Common Stock, they may reclaim the amount of the selling concession from
the Underwriters and selling group members who sold those shares as part
of this offering. In general, purchases of a security for the purpose of
stabilization or to reduce a syndicate short position could cause the
price of the security to be higher than it might otherwise be in the
absence of such purchases. The imposition of a penalty bid might have an
effect on the price of a security to the extent that it were to discourage
resales of the security by purchasers in the offering. Neither the
Company nor any of the Underwriters makes any representation or prediction
as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition,
neither the Company nor any of the Underwriters makes any representation
that the Representatives will engage in such transactions or that such
transactions, once commenced, will not be discontinued without notice.

LEGAL MATTERS

The validity of the issuance of the shares of Common Stock offered
hereby will be passed upon for the Company and the Selling Shareholder by
Foley & Lardner, Milwaukee, Wisconsin. Certain legal matters will be
passed upon for the Underwriters by Sachnoff & Weaver, Ltd., Chicago,
Illinois.

EXPERTS

The financial statements of the Company at December 31, 1995 and 1996,
and for each of the three years in the period ended December 31, 1996,
appearing in this Prospectus and in the Registration Statement, have been
audited by KPMG Peat Marwick LLP, independent auditors, as set forth in
their report thereon appearing elsewhere herein and in the Registration
Statement, and are included herein in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.

<PAGE>
NATIONAL RESEARCH CORPORATION

INDEX TO FINANCIAL STATEMENTS

Page

Independent Auditors' Report . . . . . . . . . . . . . . . . . F-2

Balance Sheets as of December 31, 1995 and 1996 and March 31,
1997 and Pro Forma Balance Sheet as of March 31, 1997 . . . . F-3

Statements of Income for the years ended December 31, 1994,
1995 and 1996 and for the three months ended March 31, 1996
and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . F-4

Statements of Shareholders' Equity for the years ended December
31, 1994, 1995 and 1996 and for the three months ended March
31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . F-5

Statements of Cash Flows for the years ended December 31, 1994,
1995 and 1996 and for the three months ended March 31, 1996 and
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6

Notes to Financial Statements . . . . . . . . . . . . . . . . . F-7

<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
National Research Corporation:

We have audited the accompanying balance sheets of National Research
Corporation as of December 31, 1995 and 1996, and the related statements
of income, shareholders' equity and cash flows for each of the years in
the three-year period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of National Research
Corporation as of December 31, 1995 and 1996, and the results of its
operations and its cash flows for each of the years in the three-year
period ended December 31, 1996 in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP

Lincoln, Nebraska
June 6, 1997, except as to
note 8 which is as
of August 8, 1997

<PAGE>

<TABLE>
NATIONAL RESEARCH CORPORATION

BALANCE SHEETS
<CAPTION>
Pro Forma
December 31, March 31, March 31,
Assets 1995 1996 1997 1997
(Unaudited)

<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 934,800 $2,782,212 $4,311,357 $ --
Investments in marketable debt
securities 587,245 1,476,965 1,261 1,261
Trade accounts receivable, less
allowance for doubtful accounts
of $25,000 in 1995, $45,000 in
1996, and $50,000 in 1997 2,912,122 1,216,812 2,416,031 2,416,031
Unbilled revenues 97,334 282,358 337,993 337,993
Prepaid expenses and other 24,610 46,022 43,499 43,499
--------- --------- --------- ---------
Total current assets 4,556,111 5,804,369 7,110,141 2,798,784
--------- --------- --------- ---------
Property and equipment:
Furniture and fixtures 173,225 291,514 301,989 301,989
Computer equipment 409,008 481,055 655,114 655,114
--------- --------- --------- ---------
582,233 772,569 957,103 957,103
Less accumulated depreciation and
amortization 310,851 434,937 476,533 476,533
--------- --------- --------- ---------
Net property and equipment 271,382 337,632 480,570 480,570
--------- --------- --------- ---------
Cash surrender value of life
insurance 157,872 -- -- --
Other 10,657 10,657 10,657 10,657
--------- --------- --------- ---------
Total assets $4,996,022 $6,152,658 $7,601,368 $3,290,011
========= ========= ========= =========
Liabilities and Shareholders'
Equity (Deficit)

Current liabilities:
Accounts payable and accrued
expenses $ 359,988 $ 494,614 $ 869,656 $ 869,656
Accrued wages, bonuses and profit
sharing 503,755 764,784 648,311 648,311
Dividends payable 269,876 359,384 -- 1,333,643
Billings in excess of revenues
earned 1,888,154 2,168,026 2,562,809 2,562,809
--------- --------- --------- ---------
Total current liabilities 3,021,773 3,786,808 4,080,776 5,414,419
Bonuses and profit sharing
accruals 144,684 286,443 342,144 342,144
--------- --------- --------- ---------
Total liabilities 3,166,457 4,073,251 4,422,920 5,756,563
--------- --------- --------- ---------
Shareholders' equity:
Common stock, $.001 par value.
Authorized 20,000,000 shares,
issued and outstanding 6,055,000
shares 6,055 6,055 6,055 6,055
Additional paid-in capital - - - -
Retained earnings (accumulated
deficit) 1,823,510 2,073,352 3,172,393 (2,472,607)
--------- --------- --------- ---------
Total shareholders' equity
(deficit) 1,829,565 2,079,407 3,178,448 (2,466,552)
--------- --------- --------- ---------
Commitments and contingencies
Total liabilities and
shareholders' equity $4,996,022 $6,152,658 $7,601,368 $3,290,011
========= ========= ========= =========

</TABLE>

See accompanying notes to financial statements.

<PAGE>

<TABLE>
NATIONAL RESEARCH CORPORATION

STATEMENTS OF INCOME
<CAPTION>
Three months
Years ended December 31, ended March 31,
1994 1995 1996 1996 1997
(Unaudited)

<S> <C> <C> <C> <C> <C>
Revenues:
Renewable performance
tracking services $4,419,564 $6,839,410 $ 9,568,915 $2,122,133 $2,871,051
Renewable syndicated
product 652,192 493,416 1,276,423 82,301 340,621
Custom and other research 1,683,198 1,584,533 1,754,895 447,102 228,122
--------- --------- ---------- --------- ---------
Total revenues 6,754,954 8,917,359 12,600,233 2,651,536 3,439,794
--------- --------- ---------- --------- ---------
Operating expenses:
Direct expenses 2,967,397 3,494,706 5,685,200 1,132,953 1,393,421
Selling, general and
administrative 2,043,878 2,364,269 3,060,189 659,932 950,802
Depreciation and
amortization 85,620 119,093 173,148 35,998 41,597
--------- --------- --------- --------- ----------
Total operating expenses 5,096,895 5,978,068 8,918,537 1,828,883 2,385,820
--------- --------- --------- --------- ----------
Operating income 1,658,059 2,939,291 3,681,696 822,653 1,053,974
--------- --------- --------- -------- ----------
Other income:
Interest income 23,579 106,300 125,948 37,137 45,067
Other, net 22,491 1,651 26,484 -- --
--------- --------- --------- --------- ----------
Total other income 46,070 107,951 152,432 37,137 45,067
--------- --------- --------- --------- ----------
Income before income
taxes 1,704,129 3,047,242 3,834,128 859,790 1,099,041

Provision for income taxes 114,500 -- -- -- --
--------- --------- --------- --------- ---------
Net income $1,589,629 $3,047,242 $ 3,834,128 $ 859,790 $1,099,041
========= ========= ========= ========= =========
Pro forma information:
Net income $1,589,629 $3,047,242 $ 3,834,128 $ 859,790 $1,099,041
Pro forma income taxes 582,796 1,218,897 1,533,651 343,916 439,614
--------- --------- --------- --------- ---------
Pro forma net income $1,006,833 $1,828,345 $ 2,300,477 $ 515,874 $ 659,427
========= ========= ========= ========= =========
Pro forma net income
per share $ .16 $ .30 $ .38 $ .09 $ .11
========= ========= ========= ========= =========
Weighted average common
shares and common share
equivalents outstanding 6,317,510 6,055,000 6,055,000 6,055,000 6,055,000
========= ========= ========= ========= =========

</TABLE>

See accompanying notes to financial statements.

<PAGE>
<TABLE>
NATIONAL RESEARCH CORPORATION

STATEMENTS OF SHAREHOLDERS' EQUITY

For the years ended December 31, 1994, 1995 and 1996 and
the three months ended March 31, 1997 (Unaudited)

<CAPTION>
Additional
Preferred Common paid-in Treasury Retained
stock stock capital stock earnings Total

<S> <C> <C> <C> <C> <C> <C>
Balances at December 31,
1993 $ 100 $12,642 $13,812 $(7,543) $270,635 $289,646
Treasury stock canceled,
6,134,371 shares -- (6,134) (1,724) 7,543 315 --

Common stock retired,
456,019 shares -- (456) (12,560) -- (62,066) (75,082)

Preferred stock retired, 10
shares (100) -- -- -- -- (100)

Common stock issued, 2,886
shares -- 3 472 -- -- 475

Net income -- -- -- -- 1,589,629 1,589,629

Dividends declared, $.01 per
share -- -- -- -- (42,797) (42,797)
------- ------- ------- ------- --------- ---------

Balances at December 31,
1994 -- 6,055 -- -- 1,755,716 1,761,771

Net income -- -- -- -- 3,047,242 3,047,242

Dividends declared, $.49 per
share -- -- -- -- (2,979,448) (2,979,448)
------- ------- -------- ------- --------- ---------

Balances at December 31,
1995 -- 6,055 -- -- 1,823,510 1,829,565

Net income -- -- -- -- 3,834,128 3,834,128
Dividends declared, $.59
per share -- -- -- -- (3,584,286) (3,584,286)

------- ------- -------- -------- ---------- ---------
Balances at December 31,
1996 -- 6,055 -- -- 2,073,352 2,079,407

Net income -- -- -- -- 1,099,041 1,099,041

------- -------- -------- -------- ---------- ---------
Balances at March 31, 1997
(unaudited) $ -- $6,055 -- $ -- $3,172,393 $3,178,448

======= ======== ======== ========= ========== =========

</TABLE>

See accompanying notes to financial statements.

<PAGE>
<TABLE>
NATIONAL RESEARCH CORPORATION

STATEMENTS OF CASH FLOWS
<CAPTION>
Three months ended
Years ended December 31, March 31,
1994 1995 1996 1996 1997
(Unaudited)

<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $1,589,629 $3,047,242 $3,834,128 $859,790 $1,099,036
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 85,620 119,093 173,148 35,998 41,597
Loss on sale of property and
equipment -- -- 32,837 -- --
Change in assets and liabilities:
Trade accounts receivable (94,234) (2,355,788) 1,695,310 1,009,090 (1,199,219)
Unbilled revenues -- (97,334) (185,024) -- (55,635)
Prepaid expenses and other (23,388) 1,278 (21,412) (21,806) 2,523
Other receivables 246,556 -- -- -- --
Accounts payable and accrued
expenses 11,630 128,422 134,626 (14,324) 354,459
Accrued wages, bonuses and profit
sharing 91,801 449,724 402,788 (33,040) (40,184)
Billings in excess of revenues
earned 701,589 488,969 279,872 610,290 394,781
Increase in cash value of life
insurance (21,018) (27,211) -- -- --
--------- --------- --------- --------- ---------
Net cash provided by
operating activities 2,588,185 1,754,395 6,346,273 2,445,998 597,358
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Purchases of property and equipment (194,330) (160,923) (272,235) (25,016) (184,534)
Purchases of securities available-
for-sale (733,519) (1,503,726)(4,154,720) (260,786) (24,295)
Proceeds from the maturities of
securities available-for-sale -- 1,650,000 3,265,000 600,000 1,500,000
--------- --------- --------- --------- ---------
Net cash provided by (used in)
investing activities (927,849) (14,649)(1,161,955) 314,198 1,291,171
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Dividends declared (42,797) (2,709,572)(3,336,906) (273,912) (359,384)
Payments on capital leases (41,294) (12,301) -- -- --
Proceeds from issuance of common
stock 475 -- -- -- --
Payments to acquire preferred stock (100) -- -- -- --
Payments to acquire common stock (45,976) (29,106) -- -- --
--------- --------- --------- ----------- ----------
Net cash used in financing
activities (129,692) (2,750,979)(3,336,906) (273,912) (359,384)
--------- --------- --------- ----------- ----------
Net increase (decrease) in cash 1,530,644 (1,011,233) 1,847,412 2,486,284 1,529,145
Cash and cash equivalents at beginning
of period 415,389 1,946,033 934,800 934,800 2,782,212
--------- --------- --------- ---------- ---------
Cash and cash equivalents at end of
period $1,946,033 $ 934,800 $2,782,212 $3,421,084 $4,311,357
========= ========= ========== ========== =========
Supplementary information
Cash paid for:
Interest $ 3,947 $ 431 -- -- --
========= ========= ========== ========== =========
Taxes $ 126,845 -- -- -- --
========= ========= ========== ========== =========

Noncash investing and financing activities:
In 1996, the Company assigned its life insurance policy to the benefit of its majority shareholder
and recorded a dividend of $178,236 for the cash surrender value of the life insurance policy.

</TABLE>

See accompanying notes to financial statements.

<PAGE>

NATIONAL RESEARCH CORPORATION

NOTES TO FINANCIAL STATEMENTS

Three years ended December 31, 1996 and
the three months ended March 31, 1997 (Unaudited)

(1) Summary of Significant Accounting Policies

Description of Business and Basis of Presentation
National Research Corporation (the "Company") is a provider of
ongoing survey-based performance measurement, analysis and
tracking services and products to the healthcare industry. The
Company provides market research services to hospitals and
insurance companies on an unsecured credit basis. One client
accounted for 28.9%, 43.7% and 40.4% of total revenues in 1994,
1995 and 1996, respectively. Another client accounted for 23.1%
and 13.6% of total revenues in 1994 and 1995, respectively. The
Company operates in a single industry segment.

Basis of Presentation
Interim Financial Statements - The financial information as of
March 31, 1997 and for the three months ended March 31, 1996 and
1997 is unaudited and has been prepared in conformity with
generally accepted accounting principles and includes all
adjustments, in the opinion of management, necessary to a fair
presentation of the results of operations for the interim periods
presented. All such adjustments are, in the opinion of
management, of a normal, recurring nature.

Pro Forma Net Income Per Share - Pro forma net income per share
has been computed assuming that the Company had been taxed as a C
corporation for Federal and state income tax purposes for all
periods presented.

Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make certain estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.

Revenue Recognition
The Company derives a substantial majority of its operating
revenues from its annually renewable services and products, which
include the NRC Listening System ("Renewable Performance Tracking
Services") and the NRC Healthcare Market Guide ("Renewable
Syndicated Product"). Under the NRC Listening System, the
Company provides interim and annual performance tracking to its
clients under annual client service contracts, although such
contracts are generally cancelable on short or no notice without
penalty. Through its syndicated NRC Healthcare Market Guide, the
Company publishes healthcare market information to its clients
generally on an annual or (prior to 1996) bi-annual basis. The
Company also derives revenues from custom and other research
projects.

The Company recognizes revenues from its Renewable Performance
Tracking Services and its custom and other research projects
using the percentage of completion method of accounting.
Revenues for these services is recognized as services are
performed. Losses expected to be incurred on jobs in progress
are charged to income as soon as such losses are known. Revenues
earned on contracts in progress in excess of billings is
classified as a current asset. Amounts billed in excess of
revenues earned are classified as a current liability. Client
projects are generally completed within a twelve-month period.
The Company recognizes revenues for its Renewable Syndicated
Product upon its delivery to clients.

Property and Equipment
Property and equipment is stated at cost. Major expenditures to
purchase property or to substantially increase useful lives of
property are capitalized. Maintenance, repairs and minor
renewals are expensed as incurred. When assets are retired or
otherwise disposed of, their costs and related accumulated
depreciation are removed from the accounts and resulting gains or
losses are included in income.

The Company provides for depreciation and amortization of
property and equipment using annual rates which are sufficient to
amortize the cost of depreciable assets over their estimated
useful lives of 5 to 7 years. The Company uses accelerated
methods of depreciation and amortization over estimated useful
lives of 5 to 7 years for furniture and fixtures and 3 to 5 years
for computer equipment.

Marketable Securities
All marketable securities held by the Company at December 31,
1995 and 1996 were classified as available-for-sale and recorded
at cost, which approximates market value. Unrealized holding
gains and losses, net of the related tax effect, on available-
for-sale securities are excluded from income and are reported as
a separate component of shareholders' equity until realized.
Realized gains and losses from the sale of available-for-sale
securities are determined on a specific-identification basis.
Fair values are estimated based on quoted market prices.

Income Taxes
Effective August 1, 1994, the Company, with consent of its
shareholders, elected under the Internal Revenue Code to be an S
corporation. In lieu of corporation income taxes, the
shareholders of an S corporation are taxed on their proportionate
share of the Company's taxable income. Therefore, no provision
or liability for Federal income taxes has been included in these
financial statements for the five months ended December 31, 1994,
for the years ended December 31, 1995 and 1996, or for the three
months ended March 31, 1996 and 1997.

The Company will adopt Statement of Financial Accounting
Standards No. 109, (SFAS No. 109) (see also note 4) in the
quarter ending September 30, 1997, upon successful completion of
its initial public offering ("IPO"). Deferred income taxes are
provided for temporary differences between tax and financial
reporting bases of assets and liabilities using enacted tax rates
under SFAS No. 109.

Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company
considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.

(2) Investments in Marketable Debt Securities
The carrying value for available-for-sale securities by major
security type is shown below. Amortized cost approximates fair
value.

December 31, March 31,
1995 1996 1997
(Unaudited)
Debt securities:
U.S. Treasury securities $243,776 $ -- $ --
Obligations of other U.S.
agencies 342,361 1,475,752 --
--------- --------- --------
586,137 1,475,752 --
--------- --------- --------
Other 1,108 1,213 1,261
--------- --------- --------
Total $587,245 $1,476,965 $ 1,261
========= ========= ========

There were no sales of marketable securities available-for-sale
during 1994, 1995, 1996 or for the three months ended March 31, 1997.
All marketable debt securities have stated maturities of one year or
less.

(3) Income Taxes and Pro Forma Income Taxes

Income tax expense for the seven months ended July 31, 1994 consisted
of the following components:

Federal $ 99,000
State 15,500
-------
$ 114,500
=======

For the seven months ended July 31, 1994, there were no deferred
income taxes.

Income tax expense for the seven months ended July 31, 1994 differed
from that computed by applying U.S. Federal income tax statutory
rates to income before income taxes of $247,139. The reasons for
this difference are shown below:

Computed "expected" income tax expense $ 84,000
State income taxes, net of Federal tax benefit 10,200
Nondeductible portion of meals and entertainment 2,700
expense
Officer life insurance 3,800
Other, net 13,800
--------
$ 114,500
========

(3) Income Taxes and Pro Forma Income Taxes, Continued

The accompanying financial statements of income reflect a provision
for income taxes on a pro forma basis, at a combined rate of 40
percent (Federal statutory rate of 34 percent plus estimated state
rate, net of Federal benefit, of 6 percent) as if the Company was
liable for Federal and state income taxes as a taxable corporate
entity throughout the periods presented.

The components of the provision for pro forma income taxes are as
follows:

Three months
Years ended December 31, ended March 31,
1994 1995 1996 1996 1997

Federal $466,236 $ 987,918 $1,278,121 $276,694 $396,837
State 116,560 246,979 319,530 69,174 99,209
------- --------- --------- ------- -------
Pro forma
income
taxes $582,796 $1,234,897 $1,597,651 $345,868 $496,046
======= ========= ========= ======= =======

The primary temporary differences giving rise to deferred tax assets
are accrued liabilities not currently deductible for income tax
purposes. Pro forma deferred tax assets of approximately $220,000
will be recorded upon completion of the Company's IPO (see also note
4). Based upon the historical earnings of the Company, management
believes it is more likely than not that the assets will be realized.

In connection with the termination of its S Corporation status, the
Company expects to distribute approximately $3,905,000 of retained
earnings subsequent to March 31, 1997, and as a final distribution to
S Corporation shareholders. The effects of this distribution have
been given effect as if the distribution had already occurred in the
unaudited pro forma balance sheet as of March 31, 1997.

(4) Common Stock

The Company is planning to file a registration statement on Form S-1
for an IPO of the Company's common stock. In connection with its
IPO, the Company effected a stock split of approximately 240.5-to-1,
which has been given retroactive effect in the accompanying financial
statements. This was accomplished pursuant to an amendment to the
Company's Restated Articles of Incorporation, which increased the
authorized common stock of the Company from 100,000 shares to
20,000,000 shares and authorized up to 2,000,000 shares of
undesignated preferred stock.

(5) Leases

The Company leases office space for a monthly base rental payment
plus maintenance and utilities. The lease expired on April 30, 1997.
Rental expense during 1994, 1995 and 1996 was $176,448, $168,417 and
$183,118, respectively, and $44,722 and $50,498 for the three months
ended March 31, 1996 and 1997, respectively, and is included in
selling, general and administrative expense on the statements of
income.

(6) Employee Benefits

During 1995, the Company established a qualified defined contribution
profit-sharing plan covering substantially all employees with a
minimum service of 1,000 hours and one year of service except for
highly compensated employees covered by nonqualified profit sharing
plans. Employer contributions, which are discretionary, vest to
participants at a rate of 20% per year. Total profit-sharing expense
was $48,989 and $75,229 in 1995 and 1996, respectively, and no
expense was recognized for the three months ended March 31, 1996 and
1997.

The Company sponsors nonqualified profit sharing bonus and incentive
plans for employees and members of executive management of the
Company. Certain bonuses under this Plan are paid over a five-year
period. Expense recorded under these plans was $118,775, $468,052
and $552,832 in 1994, 1995 and 1996, respectively, and $121,844 and
$207,300 for the three months ended March 31, 1996 and 1997,
respectively.

(7) Related Party Transactions

At December 31, 1994, accrued wages, bonuses and profit sharing
included amounts due to a former minority shareholder in the amount
of $29,106 on an unsecured 3.5% note issued by the Company in
conjunction with its redemption of the former shareholder's stock in
the Company. The note was paid in full in January 1995. Interest
expense incurred on this note during 1994 was $431. There was no
interest expense incurred during 1995.

(8) Special Bonus

In August 1997, the Company decided to pay special cash bonuses
aggregating $1,740,000 to certain executive officers (other than the
selling shareholder) prior to termination of its S Corporation status.
The related compensation charge will be recognized by the Company in
its third quarter 1997 interim financial statements. The effect of
this charge has been given effect as if the bonuses had been paid in
the unaudited pro forma balance sheet as of March 31, 1997. These
special cash bonuses will reduce the amount otherwise available for
distribution to the Company's shareholders prior to the termination
of its S Corporation status.

<PAGE>

No dealer, sales representative or other 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 by the Company, the Selling Shareholder
or the Underwriters. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy the shares of Common
Stock by anyone in any jurisdiction in which the person making the
offer or solicitation is not qualified to do so, or to any person
to whom it is unlawful to make such offer or solicitation.
Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication
that the information contained herein is correct as of any time
subsequent to the date of this Prospectus.

_________________________________

TABLE OF CONTENTS

Page

Additional Information . . . . . . . . . . . . . . . . . . 2
Prospectus Summary . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . 6
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . 12
S Corporation Termination . . . . . . . . . . . . . . . . . 12
Dividend Policy . . . . . . . . . . . . . . . . . . . . . 12
Capitalization . . . . . . . . . . . . . . . . . . . . . . 13
Dilution . . . . . . . . . . . . . . . . . . . . . . . . . 14
Selected Financial Data . . . . . . . . . . . . . . . . . . 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . 17
Business . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Management . . . . . . . . . . . . . . . . . . . . . . . . . 36
Certain Transactions . . . . . . . . . . . . . . . . . . . . 40
Principal and Selling Shareholders . . . . . . . . . . . . . 41
Description of Capital Stock . . . . . . . . . . . . . . . . 42
Shares Eligible for Future Sale . . . . . . . . . . . . . . . 44
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . 45
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . 47
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Index to Financial
Statements . . . . . . . . . . . . . . . . . . . . . . . . F-1

______________________________

Until , 1997 (25 days after the commencement of this
offering), all dealers effecting transactions in the Common Stock,
whether or not participating in this distribution, may be required
to deliver a Prospectus. This delivery requirement is in addition
to the obligation of dealers to deliver a Prospectus when acting
as Underwriters and with respect to their unsold allotments or
subscriptions.

2,100,000 Shares

[National Research
Corporation
Logo]

Common Stock

_________________________

PROSPECTUS

, 1997
_________________________

William Blair & Company

Robert W. Baird & Co.
Incorporated
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

Securities and Exchange Commission $9,514
registration fee . . . . . . . . . . . . .
NASD filing fee . . . . . . . . . . . . . . 3,640
Nasdaq National Market listing fee . . . . 36,000
Blue sky fees and expenses . . . . . . . . 10,000
Transfer agent expenses and fees . . . . . 6,000
Printing and engraving expenses . . . . . . 100,000
Accountants' fees and expenses . . . . . . 95,000
Legal fees and expenses . . . . . . . . . . 170,000
Miscellaneous . . . . . . . . . . . . . . . 69,846
--------
Total . . . . . . . . . . . . . . $500,000
========

__________________________
All of the above fees, costs and expenses above will be paid by the
Company. Other than the SEC registration fee, the NASD filing fee and the
Nasdaq National Market Listing fee, all fees and expenses are estimated.

Item 14. Indemnification of Directors and Officers.

Expenses for the defense of any action for which indemnification
may be available may be advanced by the Company under certain
circumstances.

The indemnification provided by the Nebraska Business Corporation
Law and the Company's Restated By-Laws is not exclusive of any other
rights to which a director or officer may be entitled. The general effect
of the foregoing provisions may be to reduce the circumstances which an
officer or director may be required to bear the economic burden of the
foregoing liabilities and expense.

Item 15. Recent Sales of Unregistered Securities.

On October 25, 1994, the Company issued and sold 2,886 shares (on
a post-stock split basis) of Common Stock to an employee and director of
the Company for $475.20. No underwriters were engaged in connection with
the foregoing sale. Such sale was effected in reliance upon the exemption
from registration provided by Section 4(2) of the Securities Act of 1933
for transactions not involving a public offering.

Other than as set forth in the preceding paragraph, the Company
has not sold any securities within the past three years.

Item 16. Exhibits and Financial Statement Schedules.

(a) Exhibits. The exhibits listed in the accompanying Exhibit
Index are filed as part of this Registration Statement.

(b) Financial Statement Schedules. The financial statement
schedules listed in the accompanying Financial Statement
Schedule Index are filed as part of this Registration
Statement.

Item 17. Undertakings.

The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement
certificates in such denominations and registered in such names as
required by the underwriters to permit prompt delivery to each purchaser.

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 Securities Act of 1933 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 Securities Act of 1933 and will be governed by the final
adjudication of such issue.

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 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.

<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Lincoln, and State of Nebraska, on this 8th day of August, 1997.

NATIONAL RESEARCH CORPORATION

By: /s/ Michael D. Hays
Michael D. Hays
President and Chief Executive
Officer

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

Signature Title Date

/s/ Michael D. Hays President, Chief August 8, 1997
Michael D. Hays Executive Officer and
Director (Principal
Executive Officer)

/s/ Patrick E. Beans Vice President, August 8, 1997
Patrick E. Beans Treasurer and Chief
Financial Officer
(Principal Financial and
Accounting Officer)

<PAGE>

FINANCIAL STATEMENT SCHEDULE INDEX

Form S-1
Page

Independent Auditors' Report on Financial Statement
Schedules . . . . . . . . . . . . . . . . . . . . S-2
Schedule II - Valuation and Qualifying Accounts . . S-3

All other schedules are omitted since the required information is
not present or is not present in amounts sufficient to require submission
of the schedules, or because the information required is included in the
financial statements and notes thereto.

<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors
National Research Corporation:

The audits referred to in our report dated June 6, 1997, except as to note
8 which is as of August 8, 1997, included the related financial statement
schedule as of December 31, 1996, and for each of the years in the three-
year period ended December 31, 1996, included in the registration
statement. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits. In our opinion, such
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.

KPMG Peat Marwick LLP

Lincoln, Nebraska
June 6, 1997

<PAGE>
NATIONAL RESEARCH CORPORATION

Schedule II - Valuation and Qualifying Accounts

Write-
Balance at offs, Balance
beginning Bad debt net of at end
of year expense recoveries of year

Allowance for doubtful
accounts:
Year ended December 31,
1994 $ - $10,000 $ - $10,000
======= ======= ======= ======

Year ended December 31,
1995 $10,000 $24,100 $ 9,100 $25,000
======= ======= ======= ======

Year ended December 31,
1996 $25,000 $30,764 $10,764 $45,000
======= ======= ======= =======

See accompanying independent auditors' report.

<PAGE>
EXHIBIT INDEX

Exhibit
Number Exhibit Description

(1) Proposed Form of Underwriting Agreement.

(3.1) Restated Articles of Incorporation of National Research
Corporation.

(3.2) Restated By-Laws of National Research Corporation.

(5) Opinion of Foley & Lardner regarding legality of
securities being offered (in preliminary form).

(10.1) Lease, dated as of ____________, 1997, between National
Research Corporation and ______________________.*

(10.2) National Research Corporation 1997 Equity Incentive
Plan.

(10.3) National Research Corporation Incentive Plan adopted as
of October 14, 1994 but terminated in August 1997.

(10.4) National Research Corporation Incentive Plan adopted as
of ________________, 1997.*

(10.5) Employment Memorandum, dated as of July 15, 1994, from
National Research Corporation to Patrick E. Beans.

(10.6) Employment Agreement, dated as of December 1, 1996,
between National Research Corporation and Sharon
Flaherty.

(10.7) Agreement, dated as of August 15, 1994, among National
Research Corporation, The Permanente Medical Group,
Inc. and Kaiser Foundation Health Plan, Inc.+

(10.8) Subcontract, dated as of May 9, 1997, as amended,
between National Research Corporation and United
HealthCare Corporation.+

(23.1) Consent of Foley & Lardner (included in Exhibit (5)).

(23.2) Consent of KPMG Peat Marwick LLP.

(27) Financial Data Schedule (EDGAR version only).
____________
* To be filed by amendment.

+ Portions of this exhibit have been redacted and are subject to a
confidential treatment request filed with the Secretary of the
Securities and Exchange Commission pursuant to Rule 406 under the
Securities Act of 1933, as amended. The redacted material is being
filed separately with the Securities and Exchange Commission.

Exhibit (1)

National Research Corporation
Shares Common Stock 1
Underwriting Agreement

_______________, 1997
William Blair & Company, L.L.C.
Robert W. Baird & Co. Incorporated
As Representatives of the Several
Underwriters Named in Schedule A
c/o William Blair & Company, L.L.C.
222 West Adams Street
Chicago, Illinois 60606

Ladies and Gentlemen:

SECTION 1. Introductory. National Research Corporation
("Company") a Nebraska corporation, has an authorized capital stock
consisting of ______ shares of Preferred Stock, $________ par value, of
which ______ shares were outstanding as of ____________, 19___ and
________ shares, $____ par value, of Common Stock ("Common Stock"), of
which ________ shares were outstanding as of such date. The Company
proposes to issue and sell _______ shares of its authorized but unissued
Common Stock, and a shareholder of the Company (referred to as the
"Selling Shareholder" and named in Schedule B) propose to sell ______
shares of the Company's issued and outstanding Common Stock to the several
underwriters named in Schedule A as it may be amended by the Pricing
Agreement hereinafter defined ("Underwriters"), who are acting severally
and not jointly. Collectively, such total of ________ shares of Common
Stock proposed to be sold by the Company and the Selling Shareholder is
hereinafter referred to as the "Firm Shares." In addition, the Selling
Shareholder proposes to grant to the Underwriters an option to purchase up
to ______ additional shares of Common Stock ("Option Shares") as provided
in Section 5 hereof. The Firm Shares and, to the extent such option is
exercised, the Option Shares, are hereinafter collectively referred to as
the "Shares."

You have advised the Company and the Selling Shareholder that the
Underwriters propose to make a public offering of their respective
portions of the Shares as soon as you deem advisable after the
registration statement hereinafter referred to becomes effective, if it
has not yet become effective, and the Pricing Agreement hereinafter
defined has been executed and delivered.
_________________
1 Plus an option to acquire up to ____ additional shares to cover
allotments.

Prior to the purchase and public offering of the Shares by the
several Underwriters, the Company, the Selling Shareholder and the
Representatives, acting on behalf of the several Underwriters, shall enter
into an agreement substantially in the form of Exhibit A hereto ("Pricing
Agreement"). The Pricing Agreement may take the form of an exchange of
any standard form of written telecommunication between the Company, the
Selling Shareholder and the Representatives and shall specify such
applicable information as is indicated in Exhibit A hereto. The offering
of the Shares will be governed by this Agreement, as supplemented by the
Pricing Agreement. From and after the date of the execution and delivery
of the Pricing Agreement, this Agreement shall be deemed to incorporate
the Pricing Agreement.

The Company and the Selling Shareholder hereby confirm their
agreements with the Underwriters as follows:

SECTION 2. Representations and Warranties of the Company. The
Company represents and warrants to the several Underwriters that:

(a) A registration statement on Form S-2 (File No. 33-_______)
and a related preliminary prospectus with respect to the Shares have
been prepared and filed with the Securities and Exchange Commission
("Commission") by the Company in conformity with the requirements of
the Securities Act of 1933, as amended, and the rules and regulations
of the Commission thereunder (collectively, the "1933 Act;" unless
indicated to the contrary, all references herein to specific rules
are rules promulgated under the 1933 Act); and the Company has so
prepared and has filed such amendments thereto, if any, and such
amended preliminary prospectuses as may have been required to the
date hereof and will file such additional amendments thereto and such
amended prospectuses as may hereafter be required. There have been
or will promptly be delivered to you three signed copies of such
registration statement and amendments, three copies of each exhibit
filed therewith, and conformed copies of such registration statement
and amendments (but without exhibits) and of the related preliminary
prospectus or prospectuses and final forms of prospectus for each of
the Underwriters.

Such registration statement (as amended, if applicable) at the
time it becomes effective and the prospectus constituting a part
thereof (including the information, if any, deemed to be part thereof
pursuant to Rule 430A(b) and/or Rule 434), as from time to time
amended or supplemented, are hereinafter referred to as the
"Registration Statement," and the "Prospectus," respectively, except
that if any revised prospectus shall be provided to the Underwriters
by the Company for use in connection with the offering of the Shares
which differs from the Prospectus on file at the Commission at the
time the Registration Statement became or becomes effective (whether
or not such revised prospectus is required to be filed by the Company
pursuant to Rule 424(b)), the term Prospectus shall refer to such
revised prospectus from and after the time it was provided to the
Underwriters for such use. If the Company elects (subject to your
comment) to rely on Rule 434 of the 1933 Act, subject to your
consent, all references to "Prospectus" shall be deemed to include,
without limitation, the form of prospectus and the term sheet, taken
together, provided to the Underwriters by the Company in accordance
with Rule 434 of the 1933 Act ("Rule 434 Prospectus"). Any
registration statement (including any amendment or supplement thereto
or information which is deemed part thereof) filed by the Company
under Rule 462(b) ("Rule 462(b) Registration Statement") shall be
deemed to be part of the "Registration Statement" as defined herein,
and any prospectus (including any amendment or supplement thereto or
information which is deemed part thereof) included in such
registration statement shall be deemed to be part of the
"Prospectus", as defined herein, as appropriate. The Securities
Exchange Act of 1934, as amended, and the rules and regulations of
the Commission thereunder are hereinafter collectively referred to as
the "Exchange Act."

