<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 26, 1995
REGISTRATION NO. 33-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
FIRST DATA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 7374 47-0731996
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S.
JURISDICTION CLASSIFICATION CODE NUMBER) EMPLOYER
OF INCORPORATION IDENTIFICATION
OR ORGANIZATION) NUMBER)
401 HACKENSACK AVENUE
HACKENSACK, NEW JERSEY 07601
(201) 525-4702
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DAVID P. BAILIS
GENERAL COUNSEL
2121 NORTH 117TH AVENUE
OMAHA, NEBRASKA 68164
(402) 498-2170
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
FREDERICK C. GEORGE L. COHEN, ESQ. PETER D. LYONS, ESQ.
LOWINGER, ESQ. SUTHERLAND, ASBILL & BRENNAN SHEARMAN & STERLING
SIDLEY & AUSTIN 999 PEACHTREE STREET, N.E. 599 LEXINGTON AVENUE
ONE FIRST NATIONAL ATLANTA, GEORGIA 30309-3996 NEW YORK, NEW YORK
PLAZA 10022
CHICAGO, ILLINOIS
60603
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement and the
effective time of the merger (the "Merger") of FDC Merger Corp., a wholly
owned subsidiary of First Data Corporation, with and into First Financial
Management Corporation pursuant to the Merger Agreement described herein.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per 117,284,398 N.A. $6,022,667,395 $871,846 (3)
share........................... shares (1) (2)
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Based on the maximum number of shares of First Data Common Stock issuable
in the Merger assuming the exercise of all currently outstanding options
to purchase shares of First Financial Common Stock, the conversion of
First Financial's 5% Senior Convertible Debentures due 1999 (the "5%
Debentures") and the issuance of shares of First Financial Common Stock in
connection with First Financial's acquisition of Employee Benefit Plans,
Inc. ("EBP").
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act of 1933, as amended (the
"Securities Act"), and computed pursuant to Rule 457(f) under the
Securities Act by multiplying $81.4375, the average of the high and low
prices on July 20, 1995 (the date used in the calculation of the filing
fee paid on July 21, 1995 in connection with the initial filing of
preliminary proxy materials) as reported on the New York Stock Exchange
Composite Tape of the First Financial Common Stock to be cancelled in the
Merger, by 73,954,473, the number of shares of First Financial Common
Stock outstanding on September 15, 1995, assuming the exercise of all
currently outstanding options to purchase shares of First Financial Common
Stock, the conversion of the 5% Debentures and the issuance of shares in
connection with the acquisition of EBP.
(3) Pursuant to Rule 457(b) under the Securities Act, the amount of the
registration fee of $2,076,784 is offset by the $1,204,938 previously paid
in connection with the filing of preliminary proxy materials on July 21,
1995, resulting in a remaining $871,846 required to be paid hereunder.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
FIRST DATA CORPORATION
CROSS REFERENCE TABLE
CROSS REFERENCE SHEET BETWEEN ITEMS OF FORM S-4 AND JOINT PROXY
STATEMENT/PROSPECTUS
PURSUANT TO ITEM 501(B) OF REGULATION S-K.
<TABLE>
<CAPTION>
ITEM CAPTION OR LOCATION IN
NUMBER ITEM IN FORM S-4 JOINT PROXY STATEMENT/PROSPECTUS
------ ---------------- --------------------------------
<C> <S> <C>
1. Forepart of Registration
Statement and Outside Facing Page, Cross Reference Table and
Front Cover Page of Outside
Prospectus............... Front Cover Page
2. Inside Front and Outside
Back Cover Pages of Cross Reference Table, Table of Contents,
Prospectus............... "Available Information" and "Incorporation
of Certain Documents by Reference"
3. Risk Factors, Ratio of
Earnings to Fixed Charges
and Other Information.... "Summary"
4. Terms of the Transaction.. "Summary," "The Merger" and "Comparison of
Rights of Holders of First Data Common
Stock and First Financial Common Stock"
5. Pro Forma Financial "Unaudited Pro Forma Condensed Combined
Information.............. Financial Statements"
6. Material Contacts with the
Company Being Acquired... "The Merger"
7. Additional Information
Required for Reoffering
by Persons and Parties
Deemed to be "Information Concerning First Financial
Underwriters............. Affiliates As Selling Stockholders"
8. Interests of Named Experts
and Counsel.............. "Legal Opinions" and "Experts"
9. Disclosure of Commission
Position on
Indemnification for
Securities Act
Liabilities.............. Not Applicable
10. Information with Respect
to S-3 Registrants....... "Summary," "Incorporation of Certain
Documents by Reference" and "Business of
First Data"
11. Incorporation of Certain
Information by Reference. "Incorporation of Certain Documents by
Reference"
12. Information with Respect
to S-2 or S-3
Registrants.............. Not Applicable
13. Incorporation of Certain
Information by Reference. Not Applicable
14. Information with Respect
to Registrants Other Than
S-3 or S-2 Registrants... Not Applicable
15. Information with Respect
to S-3 Companies......... "Summary," "Incorporation of Certain
Documents by Reference" and "Business of
First Financial"
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM CAPTION OR LOCATION IN
NUMBER ITEM IN FORM S-4 JOINT PROXY STATEMENT/PROSPECTUS
------ ---------------- --------------------------------
<C> <S> <C>
16. Information with Respect
to S-2 or S-3 Companies.. Not Applicable
17. Information with Respect
to Companies Other Than
S-3 or S-2 Companies..... Not Applicable
18. Information If Proxies,
Consents or "Summary," "The Special Meetings," "The
Authorizations Are to Be Merger," "Security Ownership of Management
Solicited................ and Certain Beneficial Owners" and
"Incorporation of Certain Documents by
Reference"
19. Information If Proxies,
Consents or
Authorizations Are Not to
Be Solicited or in an
Exchange Offer........... Not Applicable
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 26, 1995
FIRST DATA CORPORATION
401 HACKENSACK AVENUE
HACKENSACK, NEW JERSEY 07601
LOGO
September 26, 1995
Dear First Data Corporation Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
First Data Corporation ("First Data"), which will be held at Suite 1400, 5660
New Northside Drive, Atlanta, Georgia, at 11:00 a.m., Eastern time on October
26, 1995.
First Data has entered into a merger agreement (the "Merger Agreement")
pursuant to which FDC Merger Corp., a wholly owned subsidiary of First Data
("Sub"), will merge (the "Merger") into First Financial Management Corporation
("First Financial"), which will result in First Financial becoming a wholly
owned subsidiary of First Data. At the Special Meeting, you will be asked to
approve the issuance of shares of First Data's Common Stock in the Merger, upon
exercise of certain stock options of First Financial which, following the
Merger, will constitute options to purchase First Data Common Stock, and upon
the conversion of First Financial's outstanding convertible debentures which,
following the Merger, will be convertible into First Data Common Stock
(collectively, the "Stock Issuance"). Pursuant to the terms of the Merger
Agreement, each outstanding share of Common Stock of First Financial will be
converted into 1.5859 shares of First Data Common Stock. Cash will be paid in
lieu of fractional shares of First Data Common Stock.
The effect of your approval of the Stock Issuance will be to enable First
Data to complete the Merger with First Financial. The Merger is described in
the accompanying Joint Proxy Statement/Prospectus, which includes a summary of
the terms of the Merger and certain other information relating to the proposed
transaction.
THE BOARD OF DIRECTORS OF FIRST DATA HAS DETERMINED THAT THE MERGER IS
ADVISABLE AND FAIR TO AND IN THE BEST INTERESTS OF THE HOLDERS OF SHARES OF
FIRST DATA COMMON STOCK. ACCORDINGLY, THE BOARD HAS UNANIMOUSLY APPROVED (WITH
ONE DIRECTOR ABSENT) THE MERGER AGREEMENT AND THE MERGER, INCLUDING THE STOCK
ISSUANCE, AND RECOMMENDS THAT YOU VOTE IN FAVOR OF THE STOCK ISSUANCE AT THE
SPECIAL MEETING.
At the Special Meeting, you will also be asked to approve amendments to the
current Restated Certificate of Incorporation of First Data to increase the
authorized number of shares of First Data Common Stock (the "Stock Amendment")
and to confer upon the First Data Board of Directors the power to adopt, amend
or repeal the First Data By-laws (the "By-laws Amendment" and, together with
the Stock Amendment, the "Charter Amendments"). In addition, you will be asked
to approve an amendment to First Data's 1992 Long-Term Incentive Plan to
increase the number of shares of First Data Common Stock authorized for
issuance under such plan (the "Incentive Plan Amendment"). Finally, you will be
asked to permit the First Data Board of Directors to adjourn the Special
Meeting at its discretion, including an adjournment to obtain a quorum and/or
solicit additional stockholder votes for the foregoing proposals (the "First
Data Adjournment Matter"). APPROVALS OF THE CHARTER AMENDMENTS, THE INCENTIVE
PLAN AMENDMENT AND THE FIRST DATA ADJOURNMENT MATTER ARE NOT A CONDITION TO THE
CONSUMMATION OF THE MERGER.
THE BOARD OF DIRECTORS OF FIRST DATA HAS UNANIMOUSLY DETERMINED THAT THE
CHARTER AMENDMENTS, THE INCENTIVE PLAN AMENDMENT AND THE FIRST DATA ADJOURNMENT
MATTER ARE ADVISABLE AND FAIR TO AND IN THE BEST INTERESTS OF FIRST DATA
STOCKHOLDERS. ACCORDINGLY, THE BOARD RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
CHARTER AMENDMENTS, THE INCENTIVE PLAN AMENDMENT AND THE FIRST DATA ADJOURNMENT
MATTER AT THE SPECIAL MEETING.
<PAGE>
A Notice of the Special Meeting and a Joint Proxy Statement/Prospectus
containing detailed information concerning the Merger and related transactions
accompany this letter. We urge you to read this material carefully.
Your vote is very important. Please mark, date, sign and return the enclosed
proxy in the enclosed postage prepaid envelope as soon as possible, even if you
plan to attend the meeting. If you have any questions regarding the proposed
transaction, please call Morrow & Co., Inc., our proxy solicitation agent, toll
free at (800) 566-9061 or collect at (214) 788-0977.
We look forward to seeing you at the meeting.
Sincerely,
Henry C. Duques
LOGO
Chairman and Chief
Executive Officer
<PAGE>
FIRST DATA CORPORATION
401 HACKENSACK AVENUE
HACKENSACK, NEW JERSEY 07601
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 26, 1995
Dear Stockholder:
A Special Meeting of Stockholders of First Data Corporation ("First Data")
will be held at Suite 1400, 5660 New Northside Drive, Atlanta, Georgia, at
11:00 a.m., Eastern time, on October 26, 1995 to consider and vote upon the
following matters:
(1) in connection with the Agreement and Plan of Merger, dated as of June
12, 1995, as amended (as amended, the "Merger Agreement"), which appears as
Annex I to the accompanying Joint Proxy Statement/Prospectus, providing for
the merger (the "Merger") of FDC Merger Corp., a wholly owned subsidiary of
First Data, into First Financial Management Corporation ("First
Financial"), the issuance of shares of First Data's Common Stock (a) in the
Merger, (b) upon exercise of certain stock options of First Financial
which, following the Merger, will constitute options to purchase First Data
Common Stock, and (c) upon conversion of First Financial's outstanding 5%
Senior Convertible Debentures due 1999 which, following the Merger, will be
convertible into First Data Common Stock (collectively, the "Stock
Issuance");
(2) an amendment to the current Restated Certificate of Incorporation of
First Data to increase the number of authorized shares of First Data Common
Stock from 300,000,000 to 600,000,000 (the "Stock Amendment");
(3) an amendment to the current Restated Certificate of Incorporation of
First Data to confer upon the Board of Directors of First Data the power to
adopt, amend or repeal the By-laws of First Data (the "By-laws Amendment"
and, together with the Stock Amendment, the "Charter Amendments");
(4) an amendment to First Data's 1992 Long-Term Incentive Plan to
increase the number of shares of First Data Common Stock authorized for
issuance under such plan (the "Incentive Plan Amendment");
(5) a proposal to permit the First Data Board of Directors to adjourn the
Special Meeting at its discretion, including an adjournment of the Special
Meeting to obtain a quorum and/or solicit additional stockholder votes for
the foregoing proposals (the "First Data Adjournment Matter"); and
(6) the transaction of such other business, if any, as may properly come
before the Special Meeting or at any adjournments or postponements thereof.