(b) The Commission has not issued any order preventing or
suspending the use of any preliminary prospectus, and each
preliminary prospectus has conformed in all material respects with
the requirements of the 1933 Act and, as of its date, has not
included any untrue statement of a material fact or omitted to state
a material fact necessary to make the statements therein not
misleading; and when the Registration Statement became or becomes
effective, and at all times subsequent thereto, up to the First
Closing Date or the Second Closing Date hereinafter defined, as the
case may be, the Registration Statement, including the information
deemed to be part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b), if applicable, and the
Prospectus and any amendments or supplements thereto, contained or
will contain all statements that are required to be stated therein in
accordance with the 1933 Act and in all material respects conformed
or will in all material respects conform to the requirements of the
1933 Act, and neither the Registration Statement nor the Prospectus,
nor any amendment or supplement thereto, included or will include any
untrue statement of a material fact or omitted or will omit to state
a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the
Company makes no representation or warranty as to information
contained in or omitted from any preliminary prospectus, the
Registration Statement, the Prospectus or any such amendment or
supplement in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any
Underwriter through the Representatives specifically for use in the
preparation thereof.

(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of place of
incorporation, with corporate power and authority to own its
properties and conduct its business as described in the Prospectus;
the Company is duly qualified to do business as a foreign corporation
under the corporation law of, and are in good standing as such in,
each jurisdiction in which it owns or leases substantial properties,
has an office, or in which substantial business is conducted and such
qualification is required except in any such case where the failure
to so qualify or be in good standing would not have a material
adverse effect upon the Company; and no proceeding of which the
Company has knowledge has been instituted in any such jurisdiction,
revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification.

(d) The Company does not have any subsidiaries, is not a party
to any joint venture and is not a partner in any partnership.

(e) The issued and outstanding shares of capital stock of the
Company as set forth in the Prospectus have been duly authorized and
validly issued, are fully paid and nonassessable, and conform to the
description thereof contained in the Prospectus. Except as disclosed
in the Registration Statement, there are no outstanding
subscriptions, rights, warrants, options, calls, convertible
securities, commitments of sale or liens related to or entitling any
person to purchase or otherwise to acquire any share of the capital
stock of, or other ownership interest in, the Company or its
business.

(f) The Shares to be sold by the Company have been duly
authorized and when issued, delivered and paid for pursuant to this
Agreement, will be validly issued, fully paid and nonassessable, and
will conform to the description thereof contained in the Prospectus.

(g) The making and performance by the Company of this Agreement
and the Pricing Agreement have been duly authorized by all necessary
corporate action and will not violate any provision of the Company's
charter or bylaws and will not result in the breach, or be in
contravention, of any provision of any agreement, franchise, license,
indenture, mortgage, deed of trust, or other instrument to which the
Company is a party or by which the Company or any of its property may
be bound or affected, or any order, rule or regulation applicable to
the Company of any court or regulatory body, administrative agency or
other governmental body having jurisdiction over the Company or any
of its properties, or any order of any court or governmental agency
or authority entered in any proceeding to which the Company was or is
now a party or by which it is bound. No consent, approval,
authorization or other order of any court, regulatory body,
administrative agency or other governmental body is required for the
execution and delivery of this Agreement or the Pricing Agreement or
the consummation of the transactions contemplated herein or therein,
except for compliance with the 1933 Act and blue sky laws applicable
to the public offering of the Shares by the several Underwriters and
clearance of such offering with the National Association of
Securities Dealers, Inc. ("NASD"). This Agreement has been duly
executed and delivered by the Company.

(h) The accountants who have expressed their opinions with
respect to certain of the financial statements and schedules included
in the Registration Statement are independent accountants as required
by the 1933 Act.

(i) The financial statements and schedules of the Company
included in the Registration Statement present fairly the financial
position of the Company as of the respective dates of such financial
statements, and the results of operations and cash flows of the
Company for the respective periods covered thereby, all in conformity
with generally accepted accounting principles consistently applied
throughout the periods involved, and the supporting schedules
included in the Registration Statement present fairly the information
required to be stated therein. The financial information set forth
in the Prospectus under "Selected Consolidated Financial Data"
presents fairly on the basis stated in the Prospectus, the
information set forth therein. The pro forma financial information
included in the Prospectus present fairly the information shown
therein, have been prepared in accordance with generally accepted
accounting principles and the Commission's rules and guidelines with
respect to pro forma financial information, have been properly
compiled on the pro forma basis described therein, and, in the
opinion of the Company, the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are
appropriate under the circumstances.

(j) The Company is not in violation of its charter or in
default under any consent decree, or in default with respect to any
material provision of any lease, loan agreement, franchise, license,
permit or other contract obligation to which it is a party; and there
does not exist any state of facts which constitutes an event of
default as defined in such documents or which, with notice or lapse
of time or both, would constitute such an event of default, in each
case, except for defaults which neither singly nor in the aggregate
are material to the Company.

(k) There are no legal or governmental proceedings pending, or
to the Company's knowledge, threatened to which the Company is or may
be a party or of which material property owned or leased by the
Company is or may be the subject, or related to environmental or
discrimination matters which are not disclosed in the Prospectus, or
which question the validity of this Agreement or the Pricing
Agreement or any action taken or to be taken pursuant hereto or
thereto.

(l) There are no holders of securities of the Company having
rights to registration thereof, preemptive rights or rights of first
refusal to purchase Common Stock.

(m) The Company has good and marketable title to all the
properties and assets reflected as owned in the financial statements
hereinabove described (or elsewhere in the Prospectus), subject to no
lien, mortgage, pledge, charge or encumbrance of any kind except
those, if any, reflected in such financial statements or which are
not material to the Company and its subsidiaries taken as a whole.
The Company holds its leased properties under valid and binding
leases.

(n) The Company has not taken and will not take, directly or
indirectly, any action designed to or which has constituted or which
might reasonably be expected to cause or result, under the Exchange
Act or otherwise, in stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the
Shares.

(o) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, and except as
contemplated by the Prospectus, the Company has not incurred any
material liabilities or obligations, direct or contingent, nor
entered into any material transactions not in the ordinary course of
business and there has not been any material adverse change in its
condition (financial or otherwise) or results of operations nor any
material change in its capital stock, short-term debt or long-term
debt.

(p) The Company agrees not to sell, contract to sell or
otherwise dispose of any Common Stock or securities convertible into
Common Stock (except Common Stock issued pursuant to currently
outstanding options, warrants or convertible securities) for a period
of 180 days after this Agreement becomes effective without the prior
written William Blair & Company, L.L.C. The Company has obtained
similar agreements from each of its officers and directors.

(q) There is no document of a character required to be
described in the Registration Statement or the Prospectus or to be
filed as an exhibit to the Registration Statement which is not
described or filed as required.

(r) The Company owns and possesses all right, title and
interest in and to, or has duly licensed from third parties, all
patents, patent rights, trade secrets, inventions, know-how,
trademarks, trade names, copyrights, service marks and other
proprietary rights ("Trade Rights") material to the business of the
Company. The Company has not received any notice of infringement,
misappropriation or conflict from any third party as to any Trade
Rights which has not been resolved or disposed of and the Company has
not infringed, misappropriated or otherwise conflicted with Trade
Rights of any third parties, which infringement, misappropriation or
conflict would have a material adverse effect upon the condition
(financial or otherwise) or results of operations of the Company.

(s) The conduct of the business of the Company is in compliance
in all respects with applicable federal, state, local and foreign
laws and regulations, except where the failure to be in compliance
would not have a material adverse effect upon the condition
(financial or otherwise) or results of operations of the Company.

(t) All offers and sales of the Company's capital stock prior
to the date hereof were at all relevant times exempt from the
registration requirements of the 1933 Act and were duly registered
with or the subject of an available exemption from the registration
requirements of the applicable state securities or blue sky laws.

(u) The Company has filed all necessary federal and state
income and franchise tax returns and has paid all taxes shown as due
thereon, and there is no tax deficiency that has been, or to the
knowledge of the Company might be, asserted against the Company or
any of its properties or assets that would or could be expected to
have a material adverse affect upon the condition (financial or
otherwise) or results of operations of the Company.

(v) The Company has filed a registration statement pursuant to
Section 12(g) of the Exchange Act to register the Common Stock
thereunder, has filed an application to list the Shares on the Nasdaq
National Market, and has received notification that the listing has
been approved, subject to notice of issuance or sale of the Shares,
as the case may be.

(w) The Company is not, and does not intend to conduct its
business in a manner in which it would become, an "investment
company" as defined in Section 3(a) of the Investment Company Act of
1940, as amended ("Investment Company Act").

(x) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida,
Chapter 92-198, An Act Relating to Disclosure of Doing Business with
Cuba, and the Company further agrees that if it commences engaging in
business with the government of Cuba or with any person or affiliate
located in Cuba after the date the Registration Statement becomes or
has become effective with the Commission or with the Florida
Department of Banking and Finance (the "Department"), whichever date
is later, or if the information reported in the Prospectus, if any,
concerning the Company's business with Cuba or with any person or
affiliate located in Cuba changes in any material way, the Company
will provide the Department notice of such business or change, as
appropriate, in a form acceptable to the Department.

(y) The Company and its shareholders have made a valid election
pursuant to Section 1362(a) of the Internal Revenue Code of 1986, as
amended (the "Code") to be an "S-corporation" within the meaning of
Section 1361(a)(1) of the Code for all taxable periods beginning
after July 31, 1994 and no event has occurred that would result in a
termination of such election. The Company has no material federal
corporate income tax liability for the period from July 31, 1994 to
the termination of the election to be an S-corporation which shall
occur upon the First Closing.

SECTION 3. Representations, Warranties and Covenants of the
Selling Shareholder.

(a) The Selling Shareholder represents and warrants to, and
agrees with, the Company and the Underwriters that:

(i) The Selling Shareholder has, and on the First Closing
Date or the Second Closing Date hereinafter defined, as the case
may be, will have, valid marketable title to the Shares proposed
to be sold by the Selling Shareholder hereunder on such date and
full right, power and authority to enter into this Agreement and
the Pricing Agreement and to sell, assign, transfer and deliver
such Shares hereunder, free and clear of all voting trust
arrangements, liens, encumbrances, equities, claims and
community property rights; and upon delivery of and payment for
such Shares hereunder, the Underwriters will acquire valid
marketable title thereto, free and clear of all voting trust
arrangements, liens, encumbrances, equities, claims and
community property rights.

(ii) The Selling Shareholder has not taken and will not
take, directly or indirectly, any action designed to or which
might be reasonably expected to cause or result, under the
Exchange Act or otherwise, in stabilization or manipulation of
the price of any security of the Company to facilitate the sale
or resale of the Shares.

(iii) The Selling Shareholder has executed and
delivered a Power of Attorney ("Power of Attorney") among the
Selling Shareholder, ____________, ________________, and
______________ (the "Agents"), naming the Agents as such Selling
Shareholder's attorneys-in-fact (and, by the execution by any
Agent of this Agreement, such Agent hereby represents and
warrants that he has been duly appointed as attorney-in-fact by
the Selling Shareholder pursuant to the Power of Attorney) for
the purpose of entering into and carrying out this Agreement and
the Pricing Agreement, and the Power of Attorney has been duly
executed by the Selling Shareholder and a copy thereof has been
delivered to you.

(iv) The Selling Shareholder further represents, warrants
and agrees that he has deposited in custody, under a Custody
Agreement ("Custody Agreement") with _____________________, as
custodian ("Custodian"), certificates in negotiable form for the
Shares to be sold hereunder by the Selling Shareholder, for the
purpose of further delivery pursuant to this Agreement. The
Selling Shareholder agrees that the Shares to be sold by the
Selling Shareholder on deposit with the Custodian are subject to
the interests of the Company and the Underwriters, that the
arrangements made for such custody, and the appointment of the
Agents pursuant to the Power of Attorney, are to that extent
irrevocable, and that the obligations of the Selling Shareholder
hereunder and under the Power of Attorney and the Custody
Agreement shall not be terminated except as provided in this
Agreement, the Power of Attorney or the Custody Agreement by any
act of the Selling Shareholder, by operation of law, whether by
the death or incapacity of such Selling Shareholder or, in the
case of a trust or estate, by the death of the trustee or
trustees or the executor or executors or the termination of such
trust or estate or by the occurrence of any other event. If the
Selling Shareholder or any trustee or executor should die or
become incapacitated, or any such trust or estate should be
terminated, or if any other event should occur before the
delivery of the Shares hereunder, the documents evidencing
Shares then on deposit with the Custodian shall be delivered by
the Custodian in accordance with the terms and conditions of
this Agreement as if such death, incapacity, termination or
other event had not occurred, regardless of whether or not the
Custodian shall have received notice thereof. Each Agent has
been authorized by the Selling Shareholder to execute and
deliver this Agreement and the Pricing Agreement and the
Custodian has been authorized to receive and acknowledge receipt
of the proceeds of sale of the Shares to be sold by the Selling
Shareholder against delivery thereof and otherwise act on behalf
of the Selling Shareholder. The Custody Agreement has been duly
executed by the Selling Shareholder and a copy thereof has been
delivered to you.

(v) Each preliminary prospectus, insofar as it has related
to the Selling Shareholder and, to the knowledge of the Selling
Shareholder in all other respects, as of its date, has conformed
in all material respects with the requirements of the 1933 Act
and, as of its date, has not included any untrue statement of a
material fact or omitted to state a material fact necessary to
make the statements therein not misleading; and the Registration
Statement at the time of effectiveness, and at all times
subsequent thereto, up to the First Closing Date or the Second
Closing Date hereinafter defined, as the case may be, (1) such
parts of the Registration Statement and the Prospectus and any
amendments or supplements thereto as relate to the Selling
Shareholder, and the Registration Statement and the Prospectus
and any amendments or supplements thereto, to the knowledge of
the Selling Shareholder in all other respects, contained or will
contain all statements that are required to be stated therein in
accordance with the 1933 Act and in all material respects
conformed or will in all material respects conform to the
requirements of the 1933 Act, and (2) neither the Registration
Statement nor the Prospectus, nor any amendment or supplement
thereto, as it relates to the Selling Shareholder, and, to the
knowledge of the Selling Shareholder in all other respects,
included or will include any untrue statement of a material fact
or omitted or will omit to state any material fact required to
be stated therein or necessary to make the statements therein
not misleading.

(vi) The Selling Shareholder agrees with the Company and
the Underwriters not to sell, contract to sell or otherwise
dispose of any Common Stock for a period of 180 days after this
Agreement becomes effective without the prior written consent of
the Representatives.

(b) The Selling Shareholder severally represents and warrants
to, and agrees with, the Underwriters to the same effect as the
representations and warranties of the Company set forth in Section 2
of this Agreement.

In order to document the Underwriter's compliance with the reporting
and withholding provisions of the Internal Revenue Code of 1986, as
amended, with respect to the transactions herein contemplated, the Selling
Shareholder agrees to deliver to you prior to or on the First Closing
Date, as hereinafter defined, a properly completed and executed United
States Treasury Department Form W-8 or W-9 (or other applicable form of
statement specified by Treasury Department regulations in lieu thereof).

SECTION 4. Representations and Warranties of the Underwriters.
The Representatives, on behalf of the several Underwriters, represent and
warrant to the Company and the Selling Shareholder that the information
set forth (a) on the cover page of the Prospectus with respect to price,
underwriting discount and terms of the offering and (b) under
"Underwriting" in the Prospectus was furnished to the Company by and on
behalf of the Underwriters for use in connection with the preparation of
the Registration Statement and is correct and complete in all material
respects.

SECTION 5. Purchase, Sale and Delivery of Shares. On the basis
of the representations, warranties and agreements herein contained, but
subject to the terms and conditions herein set forth, the Company and the
Selling Shareholder, severally and not jointly, agree to sell to the
Underwriters named in Schedule A hereto, and the Underwriters agree,
severally and not jointly, to purchase from the Company and the Selling
Shareholder, respectively, _________ Firm Shares from the Company and the
respective number of Firm Shares set forth opposite the names of the
Selling Shareholder in Schedule B hereto at the price per share set forth
in the Pricing Agreement. The obligation of each Underwriter to the
Company shall be to purchase from the Company that number of full shares
which (as nearly as practicable, as determined by you) bears to
______________, the same proportion as the number of Shares set forth
opposite the name of such Underwriter in Schedule A hereto bears to the
total number of Firm Shares to be purchased by all Underwriters under this
Agreement. The obligation of each Underwriter to the Selling Shareholder
shall be to purchase from the Selling Shareholder the number of full
shares which (as nearly as practicable, as determined by you) bears to
that number of Firm Shares set forth opposite the name of the Selling
Shareholder in Schedule B hereto, the same proportion as the number of
Shares set forth opposite the name of such Underwriter in Schedule A
hereto bears to the total number of Firm Shares to be purchased by all
Underwriters under this Agreement. The initial public offering price and
the purchase price shall be set forth in the Pricing Agreement.

At 9:00 A.M., Chicago Time, on the fourth business day, if permitted
under Rule 15c6-1 under the Exchange Act, (or the third business day if
required under Rule 15c6-1 under the Exchange Act or unless postponed in
accordance with the provisions of Section 12) following the date the
Registration Statement becomes effective (or, if the Company has elected
to rely upon Rule 430A, the fourth business day, if permitted under Rule
15c6-1 under the Exchange Act, (or the third business day if required
under Rule 15c6-1 under the Exchange Act) after execution of the Pricing
Agreement), or such other time not later than ten business days after such
date as shall be agreed upon by the Representatives and the Company, the
Company and the Custodian will deliver to you at the offices of counsel
for the Underwriters or through the facilities of The Depository Trust
Company for the accounts of the several Underwriters, certificates
representing the Firm Shares to be sold by them, respectively, against
payment of the purchase price therefor by delivery of federal or other
immediately available funds, by wire transfer or otherwise, to the Company
and the Custodian. Such time of delivery and payment is herein referred
to as the "First Closing Date." The certificates for the Firm Shares so to
be delivered will be in such denominations and registered in such names as
you request by notice to the Company and the Custodian prior to
10:00 A.M., Chicago Time, on the second business day preceding the First
Closing Date, and will be made available at the Company's expense for
checking and packaging by the Representatives at 10:00 A.M., Chicago Time,
on the business day preceding the First Closing Date. Payment for the
Firm Shares so to be delivered shall be made at the time and in the manner
described above at the offices of counsel for the Underwriters.

In addition, on the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions
herein set forth, the Selling Shareholder hereby grants an option to the
several Underwriters to purchase, severally and not jointly, up to an
aggregate of _______ Option Shares, at the same purchase price per share
to be paid for the Firm Shares, for use solely in covering any
overallotments made by the Underwriters in the sale and distribution of
the Firm Shares. The option granted hereunder may be exercised at any
time (but not more than once) within 30 days after the date of the initial
public offering upon notice by you to the Company and the Agents setting
forth the aggregate number of Option Shares as to which the Underwriters
are exercising the option, the names and denominations in which the
certificates for such shares are to be registered and the time and place
at which such certificates will be delivered. Such time of delivery
(which may not be earlier than the First Closing Date), being herein
referred to as the "Second Closing Date," shall be determined by you, but
if at any time other than the First Closing Date, shall not be earlier
than three nor later than 10 full business days after delivery of such
notice of exercise. The number of Option Shares to be purchased by each
Underwriter shall be determined by multiplying the number of Option Shares
to be sold by the Selling Shareholder pursuant to such notice of exercise
by a fraction, the numerator of which is the number of Firm Shares to be
purchased by such Underwriter as set forth opposite its name in Schedule A
and the denominator of which is the total number of Firm Shares (subject
to such adjustments to eliminate any fractional share purchases as you in
your absolute discretion may make). Certificates for the Option Shares
will be made available at the Company's expense for checking and packaging
at 10:00 A.M., Chicago Time, on the business day preceding the Second
Closing Date. The manner of payment for and delivery of the Option Shares
shall be the same as for the Firm Shares as specified in the preceding
paragraph.

You have advised the Company and the Selling Shareholder that each
Underwriter has authorized you to accept delivery of its Shares, to make
payment and to receipt therefor. You, individually and not as the
Representatives of the Underwriters, may make payment for any Shares to be
purchased by any Underwriter whose funds shall not have been received by
you by the First Closing Date or the Second Closing Date, as the case may
be, for the account of such Underwriter, but any such payment shall not
relieve such Underwriter from any obligation hereunder.

SECTION 6. Covenants of the Company. The Company covenants and
agrees that:

(a) The Company will advise you and the Selling Shareholder
promptly of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the
institution of any proceedings for that purpose, or of any
notification of the suspension of qualification of the Shares for
sale in any jurisdiction or the initiation or threatening of any
proceedings for that purpose, and will also advise you and the
Selling Shareholder promptly of any request of the Commission for
amendment or supplement of the Registration Statement, of any
preliminary prospectus or of the Prospectus, or for additional
information.

(b) The Company will give you and the Selling Shareholder
notice of its intention to file or prepare any amendment to the
Registration Statement (including any post-effective amendment) or
any Rule 462(b) Registration Statement or any amendment or supplement
to the Prospectus (including any revised prospectus which the Company
proposes for use by the Underwriters in connection with the offering
of the Shares which differs from the prospectus on file at the
Commission at the time the Registration Statement became or becomes
effective, whether or not such revised prospectus is required to be
filed pursuant to Rule 424(b) and any term sheet as contemplated by
Rule 434) and will furnish you and the Selling Shareholder with
copies of any such amendment or supplement a reasonable amount of
time prior to such proposed filing or use, as the case may be, and
will not file any such amendment or supplement or use any such
prospectus to which you or counsel for the Underwriters shall
reasonably object.

(c) If the Company elects to rely on Rule 434 of the 1933 Act
(subject to your consent), the Company will prepare a term sheet that
complies with the requirements of Rule 434. If the Company elects
not to rely on Rule 434 (subject to your comment), the Company will
provide the Underwriters with copies of the form of prospectus, in
such numbers as the Underwriters may reasonably request, and file
with the Commission such prospectus in accordance with Rule 424(b) of
the 1933 Act by the close of business in New York City on the second
business day immediately succeeding the date of the Pricing
Agreement. If the Company elects to rely on Rule 434, the Company
will provide the Underwriters with copies of the form of Rule 434
Prospectus, in such numbers as the Underwriters may reasonably
request, by the close of business in New York on the business day
immediately succeeding the date of the Pricing Agreement.

(d) If at any time when a prospectus relating to the Shares is
required to be delivered under the 1933 Act any event occurs as a
result of which the Prospectus, including any amendments or
supplements, would include an untrue statement of a material fact, or
omit to state any 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, or if it is
necessary at any time to amend the Prospectus, including any
amendments or supplements thereto and including any revised
prospectus which the Company proposes for use by the Underwriters in
connection with the offering of the Shares which differs from the
prospectus on file with the Commission at the time of effectiveness
of the Registration Statement, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) to comply with the
1933 Act, the Company promptly will advise you thereof and will
promptly prepare and file with the Commission an amendment or
supplement which will correct such statement or omission or an
amendment which will effect such compliance; and, in case any
Underwriter is required to deliver a prospectus nine months or more
after the effective date of the Registration Statement, the Company
upon request, but at the expense of such Underwriter, will prepare
promptly such prospectus or prospectuses as may be necessary to
permit compliance with the requirements of Section 10(a)(3) of the
1933 Act.

(e) Neither the Company nor any of its subsidiaries will, prior
to the earlier of the Second Closing Date or termination or
expiration of the related option, incur any liability or obligation,
direct or contingent, or enter into any material transaction, other
than in the ordinary course of business, except as specifically
contemplated by the Prospectus.

(f) Neither the Company nor any of its subsidiaries will
acquire any capital stock of the Company prior to the earlier of the
Second Closing Date or termination or expiration of the related
option nor will the Company declare or pay any dividend or make any
other distribution upon the Common Stock payable to stockholders of
record on a date prior to the earlier of the Second Closing Date or
termination or expiration of the related option, except in either
case as specifically contemplated by the Prospectus.

(g) Not later than January 30, 1999 the Company will make
generally available to its security holders an earnings statement
(which need not be audited) covering a period of at least 12 months
beginning after the effective date of the Registration Statement,
which will satisfy the provisions of the last paragraph of Section
11(a) of the 1933 Act.

(h) During such period as a prospectus is required by law to be
delivered in connection with offers and sales of the Shares by an
Underwriter or dealer, the Company will furnish to you at its
expense, subject to the provisions of subsection (d) hereof, copies
of the Registration Statement, the Prospectus, each preliminary
prospectus and all amendments and supplements to any such documents
in each case as soon as available and in such quantities as you may
reasonably request, for the purposes contemplated by the 1933 Act.

(i) The Company will cooperate with the Underwriters in
qualifying or registering the Shares for sale under the blue sky laws
of such jurisdictions as you designate, and will continue such
qualifications in effect so long as reasonably required for the
distribution of the Shares. The Company shall not be required to
qualify as a foreign corporation or to file a general consent to
service of process in any such jurisdiction where it is not currently
qualified or where it would be subject to taxation as a foreign
corporation.

(j) During the period of five years hereafter, the Company will
furnish you and each of the other Underwriters with a copy (i) as
soon as practicable after the filing thereof, of each report filed by
the Company with the Commission, any securities exchange or the NASD;
(ii) as soon as practicable after the release thereof, of each
material press release in respect of the Company; and (iii) as soon
as available, of each report of the Company mailed to stockholders.

(k) The Company will use the net proceeds received by it from
the sale of the Shares being sold by it in the manner specified in
the Prospectus.

(l) If, at the time of effectiveness of the Registration
Statement, any information shall have been omitted therefrom in
reliance upon Rule 430A and/or Rule 434, then immediately following
the execution of the Pricing Agreement, the Company will prepare, and
file or transmit for filing with the Commission in accordance with
such Rule 430A, Rule 424(b) and/or Rule 434, copies of an amended
Prospectus, or, if required by such Rule 430A and/or Rule 434, a
post-effective amendment to the Registration Statement (including an
amended Prospectus), containing all information so omitted. If
required, the Company will prepare and file, or transmit for filing,
a Rule 462(b) Registration Statement not later than the date of the
execution of the Pricing Agreement. If a Rule 462(b) Registration
Statement is filed, the Company shall make payment of, or arrange for
payment of, the additional registration fee owing to the Commission
required by Rule 111.

(m) The Company will comply with all registration, filing and
reporting requirements of the Exchange Act and the Nasdaq National
Market and will file with the Commission in a timely manner all
reports on Form SR required by Rule 463 and will furnish you copies
of any such reports as soon as practicable after the filing thereof.

SECTION 7. Payment of Expenses. Whether or not the transactions
contemplated hereunder are consummated or this Agreement becomes effective
as to all of its provisions or is terminated, the Company agrees to pay
(i) all costs, fees and expenses (other than legal fees and disbursements
of counsel for the Underwriters and the expenses incurred by the
Underwriters) incurred in connection with the performance of the Company's
obligations hereunder, including without limiting the generality of the
foregoing, all fees and expenses of legal counsel for the Company and of
the Company's independent accountants, all costs and expenses incurred in
connection with the preparation, printing, filing and distribution of the
Registration Statement, each preliminary prospectus and the Prospectus
(including all exhibits and financial statements) and all amendments and
supplements provided for herein, this Agreement, the Pricing Agreement and
the Blue Sky Memorandum, (ii) all costs, fees and expenses (including
legal fees not to exceed $10,000 and disbursements of counsel for the
Underwriters) incurred by the Underwriters in connection with qualifying
or registering all or any part of the Shares for offer and sale under blue
sky laws, including the preparation of a blue sky memorandum relating to
the Shares and clearance of such offering with the NASD; and (iii) all
fees and expenses of the Company's transfer agent, printing of the
certificates for the Shares and all transfer taxes, if any, with respect
to the sale and delivery of the Shares to the several Underwriters.

The provisions of this Section shall not affect any agreement which
the Company and the Selling Shareholder may make for the allocation or
sharing of such expenses and costs.

SECTION 8. Conditions of the Obligations of the Underwriters.
The obligations of the several Underwriters to purchase and pay for the
Firm Shares on the First Closing Date and the Option Shares on the Second
Closing Date shall be subject to the accuracy of the representations and
warranties on the part of the Company and the Selling Shareholder herein
set forth as of the date hereof and as of the First Closing Date or the
Second Closing Date, as the case may be, to the accuracy of the statements
of officers of the Company made pursuant to the provisions hereof, to the
performance by the Company and the Selling Shareholder of their respective
obligations hereunder, and to the following additional conditions:

(a) The Registration Statement shall have become effective
either prior to the execution of this Agreement or not later than
1:00 P.M., Chicago Time, on the first full business day after the
date of this Agreement, or such later time as shall have been
consented to by you but in no event later than 1:00 P.M., Chicago
Time, on the third full business day following the date hereof; and
prior to the First Closing Date or the Second Closing Date, as the
case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for
that purpose shall have been instituted or shall be pending or, to
the knowledge of the Company, the Selling Shareholder or you, shall
be contemplated by the Commission. If the Company has elected to
rely upon Rule 430A and/or Rule 434, the information concerning the
initial public offering price of the Shares and price-related
information shall have been transmitted to the Commission for filing
pursuant to Rule 424(b) within the prescribed period and the Company
will provide evidence satisfactory to the Representatives of such
timely filing (or a post-effective amendment providing such
information shall have been filed and declared effective in
accordance with the requirements of Rules 430A and 424(b)). If a
Rule 462(b) Registration Statement is required, such Registration
Statement shall have been transmitted to the Commission for filing
and become effective within the prescribed time period and, prior to
the First Closing Date, the Company shall have provided evidence of
such filing and effectiveness in accordance with Rule 462(b).

(b) The Shares shall have been qualified for sale under the
blue sky laws of such states as shall have been specified by the
Representatives.

(c) The legality and sufficiency of the authorization, issuance
and sale or transfer and sale of the Shares hereunder, the validity
and form of the certificates representing the Shares, the execution
and delivery of this Agreement and the Pricing Agreement, and all
corporate proceedings and other legal matters incident thereto, and
the form of the Registration Statement and the Prospectus (except
financial statements) shall have been approved by counsel for the
Underwriters exercising reasonable judgment.

(d) You shall not have advised the Company that the
Registration Statement or the Prospectus or any amendment or
supplement thereto, contains an untrue statement of fact, which, in
the opinion of counsel for the Underwriters, is material or omits to
state a fact which, in the opinion of such counsel, is material and
is required to be stated therein or necessary to make the statements
therein not misleading.

(e) Subsequent to the execution and delivery of this Agreement,
there shall not have occurred any change, or any development
involving a prospective change, in or affecting particularly the
business, properties or shareholders of the Company, whether or not
arising in the ordinary course of business, which, in the judgment of
the Representatives, makes it impractical or inadvisable to proceed
with the public offering or purchase of the Shares as contemplated
hereby.

(f) There shall have been furnished to you, as Representatives
of the Underwriters, on the First Closing Date or the Second Closing
Date, as the case may be, except as otherwise expressly provided
below:

(i) An opinion of Foley & Lardner, counsel for the Company
and for the Selling Shareholder, addressed to the Underwriters
and dated the First Closing Date or the Second Closing Date, as
the case may be, to the effect that:

(1) the Company has been duly incorporated and is
validly existing as a corporation in good standing under
the laws of the State of Nebraska with corporate power and
authority to own its properties and conduct its business as
described in the Prospectus; and the Company has been duly
qualified to do business as a foreign corporation under the
corporation law of, and is in good standing as such in,
every jurisdiction where the ownership or leasing of
property, or the conduct of its business requires such
qualification except where the failure so to qualify would
not have a material adverse effect upon the condition
(financial or otherwise) or results of operations of the
Company taken as a whole;

(2) to such counsel's knowledge, the Company does not
have any subsidiaries, is not a party to any joint venture
and is not a partner in any partnership;

(3) the authorized capital stock of the Company, of
which there is outstanding the amount set forth in the
Registration Statement and Prospectus (except for
subsequent issuances, if any, pursuant to stock options or
other rights referred to in the Prospectus), conforms as to
legal matters in all material respects to the description
thereof in the Registration Statement and Prospectus and to
such counsel's knowledge, no holder of any security of the
Company has any right to require registration of any
subsidiary of the Company;

(4) the issued and outstanding capital stock of the
Company has been duly authorized and validly issued and is
fully paid and nonassessable and was not issued in
violation of any preemptive or similar rights arising by
operation of law under the charter or by-laws of the
Company or, to the knowledge of such counsel, under any
agreement;

(5) the certificates for the Shares to be delivered
hereunder are in due and proper form, and when duly
countersigned by the Company's transfer agent and delivered
to you or upon your order against payment of the agreed
consideration therefor in accordance with the provisions of
this Agreement and the Pricing Agreement, the Shares
represented thereby will be duly authorized and validly
issued, fully paid and nonassessable and qualified for
inclusion on the Nasdaq National Market;

(6) the Registration Statement has become effective
under the 1933 Act, and, to the best knowledge of such
counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or
contemplated under the 1933 Act, and the Registration
Statement (including the information deemed to be part of
the Registration Statement at the time of effectiveness
pursuant to Rule 430A(b) and/or Rule 434, if applicable),
the Prospectus and each amendment or supplement thereto
(except for the financial statements and other statistical
or financial data derived therefrom as to which such
counsel need express no opinion) comply as to form in all
material respects with the requirements of the 1933 Act;
such counsel have no reason to believe that either the
Registration Statement (including the information deemed to
be part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b) and/or Rule 434, if
applicable) or the Prospectus, or the Registration
Statement or the Prospectus as amended or supplemented, as
of their respective effective or issue dates, contained any
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 the
Prospectus as amended or supplemented, if applicable, as of
the First Closing Date or the Second Closing Date, as the
case may be, contained any untrue statement of a material
fact or omitted to state any material fact necessary to
make the statements therein not misleading in light of the
circumstances under which they were made; the statements in
the Registration Statement and the Prospectus summarizing
statutes, rules, regulations, contracts or documents are
accurate and fairly and correctly present the information
required to be presented by the 1933 Act or the rules and
regulations thereunder, in all material respects and such
counsel does not know of any statutes, rules, regulations,
contracts or documents required to be described or referred
to in the Registration Statement or the Prospectus that are
not described or referred to therein as required; and such
counsel does not know of any legal or governmental
proceedings pending or threatened required to be described
in the Prospectus which are not described as required, nor
of any contracts or documents of a character required to be
described in the Registration Statement or Prospectus or to
be filed as exhibits to the Registration Statement which
are not described or filed, as required;

(7) the statements under the captions "S-corporation
Termination," "Management - Employment Agreements,"
"Management-Employee Benefit Plans," "Management -
Indemnification of Directors and Officers," "Certain
Transactions," "Description of Capital Stock," "Shares
Eligible for Future Sale" and "Underwriting" in the
Prospectus, insofar as such statements constitute a summary
of documents referred to therein or matters of law, are
accurate summaries and fairly and correctly present, in all
material respects, the information called for with respect
to such documents and matters;

(8) this Agreement and the Pricing Agreement and the
performance of the Company's obligations hereunder have
been duly authorized by all necessary corporate action and
this Agreement and the Pricing Agreement have been duly
executed and delivered by and on behalf of the Company, and
are legal, valid and binding agreements of the Company,
except as enforceability of the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights and by the
exercise of judicial discretion in accordance with general
principles applicable to equitable and similar remedies and
except as to those provisions relating to indemnities for
liabilities arising under the 1933 Act as to which no
opinion need be expressed; and no approval, authorization
or consent of any public board, agency, or instrumentality
of the United States or of any state or other jurisdiction
is necessary in connection with the issue or sale of the
Shares by the Company pursuant to this Agreement (other
than under the 1933 Act, applicable blue sky laws and the
rules of the NASD) or the consummation by the Company of
any other transactions contemplated hereby;

(9) the execution and performance of this Agreement
will not contravene any of the provisions of, or result in
a default under, any agreement, franchise, license,
indenture, mortgage, deed of trust, or other instrument
known to such counsel, of the Company or by which the
property of the Company is bound and which contravention or
default would be material to the Company; or violate any of
the provisions of the charter or bylaws of the Company or,
so far as is known to such counsel, violate any statute,
order, rule or regulation of any regulatory or governmental
body having jurisdiction over the Company;

(10) to such counsel's knowledge, all offers and sales
of the Company's capital stock since August 1, 1994 were at
all relevant times exempt from the registration
requirements of the 1933 Act and were duly registered or
the subject of an available exemption from the registration
requirements of the applicable state securities or blue sky
laws;

(11) with respect to the Selling Shareholder, this
Agreement and the Pricing Agreement have been duly
authorized, executed and delivered by or on behalf of the
Selling Shareholder; the Agents and the Custodian for the
Selling Shareholder have been duly and validly authorized
to carry out all transactions contemplated herein on behalf
of the Selling Shareholder; and the performance of this
Agreement and the Pricing Agreement and the consummation of
the transactions herein contemplated by the Selling
Shareholder will not result in a breach or violation of any
of the terms and provisions of, or constitute a default
under, any statute, any indenture, mortgage, deed of trust,
note agreement or other agreement or instrument known to
such counsel to which the Selling Shareholder is a party or
by which he is bound or to which any of the property of the
Selling Shareholder is subject, or any order, rule or
regulation known to such counsel of any court or
governmental agency or body having jurisdiction over the
Selling Shareholder or any of his properties; and no
consent, approval, authorization or order of any court or
governmental agency or body is required for the
consummation of the transactions contemplated by this
Agreement and the Pricing Agreement in connection with the
sale of Shares to be sold by the Selling Shareholder
hereunder, except such as have been obtained under the 1933
Act and such as may be required under applicable blue sky
laws in connection with the purchase and distribution of
such Shares by the Underwriters and the clearance of such
offering with the NASD;

(12) the Selling Shareholder has full right, power and
authority to enter into this Agreement and the Pricing
Agreement and to sell, transfer and deliver the Shares to
be sold on the First Closing Date or the Second Closing
Date, as the case may be, by the Selling Shareholder
hereunder and good and marketable title to such Shares so
sold, free and clear of all voting trust arrangements,
liens, encumbrances, equities, claims and community
property rights whatsoever, has been transferred to the
Underwriters (who counsel may assume to be bona fide
purchasers) who have purchased such Shares hereunder;

(13) this Agreement and the Pricing Agreement are
legal, valid and binding agreements of the Selling
Shareholder except as enforceability of the same may be
limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors'
rights and by the exercise of judicial discretion in
accordance with general principles applicable to equitable
and similar remedies and except with respect to those
provisions relating to indemnities for liabilities arising
under the 1933 Act, as to which no opinion need be
expressed;

(14) to the knowledge of such counsel except as
disclosed in the Prospectus, no person has the right,
contractual or otherwise, to cause the Company to issue, or
register pursuant to the 1933 Act, any shares of capital
stock of the Company, upon the issue and sale of the Shares
to be sold by the company to the Underwriters pursuant to
this Agreement, nor does any person have preemptive rights,
rights of first refusal, or other rights to purchase any
capital stock of the Company; and

(15) the Company is not an "investment company" or a
person "controlled by" an "investment company" within the
meaning of the Investment Company Act.]

In rendering such opinion, such counsel may state that
insofar as their opinion under clause (7) above relates to the
accuracy and completeness of the Prospectus and Registration
Statement, it is based upon a general review with the Company's
representatives and independent accountants of the information
contained therein, without independent verification by such
counsel of the accuracy or completeness of such information.
Such counsel may also rely upon the opinions of other competent
counsel and, as to factual matters, on certificates of the
Selling Shareholder and of officers of the Company and of state
officials, in which case their opinion is to state that they are
so doing and copies of said opinions or certificates are to be
attached to the opinion unless said opinions or certificates
(or, in the case of certificates, the information therein) have
been furnished to the Representatives in other form.

(ii) Such opinion or opinions of Sachnoff & Weaver, Ltd.,
counsel for the Underwriters, dated the First Closing Date or
the Second Closing Date, as the case may be, with respect to the
incorporation of the Company, the validity of the Shares to be
sold by the Company, the Registration Statement and the
Prospectus and other related matters as you may reasonably
require, and the Company shall have furnished to such counsel
such documents and shall have exhibited to them such papers and
records as they request for the purpose of enabling them to pass
upon such matters.

(iii) A certificate of the chief executive officer and
the principal financial officer of the Company, dated the First
Closing Date or the Second Closing Date, as the case may be, to
the effect that:

(1) the representations and warranties of the Company
set forth in Section 2 of this Agreement are true and
correct as of the date of this Agreement and as of the
First Closing Date or the Second Closing Date, as the case
may be, and the Company has complied with all the
agreements and satisfied all the conditions on its part to
be performed or satisfied at or prior to such Closing Date;
and

(2) the Commission has not issued an order preventing
or suspending the use of the Prospectus or any preliminary
prospectus filed as a part of the Registration Statement or
any amendment thereto; no stop order suspending the
effectiveness of the Registration Statement has been
issued; and to the best knowledge of the respective
signers, no proceedings for that purpose have been
instituted or are pending or contemplated under the 1933
Act.

The delivery of the certificate provided for in this
subparagraph shall be and constitute a representation and
warranty of the Company as to the facts required in the
immediately foregoing clauses (1) and (2) of this subparagraph
to be set forth in said certificate.

(iv) A certificate of the Selling Shareholder dated the
First Closing Date or the Second Closing Date, as the case may
be, to the effect that the representations and warranties of the
Selling Shareholder set forth in Section 3 of this Agreement are
true and correct as of such date and the Selling Shareholder has
complied with all the agreements and satisfied all the
conditions on the part of the Selling Shareholder to be
performed or satisfied at or prior to such date.

(v) At the time the Pricing Agreement is executed and also
on the First Closing Date or the Second Closing Date, as the
case may be, there shall be delivered to you a letter addressed
to you, as Representatives of the Underwriters, from KPMB Peat
Marwick, LLP, independent accountants, the first one to be dated
the date of the Pricing Agreement, the second one to be dated
the First Closing Date and the third one (in the event of a
second closing) to be dated the Second Closing Date, to the
effect set forth in Schedule C. There shall not have been any
change or decrease specified in the letters referred to in this
subparagraph which makes it impractical or inadvisable in the
judgment of the Representatives to proceed with the public
offering or purchase of the Shares as contemplated hereby.

(vi) Such further certificates and documents as you may
reasonably request.

All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory to you
and to Sachnoff & Weaver, Ltd., counsel for the Underwriters, which
approval shall not be unreasonably withheld. The Company shall furnish
you with such manually signed or conformed copies of such opinions,
certificates, letters and documents as you request.

If any condition to the Underwriters' obligations hereunder to be
satisfied prior to or at the First Closing Date is not so satisfied, this
Agreement at your election will terminate upon notification to the Company
and the Selling Shareholder without liability on the part of the
Underwriter or the Company or any Selling Shareholder, except for the
expenses to be paid or reimbursed by the Company pursuant to Sections 7
and 9 hereof and except to the extent provided in Section 11 hereof.

SECTION 9. Reimbursement of Underwriters' Expenses. If the
sale to the Underwriters of the Shares on the First Closing Date is not
consummated because any condition of the Underwriters' obligations
hereunder is not satisfied or because of any refusal, inability or failure
on the part of the Company or the Selling Shareholder to perform any
agreement herein or to comply with any provision hereof, unless such
failure to satisfy such condition or to comply with any provision hereof
is due to the default or omission of any Underwriter, the Company agrees
to reimburse you and the other Underwriters upon demand for all out-of-
pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been reasonably incurred by you and them in connection
with the proposed purchase and the sale of the Shares. Any such
termination shall be without liability of any party to any other party
except that the provisions of this Section, Section 7 and Section 11 shall
at all times be effective and shall apply.

SECTION 10. Effectiveness of Registration Statement. You, the
Company and the Selling Shareholder will use your, its and his best
efforts to cause the Registration Statement to become effective, if it has
not yet become effective, and to prevent the issuance of any stop order
suspending the effectiveness of the Registration Statement and, if such
stop order be issued, to obtain as soon as possible the lifting thereof.

SECTION 11. Indemnification. (a) The Company and the Selling
Shareholder, jointly and severally, agree to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter
within the meaning of the 1933 Act or the Exchange Act against any losses,
claims, damages or liabilities, joint or several, to which such
Underwriter or such controlling person may become subject under the 1933
Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise (including in settlement of any
litigation if such settlement is effected with the written consent of the
Company and/or the Selling Shareholder, as the case may be), insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement, including the information deemed to be part of the Registration
Statement at the time of effectiveness pursuant to Rule 430A and/or Rule
434, if applicable, any preliminary prospectus, 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; and will reimburse each Underwriter and each such controlling
person for any legal or other expenses reasonably incurred by such
Underwriter or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that neither the Company nor the Selling Shareholder will be
liable in any such case to the extent that (i) 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 the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by or on behalf of any
Underwriter through the Representatives, specifically for use therein; or
(ii) if such statement or omission was contained or made in any
preliminary prospectus and corrected in the Prospectus and (1) any such
loss, claim, damage or liability suffered or incurred by any Underwriter
(or any person who controls any Underwriter) resulted from an action,
claim or suit by any person who purchased Shares which are the subject
thereof from such Underwriter in the offering and (2) such Underwriter
failed to deliver or provide a copy of the Prospectus to such person at or
prior to the confirmation of the sale of such Shares in any case where
such delivery is required by the 1933 Act. In addition to their other
obligations under this Section 11(a), the Company and the Selling
Shareholder agree that, as an interim measure during the pendency of any
claim, action, investigation, inquiry or other proceeding arising out of
or based upon any statement or omission, or any alleged statement or
omission, described in this Section 11(a), they will reimburse the
Underwriters on a monthly basis for all reasonable legal and other
expenses incurred in connection with investigating or defending any such
claim, action, investigation, inquiry or other proceeding, notwithstanding
the absence of a judicial determination as to the propriety and
enforceability of the Company's and the Selling Shareholders' obligation
to reimburse the Underwriters for such expenses and the possibility that
such payments might later be held to have been improper by a court of
competent jurisdiction. This indemnity agreement will be in addition to
any liability which the Company and the Selling Shareholder may otherwise
have.

Without limiting the full extent of the Company's agreement to
indemnify each Underwriter, as herein provided, the Selling Shareholder
shall be liable under the indemnity agreements contained in paragraph (a)
of this Section only for an amount not exceeding the sum of (i) the
proceeds received by the Selling Shareholder from the sale of Shares
hereunder plus (ii) the amount of distributions received by the Selling
Shareholder since March 31, 1997.

(b) Each Underwriter will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the
Registration Statement, and the Selling Shareholder and each person, if
any, who controls the Company within the meaning of the 1933 Act or the
Exchange Act, against any losses, claims, damages or liabilities to which
the Company, or any such director, officer, Selling Shareholder or
controlling person may become subject under the 1933 Act, the Exchange Act
or other federal or state statutory law or regulation, at common law or
otherwise (including in settlement of any litigation, if such settlement
is effected with the written consent of such Underwriter), insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue or alleged untrue statement of
any material fact contained in the Registration Statement, any preliminary
prospectus, 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 the Registration Statement,
any preliminary prospectus, the Prospectus, or any amendment or supplement
thereto in reliance upon and in conformity with the information specified
in Section 4 of this Agreement; and will reimburse any legal or other
expenses reasonably incurred by the Company, or any such director,
officer, Selling Shareholder or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
action. In addition to their other obligations under this Section 11(b),
the Underwriters agree that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding arising out
of or based upon any statement or omission, or any alleged statement or
omission, described in this Section 11(b), they will reimburse the Company
and the Selling Shareholder on a monthly basis for all reasonable legal
and other expenses incurred in connection with investigating or defending
any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the Underwriters' obligation to reimburse
the Company and the Selling Shareholder for such expenses and the
possibility that such payments might later be held to have been improper
by a court of competent jurisdiction. This indemnity agreement will be in
addition to any liability which such Underwriter may otherwise have.

(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section, notify the indemnifying party of
the commencement thereof; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party except to the extent that the indemnifying party was
materially prejudiced by such failure to notify. In case any such action
is brought against any indemnified party, and it notifies an indemnifying
party of the commencement thereof, the indemnifying party will be entitled
to participate in, and, to the extent that it may wish, jointly with all
other indemnifying parties similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party; provided,
however, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, or the indemnified and
indemnifying parties may have conflicting interests which would make it
inappropriate for the same counsel to represent both of them, the
indemnified party or parties shall have the right to select separate
counsel to assume such legal defense and otherwise to participate in the
defense of such action on behalf of such indemnified party or parties.
Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval
by the indemnified party of counsel, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have
employed such counsel in connection with the assumption of legal defense
in accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for
the expenses of more than one separate counsel (in addition to any local
counsel), approved by William Blair & Company, L.L.C., in the case of
paragraph (a) representing all indemnified parties not having different or
additional defenses or potential conflicting interest among themselves who
are parties to such action), (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of
the action or (iii) the indemnifying party has authorized the employment
of counsel for the indemnified party at the expense of the indemnifying
party. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been
a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability arising out of such proceeding.

(d) If the indemnification provided for in this Section is
unavailable to an indemnified party under paragraphs (a) or (b) hereof in
respect of any losses, claims, damages or liabilities referred to therein,
then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company, the Selling Shareholder and the
Underwriters from the offering of the Shares or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the
Company, the Selling Shareholder and the Underwriters in connection with
the statements or omissions which resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations.
The respective relative benefits received by the Company, the Selling
Shareholder and the Underwriters shall be deemed to be in the same
proportion in the case of the Company and the Selling Shareholder, as the
total price paid to the Company and the Selling Shareholder for the Shares
by the Underwriters (net of underwriting discount but before deducting
expenses), and in the case of the Underwriters as the underwriting
discount received by them bears to the total of such amounts paid to the
Company and the Selling Shareholder and received by the Underwriters as
underwriting discount in each case as contemplated by the Prospectus. The
relative fault of the Company and the Selling Shareholder and the
Underwriters shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Company or by the Selling Shareholder or by the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages and
liabilities referred to above shall be deemed to include any legal or
other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim.

The Company, the Selling Shareholder and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this
Section were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. Notwithstanding the
provisions of this Section, 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 1933 Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section are several in proportion to their
respective underwriting commitments and not joint.

(e) The provisions of this Section shall survive any termination of
this Agreement.

SECTION 12. Default of Underwriters. It shall be a condition to
the agreement and obligation of the Company and the Selling Shareholder to
sell and deliver the Shares hereunder, and of each Underwriter to purchase
the Shares hereunder, that, except as hereinafter in this paragraph
provided, each of the Underwriters shall purchase and pay for all Shares
agreed to be purchased by such Underwriter hereunder upon tender to the
Representatives of all such Shares in accordance with the terms hereof.
If any Underwriter or Underwriters default in their obligations to
purchase Shares hereunder on the First Closing Date and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed
but failed to purchase does not exceed 10 percent of the total number of
Shares which the Underwriters are obligated to purchase on the First
Closing Date, the Representatives may make arrangements satisfactory to
the Company and the Selling Shareholder for the purchase of such Shares by
other persons, including any of the Underwriters, but if no such
arrangements are made by such date the nondefaulting Underwriters shall be
obligated severally, in proportion to their respective commitments
hereunder, to purchase the Shares which such defaulting Underwriters
agreed but failed to purchase on such date. If any Underwriter or
Underwriters so default and the aggregate number of Shares with respect to
which such default or defaults occur is more than the above percentage and
arrangements satisfactory to the Representatives and the Company and the
Selling Shareholder for the purchase of such Shares by other persons are
not made within 36 hours after such default, this Agreement will terminate
without liability on the part of any nondefaulting Underwriter or the
Company or the Selling Shareholder, except for the expenses to be paid by
the Company pursuant to Section 7 hereof and except to the extent provided
in Section 11 hereof.

In the event that Shares to which a default relates are to be
purchased by the nondefaulting Underwriters or by another party or
parties, the Representatives or the Company shall have the right to
postpone the First Closing Date for not more than seven business days in
order that the necessary changes in the Registration Statement, Prospectus
and any other documents, as well as any other arrangements, may be
effected. As used in this Agreement, the term "Underwriter" includes any
person substituted for an Underwriter under this Section. Nothing herein
will relieve a defaulting Underwriter from liability for its default.

SECTION 13. Effective Date. This Agreement shall become effective
immediately as to Sections 7, 9, 11 and 14 and as to all other provisions
at 10:00 A.M., Chicago Time, on the day following the date upon which the
Pricing Agreement is executed and delivered, unless such a day is a
Saturday, Sunday or holiday (and in that event this Agreement shall become
effective at such hour on the business day next succeeding such Saturday,
Sunday or holiday); but this Agreement shall nevertheless become effective
at such earlier time after the Pricing Agreement is executed and delivered
as you may determine on and by notice to the Company and the Selling
Shareholder or by release of any Shares for sale to the public. For the
purposes of this Section, the Shares shall be deemed to have been so
released upon the release for publication of any newspaper advertisement
relating to the Shares or upon the release by you of telegrams
(i) advising Underwriters that the Shares are released for public
offering, or (ii) offering the Shares for sale to securities dealers,
whichever may occur first.

SECTION 14. Termination. Without limiting the right to terminate
this Agreement pursuant to any other provision hereof:

(a) This Agreement may be terminated by the Company by notice
to you and the Selling Shareholder or by you by notice to the Company
and the Selling Shareholder at any time prior to the time this
Agreement shall become effective as to all its provisions, and any
such termination shall be without liability on the part of the
Company or the Selling Shareholder to any Underwriter (except for the
expenses to be paid or reimbursed pursuant to Section 7 hereof and
except to the extent provided in Section 11 hereof) or of any
Underwriter to the Company or the Selling Shareholder.

(b) This Agreement may also be terminated by you prior to the
First Closing Date, and the option referred to in Section 5, if
exercised, may be canceled at any time prior to the Second Closing
Date, if (i) trading in securities on the New York Stock Exchange
shall have been suspended or minimum prices shall have been
established on such exchange, or (ii) a banking moratorium shall have
been declared by Illinois, New York, or United States authorities, or
(iii) there shall have been any change in financial markets or in
political, economic or financial conditions which, in the opinion of
the Representatives, either renders it impracticable or inadvisable
to proceed with the offering and sale of the Shares on the terms set
forth in the Prospectus or materially and adversely affects the
market for the Shares, or (iv) there shall have been an outbreak of
major armed hostilities between the United States and any foreign
power which in the opinion of the Representatives makes it
impractical or inadvisable to offer or sell the Shares. Any
termination pursuant to this paragraph (b) shall be without liability
on the part of any Underwriter to the Company or the Selling
Shareholder or on the part of the Company to any Underwriter or the
Selling Shareholder (except for expenses to be paid or reimbursed
pursuant to Section 7 hereof and except to the extent provided in
Section 11 hereof).

SECTION 15. Representations and Indemnities to Survive Delivery.
The respective indemnities, agreements, representations, warranties and
other statements of the Company, of its officers, of the Selling
Shareholder and of the several Underwriters set forth in or made pursuant
to this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or the Company or
any of its or their partners, principals, members, officers or directors
or any controlling person, or the Selling Shareholder as the case may be,
and will survive delivery of and payment for the Shares sold hereunder.

SECTION 16. Notices. All communications hereunder will be in
writing and, if sent to the Underwriters will be mailed, delivered or
telegraphed and confirmed to you S William Blair & Company, L.L.C., 222
West Adams Street, Chicago, Illinois 60606, with a copy to
___________________________________; and if sent to the Company or the
Selling Shareholder, will be mailed, delivered or telegraphed and
confirmed to the Company at its corporate headquarters with a copy to
Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202-
5367, Attention: Benjamin F. Garner, III, Esq.; and if sent to the Selling
Shareholder will be mailed, delivered or telegraphed and confirmed to the
Agents and the Custodian at such address as they have previously furnished
to the Company and the Representatives, with a copy to Sachnoff & Weaver,
Ltd., 30 South Wacker Drive, 29th Floor, Chicago, Illinois 60606,
Attention: Jeffrey A. Schumacher, Esq.

SECTION 17. Successors. This Agreement and the Pricing Agreement
will inure to the benefit of and be binding upon the parties hereto and
their respective successors, personal representatives and assigns, and to
the benefit of the officers and directors and controlling persons referred
to in Section 11, and no other person will have any right or obligation
hereunder. The term "successors" shall not include any purchaser of the
Shares as such from any of the Underwriters merely by reason of such
purchase.

SECTION 18. Representation of Underwriters. You will act as
Representatives for the several Underwriters in connection with this
financing, and any action under or in respect of this Agreement taken by
you will be binding upon all the Underwriters.

SECTION 19. Partial Unenforceability. If any section, paragraph
or provision of this Agreement is for any reason determined to be invalid
or unenforceable, such determination shall not affect the validity or
enforceability of any other section, paragraph or provision hereof.

SECTION 10. Applicable Law. This Agreement and the Pricing
Agreement shall be governed by and construed in accordance with the laws
of the State of Illinois.

If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, the
Selling Shareholder and the several Underwriters including you, all in
accordance with its terms.

Very truly yours,
National Research Corporation

By:
Its: Chief Executive Officer, Selling
Shareholder

Michael D. Hays

The foregoing Agreement is hereby
confirmed and accepted as of
the date first above written.

William Blair & Company, L.L.C.
Robert W. Baird & Co. Incorporated

Acting as Representatives of the
several Underwriters named in
Schedule A.

By William Blair & Company, L.L.C.

By:
Principal

<PAGE>
Schedule A

Number of
Firm Shares
Underwriter to be Purchased
William Blair & Company, L.L.C.
Robert W. Baird & Co. Incorporated

----------
Total
==========

<PAGE>
Schedule B

Number of Number of
Firm Shares Option Shares
to be Sold to be Sold
Company
Selling Shareholder:

Michael D. Hays

---------- ----------
Total
========== ==========

<PAGE>
SCHEDULE C

Comfort Letter of

(1) They are independent public accountants with respect to the
Company within the meaning of the 1933 Act.

(2) In their opinion the financial statements and schedules of the
Company included in the Registration Statement and the financial
statements of the Company from which the information presented under the
caption "Selected Financial Data" has been derived which are stated
therein to have been examined by them comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act.

(3) On the basis of specified procedures (but not an examination in
accordance with generally accepted auditing standards), including
inquiries of certain officers of the Company responsible for financial and
accounting matters as to transactions and events subsequent to
___________________, 19___, a reading of minutes of meetings of the
stockholders and directors of the Company since _________________, 19___,
a reading of the latest available interim unaudited financial statements
of the Company and its subsidiaries (with an indication of the date
thereof) and other procedures as specified in such letter, nothing came to
their attention which caused them to believe that (i) the unaudited
financial statements and pro forma information of the Company included in
the Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act or
that such unaudited financial statements and pro forma information are not
fairly presented in accordance with generally accepted accounting
principles applied on a basis substantially consistent with that of the
audited financial statements included in the Registration Statement, and
(ii) at a specified date not more than five days prior to the date thereof
in the case of the first letter and not more than two business days prior
to the date thereof in the case of the second and third letters, there was
any change in the capital stock or long-term debt or short-term debt
(other than normal payments) of the Company or any decrease in net current
assets or stockholders' equity as compared with amounts shown on the
latest unaudited balance sheet of the Company included in the Registration
Statement or for the period from the date of such balance sheet to a date
not more than five days prior to the date thereof in the case of the first
letter and not more than two business days prior to the date thereof in
the case of the second and third letters, there were any decreases, as
compared with the corresponding period of the prior year, in net sales,
income before income taxes or in the total or per share amounts of net
income except, in all instances, for changes or decreases which the
Prospectus discloses have occurred or which are set forth in such letter.

(4) They have carried out specified procedures, which have been
agreed to by the Representatives, with respect to certain information in
the Prospectus specified by the Representatives, and on the basis of such
procedures, they have found such information to be in agreement with the
general accounting records of the Company.

<PAGE>
Exhibit A
National Research Corporation
Shares Common Stock 1
Pricing Agreement

, 1997

William Blair & Company, L.L.C.
Robert W. Baird & Co. Incorporated
As Representatives of the Several
Underwriters
S William Blair & Company, L.L.C.
222 West Adams Street
Chicago, Illinois 60606
Ladies and Gentlemen:

Reference is made to the Underwriting Agreement dated
_________________, 1997 (the "Underwriting Agreement") relating to the
sale by the Company and the Selling Shareholder and the purchase by the
several Underwriters for whom William Blair & Company, L.L.C. and Robert
W. Baird & Co. Incorporated are acting as representatives (the
"Representatives"), of the above Shares. All terms herein shall have the
definitions contained in the Underwriting Agreement except as otherwise
defined herein.

Pursuant to Section 5 of the Underwriting Agreement, the Company and
the Selling Shareholder agree with the Representatives as follows:

1. The initial public offering price per share for the Shares shall
be $__________.

2. The purchase price per share for the Shares to be paid by the
several Underwriters shall be $_____________, being an amount equal to the
initial public offering price set forth above less $____________ per
share.

Schedule A is amended as follows:

By:
Its: Chief Executive Officer

Selling Shareholder:

Michael D. Hays

The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.

William Blair & Company, L.L.C.
Robert W. Baird & Co. Incorporated

Acting as Representatives of the
several Underwriters

By William Blair & Company, L.L.C.

By
Principal

Exhibit (3.1)
RESTATED
ARTICLES OF INCORPORATION
OF
NATIONAL RESEARCH CORPORATION

Pursuant to Section 21-20,122 of the Nebraska Business
Corporation Act, these Restated Articles of Incorporation shall supersede
and take the place of the corporation's heretofore existing Revised
Articles of Incorporation and all amendments thereto.

ARTICLE 1

The name of the corporation is National Research Corporation.

ARTICLE 2

The period of existence of the corporation shall be perpetual.

ARTICLE 3

The purpose of the corporation is to engage in any lawful
business or purpose whatever for which corporations may be organized under
the Nebraska Business Corporation Act.

ARTICLE 4

The aggregate number of shares which the corporation shall have
the authority to issue shall be Twenty-Two Million (22,000,000) shares,
consisting of: (i) Twenty Million (20,000,000) shares of a class
designated as "Common Stock," with a par value of $.001 per share; and
(ii) Two Million (2,000,000) shares of a class designated as "Preferred
Stock," with a par value of $.01 per share. Upon the effectiveness of
these Restated Articles of Incorporation, each issued and outstanding
share of Common Stock, $.10 par value per share, of the corporation held
of record by each shareholder of the corporation immediately prior to such
effectiveness and each share held in the corporation's treasury shall
automatically and without need of any further action on the part of any
shareholder be reclassified into 240.516421 shares of Common Stock, with a
par value of $.001 per share. No scrip or fractional shares will be
issued by reason of this reclassification. In lieu thereof, fractional
shares shall be converted into the right to receive a cash amount obtained
by multiplying $11.00 by the fractional share, if any, due each
shareholder as a result of this recapitalization.

The designation, relative rights, preferences and limitations of
the shares of each class and the authority of the Board of Directors of
the corporation to establish and to designate series of Preferred Stock
and to fix variations in the relative rights, preferences and limitations
as between such series, shall be as set forth herein.

A. Preferred Stock.

(1) Series and Variations Between Series. The Board of
Directors of the corporation is authorized, to the full extent permitted
under the Nebraska Business Corporation Act and the provisions of this
Section A, to provide for the issuance of the Preferred Stock in series,
each of such series to be distinctively designated, and to have such
redemption rights, dividend rights, rights on dissolution or distribution
of assets, conversion or exchange rights, voting powers, designations,
preferences and relative participating, optional or other special rights,
if any, and such qualifications, limitations or restrictions thereof as
shall be provided by the Board of Directors of the corporation consistent
with the provisions of this Article 4.

(2) Dividends. Before any dividends shall be paid or set apart
for payment upon shares of Common Stock, the holders of each series of
Preferred Stock shall be entitled to receive dividends at the rate (which
may be fixed or variable) and at such times as specified in the particular
series. The holders of shares of Preferred Stock shall have no rights to
participate with the holders of shares of Common Stock in any distribution
of dividends in excess of the preferential dividends, if any, fixed for
such Preferred Stock.

(3) Liquidation Rights. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the corporation, the
holders of shares of each series of Preferred Stock shall be entitled to
receive out of the assets of the corporation in money or money's worth the
preferential amount, if any, specified in the particular series for each
share at the time outstanding together with all accrued but unpaid
dividends thereon, before any of such assets shall be paid or distributed
to holders of Common Stock. The holders of Preferred Stock shall have no
rights to participate with the holders of Common Stock in the assets of
the corporation available for distribution to shareholders in excess of
the preferential amount, if any, fixed for such Preferred Stock.

(4) Voting Rights. The holders of Preferred Stock shall have
only such voting rights as are fixed for shares of each series by the
Board of Directors pursuant to this Section A or are provided, to the
extent applicable, by the Nebraska Business Corporation Act.

B. Common Stock.

(1) Dividends. Subject to the provisions of this Article 4,
the Board of Directors of the corporation may, in its sole discretion, out
of funds legally available for the payment of dividends and at such times
and in such manner as determined by the Board of Directors, declare and
pay dividends or other distributions on the Common Stock.

(2) Liquidation Rights. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the corporation,
after there shall have been paid to or set aside for the holders of
Preferred Stock the full preferential amounts, if any, to which they are
entitled, the holders of outstanding shares of Common Stock shall be
entitled to receive pro rata, according to the number of shares held by
each, the remaining assets of the corporation available for distribution.

(3) Voting Rights. Except as otherwise provided by the
Nebraska Business Corporation Act, and except as may be determined by the
Board of Directors with respect to Preferred Stock pursuant to Section A
of this Article 4, only the holders of Common Stock shall be entitled to
vote for the election of directors of the corporation and for all other
corporate purposes. Upon any such vote the holders of Common Stock shall,
except as otherwise provided by law, be entitled to one vote for each
share of Common Stock held by them respectively.

C. Preemptive Rights.

No holder of shares of any class of capital stock of the
corporation shall have any preferential or preemptive right to acquire
unissued shares or securities convertible into unissued shares or
conveying a right to subscribe for or acquire shares, unless otherwise
determined by the Board of Directors.

ARTICLE 5

A. Classification, General Powers, Number and Tenure of
Directors. The directors of the corporation shall be divided into three
classes, designated as Class I, Class II and Class III, with each class
containing one-third of the total number of directors (as near as may be)
as set forth in Section 3.01 of Article III of the corporation's Restated
By-Laws (as such Section shall exist from time to time). The general
powers, number, tenure and qualifications of the directors of the
corporation shall be as set forth in Sections 3.01 and 3.02 of Article III
of the Restated By-Laws of the corporation (and as such Sections shall
exist from time to time). Such Sections 3.01 and 3.02 of the Restated By-
Laws, or any provision thereof, may only be amended, altered, changed or
repealed by the affirmative vote of shareholders holding at least sixty-
six and two-thirds percent (66-2/3%) of the voting power of the then
outstanding shares of all classes of capital stock of the corporation
generally possessing voting rights in the election of directors,
considered for this purpose as a single class; provided, however, that the
Board of Directors, by resolution adopted by the Requisite Vote (as
hereinafter defined), may amend, alter, change or repeal Sections 3.01 and
3.02 of the Restated By-Laws, or any provision thereof, without a vote of
the shareholders. As used herein, the term "Requisite Vote" shall mean
the affirmative vote of at least two-thirds of the directors then in
office plus one director, but in no case more than all of the directors
then in office.

B. Removal of Directors. Any director may be removed from
office, but only for Cause (as hereinafter defined) by the affirmative
vote of holders of at least sixty-six and two-thirds percent (66-2/3%) of
the voting power of the then outstanding shares of stock of the voting
group of shareholders that elected the director to be removed; provided,
however, that if the Board of Directors by resolution adopted by the
Requisite Vote shall have recommended removal of a director, then the
shareholders may remove such director from office without Cause by a
majority vote of such outstanding shares. As used herein, "Cause" shall
exist only if the director whose removal is proposed (i) has been
convicted of a felony by a court of competent jurisdiction and such
conviction is no longer subject to direct appeal or (ii) has been adjudged
by a court of competent jurisdiction to be liable for willful misconduct
in the performance of his or her duties to the corporation in a matter
which has a material adverse effect on the business of the corporation and
such adjudication is no longer subject to direct appeal.

C. Vacancies. Any vacancy occurring in the Board of
Directors, including a vacancy created by the removal of a director or an
increase in the number of directors, shall be filled by the affirmative
vote of a majority of the directors then in office, although less than a
quorum of the Board of Directors; provided, however, that if the vacant
office was held by a director elected by a voting group of shareholders,
only the remaining directors elected by that voting group shall fill the
vacancy. For purposes of this Article 5, a director elected by directors
to fill a vacant office pursuant to this Section C shall be deemed to be a
director elected by the same voting group of shareholders that elected the
director(s) who voted to fill the vacancy. Any director elected pursuant
to this Section C shall serve until the next election of the class for
which such director shall have been chosen and until his or her successor
shall be elected and qualified.

D. Amendments.

(1) Notwithstanding any other provision of these Restated
Articles of Incorporation, the provisions of this Article 5 may be
amended, altered, changed or repealed only by the affirmative vote of
shareholders holding at least sixty-six and two-thirds percent (66-2/3%)
of the voting power of the then outstanding shares of all classes of
capital stock of the corporation generally possessing voting rights in the
election of directors, considered for this purpose as a single class.

(2) Notwithstanding the foregoing and any provisions in
the Restated By-Laws of the corporation, whenever the holders of any one
or more series of Preferred Stock issued by the corporation pursuant to
Article 4 hereof shall have the right, voting separately as a class or by
series, to elect directors at an annual or special meeting of
shareholders, the election, term of office, filling of vacancies and other
features of such directorships shall be governed by the terms of the
series of Preferred Stock applicable thereto, and such directors so
elected shall not be divided into classes unless expressly provided by the
terms of the applicable series.

ARTICLE 6

The address of the registered office of the corporation shall be
1033 "O" Street, Suite 400, Lincoln, Nebraska 68508.

ARTICLE 7

The name of the registered agent of the corporation at such
address shall be Michael D. Hays.

ARTICLE 8

These Restated Articles of Incorporation may be amended solely
as authorized herein and by law at the time of amendment.

* * *

Exhibit (3.2)

RESTATED BY-LAWS

NATIONAL RESEARCH CORPORATION
(a Nebraska corporation)

ARTICLE I. OFFICES

1.01. Principal and Business Offices. The corporation may have
such principal and other business offices, either within or without the
State of Nebraska, as the Board of Directors may designate or as the
business of the corporation may require from time to time.

1.02. Registered Office. The registered office of the
corporation required by the Nebraska Business Corporation Act to be
maintained in the State of Nebraska may be, but need not be, identical
with the principal office in the State of Nebraska, and the address of the
registered office may be changed from time to time by the Board of
Directors or by the registered agent. The business office of the
registered agent of the corporation shall be identical to such registered
office.

ARTICLE II. SHAREHOLDERS

2.01. Annual Meeting. The annual meeting of the shareholders
(the "Annual Meeting"), commencing with the Annual Meeting in 1998, shall
be held on the second Wednesday in April of each year, or at such other
time and date as may be fixed by resolution of the Board of Directors. In
fixing a meeting date for any Annual Meeting, the Board of Directors may
consider such factors as it deems relevant within the good faith exercise
of its business judgment. At each Annual Meeting, the shareholders shall
elect that number of directors equal to the number of directors in the
class whose term expires at the time of such meeting. At any such Annual
Meeting, only other business properly brought before the meeting in
accordance with Section 2.14 of these restated by-laws may be transacted.
If the election of directors shall not be held on the date designated
herein, or fixed as herein provided, for any Annual Meeting, or any
adjournment thereof, the Board of Directors shall cause the election to be
held at a special meeting of shareholders (a "Special Meeting") as soon
thereafter as is practicable.