THE BOARD OF DIRECTORS OF FIRST DATA RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
STOCK ISSUANCE, THE CHARTER AMENDMENTS, THE INCENTIVE PLAN AMENDMENT AND THE
FIRST DATA ADJOURNMENT MATTER.
The Board of Directors of First Data has fixed the close of business on
September 15, 1995 as the record date for the determination of First Data
stockholders entitled to notice of and to vote at the Special Meeting.
The approval of the Stock Issuance requires the affirmative vote of a
majority of the votes cast on the proposal, provided that the total votes cast
on the proposal represent a majority of the outstanding shares of First Data
Common Stock entitled to vote thereon. The adoption of each of the Charter
Amendments requires the affirmative vote of a majority of the outstanding
shares of First Data Common Stock. The approvals of the Incentive Plan
Amendment and the First Data Adjournment Matter require the affirmative vote of
a majority of shares present in person or represented by proxy at the Special
Meeting and entitled to vote thereon. APPROVALS OF THE CHARTER AMENDMENTS, THE
INCENTIVE PLAN AMENDMENT AND THE FIRST DATA ADJOURNMENT MATTER ARE NOT A
CONDITION TO THE CONSUMMATION OF THE MERGER.
YOUR VOTE IS VERY IMPORTANT. PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY
CARD AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PREPAID RETURN ENVELOPE,
EVEN IF YOU EXPECT TO ATTEND THE MEETING. IF YOU SIGN AND RETURN YOUR PROXY
CARD WITHOUT SPECIFYING HOW YOU WOULD LIKE YOUR SHARES VOTED, IT WILL BE
UNDERSTOOD THAT YOU WISH TO HAVE YOUR SHARES VOTED FOR THE STOCK ISSUANCE, THE
CHARTER AMENDMENTS, THE INCENTIVE PLAN AMENDMENT AND THE FIRST DATA ADJOURNMENT
MATTER. YOU MAY REVOKE YOUR PROXY BY SIGNING AND RETURNING A LATER DATED PROXY
WITH RESPECT TO THE SAME SHARES, BY FILING WITH THE SECRETARY OF FIRST DATA A
DULY EXECUTED REVOCATION, OR BY ATTENDING THE SPECIAL MEETING AND VOTING IN
PERSON (ALTHOUGH ATTENDANCE AT THE SPECIAL MEETING WILL NOT IN AND OF ITSELF
CONSTITUTE A REVOCATION OF YOUR PROXY).
By order of the Board of Directors,
LOGO
David P. Bailis
Corporate Secretary
Hackensack, New Jersey
September 26, 1995
<PAGE>
LOGO
FIRST FINANCIAL MANAGEMENT CORPORATION
SUITE 1400
5660 NEW NORTHSIDE DRIVE
ATLANTA, GEORGIA 30328
September 26, 1995
Dear First Financial Management
Corporation Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
First Financial Management Corporation ("First Financial"), which will be held
at Suite 1400, 5660 New Northside Drive, Atlanta Georgia, at 9:00 a.m., Eastern
time, on October 26, 1995.
At the Special Meeting, you will be asked to approve an Agreement and Plan of
Merger, as amended, (the "Merger Agreement") providing for the merger (the
"Merger") of FDC Merger Corp., a wholly owned subsidiary of First Data
Corporation ("First Data"), into First Financial, which will result in First
Financial becoming a wholly owned subsidiary of First Data. Pursuant to the
terms of the Merger Agreement, each outstanding share of Common Stock of First
Financial will be converted into 1.5859 shares of Common Stock of First Data.
Cash will be paid in lieu of fractional shares of First Data Common Stock. In
addition, you may be asked at the Special Meeting to vote to adjourn the
Special Meeting if recommended by the management of First Financial, including
an adjournment to obtain a quorum and/or solicit additional stockholder votes
for the Merger Agreement (the "First Financial Adjournment Matter").
The effect of your approval will be to enable First Financial to complete the
Merger with First Data. The Merger is described in the accompanying Joint Proxy
Statement/Prospectus, which includes a summary of the terms of the Merger and
certain other information relating to the proposed transaction.
THE BOARD OF DIRECTORS OF FIRST FINANCIAL HAS DETERMINED THAT THE MERGER UPON
THE TERMS AND CONDITIONS SET FORTH IN THE MERGER AGREEMENT IS FAIR TO AND IN
THE BEST INTERESTS OF THE STOCKHOLDERS OF FIRST FINANCIAL. ACCORDINGLY, THE
BOARD HAS UNANIMOUSLY APPROVED AND ADOPTED THE MERGER AGREEMENT, AND RECOMMENDS
THAT THE HOLDERS OF SHARES OF OUTSTANDING FIRST FINANCIAL COMMON STOCK VOTE IN
FAVOR OF THE APPROVAL OF THE MERGER AGREEMENT AT THE SPECIAL MEETING. THE BOARD
OF DIRECTORS HAS ALSO DETERMINED THAT THE FIRST FINANCIAL ADJOURNMENT MATTER IS
FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF FIRST FINANCIAL, AND,
ACCORDINGLY, RECOMMENDS THAT THE HOLDERS OF SHARES OF OUTSTANDING FIRST
FINANCIAL COMMON STOCK VOTE IN FAVOR OF THE APPROVAL OF THE FIRST FINANCIAL
ADJOURNMENT MATTER.