2.02. Special Meetings.

(a) A Special Meeting may be called only by (i) the President,
(ii) the Secretary or (iii) the Board of Directors and shall be called by
the President upon the demand, in accordance with this Section 2.02, of
the holders of record of shares representing at least 10% of all the votes
entitled to be cast on any issue proposed to be considered at the Special
Meeting.

(b) In order that the corporation may determine the
shareholders entitled to demand a Special Meeting, the Board of Directors
may fix a record date to determine the shareholders entitled to make such
a demand (the "Demand Record Date"). The Demand Record Date shall not
precede the date upon which the resolution fixing the Demand Record Date
is adopted by the Board of Directors and shall not be more than ten days
after the date upon which the resolution fixing the Demand Record Date is
adopted by the Board of Directors. Any shareholder of record seeking to
have shareholders demand a Special Meeting shall, by sending written
notice to the Secretary of the corporation by hand or by certified or
registered mail, return receipt requested, request the Board of Directors
to fix a Demand Record Date. The Board of Directors shall promptly, but in
all events within ten days after the date on which a valid request to fix
a Demand Record Date is received, adopt a resolution fixing the Demand
Record Date and shall make a public announcement of such Demand Record
Date. If no Demand Record Date has been fixed by the Board of Directors
within ten days after the date on which such request is received by the
Secretary, the Demand Record Date shall be the 10th day after the first
date on which a valid written request to set a Demand Record Date is
received by the Secretary. To be valid, such written request shall set
forth the purpose or purposes for which the Special Meeting is to be held,
shall be signed by one or more shareholders of record (or their duly
authorized proxies or other representatives), shall bear the date of
signature of each such shareholder (or proxy or other representative) and
shall set forth all information about each such shareholder and about the
beneficial owner or owners, if any, on whose behalf the request is made
that would be required to be set forth in a shareholder's notice described
in paragraph (a) (ii) of Section 2.14 of these restated by-laws.

(c) In order for a shareholder or shareholders to demand a
Special Meeting, a written demand or demands for a Special Meeting by the
holders of record as of the Demand Record Date of shares representing at
least 10% of all the votes entitled to be cast on any issue proposed to be
considered at the Special Meeting must be delivered to the corporation.
To be valid, each written demand by a shareholder for a Special Meeting
shall set forth the specific purpose or purposes for which the Special
Meeting is to be held (which purpose or purposes shall be limited to the
purpose or purposes set forth in the written request to set a Demand
Record Date received by the corporation pursuant to paragraph (b) of this
Section 2.02), shall be signed by one or more persons who as of the Demand
Record Date are shareholders of record (or their duly authorized proxies
or other representatives), shall bear the date of signature of each such
shareholder (or proxy or other representative), and shall set forth the
name and address, as they appear in the corporation's books, of each
shareholder signing such demand and the class and number of shares of the
corporation which are owned of record and beneficially by each such
shareholder, shall be sent to the Secretary by hand or by certified or
registered mail, return receipt requested, and shall be received by the
Secretary within seventy days after the Demand Record Date.

(d) The corporation shall not be required to call a Special
Meeting upon shareholder demand unless, in addition to the documents
required by paragraph (c) of this Section 2.02, the Secretary receives a
written agreement signed by each Soliciting Shareholder (as defined
below), pursuant to which each Soliciting Shareholder, jointly and
severally, agrees to pay the corporation's costs of holding the Special
Meeting, including the costs of preparing and mailing proxy materials for
the corporation's own solicitation, provided that if each of the
resolutions introduced by any Soliciting Shareholder at such meeting is
adopted, and each of the individuals nominated by or on behalf of any
Soliciting Shareholder for election as a director at such meeting is
elected, then the Soliciting Shareholders shall not be required to pay
such costs. For purposes of this paragraph (d), the following terms shall
have the meanings set forth below:

(i) "Affiliate" of any Person (as defined herein) shall
mean any Person controlling, controlled by or under common control
with such first Person.

(ii) "Participant" shall have the meaning assigned to such
term in Rule 14a-11 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act").

(iii) "Person" shall mean any individual, firm,
corporation, partnership, joint venture, association, trust,
unincorporated organization or other entity.

(iv) "Proxy" shall have the meaning assigned to such term
in Rule 14a-1 promulgated under the Exchange Act.

(v) "Solicitation" shall have the meaning assigned to such
term in Rule 14a-11 promulgated under the Exchange Act.

(vi) "Soliciting Shareholder" shall mean, with respect to
any Special Meeting demanded by a shareholder or shareholders, any of
the following Persons:

(A) if the number of shareholders signing the
demand or demands of meeting delivered to the corporation
pursuant to paragraph (c) of this Section 2.02 is ten or
fewer, each shareholder signing any such demand;

(B) if the number of shareholders signing the
demand or demands of meeting delivered to the corporation
pursuant to paragraph (c) of this Section 2.02 is more than
ten, each Person who either (I) was a Participant in any
Solicitation of such demand or demands or (II) at the time
of the delivery to the corporation of the documents
described in paragraph (c) of this Section 2.02 had engaged
or intended to engage in any Solicitation of Proxies for
use at such Special Meeting (other than a Solicitation of
Proxies on behalf of the corporation); or

(C) any Affiliate of a Soliciting Shareholder,
if a majority of the directors then in office determine,
reasonably and in good faith, that such Affiliate should be
required to sign the written notice described in paragraph
(c) of this Section 2.02 and/or the written agreement
described in this paragraph (d) in order to prevent the
purposes of this Section 2.02 from being evaded.

(e) Except as provided in the following sentence, any Special
Meeting shall be held at such hour and day as may be designated by
whichever of the President, the Secretary or the Board of Directors shall
have called such meeting. In the case of any Special Meeting called by
the President upon the demand of shareholders (a "Demand Special
Meeting"), such meeting shall be held at such hour and day as may be
designated by the Board of Directors; provided, however, that the date of
any Demand Special Meeting shall be not more than seventy days after the
Meeting Record Date (as defined in Section 2.06 hereof); and provided
further that in the event that the directors then in office fail to
designate an hour and date for a Demand Special Meeting within ten days
after the date that valid written demands for such meeting by the holders
of record as of the Demand Record Date of shares representing at least 10%
of all the votes entitled to be cast on each issue proposed to be
considered at the Special Meeting are delivered to the corporation (the
"Delivery Date"), then such meeting shall be held at 2:00 P.M. local time
on the 100th day after the Delivery Date or, if such 100th day is not a
Business Day (as defined below), on the first preceding Business Day. In
fixing a meeting date for any Special Meeting, the President, the
Secretary or the Board of Directors may consider such factors as he or it
deems relevant within the good faith exercise of his or its business
judgment, including, without limitation, the nature of the action proposed
to be taken, the facts and circumstances surrounding any demand for such
meeting, and any plan of the Board of Directors to call an Annual Meeting
or a Special Meeting for the conduct of related business.

(f) The corporation may engage regionally or nationally
recognized independent inspectors of elections to act as an agent of the
corporation for the purpose of promptly performing a ministerial review of
the validity of any purported written demand or demands for a Special
Meeting received by the Secretary. For the purpose of permitting the
inspectors to perform such review, no purported demand shall be deemed to
have been delivered to the corporation until the earlier of (i) five
Business Days following receipt by the Secretary of such purported demand
and (ii) such date as the independent inspectors certify to the
corporation that the valid demands received by the Secretary represent at
least 10% of all the votes entitled to be cast on each issue proposed to
be considered at the Special Meeting. Nothing contained in this paragraph
(f) shall in any way be construed to suggest or imply that the Board of
Directors or any shareholder shall not be entitled to contest the validity
of any demand, whether during or after such five Business Day period, or
to take any other action (including, without limitation, the commencement,
prosecution or defense of any litigation with respect thereto).

(g) For purposes of these restated by-laws, "Business Day"
shall mean any day other than a Saturday, a Sunday or a day on which
banking institutions in the State of Nebraska are authorized or obligated
by law or executive order to close.

2.03. Place of Meeting. The Board of Directors, the President
or the Secretary may designate any place, either within or without the
State of Nebraska, as the place of meeting for an Annual Meeting or
Special Meeting. If no designation is made, the place of meeting shall be
the principal office of the corporation. Any meeting may be adjourned to
reconvene at any place designated by vote of the shares represented
thereat.

2.04. Notice of Meeting. Written notice stating the date, time
and place of any meeting of shareholders shall be delivered not less than
ten days nor more than sixty days before the date of the meeting (unless a
different time period is provided by the Nebraska Business Corporation Act
or the restated articles of incorporation), either personally or by mail,
by or at the direction of the President or the Secretary, to each
shareholder of record entitled to vote at such meeting and to such other
persons as required by the Nebraska Business Corporation Act. In the
event of any Demand Special Meeting, such notice of meeting shall be sent
not more than thirty days after the Delivery Date. If mailed, notice
pursuant to this Section 2.04 shall be deemed to be effective when
deposited in the United States mail, addressed to the shareholder at his
or her address as it appears on the stock record books of the corporation,
with postage thereon prepaid. Unless otherwise required by the Nebraska
Business Corporation Act or the restated articles of incorporation of the
corporation, a notice of an Annual Meeting need not include a description
of the purpose for which the meeting is called. In the case of any
Special Meeting, (a) the notice of meeting shall describe any business
that the Board of Directors shall have theretofore determined to bring
before the meeting and (b) in the case of a Demand Special Meeting, the
notice of meeting (i) shall describe any business set forth in the
statement of purpose of the demands received by the corporation in
accordance with Section 2.02 of these restated by-laws and (ii) shall
contain all of the information required in the notice received by the
corporation in accordance with Section 2.14(b) of these restated by-laws.
If an Annual Meeting or Special Meeting is adjourned to a different date,
time or place, the corporation shall not be required to give notice of the
new date, time or place if the new date, time or place is announced at the
meeting before adjournment; provided, however, that if a new Meeting
Record Date for an adjourned meeting is or must be fixed, the corporation
shall give notice of the adjourned meeting to persons who are shareholders
as of the new Meeting Record Date.

2.05. Waiver of Notice. A shareholder may waive any notice
required by the Nebraska Business Corporation Act, the restated articles
of incorporation or these restated by-laws before or after the date and
time stated in the notice. The waiver shall be in writing and signed by
the shareholder entitled to the notice, contain the same information that
would have been required in the notice under applicable provisions of the
Nebraska Business Corporation Act (except that the time and place of
meeting need not be stated) and be delivered to the corporation for
inclusion in the corporate records. A shareholder's attendance at any
Annual Meeting or Special Meeting, in person or by proxy, waives objection
to all of the following: (a) lack of notice or defective notice of the
meeting, unless the shareholder at the beginning of the meeting or
promptly upon arrival objects to holding the meeting or transacting
business at the meeting; and (b) consideration of a particular matter at
the meeting that is not within the purpose described in the meeting
notice, unless the shareholder objects to considering the matter when it
is presented.

2.06. Fixing of Record Date. The Board of Directors may fix in
advance a date not less than ten days and not more than seventy days prior
to the date of an Annual Meeting or Special Meeting as the record date for
the determination of shareholders entitled to notice of, or to vote at,
such meeting (the "Meeting Record Date"). In the case of any Demand
Special Meeting, (i) the Meeting Record Date shall be not later than the
30th day after the Delivery Date and (ii) if the Board of Directors fails
to fix the Meeting Record Date within thirty days after the Delivery Date,
then the close of business on such 30th day shall be the Meeting Record
Date. The shareholders of record on the Meeting Record Date shall be the
shareholders entitled to notice of and to vote at the meeting. Except as
provided by the Nebraska Business Corporation Act for a court-ordered
adjournment, a determination of shareholders entitled to notice of and to
vote at an Annual Meeting or Special Meeting is effective for any
adjournment of such meeting unless the Board of Directors fixes a new
Meeting Record Date, which it shall do if the meeting is adjourned to a
date more than 120 days after the date fixed for the original meeting.
The Board of Directors may also fix in advance a date as the record date
for the purpose of determining shareholders entitled to take any other
action or determining shareholders for any other purpose. Such record
date shall be not more than seventy days prior to the date on which the
particular action, requiring such determination of shareholders, is to be
taken. The record date for determining shareholders entitled to a
distribution (other than a distribution involving a purchase, redemption
or other acquisition of the corporation's shares) or a share dividend is
the date on which the Board of Directors authorizes the distribution or
share dividend, as the case may be, unless the Board of Directors fixes a
different record date.

2.07. Shareholders' List for Meetings. After a Meeting Record
Date has been fixed, the corporation shall prepare a list of the names of
all of the shareholders entitled to notice of the meeting. The list shall
be arranged by class or series of shares, if any, and show the address of
and number of shares held by each shareholder. Such list shall be
available for inspection by any shareholder, beginning two business days
after notice of the meeting is given for which the list was prepared and
continuing to the date of the meeting, at the corporation's principal
office or at a place identified in the meeting notice in the city where
the meeting will be held. A shareholder or his or her agent may, on
written demand, inspect and, subject to the limitations imposed by the
Nebraska Business Corporation Act, copy the list, during regular business
hours and at his or her expense, during the period that it is available
for inspection pursuant to this Section 2.07. The corporation shall make
the shareholders' list available at the meeting and any shareholder or his
or her agent or attorney may inspect the list at any time during the
meeting or any adjournment thereof. Refusal or failure to prepare or make
available the shareholders' list shall not affect the validity of any
action taken at a meeting of shareholders.

2.08. Quorum and Voting Requirements; Postponements;
Adjournments.

(a) Shares entitled to vote as a separate voting group may take
action on a matter at any Annual Meeting or Special Meeting only if a
quorum of those shares exists with respect to that matter. If the
corporation has only one class of stock outstanding, such class shall
constitute a separate voting group for purposes of this Section 2.08.
Except as otherwise provided in the restated articles of incorporation or
the Nebraska Business Corporation Act, a majority of the votes entitled to
be cast on the matter shall constitute a quorum of the voting group for
action on that matter. Once a share is represented for any purpose at any
Annual Meeting or Special Meeting, other than for the purpose of objecting
to holding the meeting or transacting business at the meeting, it is
considered present for purposes of determining whether a quorum exists for
the remainder of the meeting and for any adjournment of that meeting
unless a new Meeting Record Date is or must be set for the adjourned
meeting. If a quorum exists, except in the case of the election of
directors, action on a matter shall be approved if the votes cast within
the voting group favoring the action exceed the votes cast opposing the
action, unless the restated articles of incorporation or the Nebraska
Business Corporation Act requires a greater number of affirmative votes.
Unless otherwise provided in the restated articles of incorporation, each
director to be elected shall be elected by a plurality of the votes cast
by the shares entitled to vote in the election of directors at an Annual
Meeting or Special Meeting at which a quorum is present. In all elections
for directors, every shareholder entitled to vote shall have the right to
vote the number of shares owned by him or her, for as many persons as
there are directors to be elected, or to cumulate such shares and give one
candidate as many votes as the number of directors multiplied by the
number of his or her shares shall equal, or to distribute such votes upon
the same principle among as many candidates as he or she may see fit.

(b) The Board of Directors acting by resolution may postpone
and reschedule any previously scheduled Annual Meeting or Special Meeting;
provided, however, that a Demand Special Meeting shall be postponed beyond
the 100th day following the Delivery Date. Any Annual Meeting or Special
Meeting may be adjourned from time to time, whether or not there is a
quorum, (i) at any time, upon a resolution by shareholders if the votes
cast in favor of such resolution by the holders of shares of each voting
group entitled to vote on any matter theretofore properly brought before
the meeting exceed the number of votes cast against such resolution by the
holders of shares of each such voting group or (ii) at any time prior to
the transaction of any business at such meeting, by the President or
pursuant to a resolution of the Board of Directors. No notice of the time
and place of adjourned meetings need be given except as required by the
Nebraska Business Corporation Act. At any adjourned meeting at which a
quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally notified.

2.09. Conduct of Meeting. The President, and in his or her
absence, a Vice President in the order provided under Section 4.07 of
these restated by-laws, and in their absence, any person chosen by the
shareholders present shall call any Annual Meeting or Special Meeting to
order and shall act as chairperson of the meeting, and the Secretary of
the corporation shall act as secretary of all meetings of the
shareholders, but, in the absence of the Secretary, the presiding officer
may appoint any other person to act as secretary of the meeting.

2.10. Proxies. At any Annual Meeting or Special Meeting, a
shareholder may vote his or her shares in person or by proxy. A
shareholder may appoint a proxy to vote or otherwise act for the
shareholder by signing an appointment form, either personally or by his or
her attorney-in-fact. An appointment of a proxy is effective when
received by the Secretary or other officer or agent of the corporation
authorized to tabulate votes. An appointment is valid for eleven months
from the date of its signing unless a different period is expressly
provided in the appointment form. Unless otherwise provided, a proxy may
be revoked at any time before it is voted, either by written notice filed
with the Secretary or the acting secretary of the meeting or by oral
notice given by the shareholder to the presiding officer during the
meeting. The presence of a shareholder who has filed his or her
appointment of proxy shall not itself constitute a revocation. The Board
of Directors shall have the power and authority to make rules establishing
presumptions as to the validity and sufficiently of proxies.

2.11. Voting of Shares.

(a) Each outstanding share shall be entitled to one vote upon
each matter submitted to a vote at an Annual Meeting or Special Meeting,
except to the extent that the voting rights of the shares of any class or
classes are enlarged, limited or denied by the Nebraska Business
Corporation Act or the restated articles of incorporation of the
corporation.

(b) Shares held by another corporation, if a sufficient number
of shares entitled to elect a majority of the directors of such other
corporation is held directly or indirectly by this corporation, shall not
be entitled to vote at an Annual Meeting or Special Meeting, but shares
held in a fiduciary capacity may be voted.

2.12. Action without Meeting. Any action required or permitted
by the restated articles of incorporation or these restated by-laws or any
provision of the Nebraska Business Corporation Act to be taken at an
Annual Meeting or Special Meeting may be taken without a meeting if a
written consent or consents, describing the action so taken, is signed by
all of the shareholders entitled to vote with respect to the subject
matter thereof and delivered to the corporation for inclusion in the
corporate records.

2.13. Acceptance of Instruments Showing Shareholder Action. If
the name signed on a vote, consent, waiver or proxy appointment
corresponds to the name of a shareholder, the corporation, if acting in
good faith, may accept the vote, consent, waiver or proxy appointment and
give it effect as the act of a shareholder. If the name signed on a vote,
consent, waiver or proxy appointment does not correspond to the name of a
shareholder, the corporation, if acting in good faith, may accept the
vote, consent, waiver or proxy appointment and give it effect as the act
of the shareholder if any of the following apply:

(a) The shareholder is an entity and the name signed purports
to be that of an officer or agent of the entity.

(b) The name purports to be that of a personal representative,
administrator, executor, guardian or conservator representing the
shareholder and, if the corporation requests, evidence of fiduciary status
acceptable to the corporation is presented with respect to the vote,
consent, waiver or proxy appointment.

(c) The name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the corporation requests,
evidence of this status acceptable to the corporation is presented with
respect to the vote, consent, waiver or proxy appointment.

(d) The name signed purports to be that of a pledgee,
beneficial owner, or attorney-in-fact of the shareholder and, if the
corporation requests, evidence acceptable to the corporation of the
signatory's authority to sign for the shareholder is presented with
respect to the vote, consent, waiver or proxy appointment.

(e) Two or more persons are the shareholders as co-tenants or
fiduciaries and the name signed purports to be the name of at least one of
the co-owners and the person signing appears to be acting on behalf of all
co-owners.

The corporation may reject a vote, consent, waiver or proxy appointment if
the Secretary or other officer or agent of the corporation who is
authorized to tabulate votes, acting in good faith, has reasonable basis
for doubt about the validity of the signature on it or about the
signatory's authority to sign for the shareholder.

2.14. Notice of Shareholder Business and Nomination of
Directors.

(a) Annual Meetings.

(i) Nominations of persons for election to the Board of
Directors of the corporation and the proposal of business to be
considered by the shareholders may be made at an Annual Meeting (A)
pursuant to the corporation's notice of meeting, (B) by or at the
direction of the Board of Directors or (C) by any shareholder of the
corporation who is a shareholder of record at the time of giving of
notice provided for in this by-law and who is entitled to vote at the
meeting and complies with the notice procedures set forth in this
Section 2.14.

(ii) For nominations or other business to be properly
brought before an Annual Meeting by a shareholder pursuant to clause
(C) of paragraph (a)(i) of this Section 2.14, the shareholder must
have given timely notice thereof in writing to the Secretary of the
corporation. To be timely, a shareholder's notice shall be received
by the Secretary of the corporation at the principal offices of the
corporation not less than sixty days nor more than ninety days prior
to the second Wednesday in the month of April; provided, however,
that in the event that the date of the Annual Meeting is advanced by
more than thirty days or delayed by more than sixty days from the
second Wednesday in the month of April, notice by the shareholder to
be timely must be so received not earlier than the 90th day prior to
the date of such Annual Meeting and not later than the close of
business on the later of (x) the 60th day prior to such Annual
Meeting and (y) the 10th day following the day on which public
announcement of the date of such meeting is first made. Such
shareholder's notice shall be signed by the shareholder of record who
intends to make the nomination or introduce the other business (or
his duly authorized proxy or other representative), shall bear the
date of signature of such shareholder (or proxy or other
representative) and shall set forth: (A) the name and address, as
they appear on this corporation's books, of such shareholder and the
beneficial owner or owners, if any, on whose behalf the nomination or
proposal is made; (B) the class and number of shares of the
corporation which are beneficially owned by such shareholder or
beneficial owner or owners; (C) a representation that such
shareholder is a holder of record of shares of the corporation
entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to make the nomination or introduce the other
business specified in the notice; (D) in the case of any proposed
nomination for election or re-election as a director, (I) the name
and residence address of the person or persons to be nominated, (II)
a description of all arrangements or understandings between such
shareholder or beneficial owner or owners and each nominee and any
other person or persons (naming such person or persons) pursuant to
which the nomination is to be made by such shareholder, (III) such
other information regarding each nominee proposed by such shareholder
as would be required to be disclosed in solicitations of proxies for
elections of directors, or would be otherwise required to be
disclosed, in each case pursuant to Regulation 14A under the Exchange
Act, including any information that would be required to be included
in a proxy statement filed pursuant to Regulation 14A had the nominee
been nominated by the Board of Directors and (IV) the written consent
of each nominee to be named in a proxy statement and to serve as a
director of the corporation if so elected; and (E) in the case of any
other business that such shareholder proposes to bring before the
meeting, (I) a brief description of the business desired to be
brought before the meeting and, if such business includes a proposal
to amend these restated by-laws, the language of the proposed
amendment, (II) such shareholder's and beneficial owner's or owners'
reasons for conducting such business at the meeting and (III) any
material interest in such business of such shareholder and beneficial
owner or owners.

(iii) Notwithstanding anything in the second sentence
of paragraph (a)(ii) of this Section 2.14 to the contrary, in the
event that the number of directors to be elected to the Board of
Directors of the corporation is increased and there is no public
announcement naming all of the nominees for director or specifying
the size of the increased Board of Directors made by the corporation
at least seventy days prior to the second Wednesday in the month of
April, a shareholder's notice required by this Section 2.14 shall
also be considered timely, but only with respect to nominees for any
new positions created by such increase, if it shall be received by
the Secretary at the principal offices of the corporation not later
than the close of business on the 10th day following the day on which
such public announcement is first made by the corporation.

(b) Special Meetings. Only such business shall be conducted at
a Special Meeting as shall have been described in the notice of meeting
sent to shareholders pursuant to Section 2.04 of these restated by-laws.
Nominations of persons for election to the Board of Directors may be made
at a Special Meeting at which directors are to be elected pursuant to such
notice of meeting (i) by or at the direction of the Board of Directors or
(ii) by any shareholder of the corporation who (A) is a shareholder of
record at the time of giving of such notice of meeting, (B) is entitled to
vote at the meeting and (C) complies with the notice procedures set forth
in this Section 2.14. Any shareholder desiring to nominate persons for
election to the Board of Directors at such a Special Meeting shall cause a
written notice to be received by the Secretary of the corporation at the
principal offices of the corporation not earlier than ninety days prior to
such Special Meeting and not later than the close of business on the later
of (x) the 60th day prior to such Special Meeting and (y) the 10th day
following the day on which public announcement is first made of the date
of such Special Meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting. Such written notice shall be
signed by the shareholder of record who intends to make the nomination (or
his duly authorized proxy or other representative), shall bear the date of
signature of such shareholder (or proxy or other representative) and shall
set forth: (A) the name and address, as they appear on the corporation's
books, of such shareholder and the beneficial owner or owners, if any, on
whose behalf the nomination is made; (B) the class and number of shares of
the corporation which are beneficially owned by such shareholder or
beneficial owner or owners; (C) a representation that such shareholder is
a holder of record of shares of the corporation entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to make
the nomination specified in the notice; (D) the name and residence address
of the person or persons to be nominated; (E) a description of all
arrangements or understandings between such shareholder or beneficial
owner or owners and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination is to be made by
such shareholder; (F) such other information regarding each nominee
proposed by such shareholder as would be required to be disclosed in
solicitations of proxies for elections of directors, or would be otherwise
required to be disclosed, in each case pursuant to Regulation 14A under
the Exchange Act, including any information that would be required to be
included in a proxy statement filed pursuant to Regulation 14A had the
nominee been nominated by the Board of Directors; and (G) the written
consent of each nominee to be named in a proxy statement and to serve as a
director of the corporation if so elected.

(i) Only persons who are nominated in accordance with the
procedures set forth in this Section 2.14 shall be eligible to serve
as directors. Only such business shall be conducted at an Annual
Meeting or Special Meeting as shall have been brought before such
meeting in accordance with the procedures set forth in this Section
2.14. The chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought
before the meeting was made in accordance with the procedures set
forth in this Section 2.14 and, if any proposed nomination or
business is not in compliance with this Section 2.14, to declare that
such defective proposal shall be disregarded.

(ii) For purposes of this Section 2.14, "public
announcement" shall mean disclosure in a press release reported by
the Dow Jones News Service, Associated Press or comparable national
news service or in a document publicly filed by the corporation with
the Securities and Exchange Commission pursuant to Section 13, 14 or
15(d) of the Exchange Act.

(iii) Notwithstanding the foregoing provisions of this
Section 2.14, a shareholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this Section
2.14. Nothing in this Section 2.14 shall be deemed to limit the
corporation's obligation to include shareholder proposals in its
proxy statement if such inclusion is required by Rule 14a-8 under the
Exchange Act.

ARTICLE III. BOARD OF DIRECTORS

3.01. General Powers, Classification and Number. All corporate
powers shall be exercised by or under the authority of, and the business
affairs of the corporation managed under the direction of, the Board of
Directors. The number of directors of the corporation shall be four (4).
As specified in the corporation's restated articles of incorporation, the
directors of the corporation are divided into three classes, designated as
Class I, Class II and Class III; and such classes shall consist of one
(1), one (1) and two (2) director(s), respectively. At the first meeting
of shareholders at which directors are elected after the date these
restated by-laws are adopted, the directors of Class I shall be elected
for a term to expire at the first Annual Meeting after their election, and
until their successors are duly elected and qualified, the directors of
Class II shall be elected for a term to expire at the second Annual
Meeting after their election, and until their successors are duly elected
and qualified, and the directors of Class III shall be elected for a term
to expire at the third Annual Meeting after their election, and until
their successors are duly elected and qualified. At each Annual Meeting
after the first meeting of shareholders at which directors are elected
after the date these restated by-laws are adopted, the successors to the
class of directors whose terms shall expire at the time of such Annual
Meeting shall be elected to hold office until the third succeeding Annual
Meeting, and until their successors are duly elected and qualified.

3.02. Tenure and Qualifications. Each director shall hold
office until the next Annual Meeting in the year in which such director's
term expires and until his or her successor shall have been duly elected
and, if necessary, qualified, or until there is a decrease in the number
of directors which takes effect after the expiration of his or her term,
or until his or her prior retirement, death, resignation or removal. A
director may be removed from office only as provided in the restated
articles of incorporation at a meeting of the shareholders called for the
purpose of removing the director, and the meeting notice shall state that
the purpose, or one of the purposes, of the meeting is removal of the
director. A director may resign at any time by delivering written notice
which complies with the Nebraska Business Corporation Act to the Board of
Directors, to the President or to the corporation. A director's
resignation is effective when the notice is delivered unless the notice
specifies a later effective date. Directors need not be residents of the
State of Nebraska or shareholders of the corporation. No other
restrictions, limitations or qualifications may be imposed on individuals
for service as a director.

3.03. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this restated by-law
immediately after the Annual Meeting and each adjourned session thereof.
The place of such regular meeting shall be the same as the place of the
Annual Meeting which precedes it, or such other suitable place as may be
announced at such Annual Meeting. The Board of Directors may provide, by
resolution, the date, time and place, either within or without the State
of Nebraska, for the holding of additional regular meetings of the Board
of Directors without other notice than such resolution.

3.04. Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the President, Secretary
or any two directors. The President or Secretary may fix any place,
either within or without the State of Nebraska, as the place for holding
any special meeting of the Board of Directors, and if no other place is
fixed the place of the meeting shall be the principal office of the
corporation in the State of Nebraska.

3.05. Notice; Waiver. Notice of each meeting of the Board of
Directors (unless otherwise provided in or pursuant to Section 3.03 of
these restated by-laws) shall be given by written notice delivered in
person, by telegraph, teletype, facsimile or other form of wire or
wireless communication, or by mail or private carrier, to each director at
his business address or at such other address as such director shall have
designated in writing filed with the Secretary, in each case not less than
forty-eight hours prior to the meeting. The notice need not describe the
purpose of the meeting of the Board of Directors or the business to be
transacted at such meeting. If mailed, such notice shall be deemed to be
effective when deposited in the United States mail so addressed, with
postage thereon prepaid. If notice is given by telegram, such notice
shall be deemed to be effective when the telegram is delivered to the
telegraph company. If notice is given by private carrier, such notice
shall be deemed to be effective when delivered to the private carrier.
Whenever any notice whatever is required to be given to any director of
the corporation under the restated articles of incorporation or these
restated by-laws or any provision of the Nebraska Business Corporation
Act, a waiver thereof in writing, signed at any time, whether before or
after the date and time of meeting, by the director entitled to such
notice shall be deemed equivalent to the giving of such notice. The
corporation shall retain any such waiver as part of the permanent
corporate records. A director's attendance at or participation in a
meeting waives any required notice to him or her of the meeting unless the
director at the beginning of the meeting or promptly upon his or her
arrival objects to holding the meeting or transacting business at the
meeting and does not thereafter vote for or assent to action taken at the
meeting.

3.06. Quorum. Except as otherwise provided by the Nebraska
Business Corporation Act or by the restated articles of incorporation or
these restated by-laws, a majority of the number of directors specified in
Section 3.01 of these restated by-laws shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors. In the
event that there are only two directors then in office, a quorum for the
transaction of business at any meeting of the Board of Directors shall
consist of one-third of the number of directors specified in Section 3.01
of these restated by-laws. Except as otherwise provided by the Nebraska
Business Corporation Act or by the restated articles of incorporation or
by these restated by-laws, a quorum of any committee of the Board of
Directors created pursuant to Section 3.12 of these restated by-laws shall
consist of a majority of the number of directors appointed to serve on the
committee. A majority of the directors present (though less than such
quorum) may adjourn any meeting of the Board of Directors or any committee
thereof, as the case may be, from time to time without further notice.

3.07. Manner of Acting. The affirmative vote of a majority of
the directors present at a meeting of the Board of Directors or a
committee thereof at which a quorum is present shall be the act of the
Board of Directors or such committee, as the case may be, unless the
Nebraska Business Corporation Act, the restated articles of incorporation
or these restated by-laws require the vote of a greater number of
directors.

3.08. Conduct of Meetings. The President, and in his or her
absence, a Vice President in the order provided under Section 4.07 of
these restated by-laws, and in their absence, any director chosen by the
directors present, shall call meetings of the Board of Directors to order
and shall act as chairperson of the meeting. The Secretary of the
corporation shall act as secretary of all meetings of the Board of
Directors but in the absence of the Secretary, the presiding officer may
appoint any other person present to act as secretary of the meeting.
Minutes of any regular or special meeting of the Board of Directors shall
be prepared and distributed to each director.

3.09. Vacancies. Any vacancies occurring in the Board of
Directors, including a vacancy created by an increase in the number of
directors, shall be filled only as provided in the restated articles of
incorporation. A vacancy that will occur at a specific later date,
because of a resignation effective at a later date or otherwise, may be
filled before the vacancy occurs, but the new director may not take office
until the vacancy occurs.

3.10. Compensation. The Board of Directors, irrespective of
any personal interest of any of its members, may establish reasonable
compensation of all directors for services to the corporation as directors
or may delegate such authority to an appropriate committee. The Board of
Directors also shall have authority to provide for or delegate authority
to an appropriate committee to provide for reasonable pensions, disability
or death benefits, and other benefits or payments, to directors, officers
and employees and to their estates, families, dependents or beneficiaries
on account of prior services rendered by such directors, officers and
employees to the corporation.

3.11. Presumption of Assent. A director who is present and is
announced as present at a meeting of the Board of Directors or any
committee thereof created in accordance with Section 3.12 of these
restated by-laws, when corporate action is taken, assents to the action
taken unless any of the following occurs: (a) the director objects at the
beginning of the meeting or promptly upon his or her arrival to holding
the meeting or transacting business at the meeting; (b) the director
dissents or abstains from an action taken and minutes of the meeting are
prepared that show the director's dissent or abstention from the action
taken; or (c) the director delivers written notice that complies with the
Nebraska Business Corporation Act of his or her dissent or abstention to
the presiding officer of the meeting before its adjournment or to the
corporation immediately after adjournment of the meeting. Such right of
dissent or abstention shall not apply to a director who votes in favor of
the action taken.

3.12. Committees. The Board of Directors by resolution adopted
by the affirmative vote of a majority of all of the directors then in
office may create one or more committees, appoint members of the Board of
Directors to serve on the committees and designate other members of the
Board of Directors to serve as alternates. Each committee shall have two
or more members who shall, unless otherwise provided by the Board of
Directors, serve at the pleasure of the Board of Directors. A committee
may be authorized to exercise the authority of the Board of Directors,
except that a committee may not do any of the following: (a) authorize
distributions; (b) approve or propose to shareholders action that the
Nebraska Business Corporation Act requires to be approved by shareholders;
(c) fill vacancies on the Board of Directors or, unless the Board of
Directors provides by resolution that vacancies on a committee shall be
filled by the affirmative vote of the remaining committee members, on any
Board committee; (d) amend the corporation's restated articles of
incorporation; (e) adopt, amend or repeal restated by-laws; (f) approve a
plan of merger not requiring shareholder approval; (g) authorize or
approve reacquisition of shares, except according to a formula or method
prescribed by the Board of Directors; and (h) authorize or approve the
issuance or sale or contract for sale of shares, or determine the
designation and relative rights, preferences and limitations of a class or
series of shares, except that the Board of Directors may authorize a
committee to do so within limits prescribed by the Board of Directors.
Unless otherwise provided by the Board of Directors in creating the
committee, a committee may employ counsel, accountants and other
consultants to assist it in the exercise of its authority.

3.13. Telephonic Meetings. Except as herein provided and
notwithstanding any place set forth in the notice of the meeting or these
restated by-laws, members of the Board of Directors (and any committees
thereof created pursuant to Section 3.12 of these restated by-laws) may
participate in regular or special meetings by, or through the use of, any
means of communication by which all participants may simultaneously hear
each other, such as by conference telephone. If a meeting is conducted by
such means, then at the commencement of such meeting the presiding officer
shall inform the participating directors that a meeting is taking place at
which official business may be transacted. Any participant in a meeting
by such means shall be deemed present in person at such meeting.
Notwithstanding the foregoing, no action may be taken at any meeting held
by such means on any particular matter which the presiding officer
determines, in his or her sole discretion, to be inappropriate under the
circumstances for action at a meeting held by such means. Such
determination shall be made and announced in advance of such meeting.

3.14. Action Without Meeting. Any action required or permitted
by the Nebraska Business Corporation Act to be taken at a meeting of the
Board of Directors or a committee thereof created pursuant to Section 3.12
of these restated by-laws may be taken without a meeting if the action is
taken by all members of the Board or of the committee. The action shall
be evidenced by one or more written consents describing the action taken,
signed by each director or committee member and retained by the
corporation. Such action shall be effective when the last director or
committee member signs the consent, unless the consent specifies a
different effective date.

ARTICLE IV. OFFICERS

4.01. Number. The principal officers of the corporation shall
be a President, the number of Vice Presidents as authorized from time to
time by the Board of Directors, a Secretary, and a Treasurer, each of whom
shall be elected by the Board of Directors. Such other officers and
assistant officers as may be deemed necessary may be elected or appointed
by the Board of Directors. The Board of Directors may also authorize any
duly appointed officer to appoint one or more officers or assistant
officers. Any two or more offices may be held by the same person.

4.02. Election and Term of Office. The officers of the
corporation to be elected by the Board of Directors shall be elected
annually by the Board of Directors at the first meeting of the Board of
Directors held after each Annual Meeting of the shareholders. If the
election of officers shall not be held at such meeting, such election
shall be held as soon thereafter as is practicable. Each officer shall
hold office until his or her successor shall have been duly elected or
until his or her prior death, resignation or removal.

4.03. Removal. The Board of Directors may remove any officer
and, unless restricted by the Board of Directors or these restated by-
laws, an officer may remove any officer or assistant officer appointed by
that officer, at any time, with or without cause and notwithstanding the
contract rights, if any, of the officer removed. The appointment of an
officer does not of itself create contract rights.

4.04. Resignation. An officer may resign at any time by
delivering notice to the corporation that complies with the Nebraska
Business Corporation Act. The resignation shall be effective when the
notice is delivered, unless the notice specifies a later effective date
and the corporation accepts the later effective date.

4.05. Vacancies. A vacancy in any principal office because of
death, resignation, removal, disqualification or otherwise, shall be
filled by the Board of Directors for the unexpired portion of the term.
If a resignation of an officer is effective at a later date as
contemplated by Section 4.04 of these restated by-laws, the Board of
Directors may fill the pending vacancy before the effective date if the
Board provides that the successor may not take office until the effective
date.

4.06. President. The President shall be the principal
executive officer of the corporation and, subject to the direction of the
Board of Directors, shall in general supervise and control all of the
business and affairs of the corporation. The President shall, when
present, preside at all meetings of the shareholders and of the Board of
Directors. He or she shall have authority, subject to such rules as may
be prescribed by the Board of Directors, to appoint such agents and
employees of the corporation as he or she shall deem necessary, to
prescribe their powers, duties and compensation, and to delegate authority
to them. Such agents and employees shall hold office at the discretion of
the President. He or she shall have authority to sign, execute and
acknowledge, on behalf of the corporation, all deeds, mortgages, bonds,
stock certificates, contracts, leases, reports and all other documents or
instruments necessary or proper to be executed in the course of the
corporation's regular business, or which shall be authorized by resolution
of the Board of Directors; and, except as otherwise provided by law or the
Board of Directors, he or she may authorize any Vice President or other
officer or agent of the corporation to sign, execute and acknowledge such
documents or instruments in his or her place and stead. In general he or
she shall perform all duties incident to the office of President and such
other duties as may be prescribed by the Board of Directors from time to
time.

4.07. The Vice Presidents. In the absence of the President or
in the event of the President's death, inability or refusal to act, or in
the event for any reason it shall be impracticable for the President to
act personally, the Vice President (or in the event there be more than one
Vice President, the Vice Presidents in the order designated by the Board
of Directors, or in the absence of any designation, then in the order of
their election) shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice President may sign, with the
Secretary or Assistant Secretary, certificates for shares of the
corporation; and shall perform such other duties and have such authority
as from time to time may be delegated or assigned to him or her by the
President or by the Board of Directors. The execution of any instrument of
the corporation by any Vice President shall be conclusive evidence, as to
third parties, of his or her authority to act in the stead of the
President.

4.08. The Secretary. The Secretary shall: (a) keep minutes of
the meetings of the shareholders and of the Board of Directors (and of
committees thereof) in one or more books provided for that purpose
(including records of actions taken by the shareholders or the Board of
Directors (or committees thereof) without a meeting); (b) see that all
notices are duly given in accordance with the provisions of these restated
by-laws or as required by the Nebraska Business Corporation Act; (c) be
custodian of the corporate records and of the seal of the corporation and
see that the seal of the corporation is affixed to all documents the
execution of which on behalf of the corporation under its seal is duly
authorized; (d) maintain a record of the shareholders of the corporation,
in a form that permits preparation of a list of the names and addresses of
all shareholders, by class or series of shares and showing the number and
class or series of shares held by each shareholder; (e) sign with the
President, or a Vice President, certificates for shares of the
corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the corporation; and (g) in general perform all duties
incident to the office of Secretary and have such other duties and
exercise such authority as from time to time may be delegated or assigned
by the President or by the Board of Directors.

4.09. The Treasurer. The Treasurer shall: (a) have charge and
custody of and be responsible for all funds and securities of the
corporation; (b) maintain appropriate accounting records; (c) receive and
give receipts for moneys due and payable to the corporation from any
source whatsoever, and deposit all such moneys in the name of the
corporation in such banks, trust companies or other depositaries as shall
be selected in accordance with the provisions of Section 5.04 of these
restated by-laws; and (d) in general perform all of the duties incident to
the office of Treasurer and have such other duties and exercise such other
authority as from time to time may be delegated or assigned by the
President or by the Board of Directors. If required by the Board of
Directors, the Treasurer shall give a bond for the faithful discharge of
his or her duties in such sum and with such surety or sureties as the
Board of Directors shall determine.

4.10. Assistant Secretaries and Assistant Treasurers. There
shall be such number of Assistant Secretaries and Assistant Treasurers as
the Board of Directors may from time to time authorize. The Assistant
Secretaries may sign with the President or a Vice President certificates
for shares of the corporation the issuance of which shall have been
authorized by a resolution of the Board of Directors. The Assistant
Treasurers shall respectively, if required by the Board of Directors, give
bonds for the faithful discharge of their duties in such sums and with
such sureties as the Board of Directors shall determine. The Assistant
Secretaries and Assistant Treasurers, in general, shall perform such
duties and have such authority as shall from time to time be delegated or
assigned to them by the Secretary or the Treasurer, respectively, or by
the President or the Board of Directors.

4.11. Other Assistants and Acting Officers. The Board of
Directors shall have the power to appoint, or to authorize any duly
appointed officer of the corporation to appoint, any person to act as
assistant to any officer, or as agent for the corporation in his or her
stead, or to perform the duties of such officer whenever for any reason it
is impracticable for such officer to act personally, and such assistant or
acting officer or other agent so appointed by the Board of Directors or an
authorized officer shall have the power to perform all the duties of the
office to which he or she is so appointed to be an assistant, or as to
which he or she is so appointed to act, except as such power may be
otherwise defined or restricted by the Board of Directors or the
appointing officer.

4.12. Salaries. The salaries of the principal officers shall
be fixed from time to time by the Board of Directors or by a duly
authorized committee thereof, and no officer shall be prevented from
receiving such salary by reason of the fact that he or she is also a
director of the corporation.

ARTICLE V. CONTRACTS, LOANS, CHECKS
AND DEPOSITS; SPECIAL CORPORATE ACTS

5.01. Contracts. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or
execute or deliver any instrument in the name of and on behalf of the
corporation, and such authorization may be general or confined to specific
instances. In the absence of other designation, all deeds, mortgages and
instruments of assignment or pledge made by the corporation shall be
executed in the name of the corporation by the President or one of the
Vice Presidents and by the Secretary, an Assistant Secretary, the
Treasurer or an Assistant Treasurer; the Secretary or an Assistant
Secretary, when necessary or required, shall affix the corporate seal, if
any, thereto; and when so executed no other party to such instrument or
any third party shall be required to make any inquiry into the authority
of the signing officer or officers.

5.02. Loans. No indebtedness for borrowed money shall be
contracted on behalf of the corporation and no evidences of such
indebtedness shall be issued in its name unless authorized by or under the
authority of a resolution of the Board of Directors. Such authorization
may be general or confined to specific instances.

5.03. Checks, Drafts, etc. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued
in the name of the corporation, shall be signed by such officer or
officers, agent or agents of the corporation and in such manner as shall
from time to time be determined by or under the authority of a resolution
of the Board of Directors.

5.04. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the
corporation in such banks, trust companies or other depositaries as may be
selected by or under the authority of a resolution of the Board of
Directors.

5.05. Voting of Securities Owned by this Corporation. Subject
always to the specific directions of the Board of Directors, (a) any
shares or other securities issued by any other corporation and owned or
controlled by this corporation may be voted at any meeting of security
holders of such other corporation by the President of this corporation if
he or she be present, or in his or her absence by any Vice President of
this corporation who may be present, and (b) whenever, in the judgment of
the President, or in his or her absence, of any Vice President, it is
desirable for this corporation to execute a proxy or written consent in
respect to any shares or other securities issued by any other corporation
and owned by this corporation, such proxy or consent shall be executed in
the name of this corporation by the President or one of the Vice
Presidents of this corporation, without necessity of any authorization by
the Board of Directors, affixation of corporate seal, if any, or
countersignature or attestation by another officer. Any person or persons
designated in the manner above stated as the proxy or proxies of this
corporation shall have full right, power and authority to vote the shares
or other securities issued by such other corporation and owned by this
corporation the same as such shares or other securities might be voted by
this corporation.

5.06. No Nominee Procedures. The corporation has not
established, and nothing in these restated by-laws shall be deemed to
establish, any procedure by which a beneficial owner of the corporation's
shares that are registered in the name of a nominee is recognized by the
corporation as a shareholder under Section 21-2061 of the Nebraska
Business Corporation Act.

ARTICLE VI. CERTIFICATES FOR SHARES; TRANSFER OF SHARES

6.01. Certificates for Shares. Certificates representing
shares of the corporation shall be in such form, consistent with the
Nebraska Business Corporation Act, as shall be determined by the Board of
Directors. Such certificates shall be signed by the President or a Vice
President and by the Secretary or an Assistant Secretary. All
certificates for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the corporation.
All certificates surrendered to the corporation for transfer shall be
canceled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
canceled, except as provided in Section 6.06 of these restated by-laws.

6.02. Facsimile Signatures and Seal. The seal of the
corporation, if any, on any certificates for shares may be a facsimile.
The signature of the President or Vice President and the Secretary or
Assistant Secretary upon a certificate may be facsimiles if the
certificate is manually signed on behalf of a transfer agent, or a
registrar, other than the corporation itself or an employee of the
corporation.

6.03. Signature by Former Officers. The validity of a share
certificate is not affected if a person who signed the certificate (either
manually or in facsimile) no longer holds office when the certificate is
issued.

6.04. Transfer of Shares. Prior to due presentment of a
certificate for shares for registration of transfer the corporation may
treat the registered owner of such shares as the person exclusively
entitled to vote, to receive notifications and otherwise to have and
exercise all the rights and power of an owner. Where a certificate for
shares is presented to the corporation with a request to register for
transfer, the corporation shall not be liable to the owner or any other
person suffering loss as a result of such registration of transfer if (a)
there were on or with the certificate the necessary endorsements, and (b)
the corporation had no duty to inquire into adverse claims or has
discharged any such duty. The corporation may require reasonable
assurance that such endorsements are genuine and effective and compliance
with such other regulations as may be prescribed by or under the authority
of the Board of Directors.

6.05. Restrictions on Transfer. The face or reverse side of
each certificate representing shares shall bear a conspicuous notation of
any restriction imposed by the corporation upon the transfer of such
shares.

6.06. Lost, Destroyed or Stolen Certificates. The Board of
Directors may direct a new certificate or certificates to be issued in
place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate
of stock to be lost, stolen or destroyed. When authorizing such issue of
a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require
the person requesting such new certificate or certificates, or his or her
legal representative, to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost,
stolen or destroyed.

6.07. Consideration for Shares. The Board of Directors may
authorize shares to be issued for consideration consisting of any tangible
or intangible property or benefit to the corporation, including cash,
promissory notes, services performed, contracts for services to be
performed or other securities of the corporation. Before the corporation
issues shares, the Board of Directors shall determine that the
consideration received or to be received for the shares to be issued is
adequate. The determination of the Board of Directors is conclusive
insofar as the adequacy of consideration for the issuance of shares
relates to whether the shares are validly issued, fully paid and
nonassessable. The corporation may place in escrow shares issued in whole
or in part for a contract for future services or benefits, a promissory
note, or other property to be issued in the future, or make other
arrangements to restrict the transfer of the shares, and may credit
distributions in respect of the shares against their purchase price, until
the services are performed, the benefits or property are received or the
promissory note is paid. If the services are not performed, the benefits
or property are not received or the promissory note is not paid, the
corporation may cancel, in whole or in part, the shares escrowed or
restricted and the distributions credited.

6.08. Stock Regulations. The Board of Directors shall have the
power and authority to make all such further rules and regulations not
inconsistent with law as it may deem expedient concerning the issue,
transfer and registration of shares of the corporation.

ARTICLE VII. SEAL

7.01. The Board of Directors may provide for a corporate seal
for the corporation.

ARTICLE VIII. FISCAL YEAR

8.01. The fiscal year of the corporation shall be from January
1 to December 31.

ARTICLE IX. INDEMNIFICATION

9.01. Provision of Indemnification. The corporation shall, to
the fullest extent permitted or required by Sections 21-20,102 to 21-
20,111, inclusive, of the Nebraska Business Corporation Act, including any
amendments thereto (but in the case of any such amendment, only to the
extent such amendment permits or requires the corporation to provide
broader indemnification rights than prior to such amendment), indemnify
its Directors and Officers against any and all Liabilities, and advance
any and all reasonable Expenses, incurred thereby in any Proceeding to
which any such Director or Officer is a Party because he or she is or was
a Director or Officer of the corporation. The corporation shall also
indemnify an employee who is not a Director or Officer, to the extent that
the employee has been successful on the merits or otherwise in defense of
a Proceeding, for all reasonable Expenses incurred in the Proceeding if
the employee was a Party because he or she is or was an employee of the
corporation. The rights to indemnification granted hereunder shall not be
deemed exclusive of any other rights to indemnification against
Liabilities or the advancement of Expenses which a Director, Officer or
employee may be entitled under any written agreement, Board resolution,
vote of shareholders, the Nebraska Business Corporation Act or otherwise.
The corporation may, but shall not be required to, supplement the
foregoing rights to indemnification against Liabilities and advancement of
Expenses under this Section 9.01 by the purchase of insurance on behalf of
any one or more of such Directors, Officers or employees, whether or not
the corporation would be obligated to indemnify or advance Expenses to
such Director, Officer or employee under this Section 9.01. All
capitalized terms used in this Article IX and not otherwise defined herein
shall have the meaning set forth in Section 21-20,102 of the Nebraska
Business Corporation Act.

ARTICLE X. AMENDMENTS

10.01. By Shareholders. Except as otherwise provided in the
restated articles of incorporation or these restated by-laws, these
restated by-laws may be amended or repealed and new by-laws may be adopted
by the shareholders at any Annual Meeting or Special Meeting at which a
quorum is in attendance.

10.02. By Directors. Except as otherwise provided by the
Nebraska Business Corporation Act or the restated articles of
incorporation, these restated by-laws may also be amended or repealed and
new by-laws may be adopted by the Board of Directors by affirmative vote
of a majority of the number of directors present at any meeting at which a
quorum is in attendance; provided, however, that the shareholders in
adopting, amending or repealing a particular by-law may provide therein
that the Board of Directors may not amend, repeal or readopt that by-law.

10.03. Implied Amendments. Any action taken or authorized by
the shareholders or by the Board of Directors which would be inconsistent
with the by-laws then in effect but which is taken or authorized by
affirmative vote of not less than the number of shares or the number of
directors required to amend the by-laws so that the by-laws would be
consistent with such action shall be given the same effect as though the
by-laws had been temporarily amended or suspended so far, but only so far,
as is necessary to permit the specific action so taken or authorized.

EXHIBIT (5)
F O L E Y & L A R D N E R

A T T O R N E Y S A T L A W

CHICAGO FIRSTAR CENTER SAN DIEGO
JACKSONVILLE 777 EAST WISCONSIN AVENUE SAN FRANCISCO
LOS ANGELES MILWAUKEE, WISCONSIN 53202-5367 TALLAHASSEE
MADISON TELEPHONE (414) 271-2400 TAMPA
ORLANDO FACSIMILE (414) 297-4900 WASHINGTON, D.C.
SACRAMENTO WEST PALM BEACH
WRITER'S DIRECT LINE

September , 1997

DRAFT

National Research Corporation
1033 "O" Street
Lincoln, Nebraska 68508

Ladies and Gentlemen:

We have acted as counsel for National Research Corporation, a
Nebraska corporation (the "Company"), and the majority shareholder of the
Company (the "Selling Shareholder") with respect to the preparation of a
Registration Statement on Form S-1 (the "Registration Statement"),
including the prospectus constituting a part thereof (the "Prospectus"),
to be filed by the Company with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"),
relating to 2,100,000 shares of the Company's common stock, $.001 par
value ("Common Stock"), together with up to 315,000 additional shares of
Common Stock being registered to cover the over-allotment option granted
by the Selling Shareholder to the underwriters.

In connection with our representation, we have examined: (a)
the Registration Statement, including the Prospectus; (b) the Restated
Articles of Incorporation and Restated Bylaws of the Company, as amended
to date and as proposed to be restated immediately prior to the effective
date of the Registration Statement; (c) resolutions of the Company's Board
of Directors relating to the authorization of the issuance of certain of
the securities covered by the Registration Statement; and (d) such other
proceedings, documents and records as we have deemed necessary to enable
us to render this opinion.

Based on the foregoing, we are of the opinion that:

1. The Company is a corporation validly existing under the
laws of the State of Nebraska.

2. The shares of Common Stock covered by the Registration
Statement that are to be offered and sold by the Company, when the price
thereof has been determined by action of the Company's Board of Directors
and when issued and paid for in the manner contemplated in the
Registration Statement and Prospectus, will be validly issued, fully paid
and nonassessable.

3. The shares of Common Stock covered by the Registration
Statement that are to be offered and sold by the Selling Shareholder are,
and when sold in the manner contemplated in the Registration Statement and
Prospectus will continue to be, validly issued, fully paid and
nonassessable.

We consent to the use of this opinion as an exhibit to the
Registration Statement and to the references to our firm therein. In
giving our consent, we do not admit that we are "experts" within the
meaning of Section 11 of the Securities Act or within the category of
persons whose consent is required by Section 7 of the Securities Act.

Very truly yours,

DRAFT

FOLEY & LARDNER

Exhibit (10.2)

NATIONAL RESEARCH CORPORATION
1997 EQUITY INCENTIVE PLAN

Section 1. Purpose

The purpose of the National Research Corporation 1997 Equity
Incentive Plan (the "Plan") is to promote the best interests of National
Research Corporation (together with any successor thereto, the "Company")
and its shareholders by providing employees of the Company and its
Affiliates (as defined below) with an opportunity to acquire a proprietary
interest in the Company. It is intended that the Plan will promote
continuity of management and increased incentive and personal interest in
the welfare of the Company by employees upon whose judgment, interest and
special effort the successful conduct of the Company's business is
dependent.

Section 2. Definitions

As used in the Plan, the following terms shall have the
respective meanings set forth below:

(a) "Affiliate" shall mean any entity that, directly or through
one or more intermediaries, is controlled by, controls, or is under common
control with, the Company.

(b) "Award" shall mean any Option, Stock Appreciation Right,
Restricted Stock, Performance Share or other award granted under the Plan.

(c) "Award Agreement" shall mean any written agreement,
contract, or other instrument or document evidencing any Award granted
under the Plan.

(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.

(e) "Commission" shall mean the United States Securities and
Exchange Commission or any successor agency.

(f) "Committee" shall mean a committee of the Board of
Directors of the Company designated by such Board to administer the Plan
and composed of not less than two directors, each of whom shall qualify as
a "non-employee director" within the meaning of Rule 16b-3 and as an
"outside director" within the meaning of Section 162(m)(4)(C) of the Code
(or any successor provision thereto).

(g) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.

(h) "Excluded Items" shall mean any items which the Committee
determines shall be excluded in fixing Performance Goals, such as any
gains or losses from discontinued operations, any extraordinary gains or
losses and the effects of accounting changes.

(i) "Fair Market Value" shall mean, with respect to any
property (including, without limitation, any Shares or other securities),
the fair market value of such property determined by such methods or
procedures as shall be established from time to time by the Committee.

(j) "Incentive Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is intended to meet the requirements of
Section 422 of the Code (or any successor provision thereto).

(k) "Non-Qualified Stock Option" shall mean an option granted
under Section 6(a) of the Plan that is not intended to be an Incentive
Stock Option.

(l) "Option" shall mean an Incentive Stock Option or a Non-
Qualified Stock Option.

(m) "Participant" shall mean any officer or other employee of
the Company or of any Affiliate designated to be granted an Award under
the Plan. Members of the Company's Board of Directors who are not
employees of the Company or of any Affiliate shall not be eligible to
receive Awards under the Plan.

(n) "Performance Goals" shall mean any of the following (in all
cases after excluding the impact of applicable Excluded Items):

(i) Return on equity for the Performance Period for the
Company on a consolidated basis.

(ii) Return on investment for the Performance Period (aa)
for the Company on a consolidated basis, (bb) for any one or more
Affiliates or divisions of the Company and/or (cc) for any other
business unit or units of the Company as defined by the Committee at
the time of selection.

(iii) Return on net assets for the Performance Period
(aa) for the Company on a consolidated basis, (bb) for any one or
more Affiliates or divisions of the Company and/or (cc) for any other
business unit or units of the Company as defined by the Committee at
the time of selection.

(iv) Economic value added (as defined by the Committee at
the time of selection) for the Performance Period (aa) for the
Company on a consolidated basis, (bb) for any one or more Affiliates
or divisions of the Company and/or (cc) for any other business unit
or units of the Company as defined by the Committee at the time of
selection.

(v) Earnings from operations for the Performance Period
(aa) for the Company on a consolidated basis, (bb) for any one or
more Affiliates or divisions of the Company and/or (cc) for any other
business unit or units of the Company as defined by the Committee at
the time of selection.

(vi) Pre-tax profits for the Performance Period (aa) for
the Company on a consolidated basis, (bb) for any one or more
Affiliates or divisions of the Company and/or (cc) for any other
business unit or units of the Company as defined by the Committee at
the time of selection.

(vii) Net earnings for the Performance Period (aa) for
the Company on a consolidated basis, (bb) for any one or more
Affiliates or divisions of the Company and/or (cc) for any other
business unit or units of the Company as defined by the Committee at
the time of selection.

(viii) Net earnings per Share for the Performance Period
for the Company on a consolidated basis.

(ix) Working capital as a percent of net sales for the
Performance Period (aa) for the Company on a consolidated basis, (bb)
for any one or more Affiliates or divisions of the Company and/or
(cc) for any other business unit or units of the Company as defined
by the Committee at the time of selection.

(x) Net cash provided by operating activities for the
Performance Period (aa) for the Company on a consolidated basis, (bb)
for any one or more Affiliates or divisions of the Company and/or
(cc) for any other business unit or units of the Company as defined
by the Committee at the time of selection.

(xi) Market price per Share for the Performance Period.

(xii) Total shareholder return for the Performance
Period for the Company on a consolidated basis.

(o) "Performance Period" shall mean, in relation to Performance
Shares or Options subject to Performance Goals, any period for which a
Performance Goal or Goals have been established.

(p) "Performance Share" shall mean any right granted under
Section 6(d) of the Plan that will be paid out as a Share (which, in
specified circumstances, may be a Share of Restricted Stock).

(q) "Person" shall mean any individual, corporation,
partnership, association, joint-stock company, trust, unincorporated
organization, or government or political subdivision thereof.

(r) "Released Securities" shall mean Shares of Restricted Stock
with respect to which all applicable restrictions have expired, lapsed, or
been waived.

(s) "Restricted Securities" shall mean Awards of Restricted
Stock or other Awards under which issued and outstanding Shares are held
subject to certain restrictions.

(t) "Restricted Stock" shall mean any Share granted under
Section 6(c) of the Plan or, in specified circumstances, a Share paid in
connection with a Performance Share under Section 6(d) of the Plan.

(u) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the
Commission under the Exchange Act, or any successor rule or regulation
thereto.

(v) "Shares" shall mean shares of common stock of the Company,
$.10 par value, and such other securities or property as may become
subject to Awards pursuant to an adjustment made under Section 4(b) of the
Plan.

(w) "Stock Appreciation Right" shall mean any right granted
under Section 6(b) of the Plan.

Section 3. Administration

The Plan shall be administered by the Committee; provided,
however, that if at any time the Committee shall not be in existence, the
functions of the Committee as specified in the Plan shall be exercised by
the Board of Directors of the Company (the "Board") and all references to
the Committee herein shall include the Board. To the extent permitted by
applicable law, the Board may delegate to another committee of the Board
or to one or more senior officers of the Company any or all of the
authority and responsibility of the Committee with respect to the Plan,
other than with respect to Participants who are subject to Section 16 of
the Exchange Act. To the extent that the Board has delegated to such
other committee or one or more officers the authority and responsibility
of the Committee, all references to the Committee herein shall include
such other committee or one or more officers.

Subject to the terms of the Plan and without limitation by
reason of enumeration, the Committee shall have full power and authority
to: (i) designate Participants; (ii) determine the type or types of
Awards to be granted to each Participant under the Plan; (iii) determine
the number of Shares to be covered by (or with respect to which payments,
rights, or other matters are to be calculated in connection with) Awards
granted to a Participant; (iv) determine the terms and conditions of any
Award granted to a Participant; (v) determine whether, to what extent, and
under what circumstances Awards granted to Participants may be settled or
exercised in cash, Shares, other securities, other Awards, or other
property, and the method or methods by which Awards may be settled,
exercised, cancelled, forfeited, or suspended; (vi) determine whether, to
what extent, and under what circumstances cash, Shares, other Awards, and
other amounts payable with respect to an Award granted to Participants
under the Plan shall be deferred either automatically or at the election
of the holder thereof or of the Committee; (vii) interpret and administer
the Plan and any instrument or agreement relating to, or Award made under,
the Plan (including, without limitation, any Award Agreement); (viii)
establish, amend, suspend, or waive such rules and regulations and appoint
such agents as it shall deem appropriate for the proper administration of
the Plan; and (ix) make any other determination and take any other action
that the Committee deems necessary or desirable for the administration of
the Plan. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations, and other decisions under
or with respect to the Plan or any Award shall be within the sole
discretion of the Committee, may be made at any time, and shall be final,
conclusive, and binding upon all Persons, including the Company, any
Affiliate, any Participant, any holder or beneficiary of any Award, any
shareholder, and any employee of the Company or of any Affiliate.

Section 4. Shares Available for Award

(a) Shares Available. Subject to adjustment as provided in
Section 4(b):

(i) Number of Shares Available. The number of Shares with
respect to which Awards may be granted under the Plan shall be
730,000. If, after the effective date of the Plan, any Shares
covered by an Award granted under the Plan, or to which any Award
relates, are forfeited or if an Award otherwise terminates, expires
or is cancelled prior to the delivery of all of the Shares or of
other consideration issuable or payable pursuant to such Award, then
the number of Shares counted against the number of Shares available
under the Plan in connection with the grant of such Award, to the
extent of any such forfeiture, termination, expiration or
cancellation, shall again be available for granting of additional
Awards under the Plan.

(ii) Limitations on Awards to Individual Participants. No
Participant shall be granted Awards under the Plan that could result
in such Participant exercising Options for, or Stock Appreciation
Rights with respect to, more than 150,000 Shares or receiving Awards
relating to more than 50,000 Shares of Restricted Stock or more than
50,000 Performance Shares under the Plan. Such number of Shares as
specified in the preceding sentence shall be subject to adjustment in
accordance with the terms of Section 4(b) hereof. In all cases,
determinations under this Section 4(a)(ii) shall be made in a manner
that is consistent with the exemption for performance-based
compensation provided by Section 162(m) of the Code (or any successor
provision thereto) and any regulations promulgated thereunder.

(iii) Accounting for Awards. The number of Shares
covered by an Award under the Plan, or to which such Award relates,
shall be counted on the date of grant of such Award against the
number of Shares available for granting Awards under the Plan.

(iv) Sources of Shares Deliverable Under Awards. Any
Shares delivered pursuant to an Award may consist, in whole or in
part, of authorized and unissued Shares or of treasury Shares.

(b) Adjustments. In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of
cash, Shares, other securities, or other property), recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, or exchange of Shares or
other securities of the Company, issuance of warrants or other rights to
purchase Shares or other securities of the Company, or other similar
corporate transaction or event affects the Shares such that an adjustment
is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to
be made available under the Plan, then the Committee may, in such manner
as it may deem equitable, adjust any or all of (i) the number and type of
Shares subject to the Plan and which thereafter may be made the subject of
Awards under the Plan, (ii) the number and type of Shares subject to
outstanding Awards, and (iii) the grant, purchase, or exercise price with
respect to any Award, or, if deemed appropriate, make provision for a cash
payment to the holder of an outstanding Award; provided, however, in each
case, that with respect to Awards of Incentive Stock Options no such
adjustment shall be authorized to the extent that such authority would
cause the Plan to violate Section 422(b) of the Code (or any successor
provision thereto); and provided further that the number of Shares subject
to any Award payable or denominated in Shares shall always be a whole
number.

Section 5. Eligibility

Any employee of the Company or of any Affiliate, including any
officer or employee-director of the Company or of any Affiliate, shall be
eligible to be designated a Participant.

Section 6. Awards

(a) Option Awards. The Committee is hereby authorized to grant
Options to any eligible employee of the Company or of any Affiliate with
the terms and conditions as set forth below and with such additional terms
and conditions, in either case not inconsistent with the provisions of the
Plan, as the Committee shall determine.

(i) Exercise Price. The exercise price per Share of an
Option granted pursuant to this Section 6(a) shall be determined by
the Committee; provided, however, that such exercise price shall not
be less than 100% of the Fair Market Value of a Share on the date of
grant of such Option.

(ii) Option Term. The term of each Option shall be fixed
by the Committee; provided, however, that in no event shall the term
of any Incentive Stock Option exceed a period of ten years from the
date of its grant.

(iii) Exercisability and Method of Exercise. An Option
shall become exercisable in such manner and within such period or
periods and in such installments or otherwise as shall be determined
by the Committee, which may include, at the discretion of the
Committee, the attainment of one or more Performance Goals. The
Committee also shall determine the method or methods by which, and
the form or forms, including, without limitation, cash, Shares, other
securities, other Awards, or other property, or any combination
thereof, having a Fair Market Value on the exercise date equal to the
relevant exercise price, in which payment of the exercise price with
respect to any Option may be made or deemed to have been made.

(iv) Incentive Stock Options. The terms of any Incentive
Stock Option granted under the Plan shall comply in all respects with
the provisions of Section 422 of the Code (or any successor provision
thereto) and any regulations promulgated thereunder. Notwithstanding
any provision in the Plan to the contrary, no Incentive Stock Option
may be granted hereunder after the tenth anniversary of the adoption
of the Plan by the Board.

(b) Stock Appreciation Rights. The Committee is hereby
authorized to grant Stock Appreciation Rights to any eligible employee of
the Company or of any Affiliate. Subject to the terms of the Plan and any
applicable Award Agreement, a Stock Appreciation Right granted under the
Plan shall confer on the holder thereof a right to receive, upon exercise
thereof, the excess of (i) the Fair Market Value of one Share on the date
of exercise over (ii) the grant price of the Stock Appreciation Right as
specified by the Committee, which shall not be less than 100% of the Fair
Market Value of one Share on the date of grant of the Stock Appreciation
Right. Subject to the terms of the Plan, the grant price, term, methods
of exercise, methods of settlement (including whether the Participant will
be paid in cash, Shares, other securities, other Awards, or other
property, or any combination thereof), and any other terms and conditions
of any Stock Appreciation Right shall be as determined by the Committee.
The Committee may impose such conditions or restrictions on the exercise
of any Stock Appreciation Right as it may deem appropriate.

(i) Issuance. The Committee is hereby authorized to grant
Awards of Restricted Stock to any eligible employee of the Company or
of any Affiliate; provided, however, that the aggregate number of
Shares of Restricted Stock granted under the Plan to all Participants
as a group shall not exceed 175,000 (such number of Shares subject to
adjustment in accordance with the terms of Section 4(b) hereof).

(ii) Restrictions. Shares of Restricted Stock granted to
Participants shall be subject to such restrictions as the Committee
may impose (including, without limitation, any limitation on the
right to vote a Share of Restricted Stock or the right to receive any
dividend or other right or property), which restrictions may lapse
separately or in combination at such time or times, in such
installments or otherwise, as the Committee may deem appropriate.

(iii) Registration. Any Restricted Stock granted under
the Plan to a Participant may be evidenced in such manner as the
Committee may deem appropriate, including, without limitation, book-
entry registration or issuance of a stock certificate or
certificates. In the event any stock certificate is issued in
respect of Shares of Restricted Stock granted under the Plan to a
Participant, such certificate shall be registered in the name of the
Participant and shall bear an appropriate legend (as determined by
the Committee) referring to the terms, conditions, and restrictions
applicable to such Restricted Stock.

(iv) Payment of Restricted Stock. At the end of the
applicable restriction period relating to Restricted Stock granted to
a Participant, one or more stock certificates for the appropriate
number of Shares, free of restrictions imposed under the Plan, shall
be delivered to the Participant, or, if the Participant received
stock certificates representing the Restricted Stock at the time of
grant, the legends placed on such certificates shall be removed.

(v) Forfeiture. Except as otherwise determined by the
Committee, upon termination of employment of a Participant (as
determined under criteria established by the Committee) for any
reason during the applicable restriction period, all Shares of
Restricted Stock still subject to restriction shall be forfeited by
the Participant; provided, however, that the Committee may, when it
finds that a waiver would be in the best interests of the Company,
waive in whole or in part any or all remaining restrictions with
respect to Shares of Restricted Stock held by a Participant.

(d) Performance Shares.

(i) Issuance. The Committee is hereby authorized to grant
Awards of Performance Shares to any eligible employee of the Company
or of any Affiliate.

(ii) Performance Goals and Other Terms. The Committee
shall determine the Performance Period, the Performance Goal or Goals
(and the performance level or levels related thereto) to be achieved
during any Performance Period, the proportion of payments, if any, to
be made for performance between the minimum and full performance
levels for any Performance Goal and, if applicable, the relative
percentage weighting given to each of the selected Performance Goals,
the restrictions applicable to Shares of Restricted Stock received
upon payment of Performance Shares if Performance Shares are paid in
such manner, and any other terms, conditions and rights relating to a
grant of Performance Shares. The Committee shall have sole
discretion to alter the selected Performance Goals set forth in
Section 2(p), subject to shareholder approval, to the extent required
to qualify the Award for the performance-based exemption provided by
Section 162(m) of the Code (or any successor provision thereto).
Notwithstanding the foregoing, in the event the Committee determines
it is advisable to grant Performance Shares which do not qualify for
the performance-based exemption under Section 162(m) of the Code (or
any successor provision thereto), the Committee may make such grants
without satisfying the requirements thereof.

(iii) Rights and Benefits During the Performance
Period. The Committee may provide that, during a Performance Period,
a Participant shall be paid cash amounts, with respect to each
Performance Share held by such Participant, in the same manner, at
the same time, and in the same amount paid, as a cash dividend on a
Share. Participants shall have no voting rights with respect to
Performance Shares held by them.