A Notice of the Special Meeting and a Joint Proxy Statement/Prospectus
containing detailed information concerning the Merger and related transactions
accompany this letter. We urge you to read this material carefully.
Your vote is very important. Please mark, date, sign and return the enclosed
proxy in the enclosed postage prepaid envelope as soon as possible, even if you
plan to attend the meeting. If you have any questions regarding the proposed
transaction, please call Morrow & Co., Inc., our proxy solicitation agent, toll
free at (800) 566-9061 or collect at (214) 788-0977.
We look forward to seeing you at the meeting.
Sincerely,
LOGO
Patrick H. Thomas
Chairman, President and
Chief Executive Officer
HOLDERS OF FIRST FINANCIAL COMMON STOCK SHOULD NOT SEND STOCK CERTIFICATES
WITH THEIR PROXY CARDS.
<PAGE>
FIRST FINANCIAL MANAGEMENT CORPORATION
SUITE 1400
5660 NEW NORTHSIDE DRIVE
ATLANTA, GEORGIA 30328
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 26, 1995
Dear Stockholder:
A Special Meeting of Stockholders of First Financial Management Corporation
("First Financial") will be held at Suite 1400, 5660 New Northside Drive,
Atlanta, Georgia, at 9:00 a.m., Eastern time, on October 26, 1995 to consider
and vote upon the following matters:
(1) the approval of an Agreement and Plan of Merger, dated as of June 12,
1995, as amended (the "Merger Agreement"), which appears as Annex I to the
accompanying Joint Proxy Statement/Prospectus, providing for the merger
(the "Merger") of FDC Merger Corp., a wholly owned subsidiary of First Data
Corporation ("First Data"), into First Financial;
(2) adjournment of the Special Meeting if recommended by the management
of First Financial, including an adjournment of the Special Meeting to
obtain a quorum and/or solicit additional stockholder votes for the Merger
Agreement (the "First Financial Adjournment Matter"); and
(3) the transaction of such other business, if any, as may properly come
before the Special Meeting or at any adjournments or postponements thereof.
THE BOARD OF DIRECTORS OF FIRST FINANCIAL RECOMMENDS THAT YOU VOTE IN FAVOR
OF APPROVING THE MERGER AGREEMENT AND THE FIRST FINANCIAL ADJOURNMENT MATTER.
The Board of Directors of First Financial has fixed the close of business on
September 15, 1995 as the record date for the determination of stockholders
entitled to notice of and to vote at the meeting.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock of First Financial is required to approve the Merger Agreement.
The affirmative vote of a majority of shares present in person or represented
by proxy at the Special Meeting is required to approve the First Financial
Adjournment Matter.
YOUR VOTE IS VERY IMPORTANT. PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY
CARD AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PREPAID RETURN ENVELOPE,
EVEN IF YOU EXPECT TO ATTEND THE MEETING. IF YOU SIGN AND RETURN YOUR PROXY
CARD WITHOUT SPECIFYING HOW YOU WOULD LIKE YOUR SHARES VOTED, IT WILL BE
UNDERSTOOD THAT YOU WISH TO HAVE YOUR SHARES VOTED FOR THE APPROVAL OF THE
MERGER AGREEMENT AND THE FIRST FINANCIAL ADJOURNMENT MATTER. YOU MAY REVOKE
YOUR PROXY BY SIGNING AND RETURNING A LATER DATED PROXY WITH RESPECT TO THE
SAME SHARES, BY FILING WITH THE SECRETARY OF FIRST FINANCIAL A DULY EXECUTED
REVOCATION, OR BY ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON (ALTHOUGH
ATTENDANCE AT THE SPECIAL MEETING WILL NOT IN AND OF ITSELF CONSTITUTE A
REVOCATION OF YOUR PROXY).
By order of the Board of Directors,
LOGO
Stephen D. Kane
Secretary
Atlanta, Georgia
September 26, 1995
HOLDERS OF FIRST FINANCIAL COMMON STOCK SHOULD NOT SEND STOCK CERTIFICATES
WITH THEIR PROXY CARDS.