(iv) Payment of Performance Shares. As soon as is
reasonably practicable following the end of the applicable
Performance Period, and subject to the Committee certifying in
writing as to the satisfaction of the requisite Performance Goal or
Goals if such certification is required in order to qualify the Award
for the performance-based exemption provided by Section 162(m) of the
Code (or any successor provision thereto), one or more certificates
representing the number of Shares equal to the number of Performance
Shares payable shall be registered in the name of and delivered to
the Participant; provided, however, that any Shares of Restricted
Stock payable in connection with Performance Shares shall, pending
the expiration, lapse, or waiver of the applicable restrictions, be
evidenced in the manner as set forth in Section 6(c)(iii) hereof.

(e) Other Awards.

(i) Other Stock-Based Awards. Other awards, valued in
whole or in part by reference to, or otherwise based on, Shares may
be granted either alone or in addition to or in conjunction with
other Awards for such consideration, if any, and in such amounts and
having such terms and conditions as the Committee may determine.

(ii) Other Benefits. The Committee shall have the right to
provide types of benefits under the Plan in addition to those
specifically listed if the Committee believes that such benefits
would further the purposes for which the Plan was established.

(f) General.

(i) No Consideration for Awards. Awards shall be granted
to Participants for no cash consideration unless otherwise determined
by the Committee.

(ii) Award Agreements. Each Award granted under the Plan
shall be evidenced by an Award Agreement in such form (consistent
with the terms of the Plan) as shall have been approved by the
Committee.

(iii) Awards May Be Granted Separately or Together.
Awards to Participants under the Plan may be granted either alone or
in addition to, in tandem with, or in substitution for any other
Award or any award granted under any other plan of the Company or any
Affiliate. Awards granted in addition to or in tandem with other
Awards, or in addition to or in tandem with awards granted under any
other plan of the Company or any Affiliate, may be granted either at
the same time as or at a different time from the grant of such other
Awards or awards.

(iv) Forms of Payment Under Awards. Subject to the terms
of the Plan and of any applicable Award Agreement, payments or
transfers to be made by the Company or an Affiliate upon the grant,
exercise, or payment of an Award to a Participant may be made in such
form or forms as the Committee shall determine, and may be made in a
single payment or transfer, in installments, or on a deferred basis,
in each case in accordance with rules and procedures established by
the Committee. Such rules and procedures may include, without
limitation, provisions for the payment or crediting of interest on
installment or deferred payments.

(v) Limits on Transfer of Awards. No Award (other than
Released Securities), and no right under any such Award, shall be
assignable, alienable, saleable, or transferable by a Participant
otherwise than by will or by the laws of descent and distribution
(or, in the case of an Award of Restricted Securities, to the
Company); provided, however, that a Participant at the discretion of
the Committee may be entitled, in the manner established by the
Committee, (A) to designate a beneficiary or beneficiaries to
exercise his or her rights, and to receive any property
distributable, with respect to any Award upon the death of the
Participant; or (B) transfer any Award. No Award (other than
Released Securities), and no right under any such Award, may be
pledged, alienated, attached, or otherwise encumbered, and any
purported pledge, alienation, attachment, or encumbrance thereof
shall be void and unenforceable against the Company or any Affiliate.

(vi) Term of Awards. Except as otherwise provided in the
Plan, the term of each Award shall be for such period as may be
determined by the Committee.

(vii) Share Certificates; Representation. In addition
to the restrictions imposed pursuant to Section 6(c) and Section 6(d)
hereof, all certificates for Shares delivered under the Plan pursuant
to any Award or the exercise thereof shall be subject to such stop
transfer orders and other restrictions as the Committee may deem
advisable under the Plan or the rules, regulations, and other
requirements of the Commission, any stock exchange or other market
upon which such Shares are then listed or traded, and any applicable
federal or state securities laws, and the Committee may cause a
legend or legends to be put on any such certificates to make
appropriate reference to such restrictions. The Committee may
require each Participant or other Person who acquires Shares under
the Plan by means of an Award originally made to a Participant to
represent to the Company in writing that such Participant or other
Person is acquiring the Shares without a view to the distribution
thereof.

(viii) Waiver of Conditions. The Committee may, in
whole or in part, waive any conditions or other restrictions with
respect to any Award.

Section 7. Amendment and Termination of the Plan; Correction of
Defects and Omissions

(a) Amendments to and Termination of the Plan. The Plan shall
terminate on the date of the Company's annual meeting of shareholders in
the year 2001, unless sooner terminated as hereinafter provided. The
Board may at any time amend, alter, suspend, discontinue, or terminate the
Plan; provided, however, that shareholder approval of any amendment of the
Plan shall also be obtained if otherwise required by: (i) the Code or any
rules promulgated thereunder (in order to allow for Incentive Stock
Options to be granted under the Plan), or (ii) the quotation or listing
requirements of the Nasdaq National Market or any principal securities
exchange or market on which the Shares are then traded (in order to
maintain the quotation or listing of the Shares thereon). To the extent
permitted by applicable law and subject to such shareholder approval as
may be required above, the Committee may also amend the Plan, provided
that any such amendments shall be reported to the Board. Termination of
the Plan shall not affect the rights of Participants with respect to
Awards previously granted to them, and all unexpired Awards shall continue
in force and effect after termination of the Plan except as they may lapse
or be terminated by their own terms and conditions.

(b) Correction of Defects, Omissions and Inconsistencies. The
Committee may correct any defect, supply any omission, or reconcile any
inconsistency in any Award or Award Agreement in the manner and to the
extent it shall deem desirable to carry the Plan into effect.

Section 8. General Provisions

(a) No Rights to Awards. No employee of the Company or of any
Affiliate, Participant or other Person shall have any claim to be granted
any Award under the Plan, and there is no obligation for uniformity of
treatment of employees of the Company or of any Affiliate, Participants or
holders or beneficiaries of Awards under the Plan. The terms and
conditions of Awards need not be the same with respect to each
Participant.

(b) Withholding. No later than the date as of which an amount
first becomes includible in the gross income of a Participant for Federal
income tax purposes with respect to any Award under the Plan, the
Participant shall pay to the Company, or make arrangements satisfactory to
the Company regarding the payment of, any Federal, state, local or foreign
taxes of any kind required by law to be withheld with respect to such
amount. Unless otherwise determined by the Committee, withholding
obligations arising with respect to Awards to Participants under the Plan
may be settled with Shares (other than Restricted Securities), including
Shares that are part of, or are received upon exercise of, the Award that
gives rise to the withholding requirement. The obligations of the Company
under the Plan shall be conditional on such payment or arrangements, and
the Company and any Affiliate shall, to the extent permitted by law, have
the right to deduct any such taxes from any payment otherwise due to the
Participant. The Committee may establish such procedures as it deems
appropriate for the settling of withholding obligations with Shares.

(c) No Limit on Other Compensation Arrangements. Nothing
contained in the Plan shall prevent the Company or any Affiliate from
adopting or continuing in effect other or additional compensation
arrangements, and such arrangements may be either generally applicable or
applicable only in specific cases.

(d) Rights and Status of Recipients of Awards. The grant of an
Award shall not be construed as giving a Participant the right to be
retained in the employ of the Company or any Affiliate. Further, the
Company or any Affiliate may at any time dismiss a Participant from
employment, free from any liability, or any claim under the Plan, unless
otherwise expressly provided in the Plan or in any Award Agreement.
Except for rights accorded under the Plan and under any applicable Award
Agreement, Participants shall have no rights as holders of Shares as a
result of the granting of Awards hereunder.

(e) Unfunded Status of the Plan. Unless otherwise determined
by the Committee, the Plan shall be unfunded and shall not create (or be
construed to create) a trust or a separate fund or funds. The Plan shall
not establish any fiduciary relationship between the Company and any
Participant or other Person. To the extent any Person holds any right by
virtue of a grant under the Plan, such right (unless otherwise determined
by the Committee) shall be no greater than the right of an unsecured
general creditor of the Company.

(f) Governing Law. The validity, construction, and effect of
the Plan and any rules and regulations relating to the Plan shall be
determined in accordance with the laws of the State of Nebraska and
applicable Federal law.

(g) Severability. If any provision of the Plan or any Award
Agreement or any Award is or becomes or is deemed to be invalid, illegal,
or unenforceable in any jurisdiction, or as to any Person or Award, or
would disqualify the Plan, any Award Agreement or any Award under any law
deemed applicable by the Committee, such provision shall be construed or
deemed amended to conform to applicable laws, or if it cannot be so
construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan, any Award Agreement
or the Award, such provision shall be stricken as to such jurisdiction,
Person, or Award, and the remainder of the Plan, any such Award Agreement
and any such Award shall remain in full force and effect.

(h) No Fractional Shares. No fractional Shares or other
securities shall be issued or delivered pursuant to the Plan, any Award
Agreement or any Award, and the Committee shall determine (except as
otherwise provided in the Plan) whether cash, other securities, or other
property shall be paid or transferred in lieu of any fractional Shares or
other securities, or whether such fractional Shares or other securities or
any rights thereto shall be canceled, terminated, or otherwise eliminated.

(i) Headings. Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference.
Such headings shall not be deemed in any way material or relevant to the
construction or interpretation of the Plan or any provision thereof.

Section 9. Effective Date of the Plan

The Plan shall be effective on the day immediately following its
approval by the shareholders of the Company provided that such approval is
obtained within twelve months following the date of adoption of the Plan
by the Board.

Exhibit 10.3

NATIONAL RESEARCH CORPORATION

INCENTIVE PLAN

This Incentive Plan (the "Plan") is approved and adopted as of
this 14th day of October, 1994, by National Research Corporation, a
Nebraska corporation (the "Company").

1. Purpose. The purpose of this Plan is to advance the
interests of the Company by stimulating superior performance through
financial rewards to individual key employees for achievement of earnings
objectives in order to increase such employees' incentive and personal
interest in the continued success and growth of the Company.

2. Definitions. The following definitions shall be applicable
in the administration of this Plan:

(A) Award Period: Award Period shall coincide with the
Company's fiscal year.

(B) Company: Company shall mean National Research Corporation.

(D) Incentive Award: Incentive Award shall mean the dollar
value of the incentive earned by a Participant attributable to a
particular Award Period.

(E) Incentive Awards: Incentive Awards shall mean the total
dollar value of all incentive awards to all Participants attributable to a
particular Award Period.

(F) Legal Representatives: Legal representatives shall mean
the personal representatives, estates, beneficiaries, heirs or legatees of
deceased participants, or guardians and conservators.

(G) Operating Income: Operating Income shall mean the net
operating income of the Company after depreciation and interest expense,
but before deduction of any bonus payable to the President and income
taxes.

(H) Participant: Participant shall mean a key employee who has
been designated by the President to participate in the Plan.

(I) Personal Goals: Personal Goals shall mean the goals and
objectives established by the President for a Participant pertaining to an
Award Period.

(J) Plan: Plan shall mean this Incentive Plan.

(K) President: President shall mean the President of the
Company.

(L) Total Disability: Total Disability shall have the
definition as set forth in the Company's Disability Insurance Plan.

3. Administration. The Plan will be administered by the
President, who will interpret the Plan, establish administrative rules,
select key employees for participation, and shall take such other actions
as may be necessary in conjunction with the Plan. Determinations and
actions by the President, with regard to this Plan, shall be final and
binding upon the Participants and their Legal Representatives.

4. Eligibility. Key employees of the Company, selected by the
President will be eligible for participation in the Plan.

5. Effective Date. The Plan will become effective upon
approval by the President, and shall continue in effect until terminated
in whole or in part by the President.

6. Grant of Incentive Awards. Subject to the terms and
conditions of this Plan, the Company, as approved by the President, may
grant Incentive Awards to eligible employees. Incentive Awards may be
granted at any time during the continuation of the Plan.

7. Incentive Awards Available During an Award Period.

(A) The Incentive Awards which may be granted under the
Plan for any Award Period shall be a percentage of Operating Income for
such Award Period as established by the President, provided that the
Operating Income exceeds the minimum amount established by the President.
Such percentage and minimum amount shall be established not less than
thirty (30) days prior to the commencement of the Award Period and shall
be communicated to Participants in writing. In the event that the Company
does not achieve the minimum Operating Income amount set by the President,
no Incentive Awards shall be made for such period.

(B) If the minimum Operating Income is achieved by the
Company for an Award Period, the Participant's total potential share of
the Incentive Awards shall be calculated by multiplying a factor, the
numerator of which shall be the Participant's base salary as of the
beginning of the Award Period, and the denominator of which shall be the
total base salaries for all Participants as of the beginning of the Award
Period, times the percentage set by the President as provided in (A)
above. This potential share of the Incentive Awards shall be communicated
to the Participants in writing.

(C) The President shall determine at the beginning of
the Award Period (1) that percentage of the Participant's potential
Incentive Award which shall be awarded to the Participant solely as a
result of the Company attaining the minimum Operating Income for the Award
Period, and (2) that portion of the Participant's potential Incentive
Award which shall be awarded to the Participant which is attributable to
accomplishment of the Participant's personal goals for the Award Period.
The amount of the Participant's Incentive Award to be awarded as a result
of the degree of accomplishment of such personal goals shall be determined
in the sole discretion of the President not later than ninety (90) days
following the end of the Fiscal Year in which the Incentive Award is
earned.

(D) For purposes of calculating Operating Income,
accounting methods and principals consistently applied in accordance with
the annual compiled financial statements of the Company shall be utilized.

8. Vesting and Payment of Incentive Awards. Incentive Awards
granted hereunder shall become vested in and shall be paid to Participants
not later than ninety (90) days following the end of the Fiscal Year in
which the Incentive Award is earned and each Fiscal Year thereafter, in
the following installments:

Year Following Award Period Percentage Vested
for Which Incentive Awarded and Payable

1st Year 20%
2nd Year 40%
3rd Year 60%
4th Year 80%
5th Year 100%

9. Termination of Employment of a Participant; Termination of
Plan. In the event that a Participant's employment with the Company
terminates by reason of death or Total Disability prior to complete
vesting of the Incentive Award pursuant to the foregoing schedule, each
Incentive Award awarded to the Participant shall immediately be fully
vested in such Participant as of his or her date of death or Total
Disability. If a Participant's employment terminates for any reason other
than death or Total Disability, such Participant shall be vested in each
Incentive Award only to the extent each such Incentive Award had vested
prior to such termination as provided in paragraph 8 hereinabove. In the
event of Participant's death or Total Disability, the Company shall make
payment to the Participant in accordance with paragraph 11 hereinbelow.
In the event that this Plan shall be terminated by the President, the
unvested portion of any Incentive Award shall become vested, and the
Company shall make payment to the Participant in accordance with paragraph
11 hereinbelow.

10. Payment for Incentive Awards.

(A) In the event of Plan termination by the President,
payment of the invested and unpaid portion of each Incentive Award made to
the Participant may, in the President's discretion, be made by the Company
to a Participant, in a lump sum, or by issuance to the Participant of a
promissory note in a principal amount equal thereto as follows:

(1) Payment of the principal amount shall be made in equal
semi-annual installments over a period of five (5)
years following the date of Plan termination;

(2) Interest on the unpaid principal balance shall be
paid, along with the semi-annual principal payments,
at the rate as provided in accordance with Section
1274(d) of the Internal Revenue Code at the beginning
of each semi-annual period for which principal
payments are due; and

(3) The Company shall be entitled to prepay the promissory
note, in whole or in part, at any time without notice,
demand or penalty.

(B) In the event of the Total Disability or death of
Participant, the value of the unvested and unpaid portion of each
Incentive Award made to Participant may be paid by the Company to the
Participant or the Participant's estate, as appropriate, in accordance
with the procedure set forth in paragraph 10(A) hereinabove.

11. Non-Alienation. The Participant shall not have any right
to assign, transfer, pledge or otherwise convey by will or inter vivos
instrument, any Incentive Award which may be awarded hereunder, and any
such attempted assignment, transfer, pledge or other conveyance shall not
be binding upon the Company. Any payments for Incentive Awards under this
Plan to a deceased or Totally Disabled Participant shall be paid to such
Participant's designated beneficiary, or in the absence of such
designation, to such Participant's Legal Representative.

12. Nature of Incentive Awards. The Participant's Incentive
Awards shall be utilized solely as a device for the measurement and
determination of compensation to be paid to the Participant as provided in
this Plan. The Incentive Awards shall not constitute or be treated as a
trust fund of any kind. On the contrary, all amounts at any time credited
to the Participant shall be and remain the sole property of the Company,
and the Participant shall have no ownership rights with respect thereto.
The Participant's right to receive payments as herein provided and the
Participant's position with respect thereto is that of a general unsecured
creditor of the Company.

13. Tax Withholding. The Company may deduct and withhold from
any cash otherwise payable to the Participant such amount as may be
required for the purpose of satisfying the Company's obligation to
withhold federal, state or local taxes.

14. Limited Interest. The grant of an Incentive Award shall
not be construed as giving the Participant any interest other than as
provided in this Plan. Nothing in this Plan or any agreement entered into
pursuant hereto shall confer upon the Participant the right to continue in
the employment of the Company.

15. State Law. This Plan shall be governed by and construed in
accordance with the internal laws of the State of Nebraska.

16. Amendment. This Plan may be amended, modified, terminated
or otherwise altered by the President, for reasons including, but not
limited to, the overall financial and business condition of the Company.

Exhibit 10.5

MEMORANDUM

TO: Pat Beans

FROM: Mike Hays

DATE: July 15, 1994

RE: Employment Agreement

This memorandum is to document the conditions for your employment with
National Research Corporation.

- Base salary $70,000.00 per year.

- Participation in NRC's incentive program which currently places 5% of
operating profits into a pool to be shared by those individuals
participating in the incentive plan.

- Participation in NRC's stock option pool (currently undefined--to be
determined in the 1st quarter of FY 94/95).

- Your title will be Chief Financial Officer.

- Paid vacation will be two weeks per year for employment years one
through five and three weeks per year for employment year six and
after. June 1992 will be used to calculate vacation pay.

- NRC will pay the professional dues necessary to maintain your State
and National CPA License estimated at $225.00 per year.

- NRC will pay on a 50/50 basis the cost of CPE expenses up to a
maximum of $300.00 per year.

- NRC will provide up to 40 hours per year time off in order to meet
the requirements of your CPA License.

- NRC will provide severance pay of six months of base salary if you
were to be discharged except for cause (misconduct, etc.) for your
employment years one through three. Five months severance pay during
employment year four and four months of severance pay during
employment year five. After year five, standard company policy would
be in effect.

- Participation in NRC's 401(k) program.

- NRC would pay 50% (or current company wide policy in effect at the
time) of your health, dental and disability premiums for the policies
offered through NRC.

- Become a member of NRC's Advisory Board.

- Employment start date will be September 1, 1994.

In addition to the above, it has been agreed that outside accounting or
consulting work will be eliminated with the exception of a handful of
personal tax clients worked for over a number of years. At your
convenience, it would be appreciated if you could provide the list of
those tax accounts.

Pat, I believe this documents each of the specifics we have discussed.
Please feel free to contact me for clarification of any of these or other
issues.

I look forward to September 1!

Sincerely,

/s/Michael D. Hays

Michael D. Hays
President, NRC

Exhibit 10.6

EMPLOYMENT AGREEMENT

This Agreement dated as of the 1st day of December, 1996, by and between
National Research Corporation, a Nebraska corporation (hereinafter
referred to as the "Company") qualified to do business in the State of
Nebraska, and Sharon Flaherty (hereinafter referred to as the "Employee").

In consideration of the mutual agreements herein contained, the parties
hereto hereby agree as follows:

1. EMPLOYMENT. The Company hereby employs Employee, and Employee hereby
accepts employment, effective December 1, 1996, upon and subject to
the terms and conditions hereinafter set forth.

2. TERM. Subject to the provisions for termination hereinafter
provided, this Agreement shall be effective on and from the date
first mentioned above and shall terminate on November 30, 1999, and
on each one-year anniversary of that date, the Agreement shall be
extended for a period of an additional twelve months, and if not
terminated thereafter, shall be extended for an additional year,
unless this Agreement has been terminated in accordance with the
provisions of Paragraph 10, on or before that date.

3. JOB EXPECTATIONS AND REQUIREMENTS. Employee shall have a direct
responsibility for the Company's sales, marketing and client services
and such other duties as assigned by the Chief Executive Officer of
the Company. Direct responsibility is defined as the creation,
implementation and continual refinement of programs and policies to
achieve short and long-term goals of the Company. Employee shall
serve as a member of the Company's Advisory Board. In addition to
stated areas of functional responsibility, Employee will contribute
to the overall management and direction of the Company. Expectations
in this area of general management will include, but not be limited
to:

a. Lead an effort to create and implement a strategic plan for the
Company.
b. Broaden relationships between the Company and health care
regulatory and policy makers.
c. Help the Company transition from an entrepreneurial to a
professional-based management model.

4. PERFORMANCE MEASURES. Employee shall, in general, be measured by
Employee's performance in helping the Company achieve its' strategic
goals set forth in the Company's strategic plan and achieve
functional goals in the areas of revenue, profit, market share and
client satisfaction and retention.

5. EXTENT OF SERVICE. Employee shall devote her entire business time,
attention and energies, as well as her best talents and abilities, to
the business of the Company in accordance with the Company's
instructions and directions and shall not during the term of this
Agreement be engaged in any other business activity, whether or not
such business activity is pursued for gain, profit or other pecuniary
advantage, except to the extent an exception hereto may be permitted
by the express written authorization of the Company.

6. COMPENSATION. For all services rendered by Employee under this
Agreement, including any expenses incurred therewith except as
provided in paragraph 7 hereof and in Appendix A attached, the
Company hereby agrees to pay Employee:

a. An annual base salary in the amount of $140,000, which shall be
payable to Employee in such installments, but not less than
monthly, as are consistent with the Company's practice for its
other executives.

b. An annual incentive based on increases in rate of revenue
growth, in revenue level and in profitability. Currently, NRC's
annual incentive plan is generally structured as follows:
incentive will be paid if the Company meets its minimum
performance targets; the amount of such annual incentive shall
be a target equal to 1% of profits, 1.5% of increase in gross
revenue over previous year and .1875% of total gross revenue;
such target annual incentive is estimated at $140,000. It is
anticipated that for 1997 and for subsequent years, a revised
annual incentive plan will be implemented. This plan will be
implemented in accordance with Paragraph 6(d). Any amounts
payable under the annual incentive plan shall be paid to
Employee within 75 days following the end of the Company's
fiscal year.

c. A long-term incentive determined and paid in accordance with the
terms of a plan to be established by January 1, 1997, and first
effective for calendar year 1997; Employee shall participate in
such plan on essentially the same terms as the other senior
officers of the Company.

d. During the term of this Agreement, the Company has the right to
change the amount of and procedures for determining the annual
base salary, annual incentive and long-term incentive; provided,
however, that any such change will not reduce the total
compensation opportunity available to the Employee at the time
such change is made.

7. EMPLOYEE BENEFITS. Employee shall be entitled to participate in any
life insurance, accident, medical, hospital, pension or profit
sharing or other group program as may from time to time uniformly be
maintained by the Company for all of its salaried employees during
the term of employment hereunder. Cost of the group plan will be
shared at the same ratio as it is for all of the Company's other
salaried employees. The current cost is shared 50/50 between
employees and Company. The Company will maintain in effect during
the term of employment hereunder a life insurance policy(ies) on the
life of the Employee in the face amount of $600,000 and the proceeds
of such policies upon the death of the Employee shall be payable to a
beneficiary or beneficiaries designated in writing from time to time
by the Employee. The Employee shall be responsible for any income
taxes attributable to imputed income from such contracts. In the
event the Company is unable to obtain insurance coverage on the life
of the Employee at standard rates, the Company may at its discretion
reduce the amount of such coverage to be provided to the Employee
such that the premiums payable by the Company on such reduced
coverage would be equal to the premiums payable at standard rates, on
a policy(ies) having a face amount of $600,000. The Company shall
endeavor to maintain in effect life insurance policy(ies) that extend
to the Employee the right to assume the life insurance policies or
convert the policies to individual coverage.

8. EXPENSES. The Company will reimburse Employee for all reasonable and
ordinary business expenses; including pre-approved job-related
education expenses, business entertainment and travel expenses
incurred by her in the performance of her duties hereunder, but only
upon the presentation by Employee to the Company, from time to time,
of an itemized account of such expenditures.

9. VACATIONS. Employee shall be entitled to 15 days of vacation time
per calendar year during her employment with the Company. Vacation
shall be administered in accordance with the procedures established
by the Company from time to time.

10. TERMINATION. In the event this Agreement is terminated by Employee's
death, by Employee's own action, or by the Company, each party's
obligations under this Agreement shall thereupon cease and terminate
except for obligations accrued but undischarged to and including the
date of such event and except as otherwise provided in Paragraphs 10,
13, and 14. The Company may terminate the Employee "for cause" only
if Employee is convicted of a felonious act of moral turpitude, is
consistently, flagrantly and grossly negligent in the performance of
her duties hereunder, or knowingly engages in wrongful misconduct
resulting in substantial damage to the Company. The Company may
terminate the Employee for any reason other than cause, as described
above, but in that event, the Employee shall be entitled to
outplacement assistance as described below, and severance in an
amount equal to $200,000 annually over the remaining term of the
initial agreement, or twelve months during any extended term, in
either event, such amount shall be paid as salary continuation
payments monthly over the period following the Employee's
termination. During the period of such salary continuation, Employee
shall be covered by the medical and group term life insurance
programs made available by the Company to its employees to the extent
Employee had such coverage immediately prior to the period of such
salary continuation at the same cost as described in Paragraph 7.
During the period of salary continuation, the separated Employee may
not participate in the retirement program sponsored by the Company.
The Company will reimburse the Employee for outplacement service
expenses incurred by the Employee upon presentation of itemized
expenditures not to exceed $3,500.

11. DISABILITY. Company shall reimburse Employee for premiums paid by
Employee for disability insurance coverage in excess of Company's
group policy. Such coverage, including the group policy, shall
provide a benefit not to exceed 60% of the annual base salary of the
Employee and shall be payable by reason of illness, disability,
incapacity or other inability, which said disability lasts for a
period of more than one hundred eighty (180) consecutive days, to
provide the services contemplated by Paragraphs 4 and 5. Company
shall be discharged of all of its obligations under this Agreement
and all further obligations or liabilities of the Company shall
immediately cease and terminate upon the Employee's qualifying for
benefits under such coverage. Reimbursement shall be made upon
timely submission of evidence of the premiums paid. Such premium
reimbursement shall be taxable income to the Employee. If Employee
maintains such policy above the group policy, the Company shall be
responsible only for the cost of a policy with similar features and
options as the Company's group policy.

12. RELOCATION COSTS. Company shall reimburse Employee for relocation
costs in connection with the move of Employee's principal residence
from Dallas, Texas, to a location convenient to the Employer's
principal place of business in Lincoln, Nebraska. Such relocation
shall take place as soon as reasonably practicable. In the event
Employee, by her own action terminates her employment with the
Company within one year of Employee being reimbursed for her
relocation expenses, Employee shall be obligated to repay such
reimbursements to the Company. Relocation costs eligible for
reimbursement are set forth in Appendix A attached.

13. NONDISCLOSURE BY EMPLOYEE. Employee acknowledges and agrees that
information the Employee will obtain while employed by the Company is
highly confidential, proprietary or a trade secret which is important
to the Company and to the effective operation of the Company's
business. Employee therefore agrees that while employed by the
Company, and at any time thereafter, she will make no disclosure of
any kind, directly or indirectly, concerning any confidential matters
relating to the Company or any of its activities.

14. NONCOMPETITION BY EMPLOYEE. Upon termination of Employee's
employment, then Employee agrees not to compete with the Company in
the United States, except Hawaii and Alaska, for a period equal to
the remaining term or twelve months during the extended term,
following such termination. The intent of the noncompetition
provision is for it to coincide with the time period of salary
continuation as described in Paragraph 10. Employee agrees that
during the period in which she must not compete, she will not work
for, advise, consult with, serve or assist in any way, directly or
indirectly, any party whose business is directly competitive with the
activities or businesses of the Company, and Employee agrees further
that she will herself not compete in any way, directly or indirectly,
with the Company, and that she will not purchase or otherwise acquire
any interest of any kind in any business which is directly
competitive with the Company, except that a 10% or less ownership
interest in public traded company shall not be subject to this
acquisition prohibition. The foregoing restrictions on competition
by Employee shall be operative for the benefit of the Company and of
any business owned or controlled by the Company, or any successor or
assign of any of the foregoing. Notwithstanding the foregoing, if
the Employee informs the Company that Employee is to be employed by a
consulting firm that is generally viewed as not competing with the
Company, and the Company does not within 15 days of such notice
advise the Employee that such employment will be viewed by the
Company as a violation of this Paragraph 14, Employee will not be
viewed as in violation of this Paragraph 14.

The parties hereto, recognizing that irreparable injury will result
to the Company, its' business and property in the event of Employee's
breach of her Agreement not to compete, and that employment is based
primarily upon this Agreement, agree that in the event of Employee's
breach of her agreement not to compete, the Company shall be
entitled, in addition to any other remedies and damages available, to
an injunction to restrain the violation thereof by Employee, her
partners, agents, servants, employers, employees and all persons
acting for or with her and/or to stop the payment of the severance
described in Paragraph 10. Employee represents and admits that in
the event of the termination of her employment for any cause
whatever, her experience and capabilities are such that she can
obtain employment in a business engaged in other lines and/or of a
different nature than the Company, and that the enforcement of a
remedy by way of injunction will not prevent her from earning a
livelihood.

15. TAXES. Employee shall be liable for all of Employee income and
employment taxes, that may be payable upon the compensation and
benefits made available to the Employee by the Company. Company may
withhold taxes in accordance with applicable law.

16. NOTICES. Any notice given under this Agreement to either party shall
be made in writing. Any such notice shall be deemed to be given when
mailed to any such party by registered or certified mail, postage
prepaid, addressed to such party at their respective addresses set
forth below, or at such other address as such party may hereafter
designate (by written notice given to the other party) as their
respective address for purposes of notice hereunder:

Employee: Sharon Flaherty
2808 Chapman Road
Plano, TX 75093

Company: National Research Corporation
Michael Hays, President
1033 "O" Street, 4th Floor
Gold's Galleria
Lincoln, NE 68508

17. WAIVER OF BREACH. The waiver of either party of a breach of any
provisions of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.

18. ASSIGNMENT. The rights and obligations of the Company under this
Agreement shall inure to the benefit of, and shall be binding upon,
the successors and assigns of the Company, but the Company shall not
assign this Agreement without Employee's prior written consent, which
consent shall not be unreasonably withheld. Employee may not assign
her rights and obligations under the Agreement.

19. HEADINGS. The headings of this Agreement are inserted for
convenience only and are not to be considered in construction of the
provisions thereof.

20. INTERPRETATION. All questions of validity and interpretation of this
agreement shall be governed by, and construed and enforced in all
respects in accordance with, the laws of the State of Nebraska. All
decisions and consents which shall or may be made and given by the
Company hereunder are required to be made or given, if at all, by the
Advisory Board of the Company, but Employee shall be entitled to rely
on any writing purporting to be signed by an executive officer of the
company (other than Employee).

21. ENTIRE AGREEMENT. This instrument contains the entire Agreement of
the parties and no previous representations, inducements, promises or
agreements, oral or otherwise, shall be of any force or effect. No
change or modification of this Agreement shall be valid unless the
same be in writing and signed by the party against whom such change
or modification is sought to be enforced.

In witness whereof, the parties have executed this Agreement as of the
date first mentioned above.

Attest: National Research Corporation

By:/s/Michael D. Hays

/s/Connie White Its: CEO
Witness

Sharon Flaherty

/s/Sharon Flaherty

<PAGE>

EMPLOYMENT AGREEMENT
APPENDIX A

RELOCATION EXPENSES

The Company shall reimburse Employee for the following expenses up to the
not-to-exceed amounts.

STANDARD CLOSING COST - SALE OF DALLAS HOME - Not to exceed $45,000.

- Real estate commissions
- Title insurance
- Tax certificate
- Attorney fee warranty and deed
- Release
- Closing escrow fee
- File release

STANDARD MOVING EXPENSES - MOVE OF HOUSEHOLD ITEMS FROM DALLAS TO LINCOLN
- Not to exceed $10,000.

- Storage
- Delivery
- Insurance

INTEREST FREE LOAN FOR 18 MONTHS - Not to exceed $250,000.

- Employee will execute promissory note
- Made upon the purchase of a home in Lincoln
- Employee pays income tax on imputed interest income
- Promissory note is due upon earlier of sale of Dallas home or
May 31, 1998
- If not repaid by May 31, 1998, then Company has the right to
offset against incentive monies due to the employee.

STANDARD CLOSING COST - PURCHASE OF LINCOLN HOME - Not to exceed $6,000.

- Appraisal
- Tax Service Fee
- Credit Report
- Investors Underwriting
- Recording Fee
- Surveyor Fee
- Termite Inspection
- Flood Plain Certificate
- Loan Origination Fee 1% of Mortgage Amount

LIVING AND TRAVEL EXPENSES - Not to exceed $15,000

- Temporary living expenses in Lincoln prior to closing on Lincoln
home
- Travel expenses between Lincoln and Dallas prior to closing on
Lincoln home

Expenses will be subject to reimbursement only upon presentation of
appropriate receipts.

Exhibit (10.7)

AGREEMENT

This Agreement is made by and between NATIONAL RESEARCH
CORPORATION, a Nebraska corporation ("NRC"), and THE PERMANENTE MEDICAL
GROUP, INC., a California corporation ("TPMG"), and KAISER FOUNDATION
HEALTH PLAN, INC., a California nonprofit public benefit corporation
("KFHP"), for the benefit of its Northern California Region. TPMG and
KFHP are hereinafter referred to together as "Kaiser".

WHEREAS, the parties to this Agreement have entered into a
Memorandum of Understanding dated January 18, 1994 ("MOU"), which
describes the terms of an arrangement between the parties regarding a
Member/Patient Survey Project to be undertaken by NRC for Kaiser, and in
an Addendum to the MOU describes a Competitor Benchmark Study and the
trial of certain Listening System Software (TM); and

WHEREAS, the parties desire to enter into this Agreement to set
forth the terms and conditions governing the transaction as described
herein which shall supersede the MOU.

NOW, THEREFORE, in consideration of the mutual promises and
agreements set forth herein, and intending to be legally bound, the
parties agree as follows:

1. SCOPE OF SERVICES/CHANGE REQUESTS.

(a) NRC shall provide services to Kaiser as described in the
Task Specification for Member/Patient Survey Project, attached hereto as
Attachment A, which Attachment is incorporated in this Agreement by this
reference. Additionally, NRC shall provide services to Kaiser as
described in the Task Specification for Competitor Benchmark Study,
attached hereto as Attachment B, which Attachment is incorporated in this
Agreement by this reference. Such Task Specifications may, during the
term of this Agreement, be amended by mutual agreement of the parties with
such amendments to be in writing and executed by authorized
representatives of the parties. NRC shall also provide KFHP's Northern
California Regional Office the Listening System Software (TM) on a trial
usage basis as described in Attachment C, which Attachment is incorporated
in this Agreement by this reference.

(b) Change Requests. Kaiser may request changes to the
services described in Section 1(a) above during the course of this
Agreement. NRC shall make reasonable efforts to accommodate such changes
within the scope and schedule of this Agreement. If any requested change
is of such a material nature as to result in additional costs and expenses
or delay in the schedule, NRC shall immediately notify Kaiser of the
amount of such additional cost and the impact on the schedule. Kaiser
shall promptly notify NRC of its desire to implement such change. No such
change, however, shall be implemented until the details and cost of such
change is agreed upon in writing by NRC and Kaiser.

2. ASSIGNED PERSONNEL.

(a) NRC will provide qualified and trained personnel to perform
the Task Specifications, Attachments A and B hereto, at NRC's offices in
Lincoln, Nebraska. NRC shall designate a project leader who will be the
principal contact between Kaiser and NRC. NRC project leader will be
David Copper. Kaiser will also designate a principal contact person.
Kaiser's principal contact person will be J. Mark Rogers. NRC shall
assign and direct its employees in such a manner as necessary to perform
the Task Specifications, Attachments A and B hereto.

(b) During the Initial Term or any renewal term of this
Agreement, and continuing for a period of one (1) year thereafter, NRC and
Kaiser agree not to hire, nor to engage on contract, nor to solicit the
employment of any of the other's employees with whom there is contact
during an assignment under this Agreement, without the written
authorization of the other.

3. TERM. This Agreement shall become effective as of February
1, 1994 (the "Effective Date"), and shall continue in effect through *
unless earlier terminated by one of the parties hereto in accordance with
the provisions of paragraph 6 hereinbelow (the "Initial Term").

_______________
* Indicates that material has been omitted and confidential treatment
has been requested therefor. All such omitted material has been filed
separately with the SEC pursuant to Rule 406.

4. COMPENSATION AND TERMS OF PAYMENT. The compensation
payable by Kaiser to NRC shall be as follows:

(a) The compensation for performance by NRC of the Task
Specification for the Member/Patient Survey Project, as specified in
Attachment A hereto, shall be * Dollars ($ * ) for the period commencing
with the Effective Date of this Agreement through *, and the compensation
to be paid to NRC by Kaiser for the performance of such Project during the
period of * through * shall be * Dollars ($ * ). The compensation
payable by Kaiser to NRC for the period from the Effective Date through *
is payable as follows:

On or before * $ *

Upon initiation of sampling $ *

On * and the first day of each
month thereafter (eight payments)
through * $ *

Final payment for *, upon receipt
and acceptance by Kaiser of the full
* sample data set and performance
reports for facilities and departments $ *

The compensation payable by Kaiser to NRC for the period from * through *
is payable as follows:

Commencing * and as of
the first day of each month through
* $ *

Final payment for *, upon receipt
and acceptance by Kaiser of the full
* sample data set and performance
reports for facilities and departments
(no earlier than * ) $ *

(b) The compensation for performance by NRC of the Task
Specification for the Competitor Benchmark Study, as set forth in
Attachment B hereto, shall be the sum of * Dollars ($ * ), payable
one-half upon execution of this Agreement and one-half on or before *.

(c) In addition to the payments set forth in subparagraphs 4(a)
and (b) hereof, Kaiser shall reimburse NRC for NRC's actual costs for
reasonable travel expenses (including air travel costs, hotel, meals and
incidental expenses) for NRC personnel, and overnight express delivery
service charges when such travel expenses or overnight express deliveries
are requested by representatives of Kaiser. In-house photocopying,
routine postage and telephone (within California) are excluded from
reimbursable expenses and shall not be charged to Kaiser. It is estimated
that air travel, hotel, meals and incidental expenses for a two-day trip
to the offices of Kaiser's Northern California Region will approximate One
Thousand Five Hundred Dollars ($1,500), and four to six such trips will be
required during each twelve-month period. NRC will bill Kaiser for the
foregoing out-of-pocket expenses on a monthly basis and shall furnish to
Kaiser copies of bills for which expense reimbursement is being requested.
Reimbursable expenses shall not exceed * Dollars ($ * ).

(d) Records. NRC shall maintain complete and accurate
accounting records, in a form in accordance with generally accepted
accounting principles, to substantiate NRC's fees and expenses under this
Agreement. Kaiser shall have the right to review these records during the
term of this Agreement. If this Agreement is subject to the provisions of
Section 952 of P.L. 96-499, which governs access to books and records of
subcontractors of services to Medicare providers where the cost or value
of such services under the contract exceeds Ten Thousand Dollars
($10,000.00) over a twelve (12) month period, then NRC shall permit
representatives of the Secretary of the Department of Health and Human
Services and the Comptroller General, in accord with criteria and
procedures contained in applicable Federal regulations, to have access to
their books, documents and records as necessary to verify the cost of
services provided under this Agreement.

(e) Other charges in compensation or expense reimbursement
pursuant to this paragraph shall occur only on mutual written agreement of
the parties. In no event will equipment or software purchased by NRC be
billed to or reimbursable by Kaiser without the prior written consent of
Kaiser.

(f) Kaiser and NRC acknowledge and agree that increases in the
postal rates may be implemented by the United States Postal Service
subsequent to the Effective Date. Any such postal rate increases will be
passed through to Kaiser on a dollar-for-dollar basis. Other changes in
compensation or expense reimbursement pursuant to this paragraph shall
occur only on mutual written agreement of the parties.

5. INVOICES. NRC will invoice Kaiser for compensation payable
to NRC for services rendered in connection with the performance of the
Task Specifications and for all reimbursable out-of-pocket expenses.
Kaiser shall make payment to NRC in U.S. Dollars of all amounts due and
owing within * ( * ) days after receipt of invoice. Kaiser shall pay a
late payment fee of * percent (*%) per month for the outstanding balance
of any amount past due for more than three (3) business days after receipt
of notice from NRC that such amount is past due.

6. TERMINATION.

(a) Termination For Default. If either NRC or Kaiser shall at
any time during the Initial Term, or any renewal term hereof, fail or
refuse to perform in accordance with any material provision of this
Agreement, then the other party may serve upon such defaulting party a
notice of intention to terminate this Agreement, which notice shall
specify the claimed neglect, failure or refusal, and shall be served in
accordance with the NOTICES section of this Agreement. If within * ( * )
days after the date of providing such written notice, the defaulting party
shall not have cured the default indicated in such Notice, or presented a
plan acceptable to the other party to cure such default, then upon the
expiration of such * ( * ) day period, the other party may, at its
option, elect to terminate this Agreement. In the event of termination by
Kaiser due to NRC's uncured default, NRC shall, within * ( * ) days after
termination, refund to Kaiser all amounts paid by Kaiser for NRC's
services but not yet performed through the date of termination, including
any prepaid out-of-pocket expenses reimbursed by Kaiser through the date
of termination. The right of either party to terminate this Agreement for
default shall not be affected by such party's failure to take action with
respect to any previous default.

(b) Termination Without Cause. At its option and for its
convenience, Kaiser may terminate this Agreement for any reason upon * ( *
) days written notice to NRC. NRC shall be entitled to payment for all
amounts specified herein for its services performed through the date of
termination, and reimbursed for its out-of-pocket expenses through the
date of termination, including expenses incurred for inventory of
materials relating to this Agreement which could not otherwise be used by
NRC customers.

(c) Actions on Termination. NRC shall not perform any more
services or incur any further costs claimed to be reimbursable hereunder
after the date of the termination notice, without the prior written
approval of Kaiser. Upon termination, NRC shall act in such a manner as
to facilitate Kaiser's or any new consultant's assumption of duties;
provided however, that NRC shall not be obligated to provide to any new
consultant any NRC proprietary materials or NRC confidential information
utilized by NRC in its performance pursuant to this Agreement.

7. CONFIDENTIAL INFORMATION. NRC acknowledges that it and its
employees, agents or representatives may, in the course of performance of
this Agreement, require access to proprietary or confidential information
of Kaiser and will be exposed to or acquire information which is
proprietary to or confidential to Kaiser, its affiliated companies,
vendors or Kaiser members or employees. This information may include data
relating to survey results, identities of Kaiser members or employees
involved in the survey, financial data, personnel records, computer
programs, marketing information and, to the extent marked proprietary or
confidential, any other information relating to the business affairs of
Kaiser. All such information obtained by NRC or its employees, agents and
representatives, shall be deemed to be the confidential and proprietary
information of Kaiser ("Confidential Information"). NRC agrees to hold
such information in strict confidence and not to disclose such information
for any purposes other than the provision of services to Kaiser under this
Agreement and to take appropriate actions by instruction or agreement with
each of its employees, contractors, agents and representatives to keep
such information confidential and NRC will, upon written request by
Kaiser, have all NRC employees, contractors, agents and representatives
performing work under this Agreement sign the confidentiality agreements
satisfactory to Kaiser. NRC further acknowledges that Kaiser has a legal
obligation to keep all Confidential Information confidential, including
without limitation, all patient records, medical records, test results and
personnel records; and that the unauthorized disclosure of the same could
irreparably damage Kaiser and its affiliated corporations; and that by
reason of its duties under its Agreement, NRC may come into possession of
such Confidential Information. If NRC breaches this provision, damages
may not be an adequate remedy and Kaiser shall be entitled to injunctive
relief to restrain such breach, threatened or actual. Upon termination of
this Agreement, NRC shall return to Kaiser all Confidential Information in
NRC's possession. This paragraph shall survive the termination of this
Agreement.

8. TITLE AND POSSESSION. NRC does not convey to Kaiser, nor
does Kaiser obtain any rights in any software programs, systems, data or
materials provided by NRC in the course of performing this Agreement. NRC
shall retain all rights, title and interest in the Listening System
Software (TM) provided to Kaiser for its use as stated in Attachment C
hereto. Kaiser is hereby granted all rights of ownership and the right to
produce or copy all of the survey response data and periodic reports
provided by NRC to Kaiser as specified in the Task Specification for
Member/Patient Survey Project, Attachment A hereto, or the Task
Specification for Competitor Benchmark study, Attachment B hereto. All
survey forms, results, data, member lists; all other information and
materials provided by Kaiser; and all survey reports and other reports
produced by NRC under this Agreement, shall remain the property of Kaiser
and NRC shall return all such information and material to Kaiser upon
completion or earlier termination of this Agreement unless otherwise
instructed in writing by Kaiser.

9. WARRANTY.

(a) NRC warrants that the services provided hereunder will be
performed in a good and workmanlike manner, and that the deliverables
provided by NRC to Kaiser will conform to the applicable Task
Specification. NRC's sole obligation under this warranty is to correct
and adjust the deliverables which, within a reasonable time, are found to
not conform to this warranty.

(b) NRC does not warrant or represent that the services or
products provided pursuant to this Agreement will be capable of achieving
any particular result in Kaiser's business, or that all errors, defects or
deficiencies can or will be found or corrected, or that any deliverables
which are the subject of the Task Specification will be error free. NRC'S
ENTIRE LIABILITY AND KAISER'S EXCLUSIVE REMEDY FOR DEFECTIVE PERFORMANCE
OR NON-PERFORMANCE UNDER THE WARRANTY CONTAINED IN THIS SECTION 9 SHALL BE
LIMITED TO CORRECTION AND ADJUSTMENT OF OR SUBSTITUTION FOR THE SERVICES
OR PRODUCTS WHICH DO NOT COMPLY WITH THIS WARRANTY, PROVIDED THAT NRC
PROMPTLY AND IMMEDIATELY CORRECT, ADJUST OR SUBSTITUTE THE SERVICES OR THE
PRODUCTS WHICH DO NOT COMPLY WITH THIS WARRANTY AND FURTHER PROVIDED THAT
KAISER SHALL ALLOW A REASONABLE OPPORTUNITY FOR NRC TO PROVIDE SUCH REMEDY
AND SHALL ASSIST NRC, AT NRC'S EXPENSE, IN IDENTIFYING AND ANALYZING SUCH
DEFECTS OR DEFICIENCIES.

(c) THE LIMITED WARRANTY PROVIDED HEREIN IS IN LIEU OF ALL
OTHER WARRANTIES, GUARANTEES AND CONDITIONS, EXPRESS OR IMPLIED, INCLUDING
BUT NOT LIMITED TO ANY IMPLIED WARRANTIES AND CONDITIONS OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND THOSE ARISING BY
STATUTE OR OTHERWISE IN LAW, OR FROM A COURSE OF DEALING OR USAGE OF
TRADE.

(d) IN NO EVENT SHALL NRC BE OBLIGATED OR LIABLE TO KAISER FOR
ANY CONSEQUENTIAL, INCIDENTAL OR INDIRECT DAMAGES ARISING OUT OF OR IN
CONNECTION WITH THE SERVICES OR PRODUCTS PROVIDED BY NRC HEREUNDER, OR ANY
DELIVERABLES PROVIDED BY NRC TO KAISER HEREUNDER, INCLUDING BUT NOT
LIMITED TO LOSS OF REVENUE OR PROFIT, EVEN IF NRC HAS BEEN ADVISED OR KNEW
OR SHOULD HAVE KNOWN OF THE POSSIBILITY OF SUCH DAMAGES OR LOSS.

10. INDEMNITY.

(a) Kaiser shall, except to the extent of NRC negligence or
willful misconduct, indemnify and hold NRC harmless from and against any
and all liabilities, claims, actions, proceedings or suits against NRC by
any physician, specialist or other employee of Kaiser, or by any third
party arising out of or connected with the performance by NRC pursuant to
this Agreement and the Task Specification, or any use by Kaiser of the
deliverables produced by NRC pursuant to the agreement and Task
Specification. This indemnity shall include all costs, attorneys' fees
and damages which NRC is or may be required to pay by reason of any
claims, actions, proceedings or suits against NRC. NRC shall give Kaiser
written notification of any claims, actions, proceedings or suits against
NRC within the scope of this indemnification. Upon receipt of such
notice, Kaiser shall, at its expense, defend NRC, and NRC shall provide
Kaiser with reasonable assistance and cooperation to facilitate the
defense or settlement of such claim, action, proceeding or suit.

(b) NRC shall indemnify and hold harmless Kaiser, its officers,
agents, affiliates and employees from and against all liabilities, claims,
losses, damages, demands and expenses, including reasonable attorneys'
fees, arising out of NRC's breach of Section 7, Confidential Information
and for personal injury or property damage to the extent that any such
liabilities, claims, losses, damages, demands or expenses are caused by
any act, error or omission of NRC, its officers, employees, agents or
consultants. This indemnity shall include all costs, attorneys' fees and
damages which Kaiser is or may be required to pay by reason of any claims,
actions, proceedings or suits against Kaiser. Kaiser shall give NRC
written notification of any claims, actions, proceedings or suits against
Kaiser within the scope of this indemnification. Upon receipt of such
notice, NRC shall, at its expense, defend Kaiser, and Kaiser shall provide
NRC with reasonable assistance and cooperation to facilitate the defense
or settlement of such claim, action, proceeding or suit.

11. INDEPENDENT CONTRACTOR. NRC is an independent contractor
and engages in the operation of its own business, and neither party is or
shall be considered to be the agent of the other party for any purposes.
Neither party has authorization to enter into any contracts, assume any
obligations or make any warranties or representations on behalf of the
other party. Nothing in this Agreement shall be construed to establish a
relationship of co-partner or joint venturer between the parties. Kaiser
shall not be responsible to NRC, NRC's employee or any governing body for
any payroll-related taxes related to the performance of this Agreement.

12. INSURANCE.

a. NRC shall procure and maintain in effect the following
policies of insurance covering liability arising from or related to
services performed or to be performed by NRC under this Agreement:

(1) all insurance coverage required by Federal and State
law, including worker's compensation and employer's liability all with
statutory minimum limits;

(2) general comprehensive liability insurance with not
less than a * Dollar ($ * ) combined single limit and aggregate,
including personal injury, death, sickness or disease of any persons and
injury to or destruction of property, including loss of use resulting
therefrom, and also including a contractual liability endorsement covering
NRC's liability under Section 8, Indemnity;

(3) automobile liability insurance (bodily injury and
property damage liability) with not less than a * Dollar ($ * ) combined
single limit each accident for bodily injury and property damage combined,
including coverage for all owned, hired and non-owned automobiles; and

(4) professional liability (errors and omissions)
insurance with a limit of not less than * Dollars ($ * ).

b. All insurance required under this Section shall be carried
by companies acceptable to Kaiser and the insurance required under
subsections 12a(2) and 12a(3) shall name Kaiser and its affiliate, Kaiser
Foundation Hospitals/Health Plan, Inc., as additional insureds. All
insurance shall also contain cross-liability endorsements, be primary and
noncontributing with respect to any policies carried by Kaiser, and shall
state that any coverage carried by Kaiser shall be excess insurance.

c. NRC shall, upon execution of this Agreement, provide Kaiser
with a certificate of insurance evidencing these coverages, naming Kaiser
and its affiliate as additional insureds as required and providing that no
such coverage shall be subject to cancellation or material reduction in
coverage without thirty (30) days prior written notice to Kaiser. The
insurance requirements hereunder shall not limit or relieve NRC of its
duties, responsibilities or liabilities under this Agreement.

13. FORCE MAJEURE. Neither party shall be responsible for any
failure to comply with, or for any delay in, the performance of the terms
of this Agreement, including but not limited to, delays in delivery, to
the extent that such failure or delay is directly or indirectly caused by
or results from events of force majeure beyond the reasonable control of
the party claiming a failure to perform or delay under this paragraph.

14. TAXES. If Kaiser is exempt from payment of taxes, Kaiser
shall provide NRC with a certification of exemption or comparable document
issued by the applicable taxing authority, If exemption of Kaiser from
taxes is not established, Kaiser shall promptly pay to NRC an amount equal
to any excise, use, privilege, sales, or any other tax (except income and
franchise taxes of NRC), assessment, or any import duties, imposed by or
under authority of any federal, state, provincial, or local law, and to be
paid by NRC with respect to the goods and services furnished under this
Agreement or any Attachment hereto. Notwithstanding any other provision
in this Agreement, in no event shall Kaiser be responsible to NRC, the
employees of NRC or any governing body for taxes or withholding on the
payroll of NRC.

15. NOTICES. All notices of any kind required or permitted
under the terms of this Agreement shall be in writing and shall be
delivered by mailing a copy thereof by certified or registered United
States mail, postage prepaid, with return receipt requested, or by
overnight express delivery, addressed as follows, or to such other address
as either party shall give notice of from time to time:

If to NRC:

NATIONAL RESEARCH CORPORATION
Gold's Galleria
1033 "O" Street, Suite 400
Lincoln, NE 68508
Attn: Michael Hays, President

If to Kaiser:

THE PERMANENTE MEDICAL GROUP, INC.
Executive Offices
1950 Franklin, 20th Floor
Oakland, CA 94612
Attn: Robert S. Klein, MD
Associate Executive Director

KAISER FOUNDATION HEALTH PLAN, INC.
Executive Offices
1950 Franklin, 20th Floor
Oakland, CA 94612
Attn: Jerry C. Fleming, Vice President

16. Intentionally Omitted.

17. NO PUBLICITY. NRC shall not, without the prior written
consent of Kaiser, use in advertising, publicity or otherwise the name of
Kaiser Foundation Health Plan, Inc., Kaiser Foundation Hospitals, The
Permanente Medical Group, Inc. or the Kaiser Permanente Medical Care
Program, or refer to the existence of this Agreement in any press
releases, advertising or materials distributed to prospective customers or
other third parties.

18. BINDING EFFECT; ASSIGNMENT. This Agreement shall not be
assigned by either party without the prior written consent of the other,
except that Kaiser may assign this Agreement or any interest herein, to
any organization directly associated with the Kaiser Permanente Medical
Care Program, or to (i) any parent, subsidiary or affiliated corporation
of Kaiser; or (ii) any corporation with which Kaiser may merge or
consolidate, except that Kaiser shall remain responsible to NRC for the
full performance of the terms of this Agreement. Nothing in this
Agreement, whether express or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any party other than the
parties hereto and their respective successors, nor is anything in this
Agreement intended to relieve or discharge the obligation or liability of
any third party to either party to this Agreement, nor shall any provision
give any third party any right of subrogation or action against either
party to this Agreement.

19. ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes
the entire agreement between the parties pertaining to the subject matter
hereof and supersedes all prior agreements, representations, and
understandings of the parties hereto with respect to the subject matter
hereof, including without limitation, the MOU. This Agreement may be
supplemented, modified or amended only by a written instrument duly
executed by authorized representatives of each of the parties hereto.

20. ATTORNEYS' FEES. If any action is commenced to enforce any
of the provisions of this Agreement, including without limitation, an
arbitration proceeding, the prevailing party shall, in addition to other
remedies, be entitled to recover reasonable attorneys' fees and costs of
suit from the other party.

21. NONDISCRIMINATION. NRC recognizes that as a government
contractor, Kaiser is subject to various federal laws, executive orders
and regulations regarding equal opportunity and affirmative action which
may also be applicable to subcontractors. NRC, therefore, agrees that any
and all applicable equal opportunity and affirmative action clauses shall
be incorporated herein as required by federal laws, executive orders, and
regulations which include the following:

A. The nondiscrimination and affirmative action clauses
contained in: Executive Order 11246, as amended, relative to equal
opportunity for all persons without regard to race, color, religion, sex
or national origin; the Vocational Rehabilitation Act of 1973, as amended,
relative to the employment of qualified handicapped individuals without
discrimination based upon their physical or mental handicaps; the Vietnam
Era Veterans Readjustment Assistance Act of 1974, as amended relative to
the employment of disabled veterans and veterans of the Vietnam Era; and
the implementing rules and regulations prescribed by the Secretary of
Labor in Title 41, Part 60 of the Code of Federal Regulations.

B. The utilization of small and minority business concerns
clauses contained in: the Small Business Act, as amended; Executive Order
11625; and the Federal Acquisition Regulation (FAR) at 48 CFR Chapter 1,
Part 19, Subchapter D, and Part 52, Subchapter H, relative to the
utilization of minority business enterprises, small business concerns and
small business concerns owned and controlled by socially and economically
disadvantaged individuals, in the performance of contracts awarded by
federal agencies.

22. MISCELLANEOUS.

(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of California.

(b) The waiver by one party of the performance of a
covenant, condition or promise herein shall not invalidate this Agreement
nor shall it be considered a waiver by such party of any other covenant,
condition or promise herein, nor shall any such waiver be construed as a
future waiver of the performance of any other like act, covenant,
condition or promise.

(c) Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law; provided, however, that in the event that any provision of
this Agreement shall be invalid or prohibited under such applicable law,
such provision shall be ineffective only to the extent of such prohibition
or invalidity without invalidating the remainder of such provision or the
remaining provisions of this Agreement.

(d) The headings of the several paragraphs of this
Agreement are inserted solely for the convenience of reference and are not
a part of this Agreement and are not intended to govern, limit or aid in
the construction of any of the terms or provisions of this Agreement.

(e) This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. The parties
hereto agree that a facsimile copy of the signature of an authorized
representative of one or more of the parties hereto shall have the same
legal effect as the original signature of such representative.

IN WITNESS WHEREOF, the parties, by and through their authorized
representatives, have executed this Agreement on the dates indicated
below.

NATIONAL RESEARCH CORPORATION ("NRC")

By: /s/ Michael Hays

Name: Michael Hays

Title: CEO

Date: 7-15-94

THE PERMANENTE MEDICAL GROUP, INC. ("TPMG")

By: /s/ Robert Klein

Name: Robert Klein, MD

Title: Associate Executive Director

Date: 8/15/94

KAISER FOUNDATION HEALTH PLAN, INC. ("KPHP")

By: /s/ Jerry C. Fleming

Name: Jerry C. Fleming

Title: V.P. Associate Regional Manager

Date: 8/11/94

<PAGE>
ATTACHMENT A

Task Specification for Member/Patient
Survey Project

Kaiser will provide to NRC certain member and patient level
data, and NRC, by use of this data, will perform periodic surveys of
Kaiser's members and patients regarding satisfaction with the services
such members and patients have received from KPHP. Based upon survey
results, NRC will provide period reports to Kaiser as more specifically
described herein. The Survey Project will cover data for the period of *
through *, unless extended pursuant to Paragraph 3 of the agreement.

Kaiser will provide NRC with the data relating to the patient or
member to whom NRC shall transmit a survey form. Data pertaining to
patients and members shall include information as reasonably required by
NRC to perform this Task Specification, such information to be provided by
Kaiser to NRC in a mutually acceptable format. Kaiser agrees to exercise
its best efforts to keep such data up-to-date and accurate. Data
regarding certain patients may be withheld by Kaiser in the event that
Kaiser determines that confidentiality considerations so warrant.

Kaiser and NRC will cooperate in the design of a questionnaire
to be used as the survey instrument. Kaiser shall approve the survey in
writing prior to NRC's distribution of the instrument to patients or
members. The survey instrument may undergo periodic revision in response
to Kaiser's needs for new or different survey data.

NRC shall collect * completed patient surveys and * member
surveys during each of the periods of * through *, and * through *, as
more specifically described on the following page of this Attachment.
These survey return numbers are based on the * response rates of *% for
the patient survey and *% for the member survey.
_______________
* Indicates that material has been omitted and confidential treatment
has been requested therefor. All such omitted material has been filed
separately with the SEC pursuant to Rule 406.

NRC shall monitor a sample selection and avoid transmitting a
survey to a patient more than once during a * period. No member shall be
surveyed if he or she has made a visit to a Kaiser physician within the
past * (*) months. (If a member has visited a physician within the prior
*, such member shall be regarded as a "patient" for survey purposes).
Kaiser shall provide NRC with necessary data to establish the date of a
member's last office visit.

* NRC will restrict its phone contacts to the hours of 10:00
a.m.-9:00 p.m. Monday through Friday, 10:00 a.m.-5:00 p.m. Saturday, and
12:00 p.m.-4:00 p.m. Sunday. Phone contacts shall be conducted in
professional manner.

NRC will issue written reports using the survey returns on the
following schedule:

* - * facility reports and * Medical Center reports;

* - * facility reports, * Medical Center reports, and
reports for individual physicians and nurse
practitioners;

* - * facility reports, * Medical Center reports, and
reports for the departments of each facility;

NRC shall hold in storage for a maximum of * (*) months the
completed survey forms received from members or patients. Thereafter,
unless Kaiser wishes to take possession of such surveys, such documents
will be destroyed, provided, however, that the survey results shall be
stored by NRC on magnetic media.

At the beginning of each month, NRC shall deliver to Kaiser the
original copies of completed surveys received in the prior month which
contain written comments from the respondents. NRC shall make and retain
copies of these original surveys and hold them in storage for a maximum of
* (*).

On a weekly basis, NRC will provide a written summary report to
Kaiser detailing the number of surveys mailed out and the number received
by NRC. This report shall be in a form specified by Kaiser as necessary
to track the response rate for mailings which occur at different times
throughout the year, and to track the response rate resulting from
different stages of NRC's survey process.

At the beginning of each month, NRC shall deliver to Kaiser an
updated electronic data set containing all survey responses received from
members and patients as of that date. Such data sets will include for
each respondent all survey items, necessary weighing factors, Kaiser-
supplied data (e.g., date of visit, provider code), and survey tracking
data maintained by NRC (e.g., date of survey mailing, last contact, date
of survey return to NRC). Such data sets shall be delivered in the format
and on the storage medium specified by Kaiser. NRC shall deliver such
documentation as necessary to access the delivered data sets, and shall
update the documentation whenever any changes are made to the data set
contents or format.

Due to the fact that a significant proportion of Kaiser's
members and patients are non-English speaking (and are not literate in the
English language), NRC will take reasonable steps to facilitate response
by such individuals to surveys. On the survey instrument NRC will provide
an explanation and 800 numbers to be staffed during extended business
hours by Spanish-speaking and Chinese-speaking individuals. Kaiser shall
provide NRC with the survey instrument translated from English to Spanish
and English to Chinese. Upon request, a Spanish-speaking Kaiser pateitn
or member will be provided with a Spanish language survey form. Upon
request, a Chinese-speaking Kaiser patient or member will be administered
the survey over the phone by a Chinese-speaking NRC staff person. If
required, NRC will explore with Kaiser the need to provide assistance to
patients or members in other languages. NRC shall include the requested
data on survey activity and response rates for these special language
groups in its weekly survey activity and response reports.

<PAGE>
ATTACHMENT B

Task Specification for Competitor Benchmark Study

In conjunction with Kaiser's Member/Patient Survey Project, NRC
will conduct a Competitor Benchmark Study of individuals enrolled in the
following health plans;

(a) Fee for service;

(b) Non-Kaiser managed care plans; and

Such Study shall be performed in accordance with this Task
Specification.

The Study's objective is to provide Kaiser with comparative
health plan satisfaction scores. The sample group from which data will be
collected will be identified through the use of * . The responses will
consist of * individuals enrolled in a fee-for-service health care plan, *
individuals enrolled in a managed care plan other than Kaiser, and *
individuals who are Kaiser members. Due to the size of the sample, it
will be impractical to report study results by specific health care
providers other than Kaiser. All market research conducted in conjunction
with this Study will be performed in accordance with generally accepted
standards for sound market research.

<PAGE>
ATTACHMENT C

Listening System Software (TM) Trial

In conjunction with this Study, NRC will install at Kaiser's
Northern California Regional Office, NRC's Listening System Software (TM)
(the "Software"). The objective of such installation is to allow Kaiser,
on a trial basis for the period from the date of installation to *, to
evaluate the benefits and merits of the Software for licensing from NRC
and installation at each of Kaiser's Northern California Region Medical
Centers.

NRC shall install one copy of the Software on a Kaiser personal
computer at an office of Kaiser's choice, train two (2) Kaiser personnel
in the operation of the Software, and support the Software for the
duration of the trial review. NRC will not charge Kaiser for the use,
installation or support of the Software during the trial period. Software
support shall be provided Monday through Friday (excluding holidays) from
9:00 a.m. to 4:00 p.m. Central Time via a telephone user support line.
NRC shall provide one (1) day of installation and training services at
Kaiser's site. NRC will furnish, free of charge, one (1) Systems
Operations Manual for training of Kaiser's personnel and for such during
the trial period.

NRC has, and shall retain, title to the Software during the
trial period and NRC warrants that it has the right to grant the license
to the Software. Kaiser shall not make copies of the Software for any
purpose. Kaiser may not alter or modify the Software or merge the
Software into other programs. Kaiser acknowledges that it has no
proprietary interest in or right to use of the Software except in
accordance with the terms described herein.

Kaiser recognizes that the Software and other materials supplied
by NRC to Kaiser are subject to the proprietary rights of NRC. Kaiser
agrees that it will hold the Software in confidence, and that it shall not
disclose to any third party the Software and documentation and that the
Software and documentation are provided for Kaiser's exclusive use.
Kaiser further understands that operator manuals, training aids and other
written materials are subject to copyright protection.

If at the end of the trial period, Kaiser desires to enter into
a license for the use of the Software, Kaiser and NRC shall in good faith
negotiate the terms of a license agreement. If Kaiser does not desire to
license the Software, it shall return the Software and any documentation
to NRC without further obligation.

NRC warrants that it has the right to grant the license granted
to Kaiser under this Agreement, free and clear of any liens and
encumbrances, and that the Software will not infringe upon or violate any
patent, copyright or trade secret right of any third party. NRC shall
indemnify, defend, save and hold Kaiser harmless from any and all
liabilities, including attorneys' fees and costs, arising out of claims
that the Software infringes the patent, trademark, copyright, trade secret
or other proprietary or intellectual property rights of others. Kaiser
shall promptly notify NRC in writing if Kaiser becomes subject to any such
claims. Kaiser shall, upon NRC's request and at NRC's expense and to the
extent Kaiser's interests are not adverse to NRC, provide reasonable
assistance to NRC in the defense of such action. NRC shall have the sole
control of the defense and settlement of such claims (except that any
settlement which will adversely affect the financial viability of NRC must
be approved by Kaiser) and NRC shall be entitled to replace or modify the
Software so that it becomes noninfringing provided that the performance of
the Software is not materially impaired thereby.

Exhibit (10.8)

SUBCONTRACT

Between

__________________________________________________________________________

United HealthCare Corporation & National Research Corporation
9900 Bren Road East 1033 O Street
Minnetonka, Minnesota 55343 Gold's Galleria
Lincoln, Nebraska 68508

for services to be performed for the Defense Medical Information
System/System Integration, Design, Development, Operations and Maintenance
(D/SIDDOMS - Lot III) in support of the Office of the Assistant Secretary
of Defense for Health Affairs, Department of Defense.

This Subcontract is issued in accordance with and is subordinate to:
Prime Contract No. DASW01-95-0029.

<PAGE>

This subcontract is made as of May 9, 1997 ("Effective Date"), by and
between United HealthCare Corporation, through its wholly owned subsidiary
Applied HealthCare Informatics (hereinafter referred to as "UHC") and
National Research Corporation, Inc. ("Subcontractor").

Witnesseth that:

Whereas, UHC has entered into a contract with the U.S. Department of
Defense to provide services for studies, econometric analysis and modeling
for the D/SIDDOMS project, Contract No. DASW01-95-0029, (hereinafter
"Prime Contract"); and

Whereas, UHC desires to utilize the services of Subcontractor and
Subcontractor desires to provide certain services as requested by the
Department of Defense and described herein; and

Whereas, UHC and Subcontractor executed an agreement entitled Subcontract
Between United HealthCare Corporation and National Research Corporation,
effective January 6, 1997; and

Whereas, UHC and Subcontractor desire to terminate the January 6, 1997
agreement and execute this agreement in its place;

Now, therefore, UHC and Subcontractor mutually agree as follows:

Article 1 - Definitions

1.1 "Agreement" means this instrument and its Appendices.

1.2 "UHC Project Manager" means the individual identified in a
Task Order as being responsible for supervision of work performed pursuant
to the Task Order.

1.3 "Delivery Order" means an order executed by the U.S.
Department of Defense under the Prime Contract and provided to UHC which
summarizes the contents of both a task statement and technical proposal.

1.4 "DFARS" means the Department of Defense FAR Supplement
contained in Title 48, Chapter 2 of the Code of Federal Regulations in
effect as of the date of this Agreement unless otherwise updated by
consent of the parties or by law.

1.5 "FAR" means the Federal Acquisition Regulations contained
in Title 48 of the Code of Federal Regulations in effect as of the date of
this Agreement unless otherwise updated by consent of the parties or by
law.

1.6 "Prime Contract" means the contract between UHC and the
U.S. Department of Defense, Contract No. DASW01-95-0029.

1.7 "Task Order" means any work request issued by UHC to
Subcontractor in accordance with Article 2 of this Agreement.

Article 2 - Services to be Performed.

2.1 Subcontractor shall assist UHC in responding to task
statements issued under the Prime Contract, including assistance in
preparing technical and cost proposals. Subcontractor shall not be
compensated for these and other services not associated with a special
Delivery Order issued under the Prime Contract, except as otherwise
provided in this Agreement or a Task Order.

2.2 This is an indefinite-quantity subcontract for the supplies
and services specified. Subcontractor will deliver or perform, and UHC
shall be obligated to pay, only as provided in Task Orders issued in
accordance with this Agreement. Each Task Order and corresponding
Delivery Order, which shall together be entitled Delivery Order and Task
Order Addendum, shall be executed by the parties and attached hereto as an
Appendix and incorporated in this Agreement.

2.3 Prior to issuance of a Task Order by UHC, the parties will
agree upon the contents of the order and the duties to be included
therein.

2.4 Task Orders shall be issued to Subcontractor on the basis
of Prime Contract specifications and, except as otherwise provided herein
shall be subordinate to the terms, conditions, specifications and
objectives of the Prime Contract. Each Task Order issued under this
Agreement shall require the UHC Project Manager's approval. Each Task
Order issued under this Agreement shall be individually and sequentially
numbered, and shall include the specifications and requirements applicable
to the Task Order. Task Orders may not conflict with the terms and
conditions of this Agreement unless the variance is explicitly stated in
the Task Order. In the event of conflict or ambiguity of terms, this
Agreement shall prevail over the language in the Task Order.

2.5 Each Task Order assigned under this Agreement shall include
at least the following information:

a) Description of the work to be performed.

b) Period of performance of the Task Order.

c) Deliverable items schedule.

d) The specific labor hours committed to the Task Order, by
approved labor category; the names of Key Personnel and
their actual job title. However, for services provided by
Subcontractor where catalog or market prices of commercial
items are used, this will be listed as deliverables.

e) Subcontractor's estimated number of labor hours and total
costs for preparation of progress reports and assistance
under Article 4.2 of this Agreement. However, for services
provided by Subcontractor where catalog or market prices of
commercial items are used, these costs are part of the
commercial per unit price.

f) The total dollar value of the Task Order.

g) Reporting requirements.

h) Required participation in oral briefings, to the extent
known at the time of issuance of the Task Order.