<PAGE>
FIRST DATA CORPORATION
AND
FIRST FINANCIAL MANAGEMENT CORPORATION
JOINT PROXY STATEMENT
---------------
FIRST DATA CORPORATION
PROSPECTUS
---------------
SPECIAL MEETING OF STOCKHOLDERS OF FIRST DATA
CORPORATION TO BE HELD ON OCTOBER 26, 1995
SPECIAL MEETING OF STOCKHOLDERS OF FIRST FINANCIAL MANAGEMENT
CORPORATION TO BE HELD ON OCTOBER 26, 1995
This Joint Proxy Statement/Prospectus ("Joint Proxy Statement/Prospectus") is
being furnished to stockholders of First Data Corporation, a Delaware
corporation ("First Data"), and to stockholders of First Financial Management
Corporation, a Georgia corporation ("First Financial"), in connection with the
solicitation of proxies by the Board of Directors of each corporation for use
at the Special Meeting of Stockholders of First Data (the "First Data Special
Meeting") and the Special Meeting of Stockholders of First Financial (the
"First Financial Special Meeting" and, together with the First Data Special
Meeting, the "Special Meetings"), respectively, in each case including any
adjournments or postponements thereof. The Special Meetings are both scheduled
to be held on October 26, 1995. This Joint Proxy Statement/Prospectus relates
to the proposed merger (the "Merger") of FDC Merger Corp., a Georgia
corporation and a wholly owned subsidiary of First Data ("Sub"), into First
Financial pursuant to the Agreement and Plan of Merger, dated as of June 12,
1995, as amended (as amended, the "Merger Agreement"), among First Data, Sub
and First Financial, with First Financial, as the surviving corporation in the
Merger, to become a wholly owned subsidiary of First Data. In addition, this
Joint Proxy Statement/Prospectus describes two proposed amendments to the
current Restated Certificate of Incorporation of First Data (collectively the
"Charter Amendments") and a proposed amendment (the "Incentive Plan Amendment")
to First Data's 1992 Long-Term Incentive Plan (the "Incentive Plan") to be
considered at the First Data Special Meeting. At the First Data and First
Financial Special Meetings, the respective stockholders of First Data and First
Financial will also consider and vote upon proposals to permit adjournment of
their respective Special Meetings at the discretion of the First Data Board or
First Financial's management, including adjournments to obtain a quorum and/or
solicit additional stockholder votes in favor of the Stock Issuance (as defined
herein), the Charter Amendments and the Incentive Plan Amendment, in the case
of the First Data Special Meeting (the "First Data Adjournment Matter"), and
the Merger Agreement, in the case of the First Financial Special Meeting (the
"First Financial Adjournment Matter"). APPROVALS OF THE CHARTER AMENDMENTS, THE
INCENTIVE PLAN AMENDMENT, THE FIRST DATA ADJOURNMENT MATTER AND THE FIRST
FINANCIAL ADJOURNMENT MATTER ARE NOT A CONDITION TO THE CONSUMMATION OF THE
MERGER.
Subject to certain provisions described herein with respect to shares owned
by First Data, First Financial and their respective subsidiaries, each
outstanding share of Common Stock, par value $.10 per share, of First Financial
(the "First Financial Common Stock"), will be converted in the Merger into
1.5859 validly issued, fully paid and nonassessable shares of Common Stock, par
value $.01 per share, of First Data (the "First Data Common Stock"). Cash will
be paid in lieu of fractional shares of First Data Common Stock.
This Joint Proxy Statement/Prospectus constitutes a prospectus of First Data
regarding up to 117,284,398 shares of First Data Common Stock issuable to First
Financial stockholders pursuant to the Merger Agreement in the Merger, assuming
the exercise of all currently outstanding stock options of First Financial, the
conversion of First Financial's outstanding 5% Senior Convertible Debentures
due 1999 (the "5% Debentures") and the issuance of First Financial Common Stock
in connection with First Financial's pending acquisition of Employee Benefit
Plans, Inc. ("EBP"). This Joint Proxy Statement/Prospectus also constitutes a
prospectus, during the time periods described herein, with respect to resales
of First Data Common Stock received in the Merger by certain affiliates of
First Financial. See "THE MERGER--Reofferings and Resales of First Data Common
Stock."
The First Data Common Stock is listed for trading on the New York Stock
Exchange, Inc. (the "NYSE") under the symbol "FDC," and the First Financial
Common Stock is listed for trading on the NYSE under the symbol "FFM." On June
12, 1995, the last trading day prior to the announcement of the execution of
the Merger Agreement, the last sales prices of the First Data Common Stock and
the First Financial Common Stock as reported on the NYSE Composite Transactions
Tape were $56 7/8 per share and $76 3/4 per share, respectively. On September
25, 1995, the last trading day prior to the date of this Joint Proxy
Statement/Prospectus, the last sale prices of First Data Common Stock and First
Financial Common Stock as reported on the NYSE Composite Transactions Tape were
$61 3/8 per share and $96 1/8 per share, respectively. For a description of
First Data Common Stock, see "DESCRIPTION OF FIRST DATA CAPITAL STOCK" and
"COMPARISON OF RIGHTS OF HOLDERS OF FIRST DATA COMMON STOCK AND FIRST FINANCIAL
COMMON STOCK." First Data and First Financial stockholders are urged to obtain
current market quotations for the First Data Common Stock and the First
Financial Common Stock.
This Joint Proxy Statement/Prospectus, the accompanying forms of proxy and
the other enclosed documents are first being mailed to stockholders of First
Data and First Financial on or about September 27, 1995.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIESAND
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 JOINT PROXY STATEMENT/
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
The date of this Joint Proxy Statement/Prospectus is September 26, 1995.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PAGE
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AVAILABLE INFORMATION...................................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 4
SUMMARY.................................................................... 5
The Companies............................................................. 5
The Merger Agreement...................................................... 6
The Special Meetings...................................................... 6
Time, Date and Place...................................................... 6
Matters To Be Considered at the Special Meetings.......................... 6
Votes Required............................................................ 7
Record Date............................................................... 8
Security Ownership of Management.......................................... 8
The Merger................................................................ 8
Effect of Merger.......................................................... 8
Recommendations of the Boards of Directors................................ 8
Opinions of Financial Advisors............................................ 9
Effective Time of the Merger.............................................. 9
Interests of Certain Persons in the Merger................................ 9
Conditions to the Merger.................................................. 9
Termination of the Merger Agreement....................................... 10
No Stockholders' Rights of Appraisal...................................... 11
Certain Federal Income Tax Consequences................................... 11
Accounting Treatment of the Merger........................................ 11
Comparison of Rights of Holders of First Data Common Stock and First
Financial Common Stock................................................... 11
Other Significant Considerations.......................................... 11
Selected Financial Data................................................... 13
Comparative Per Share Data................................................ 17
Comparative Stock Prices and Dividends.................................... 19
INTRODUCTION............................................................... 21
THE SPECIAL MEETINGS....................................................... 21
Matters To Be Considered at the Special Meetings.......................... 21
Votes Required............................................................ 22
Voting of Proxies......................................................... 23
Revocability of Proxies................................................... 23
Record Dates; Stock Entitled to Vote; Quorum.............................. 23
Appraisal Rights.......................................................... 24
Solicitation of Proxies; General.......................................... 24
THE MERGER................................................................. 25
General................................................................... 25
Background of the Merger.................................................. 25
Recommendations of the Board of Directors; Reasons for the Merger......... 28
Opinions of Financial Advisors............................................ 32
Merger Consideration...................................................... 43
Effective Time of the Merger.............................................. 44
Conversion of Shares; Procedures for Exchange of Certificates............. 44
Governmental and Regulatory Approvals..................................... 45
Certain Federal Income Tax Consequences................................... 46
Accounting Treatment...................................................... 47
Interests of Certain Persons in the Merger................................ 47
Stock Exchange Listing.................................................... 49
Reofferings and Resales of First Data Common Stock........................ 50
</TABLE>
<TABLE>
PAGE
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<S> <C>
THE MERGER AGREEMENT...................................................... 52
Terms of the Merger...................................................... 52
Surrender and Payment.................................................... 52
Fractional Shares........................................................ 53
Conditions to the Merger................................................. 53
Representations and Warranties........................................... 54
Conduct of Business Pending the Merger................................... 55
First Financial Stock Options............................................ 58
Employee Benefit Plans................................................... 58
No Solicitation.......................................................... 59
Indemnification; Directors and Officers Insurance........................ 60
Termination.............................................................. 60
Fees and Expenses........................................................ 61
Amendment................................................................ 63
Waiver................................................................... 63
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS............... 64
DESCRIPTION OF FIRST DATA CAPITAL STOCK................................... 72
COMPARISON OF RIGHTS OF HOLDERS OF FIRST DATA COMMON STOCK AND FIRST
FINANCIAL COMMON STOCK................................................... 73
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS............ 79
INFORMATION CONCERNING FIRST FINANCIAL AFFILIATES AS SELLING STOCKHOLDERS. 82
PROPOSED AMENDMENTS TO FIRST DATA RESTATED CERTIFICATE OF INCORPORATION... 82
The Stock Amendment Proposal............................................. 82
The By-laws Amendment Proposal........................................... 83
PROPOSED AMENDMENT TO FIRST DATA 1992 LONG-TERM INCENTIVE PLAN............ 84
THE ADJOURNMENT MATTERS................................................... 90
BUSINESS OF FIRST DATA.................................................... 90
BUSINESS OF FIRST FINANCIAL............................................... 91
CERTAIN LITIGATION........................................................ 92
LEGAL OPINIONS............................................................ 92
EXPERTS................................................................... 92
OTHER INFORMATION AND STOCKHOLDER PROPOSALS............................... 93
Annexes
Annex I Agreement and Plan of Merger dated as of June 12, 1995, as
amended, among First Data Corporation, FDC Merger Corp. and First
Financial Management Corporation
Annex II Opinion of Smith Barney Inc.
Annex III Opinion of Morgan Stanley & Co. Incorporated
Annex IV Form of First Data's 1992 Long-Term Incentive Plan as proposed to
be amended
</TABLE>
2
<PAGE>
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
JOINT PROXY STATEMENT/PROSPECTUS IN CONNECTION WITH THE OFFERING OF SECURITIES
MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY FIRST DATA OR FIRST FINANCIAL. THIS
JOINT PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, NOR DOES IT CONSTITUTE THE
SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT
IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF FIRST
DATA OR FIRST FINANCIAL SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
First Data and First Financial are subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by First Data and First Financial with
the Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and should be available at the Commission's Regional Offices at 7
World Trade Center, 13th Floor, New York, New York 10048, and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material also can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition,
material filed by First Data and First Financial can be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.
First Data has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
First Data Common Stock to be issued in connection with the Merger Agreement.
This Joint Proxy Statement/Prospectus also constitutes a prospectus, during the
time periods described herein, with respect to resales of First Data Common
Stock received in the Merger by certain affiliates of First Financial. See "THE
MERGER--Reofferings and Resales of First Data Common Stock." This Joint Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits thereto. Such additional information
may be obtained from the Commission's principal office in Washington, D.C.
Statements contained in this Joint Proxy Statement/Prospectus or in any
document incorporated in this Joint Proxy Statement/Prospectus by reference as
to the contents of any contract or other document referred to herein or therein
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 or such other document, each such statement being qualified in all
respects by such reference.
3
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by First Data (File No. 1-
11073) and First Financial (File No. 1-10442) pursuant to the Exchange Act are
incorporated by reference in this Joint Proxy Statement/Prospectus:
1. First Data's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 ("First Data's 1994 10-K");
2. First Data's Quarterly Reports on Form 10-Q for the quarters ended
March 31 and June 30, 1995;
3. First Data's Current Reports on Form 8-K reporting events occurring on
January 26, 1995, March 23, 1995, April 26, 1995, May 16, 1995, June 6,
1995, June 12, 1995, June 30, 1995, July 14, 1995, July 21, 1995, July 27,
1995, August 17, 1995, September 1, 1995 and September 11, 1995;
4. The description of the First Data Common Stock contained in First
Data's Registration Statement on Form 8-A dated March 24, 1992;
5. First Financial's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 ("First Financial's 1994 10-K");
6. First Financial's Quarterly Reports on Form 10-Q for the quarters
ended March 31 and June 30, 1995;
7. First Financial's Current Reports on Form 8-K dated November 4, 1994,
November 15, 1994, March 28, 1995, June 9, 1995, June 12, 1995, July 21,
1995 and September 11, 1995; and
8. The description of the First Financial Common Stock contained in First
Financial's Registration Statement on Form 8-A filed with the Commission on
January 16, 1990, as updated by Item 2, Part II to First Financial's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1990 and
information contained in Note I to the financial statements included in
First Financial's Annual Report on Form 10-K for the year ended December
31, 1993.