2.6 All work performed under this Agreement shall be supervised
by Subcontractor's Project Manager, under the general technical direction
of UHC's Project Manager. UHC will notify Subcontractor of the identity
of its Project Manager for the project in each Task Order. Subcontractor
shall notify UHC in writing of the identity of its Project Manager within
twenty (20) days of execution of this Agreement, and by prior written
notice if a new or alternate Project Manager will be appointed during the
term of this Agreement.

2.7 UHC may modify a Task Order based on modifications made to
a Delivery Order issued under the Prime Contract. UHC shall notify
Subcontractor in writing of the required modification. If Subcontractor
believes a change to a Task Order is necessary, Subcontractor shall notify
UHC in writing. If a modification causes an increase or decrease in the
cost of services to be provided by Subcontractor, UHC will make an
equitable adjustment consistent with FAR 52.243-2, Alternate I.

2.8 In the event the Subcontractor anticipates difficulty in
complying with the Task Order delivery schedule, Subcontractor shall
immediately notify UHC in writing, giving pertinent details, including the
date by which it expects to make delivery; provided, however, that this
date shall be informational only and that receipt thereof shall not be
construed as a waiver by UHC of any delivery schedule, or any rights or
remedies provided by law or under this Agreement.

2.9 Subcontractor must strictly comply with the Limitation of
Cost clause on cost reimbursement Task Orders and notify UHC in a timely
fashion if additional funds will be required. No expenditures beyond the
ceiling amount will be reimbursed unless specifically authorized by UHC's
Project Manager.

2.10 Subcontractor shall promptly notify UHC in writing if it
has reason to believe that the level of effort or the total cost to UHC of
work under a Task Order will be either greater or substantially less than
the amount obligated for that Task Order. In addition, Subcontractor
shall promptly notify UHC in writing when the expenditures plus
outstanding commitments and liabilities allowable under a Task Order have
reached 75% of the amount obligated under the Task Order, or two months
prior to exhaustion of the funds, whichever comes first.

2.11 In performing all services under this Agreement,
Subcontractor shall use its best efforts to assist UHC in performing the
requirements of the Prime Contract, including preparation of proposals and
execution of Task Orders.

Article 3 - Effective Date and Term of Agreement

3.1 The services to be performed under this Agreement shall be
provided during the period of performance set out in each Task Order, or
until all deliverables required by the Task Order are provided. If the
Prime Contract is extended, this Agreement shall be extended for up to *
additional years in accordance with Article 3.2 below.

3.2 This Agreement may be extended for up to * additional one-
year periods based upon the options in the Prime Contract. UHC will
notify Subcontractor of any extension of the Agreement upon receipt of
written notification of extension under the Prime Contract. UHC will
notify Subcontractor of its receipt of any preliminary written notice of
intent to extend under the Prime Contract, but will not be committed to an
extension based on a preliminary notice. All other terms and conditions
of this Agreement shall remain in full force and effect during any period
of extension.

3.3 Any Task Order issued during the effective period of this
Agreement and not completed within that period shall be completed by
Subcontractor within the time specified in the Task Order, unless the time
is extended because of an excusable delay. This Agreement shall govern
the Subcontractor's and UHC's rights and obligations with respect to the
Task Order to the same extent as if the Order were completed during the
Agreement's effective period. In the event that optional periods are
exercised in the Prime Contract, the parties may extend a Task Order
beyond the original Agreement expiration date. Such Task Order shall be
completed within the terms and conditions of the Task Order as written
prior to the expiration date of the contract year in which it was issued,
unless specified otherwise in the extended Task Order.

Article 4 - Reports and Deliverables

4.1 Monthly Progress Reports. Subcontractor will provide to
UHC monthly progress reports that address total work activity under this
Agreement for the reporting period and address individually each active
Task Order. Each report shall include:

a) Staff hours expended during the reporting period. This
information shall be provided at two levels: cumulative,
over the entire Agreement reporting period, and
individually, by Task Order on a per person, per task
basis. However, for services provided by Subcontractor
where catalog or market prices of commercial items are
used, this information will be provided on a commercial per
unit basis.

b) Staff hours remaining, by Task Order. However, for
services provided by Subcontractor where catalog or market
prices of commercial items are used, the report shall
include remaining unit price information and remaining
deliverables.

c) Funds expended, overall and by individual Task Order,
during the reporting period.

d) Funds remaining, by individual Task Order.

e) Status of work in progress.

f) Problems or constraints encountered during the reporting
period and suggested solution(s).

4.2 Subcontractor shall assist UHC, as required to comply with
the requirements of Section C-3 of the Prime Contract, in providing
information for Delivery Order management plans, status reports and cost
reports. Subcontractor will, if requested by UHC, participate in
management reviews and assist in developing the required materials and
documentation to support review activities.

4.3 Subcontractor shall participate, as requested by UHC, in
formal oral briefings as required under the Prime Contract.

4.4 All reports and other documentation supplied under this
Agreement will be in compliance with the provisions of the Corporate IM
Technical Standards, Technical Reference Model, Section J, Attachment 4
and the DoD Standard 7935A, "Automated Data Systems (ADP) Documentation,"
dated Oct. 1, 1988, or the most recent current revision.

4.5 The Subcontractor shall ensure that automated resources and
procedures be used, whenever possible, to maintain the most cost-effective
use of Government funds. All deliverables shall be formatted in Word and
be available on a 3 1/2 inch IBM compatible diskette if so requested or as
otherwise specified in the Task Order. The Subcontractor's software shall
be capable of producing high quality "camera-ready" copies of
deliverables. The Subcontractor's software shall also be capable of
producing high quality graphics for use in deliverables if necessary.

4.6 Reports provided under this Agreement shall be considered
"Technical Data" as defined in the "Rights in Data" clause in the
Incorporated Provisions (DFARS 252.227-7013).

4.7 Subcontractor will submit three copies of all reports
specified in each Task Order, and a camera-ready copy of all deliverable
draft and final reports, if such reports are called for.

4.8 All reports, and any other materials as may be required
under this Agreement or Task Orders, shall be addressed and delivered
prepaid, unless otherwise directed by UHC, to the following address:

Applied HealthCare Informatics
United HealthCare Corporation
ATTN: Kathia Kennedy
Mail Route MN008-W125
PO Box 1459
Minneapolis, MN 55440-1459

4.9 The Subcontractor shall, over the term of this Agreement,
correct errors in Subcontractor developed software and applicable
documentation which are discovered by UHC, the Government, any other user
of the software, or the Subcontractor. Such corrections shall be made
within 25 days of the date the Subcontractor is notified that the error
exists or the date the Subcontractor discovers the error. Inability of
the parties to determine the cause of software errors shall be resolved in
accordance with the Disputes clause in Article 12 of this Agreement, but
in no event constitutes grounds for delay of error correction beyond the
time frame specified above.

4.10 If, during performance of this Agreement, Subcontractor
provides proprietary information, including intellectual property, which
is related to this Agreement but has been developed by Subcontractor for
purposes other than this Agreement, Subcontractor shall clearly identify
the information as "NRC Proprietary Information." Such identification
will not, in and of itself, be determinative of whether the information
was developed separate from this Agreement or whether it is proprietary to
the Subcontractor. The Government will retain rights to all intellectual
property produced in the course of developing, deploying, conducting and
reporting the surveys performed pursuant to this Agreement.

4.11 Notwithstanding any other provisions of this subcontract to
the contrary, Subcontractor's failure to submit required reports when due,
or failure to perform or deliver require services may, at the discretion
of UHC, result in withholding of payments under this Agreement, unless
such failure is beyond the control and without the fault or negligence of
Subcontractor and is determined by UHC to be an Excusable Delay as defined
in FAR 52.249-14. Any failure set out above which is not excused and not
cured within a period specified by UHC, which must be a minimum of ten
working days, may be considered a breach and grounds for termination in
accordance with Article 11 herein.

Article 5 - Consideration and Payment

5.1 In consideration of Subcontractor's satisfactory delivery
of the work specified in any and all Task Orders issued under this
Agreement, UHC shall reimburse Subcontractor for all allowable costs not
to exceed the estimated amount for the Task Order. Funds shall be
specific to each individual Task Order. Cost allowability shall be
determined in accordance with the provisions of the Prime Contract, FAR
Parts 30 and 31, and applicable provisions incorporated in Article 20 of
this Agreement.

5.2 For the services provided by Subcontractor under this
Agreement, UHC shall reimburse Subcontractor as specified in each Task
Order. The billing instructions applicable to each Task Order may be
specified in each Task Order, and shall supersede any inconsistent billing
instructions in Appendix B of this Agreement.

5.3 Rates incurred by the Subcontractor in excess of the
maximum amount specified in each Task Order for all services provided
under that Task Order shall not be an allowable cost under this Agreement.
The Subcontractor bears the sole risk of any costs exceeding these
amounts.

5.4 Subcontractor shall submit to UHC on a monthly basis an
invoice for each Task Order active in the invoice period. The invoice
shall be prepared in accordance with the requirements set out in Appendix
B, and shall be accompanied by a statement of costs incurred by
Subcontractor, cumulative expenditures to date, and a statement of the
original funds in the Task Order and the funds remaining in the Task
Order. To the extent that some of this information is already being
provided by Subcontractor under Article 4 of this Agreement, Subcontractor
may submit copies of the progress reports instead of providing the
identical information under this provision. Subcontractor shall clearly
identify in the progress reports where the information required by this
provision is constrained.

5.5 Subcontractor shall submit to UHC a weekly status report
outlining activities performed to date and the status of pending and
future deliverables and tasks. The status report may be submitted
electronically via the Internet, or by facsimile.

5.6 Upon receipt of each invoice submitted by Subcontractor in
accordance with this Agreement, UHC shall enter on a UHC invoice to be
submitted to the Government all or such part of the labor, materials and
indirect costs specified in Subcontractor's invoice that UHC determines to
be allowable costs, plus the amount of the fixed fee applicable to
Subcontractor under the Task Order if such fee is invoiced by
Subcontractor. Upon receipt of payment from the Government for one or
more of the items listed on Subcontractor's invoice, UHC shall pay
Subcontractor within * after the amount is determined to be allowable.

5.7 UHC reserves the right to have invoices and statements of
cost audited. Each payment made to Subcontractor shall be subject to
reduction for amounts included in the audited invoice which are found by
the UHC Project Manager, on the basis of an audit, not to constitute
allowable or allocable cost, including Subcontractor's rates and fees.
Any subsequent payment may be reduced for previous overpayment, or
increased for underpayments.

Article 6 - Travel and Per Diem

6.1 UHC will reimburse Subcontractor for the actual,
reasonable, and necessary costs of local and out of town travel incurred
in connection with Subcontractor's direct performance under this Agreement
if the costs are in compliance with the Joint Travel Regulations, are
approved by UHC in advance and are included in a Task Order.

Article 7 - Key Personnel

7.1 Subcontractor shall provide the key personnel identified in
each Task Order to perform services under this Agreement unless alternate
personnel are assigned in accordance with this Article. Prior to
assigning any alternate personnel, Subcontractor shall submit sufficient
information to demonstrate that the qualifications of the prospective
personnel are equal to or better than the qualifications of the personnel
being replaced. No substitution will be made without prior approval of
UHC.

Article 8 - Prime Contract

8.1 Subcontractor shall assume toward UHC all the obligations
and responsibilities which UHC, by the Prime Contract, assumes toward the
Government, with respect to any portion of the UHC's supplies or services
performed or to be performed by the Subcontractor pursuant to this
Agreement. The Prime Contract is subject to public law, statutes and
regulations requiring the "flow-down" of contract terms and conditions to
Subcontractors. Any such terms and conditions applicable to
Subcontractors by reason of law or the Prime Contract, which is
incorporated herein as Appendix A, shall be applicable to this Agreement.
Nothing in this Agreement is intended by the parties to be in conflict
with any such terms or conditions.

8.2 The parties agree that this Agreement is subject to the
provisions of the Prime Contract and is intended to be interpreted
consistently with the provisions of the Prime Contract. The parties also
agree, however, that this Agreement shall not in any way be deemed to
establish or create a contractual obligation between the Government and
Subcontractor, and that Subcontractor shall have no privity of contract or
other access to the Government by reason of this Agreement, unless
explicitly stated herein.

Article 9 - Publication and Rights in Data

9.1 Subcontractor shall not disseminate or publish, except
within and between Subcontractor and UHC, and as required by the
Government, any information received or developed under this Agreement or
contained in the reports to be furnished pursuant to this Agreement,
without prior written consent from UHC.

9.2 Title to all source data and materials furnished to UHC or
the Government, together with all plans, systems analysis and design
specifications and drawings, completed programs except proprietary
programs and documentation thereof, reports and listings, all punched
cards and all other items pertaining to the work and services to be
performed under Task Orders pursuant to this Agreement, including any
copyright shall become and remain with the Government upon completion.
The Government shall have the full right to use each of these for its
purposes without compensation or approval on the part of Subcontractor or
UHC. The Government shall have access to and the right to make copies of
the above mentioned items. Subcontractor shall indicate when proprietary
programs are included in materials furnished under this Agreement.

9.3 Subcontractor agrees to grant and does grant, convey and
reserve to the United States of America a nonexclusive, irrevocable, world
wide, royalty-free license in all written material, published, printed,
presented or used in connection with this Agreement, in which
Subcontractor presently holds a copyright or in the future shall obtain a
copyright or in which it has the right to issue royalty-free licenses.

9.4 All software to be provided under this agreement shall be
delivered with unlimited rights in accordance with the provisions of DoD
FAR Supplement 252.227-7013, 252.227-7018 and 252.227-7029.

9.5 If during the term of this Agreement, Subcontractor
determines that it is more advantageous to UHC and/or the Government to
incorporate a package, subroutine or module that can not be provided with
unlimited rights into the system, Subcontractor shall notify UHC in
writing. Such notification shall include at a minimum the name of the
item to be furnished with restricted rights and cost saving or other
benefits accruing to the Government from its use. If the parties agree to
incorporate such software package, subroutine or module into the system
the Government shall be given at a minimum the following rights:

a. Use of the computer software with the computer for which or
with which it was acquired, including use at any Government installation
to which the computer may be transferred by the Government;

b. Use of the computer software with a backup computer if the
computer for which or with which it was acquired is inoperative;

c. Modify the computer software, or combine it with other
software, subject to the provision that those portions of the derivative
software incorporating restricted rights software are subject to the same
restricted rights;

If Subcontractor includes any software packages, routines or
modules developed at Subcontractor's expense in the system without
identifying it to UHC, all such software shall be considered delivered
with "unlimited rights". If the program maintenance of the system is
dependent on the source code of any such software, the Subcontractor shall
provide the source code and rights to the source code for the life of the
system at the time the software and documentation is delivered.

9.6 If in performing under this Agreement Subcontractor
requests access to proprietary data of other companies to conduct studies
and research, it will enter into agreements with the supplying companies
to protect such data from unauthorized use or disclosure so long as such
data remains proprietary. These agreements shall be made available to UHC
upon request.

9.7 If in performing under this Agreement Subcontractor is
given access by UHC or the Government to the proprietary date of UHC or
the Government or proprietary data of third parties possessed by UHC or
the Government, Subcontractor agrees to protect such data from
unauthorized use or disclosure so long as such data remains proprietary.
This provision shall survive termination of this Agreement.

Article 10 - Changes

10.1 UHC may at any time, by a written order, and without notice
to the sureties, if any, make changes within the general scope of this
Agreement. Any such change shall be in accordance with the terms in the
Changes clause of the Incorporated Provisions of this Agreement included
in Appendix A. However, in order to allow UHC time to complete its
proposal for adjustment, the Subcontractor must submit its proposal within
5 days from the date of receipt of the written order unless otherwise
given an extension in writing by UHC.

Article 11 - Termination

11.1 UHC may *, by written notice to Subcontractor, terminate
this Agreement in whole or in part either because termination is
determined to be in the best interest of the Government or because
Subcontractor fails to fulfill its obligations under this Agreement.
Termination shall be in accordance with the terms and conditions of the
Prime Contract termination provisions as specified in FAR 52.249-6, and
incorporated herein in Appendix B, except that: a) notwithstanding the
definitions provided in this Agreement, references in the Prime Contract
termination clause to the Government shall be deemed to mean UHC;
Contractor shall be deemed to mean Subcontractor; Contracting Officer
shall be deemed to mean UHC; and b) in order to allow UHC time to complete
its final termination settlement proposal, Subcontractor shall submit its
proposal promptly but no later than nine (9) months after the effective
date of termination unless this period is extended in writing by UHC.

Article 12 - Disputes

12.1 The parties shall attempt to resolve any dispute arising
out of or relating to this subcontract promptly by negotiation between
executives who have authority to settle the controversy. Any party may
give the other party written notice of any dispute not resolved in the
normal course of business. Within twenty (20) days after delivery of the
disputing party's notice, the executives of both parties shall meet at a
mutually acceptable time and place to attempt to resolve the dispute. If
the matter has not been resolved within thirty (30) days of the disputing
party's notice, or if the parties fail to meet within thirty (30) days,
either party may initiate further proceedings with respect to the
controversy or claim as provided hereafter. All negotiations pursuant to
this clause are confidential and shall be treated as compromise and
settlement negotiations for purposes of the rules of evidence.

12.2 All claims, disputes and other matters in controversy
arising out of or related to this Subcontract, or the performance or
breach thereof, shall be decided by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then
obtaining, unless the parties mutually agree otherwise; provided, however,
that UHC shall not be required to arbitrate any claim, dispute or other
matter involving a claim by or against a third party or a third party who,
in the judgment of UHC, is indispensable to a just and equitable
resolution of the matter or who is alleged to be wholly or partially
responsible for the matter, unless such third party is subjected to the
jurisdiction of, and made a party to, the arbitration. The arbitrators
are to decide only the issue(s) presented to them and shall have no
authority to award any punitive damages or exemplary damages or to vary or
ignore the terms of this agreement, and shall be bound by controlling law.
The arbitrators shall be the final judge of the law and the facts. Their
decision shall be final and binding. The award may be modified, set
aside, or appealed based only upon the standards therefore set forth in
the Uniform Arbitration Act as that Act is enacted in the State of
Minnesota. In addition to such discovery as may be ordered in the
discretion of the arbitrators, at least thirty (30) days prior to the
hearing, the parties shall exchange documents relevant to the claims and
defenses of the parties, a detailed itemization of damages, identification
of witnesses, and any reports of experts who are expected to testify or,
if there are not reports, summaries in reasonable detail of their expected
testimony.

The parties agree that there is no privity of contract between
the Government and Subcontractor. If at any time any controversy should
arise between UHC and Subcontractor with respect to any matter arising
under this Subcontract which relates to an act, omission, or decision by
the Government, and is not a separate dispute between UHC and
Subcontractor, it is the intention of the parties that the UHC shall be
liable to Subcontractor to the same extent that the Government is liable
to UHC, but not to any greater extent. Subcontractor agrees to allow UHC
to exhaust the remedies available under the Prime Contract, including
remedies available for breach of contract, prior to instituting any
separate action or proceeding. If a separate action or proceeding is
instituted prior to the exhaustion of the aforesaid remedies,
Subcontractor agrees to stay said action or proceeding pending the
exhaustion of remedies against the Government. If UHC prosecutes or
defends a matter against the Government under the terms of the Prime
Contract, Subcontractor agrees to furnish all documents, certifications,
statements, witnesses, notices, reports, and information reasonably
required by UHC for such purposes.

12.3 The parties agree that, in the event a dispute arises
concerning performance of any Task Order, performance of work under the
Task Order will continue according to scheduled dates, at the direction of
UHC, pending resolution of any arbitration, or other resolution of the
dispute. Any arbitration must be initiated within the period of any
applicable statute of limitations. The expenses of any arbitration
proceeding, including compensation to the arbitrators, shall be borne
equally by the parties.

Article 13 - Workers' Compensation and Insurance

The Subcontractor shall maintain the types of insurance and
coverage listed below:

TYPE OF INSURANCE MINIMUM AMOUNT

(i) Worker's Compensation and all As required by State Law.
occupational disease.

(ii) Employer's Liability including
all occupational disease when
not so covered in Workmen's
Compensation above. $100,000 per acc.

(iii) General Liability (Comprehensive)
Bodily Injury per occurrence $500,000

(iv) Automobile Liability
(Comprehensive)
Bodily Injury per person $200,000
Bodily Injury per occurrence $500,000
Property Damage per accident $ 20,000

Article 14 - Service Contract Act

The Service Contract Act, 41 U.S.C. 351-358, and related regulations,
are applicable to the Prime Contract and this Agreement. Subcontractor
shall comply with the requirements of the Act and the regulations.
Subcontractor shall also comply with the Department of Labor Wage
Determination in Section J-1 of the Prime Contract, which is attached in
Appendix B of this Agreement.

Article 15 - Warranty Exclusion and Limitation of Damages

Except as expressly set forth in writing in this Agreement and except
for the implied warranty of merchantability, there are no warranties
expressed or implied.

In no event will the Subcontractor be liable to UHC for consequential
damages as defined in the Uniform Commercial Code, section 2/715, in
effect in the District of Columbia as of January 1, 1973, i.e. --
Consequential damages resulting from the seller's breach include --

(a) Any loss resulting from general or particular requirements and
needs of which the seller at the time of contracting had reason to know
and which could not reasonably be prevented by cover or otherwise; and

(b) Injury to person or property proximately resulting from any
breach of warranty.

Article 16 - Exclusive Services

Subcontractor agrees that it will not agree to perform or perform any
services in support of the D/SIDDOMS project - Lot III, Contract No.
DASW01-95-0029 during the term of this Agreement, including any extension
of the term in accordance with Article 3 herein, in association with any
other prime contractors awarded a portion of the D/SIDDOMS - Lot III
contract or their Subcontractors providing support for the Prime Contract.
Nothing in this provision is intended by the parties to be in conflict
with the provisions of FAR 52.203-6: Restrictions on Subcontractor Sales
to the Government.

Article 17 - Assignment

Subcontractor may not assign this Agreement or any of its rights or
obligations under this Agreement to any entity without the prior written
consent of UHC.

Article 18 - Applicable Law

This Agreement shall be governed and construed in all respects by
Federal Contract law. In the event that these laws and decisions do not
apply to a given issue or dispute, then the laws of the State of Minnesota
will apply.

Article 19 - Indemnification

Subcontractor will indemnify and hold harmless UHC and UHC's
director, officers and employees from and against claims, liabilities,
judgments or costs, including reasonable attorney's fees, arising out of
the negligence or misconduct of Subcontractor or any of its employees,
representatives or Subcontractors in the discharge of its or their duties
under this Agreement. Subcontractor's obligation under this provision
includes indemnification for losses resulting from Subcontractor's failure
to comply with incorporated provisions, including FAR 52.203-3, 52.203-10
and 52.215.22.

UHC will indemnify and hold harmless Subcontractor and its directors,
officers and employees from and against claims, liabilities, judgments or
costs, including reasonable attorney's fees, arising out of the negligence
or misconduct of UHC or any of its employees or representatives in the
discharge of its or their duties under this Agreement.

Article 20 - Modification

Except as specifically provided herein, this Agreement may not be
altered, amended or modified without a written agreement between the
parties.

Article 21 - Incorporated Provisions

Section I of the Prime Contract incorporates certain clauses by
reference including, but not limited to, the following clauses. These
clauses, as applicable, and as in effect on the date of this Agreement
except where updated by consent of the parties or law, are incorporated in
this Agreement by reference with the same force and effect as though
herein set forth in full. Subcontractor agrees that is bound to UHC such
UHC shall be entitled to any performance of the Subcontractor which the
Government can require of UHC under the incorporated clauses, with respect
to the supplies and services to be furnished by the Subcontractor under
this Agreement.

Federal Acquisition Regulations (FAR)

FAR Clauses

Title Reference # Date

Definitions 52.202-1 SEP 1991
Restrictions on Subcontractor
Sales to the Government 52.203-6 JUL 1985
Anti-Kickback Procedures 52.203-7 OCT 1988
Requirement for Certificate of
Procurement Integrity -
Modification 52.203-9 NOV 1990
Limitations on Payments to
Influence Certain Federal
Transactions 52.203-12 JAN 1990
Protecting the Government's
Interest When 52.203-6 JUN 1991
Subcontracting with Contractors
Debarred, Suspended, or Proposed
for Debarment Stop-Work Order
(Alternate I) 52.212-13 APR 1984
Examination of Records by
Comptroller General 52.215-1 FEB 1993
Audit - Negotiation 52.215-2 FEB 1993
Subcontractor Cost or Pricing
Data 52.215-24 DEC 1991
Integrity of Unit Prices 52.215-26 APR 1991
Termination of Defined Benefit
Pension Plans 52.215-27 SEP 1989
Reversion of Adjustment of Plans
for Postretirement Benefits
Other than Pension 52.215-39 JUL 1991
Allowable Cost and Payment 52.216-7 JUL 1991
Fixed Fee 52.216-8 APR 1984
Option to Extend Service 52.217-8 AUG 1989
Option to Extend the Term of
the Contract 52.217-9 MAR 1989
Utilization of Small Business
Concerns and small Disadvantaged
Business Concerns 52.219-8 FEB 1990
Small Business and Small
Disadvantaged Business
Subcontracting Plan 52.219-9 JAN 1991
Liquidated Damages - Small
Business Subcontracting Plan 52.219-16 AUG 1989
Utilization of Labor Surplus
Area Concerns 52.220-3 APR 1984
Labor Surplus Area Subcontracting
Program 52.220-4 APR 1984
Notice to the Government of Labor
Disputes 52.222-1 APR 1984
Convict Labor 52.222-3 APR 1984
Equal Opportunity - Alternate I 52.222-26 APR 1984
Affirmative Action of Special
Disabled and Vietnam Era
Veterans 52.222-35 APR 1984
Affirmative Action for Handicapped
Workers 52.222-36 APR 1984
Employment Reports on Special
Disabled Veterans and Veterans
of the Vietnam Era 52.222-37 JAN 1988
Service Contract Act of 1965,
As Amended 52.222-41 MAY 1989
Clean Air and Water 52.223-2 APR 1984
Drug-Free Workplace 52.223-6 JUL 1990
Privacy Act Notification 52.224-1 APR 1984
Privacy Act 52.224-2 APR 1984
Restrictions on Certain Foreign
Purchase 52.225-11 MAY 1992
Authorization and Consent 52.227-1 APR 1984
Notice and Assistance Regarding
Patent and Copyright
Infringement 52.227-2 APR 1984
Patent Indemnity 52.227-3 APR 1984
Insurance - Liability to Third
Person 52.228-7 APR 1984
Cost Accounting Standards 52.230-2 AUG 1992
Disclosure and Consistency
of Cost Accounting Practices 52.230-3 AUG 1992
Consistency in Cost Accounting
Practices 52.230-4 AUG 1992
Administration of Cost Accounting
Standards 52.230-5 AUG 1992
Interest 52.232-17 JAN 1991
Limitation of Cost 52.232-20 APR 1984
Protest After Award -
Alternate I 52.233-3 JUN 1985
Protection of Government
Buildings, Equipment, and
Vegetation 52.237-2 APR 1984
Bankruptcy 52.242-13 APR 1991
Changes - Cost-Reimbursement -
Alternate I 52.243-2 APR 1984
Subcontracts (Cost-Reimbursement
and Letter Contracts) -
Alternate I 52.244-2 APR 1985
Competition in Subcontracting 52.244-5 APR 1984
Government Property (Cost-
Reimbursement, Time-and-Material,
or Labor-Hour Contracts) 52.245-5 JAN 1986
Government Property Furnished "As
Is" 52.245-19 APR 1984
Inspection of Supplies - Cost
Reimbursement 52.246-3 APR 1984
Inspection of Services - Cost
Reimbursement 52.246-5 APR 1984
Limitation of Liability-
Services 52.246-25 APR 1984
Preference for U.S. - Flag Air
Carriers 52.247-63 APR 1984
Preference for Privately Owned
U.S. - Flag Commercial Vessels
Alt I 52.247-64 APR 1984
Value Engineering 52.248-1 MAR 1989
Termination (Cost-Reimbursement) 52.249-6 MAY 1986
Excusable Delays 52.249-14 APR 1984

DoD Federal Acquisition Regulation Supplement Clauses

DoD Clauses

Title Reference # Date

Statutory Prohibition on
Compensation to Department
of Defense Employees 252.203-7000 DEC 1991
Special Prohibition on
Employment 252.203-7001 APR 1993
Acquisitions From Subcontractors
Subject to On-Site Inspection
Under the Intermediate-Range
Nuclear Forces (INF) Treaty 252.209-7000 DEC 1991
Pricing Adjustments 252.215-7000 DEC 1991
Availability of Contractor
Records 252.215-7001 DEC 1991
Small Business and Small
Disadvantaged Business Sub-
contracting Plan (DoD Contracts) 252.219-7003 MAY 1994
Termination 252.227-7003 AUG 1994
Rights in Technical Data and
Computer Software 252.227-7013 OCT 1988
Restrictive Markings on Technical
Data 252.227-7018 OCT 1988
Identification of Restricted
Rights Computer Software 252.227-7019 APR 1988
Identification of Technical
Data 252.227-7029 APR 1988
Technical Data - Withholding of
Payment 252.227-7030 OCT 1988
Validation of Restrictive
Markings on Technical Data 252.227-7037 APR 1988
Supplemental Cost Principles 252.231-7000 DEC 1991
Penalties for Unallowable Costs 252.231-7001 MAY 1994
Identification of Uncompensated
Overtime 252.237-7019 APR 1994

FIRMR Clauses

Title Reference # Date

Notification of Substantial
Impact on Employment 252.249-7001 DEC 1991
Privacy or Security Safeguards
(Oct 90 FIRMR) 201-39.5202-5 OCT 1990

UNITED HEALTHCARE CORPORATION NATIONAL RESEARCH CORPORATION

By: /s/ Ken H. Roche By: /s/ Michael Hayes

Title: CEO, Applied HealthCare Title: CEO, NRC

Date: 4-8-97 Date: 4-11-97

<PAGE>

APPENDIX A

Prime Contract

AWARD/CONTRACT

1. This contract is a rated order under DPAS (15 CFR 350) Rating

2. Contract (Proc. Inst. Ident.) No.

DASW01-95-D-0029

3. Effective Date

31 MAR 95

4. Requisition/Purchase Request/Project No.

HT0003-1020-0095

5. Issued By Code - W74V8H

DEFENSE SUPPLY SERVICE - WASHINGTON
5200 Army Pentagon
Washington, DC 20310-5200

6. Administered By (If other than Item 5) Code - 52401A

DCMAO Twin Cities
3001 Metro Drive
Bloomington, MN 55425-1573

7. Name and Address of Contractor (No., Street, city, county, State and
ZIP Code)
Vendor ID: 00011849

UNITED HEALTHCARE CORPORATION
9900 Bren Road East
Minneapolis, MN 55343

8. Delivery

Other

9. Discount for prompt payment

00.000% 00 Net 030

10. Submit Invoices (4 copies unless otherwise specified) to the Address
Shown in:

Item: G-4

11. Ship To/Mark For Code: HT0003

DMSSC PRGM OFC INVESTIGATIVE SVC
5 Skyline Place, Suite 810
5111 Leesburg Pike
Falls Church, VA 22041-3201

12. Payment will be made by

DFAS COLUMBUS CENTER
GATEWAY CONTRACT ACCTG. DIV.
P.O. Box 192251
Columbus, OH 43218-2251

13. Authority for using other than full and open competition

[blank]

14. Accounting and appropriation Data

Award Oblig Amt US$ 0.00

15A. Item No.

15B. Supplies/Services

See attached Schedule(s)

15C. Quantity

15D. Unit

15E. Unit Price

15F. Amount

15G. Total amount of contract

$0.00

16. Table of Contents

A Solicitation/Contract Form 1
B Supplies or Services and
Prices/Costs 2
C Description/Specs./Work Statement 5
D Packaging and Marking 10
E Inspection and Acceptance 11
F Deliveries or Performance 12
G Contract Administration Data 14
H Special Contract Requirements 17
I Contract Clauses 24
J List of Attachments 32

17. Contractor's Negotiated Agreement

[Blank]

18. Award

[Blank]

19A. Name and Title of Signer

Sheila Leatherman

19B. Name of Contractor

By: Sheila Leatherman (Signature of person authorized to sign)

19C. Date signed

3/31/95

20A. Name of Contracting Officer

Frankye E. Wehmhoner FEW

20B United States of America

Frankye E. Wehmhoner (Signature of Contracting Officer

20C. Date signed

3/31/95

AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT

1. Contract ID Code

[Blank]

2. Amendment/Modification No.

P00002

3. Effective Date

03/30/97

4. Requisition/Purchase Req. No.

HT0003-7027-2527

5. Project No. (If applicable)

[Blank]

6. Issued By Code: W74V8H

DEFENSE SUPPLY SERVICE - WASHINGTON
5200 Army Pentagon
Room 1D245 Pentagon
Washington, DC 20310-5200
Faye D. Harler FDH(703) 681-9534

7. Administered By (If other than Item 6) Code: S2401A

DCMAO TWIN CITIES
3001 Metro Drive
Bloomington, MN 55425-1573

8. Name and Address of Contractor (No., street, county, State and ZIP
Code) Vendor ID: 00011849

UNITED HEALTHCARE CORPORATION
9900 Bren Road East
Minnetonka, MN 55343

9A. Amendment of Solication No.

[Blank]

9B. Dated (See Item 11)

[Blank]

10A. Modification of Contract/Order No.

DASW01-95-D-0029

10B. Dated (See Item 13)

03/02/95

11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICATIONS

[Blank]

12. Accounting and Appropriation Data (if required) Mod Obligated
Amount US $00.00

No Change

13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS, IT
MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.

A(checked) THIS CHANGE ORDER IS ISSUED PURSUANT TO:

D(checked) OTHER (Specify type of modification and authority):
iaw Section I, Article I-2

E IMPORTANT Contractor is not, required to sign this document and
return ____________ copies to the issuing office.

14. DESCRIPTION OF AMENDMENT/MODIFICATION

Contract noted above in Blk #10A is hereby modified to exercise
Option Year Two (Months 25-36) beginning 31 MAR 97.

Section F, Article F-3 TERM OF CONTRACT, is changed to read:
The term of this contract is from 31 March 1995 through 30 March
1998, subject to the Government's option to renew in accordance
with the provisions at Section I, Article I-2.

15A. Name and Title of Signer

[Blank]

15B. Contractor/Offeror

[Blank]

16A. Name and Title of Contacting Officer

Gregory J. Nowak GJN

16B. United States of America

By: Gregory J. Nowak (Signature of Contracting Officer)

15C. Date signed

[Blank]

16C. Date signed

21 MAR 97

DASW01-95-D-0029

SECTION B - SUPPLIES/SERVICES AND PRICES/COSTS

B-1. SCOPE

a. This contract is for the acquisition of services for studies,
econometric analysis and modeling for the Defense Medical Information
System/Systems Integration, Design, Development, Operations and
Maintenance (D/SIDDOMS - LOT III) in support of the Office of the
Assistant Secretary of Defense for Health Affairs {OASD(HA)}.

b. All services to be ordered under this contract shall be set forth in
individual delivery orders. All delivery orders will be issued in
accordance with the provisions of Section H, Article H-5.

c. The potential maximum estimated amount for all awards for LOT III is
$25,000,000.00. The maximum amount allowable under this contract is $
for the base year and four option years of the contract. The
minimum amount for award for LOT III is $100,000.00 for the base year and
$100,000.00 per year for any option exercised.

B-2. SUPPLIES OR SERVICES AND PRICES/COSTS - Base Year
(Months 1 - 12)

ITEM NO. DESCRIPTION ESTIMATED
AMOUNT