All documents and reports filed by First Data or First Financial pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Joint Proxy Statement/Prospectus and prior to the date of the termination of
the reofferings of First Data Common Stock contemplated herein shall be deemed
to be incorporated by reference in this Joint Proxy Statement/Prospectus and to
be a part hereof from the dates of filing of such documents or reports. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Joint Proxy Statement/Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Joint Proxy
Statement/Prospectus.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER
THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS
IS DELIVERED, ON WRITTEN OR ORAL REQUEST, WITHIN ONE BUSINESS DAY OF SUCH
REQUEST, IN THE CASE OF DOCUMENTS RELATING TO FIRST DATA, TO FIRST DATA
CORPORATION, 11718 NICHOLAS STREET, OMAHA, NEBRASKA 68154-4477 (TELEPHONE
NUMBER: (402) 222-8545), ATTENTION: INVESTOR RELATIONS; OR, IN THE CASE OF
DOCUMENTS RELATING TO FIRST FINANCIAL, TO FIRST FINANCIAL MANAGEMENT
CORPORATION, SUITE 1400, 5660 NEW NORTHSIDE DRIVE, ATLANTA, GEORGIA 30328
(TELEPHONE NUMBER: (770) 857-0001), ATTENTION: RANDOLPH L. M. HUTTO. IN ORDER
TO ENSURE DELIVERY OF THE DOCUMENTS PRIOR TO THE APPLICABLE SPECIAL MEETING,
REQUESTS SHOULD BE RECEIVED BY OCTOBER 19, 1995.
All information contained or incorporated by reference in this Joint Proxy
Statement/Prospectus relating to First Data or Sub has been supplied by First
Data, and all such information relating to First Financial has been supplied by
First Financial.
4
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere or
incorporated by reference in this Joint Proxy Statement/Prospectus. Reference
is made to, and this summary is qualified in its entirety by, the more detailed
information contained or incorporated by reference in this Joint Proxy
Statement/Prospectus and the Annexes hereto. As used herein, unless the context
otherwise requires, "First Data" means First Data Corporation and its
consolidated subsidiaries, "First Financial" means First Financial Management
Corporation and its consolidated subsidiaries and "Sub" means FDC Merger Corp.,
a wholly owned subsidiary of First Data.
Stockholders of First Data and First Financial are urged to read this Joint
Proxy Statement/Prospectus and the Annexes hereto in their entirety.
Stockholders should carefully consider the information set forth below under
the heading "Other Significant Considerations."
THE COMPANIES
First Data and Sub. First Data provides high-quality, high-volume information
processing and related services to specific client groups: the transaction
card, payment instruments, teleservices, mutual fund, receivables and
information management industries. First Data's information processing
facilities are comprised of integrated networks of computer hardware,
proprietary software and other telecommunications and operations systems. First
Data has data centers which are capable of servicing a wide range of client
groups, enabling it to process transactions for hundreds of clients in a rapid
and cost effective manner and to take advantage of economies-of-scale when
adding new clients. First Data regularly considers acquisition opportunities as
well as other forms of business combinations and divestitures. Historically,
First Data has been involved in numerous transactions of various magnitudes for
consideration which has included cash or securities (including First Data
Common Stock) or combinations thereof. First Data continues to evaluate and
pursue transaction opportunities as they arise. In evaluating opportunities for
future expansion, First Data targets markets in which it believes it can
achieve and sustain a strong competitive position. No assurance can be given
with respect to the timing, likelihood or the financial or business effect of
any possible transaction. First Data is incorporated in Delaware, its principal
executive offices are located at 401 Hackensack Avenue, Hackensack, New Jersey
07601, and its telephone number is (201) 525-4702. For further information
concerning First Data, see "-- Selected Financial Data," "BUSINESS OF FIRST
DATA," "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
Sub was organized as a Georgia corporation on June 9, 1995 for the purpose of
consummating the Merger and the other transactions contemplated by the Merger
Agreement. Sub has no assets or business and has not carried on any activities
to date other than incident to its formation and in connection with the Merger
and the other transactions contemplated by the Merger Agreement. Sub's
principal executive offices are located at 2121 North 117th Avenue, Omaha,
Nebraska 68164, and its telephone number is (402) 498-2170.
First Financial. First Financial is a worldwide leader in information
services, offering a vertically integrated set of data processing, storage and
management products for the capture, manipulation and distribution of data.
Services include merchant and consumer payment services (involving credit
cards, debit cards, checks and nonbank immediate money transfers); debt
collection and accounts receivable management; data imaging, micrographics and
electronic database management; health care claims processing and integrated
management and cost containment services; and the development and marketing of
data communications and information processing systems, including in-store
marketing programs and systems for supermarkets. First Financial's principal
executive offices are located at Suite 1400, 5660 New Northside Drive, Atlanta,
Georgia 30328, and its telephone number is (770) 857-0001. For further
information concerning First Financial, see "--Selected Financial Data,"
"BUSINESS OF FIRST FINANCIAL," "AVAILABLE INFORMATION" and "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
5
<PAGE>
THE MERGER AGREEMENT
The Merger Agreement provides that, upon the terms and subject to the
conditions contained therein, Sub will be merged into First Financial at the
effective time of the Merger (the "Effective Time"), and First Financial will
continue as the surviving corporation and a wholly owned subsidiary of First
Data. Subject to the terms and conditions of the Merger Agreement, each share
of First Financial Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares held by First Data, First Financial or their
respective subsidiaries) will be converted into 1.5859 (the "Conversion
Number") shares of First Data Common Stock. Cash will be paid in lieu of
fractional shares of First Data Common Stock. See "THE MERGER AGREEMENT."
The Conversion Number was determined through negotiations between First Data
and First Financial and was derived by dividing $90 per share of First
Financial Common Stock by $56.75, the per share closing price of the First Data
Common Stock on June 9, 1995.
THE SPECIAL MEETINGS
Time, Date and Place
The First Data Special Meeting will be held at 11:00 a.m., Eastern time, on
October 26, 1995, at Suite 1400, 5660 New Northside Drive, Atlanta, Georgia.
The First Financial Special Meeting will be held at 9:00 a.m., Eastern time, on
October 26, 1995, at Suite 1400, 5660 New Northside Drive, Atlanta, Georgia.
Matters To Be Considered at the Special Meetings
First Data Special Meeting. At the First Data Special Meeting, holders of
shares of First Data Common Stock will consider and vote upon proposals to (i)
approve the issuance of shares of First Data Common Stock in connection with
the Merger Agreement, a conformed copy of which appears as Annex I to this
Joint Proxy Statement/Prospectus, including the issuance of shares of First
Data Common Stock in the Merger, upon exercise of stock options of First
Financial which, pursuant to the terms of the related stock option plans,
following the Merger, will constitute options to purchase shares of First Data
Common Stock upon the terms set forth in such stock option plans and the Merger
Agreement, and upon the conversion of the outstanding 5% Debentures which,
pursuant to the terms of the related indenture, following the Merger, will be
convertible into shares of First Data Common Stock (in lieu of First Financial
Common Stock) upon the terms set forth in such indenture and the Merger
Agreement (collectively, the "Stock Issuance"), (ii) approve an amendment to
the current Restated Certificate of Incorporation to increase the number of
authorized shares of First Data Common Stock from 300,000,000 to 600,000,000
(the "Stock Amendment"), (iii) approve an amendment to the current Restated
Certificate of Incorporation to confer upon the Board of Directors of First
Data the power to adopt, amend or repeal the By-laws of First Data (the "By-
laws Amendment," and, together with the Stock Amendment, the "Charter
Amendments"), (iv) approve an amendment to First Data's 1992 Long-Term
Incentive Plan to increase the number of shares of First Data Common Stock
authorized for issuance under such plan (the "Incentive Plan Amendment"), a
copy of which Incentive Plan, as proposed to be amended, appears as Annex IV to
this Joint Proxy Statement/Prospectus, and (v) permit the First Data Board of
Directors to adjourn the First Data Special Meeting at its discretion,
including an adjournment of the First Data Special Meeting to obtain a quorum
and/or solicit additional stockholder votes for the foregoing proposals (the
"First Data Adjournment Matter"). Because Sub, rather than First Data, is the
actual party to the Merger with First Financial, stockholders of First Data
will not vote on the Merger itself. APPROVALS OF THE CHARTER AMENDMENTS, THE
INCENTIVE PLAN AMENDMENT AND THE FIRST DATA ADJOURNMENT MATTER ARE NOT A
CONDITION TO THE CONSUMMATION OF THE MERGER. Holders of shares of First Data
Common Stock entitled to vote also will consider and vote upon any other matter
that may properly come before the First Data Special Meeting or at any
adjournments and postponements thereof.
6
<PAGE>
First Financial Special Meeting. At the First Financial Special Meeting,
holders of shares of First Financial Common Stock will consider and vote upon
proposals to (i) approve the Merger Agreement, which provides for the Merger of
Sub with and into First Financial, with First Financial to be the surviving
corporation in the Merger and a wholly owned subsidiary of First Data and (ii)
adjourn the First Financial Special Meeting if recommended by the management of
First Financial, including an adjournment of the First Financial Special
Meeting to obtain a quorum and/or solicit additional stockholder votes for the
Merger Agreement (the "First Financial Adjournment Matter"). Holders of shares
of First Financial Common Stock entitled to vote also will consider and vote
upon any other matter that may properly come before the First Financial Special
Meeting or at any adjournments and postponements thereof.
Votes Required
First Data. Each holder of First Data Common Stock is entitled to one vote
per share held of record on the record date. The approval of the Stock Issuance
requires the affirmative vote of a majority of the votes cast on the proposal,
provided that the total votes cast on the proposal represent a majority of the
outstanding shares of First Data Common Stock entitled to vote thereon. The
approval of each of the Charter Amendments requires the affirmative vote of a
majority of the outstanding shares of First Data Common Stock. The approvals of
the Incentive Plan Amendment and the First Data Adjournment Matter require the
affirmative vote of a majority of the shares present in person or represented
by proxy at the First Data Special Meeting and entitled to vote thereon.
Abstentions with respect to the Stock Issuance proposal will not have the
effect of a vote for or against the matter; however, abstaining shares will not
be counted in determining whether a majority of the outstanding shares of First
Data Common Stock entitled to vote on the matter had cast votes. Abstentions
with respect to each of the Charter Amendments and with respect to the
Incentive Plan Amendment and the First Data Adjournment Matter will have the
effect of votes against the approval of such matters. In addition, brokers who
hold shares of First Data Common Stock as nominees will not have discretionary
authority to vote such shares in the absence of instructions from the
beneficial owners thereof. Votes which are not cast for this reason ("broker
non-votes") will have the effect of a vote against the Charter Amendments.
Broker non-votes with respect to the Stock Issuance, the Incentive Plan
Amendment and the First Data Adjournment Matter will not have the effect of
votes for or against the matter. See "THE SPECIAL MEETINGS--Votes Required--
First Data."
Stockholders of First Data should be aware that, under Delaware law, a
stockholder who votes to approve the Stock Issuance may be deemed to have
ratified the terms of the Stock Issuance, including the fairness thereof, and,
under certain circumstances, such stockholder may be precluded from challenging
the fairness of the Stock Issuance in a subsequent legal proceeding. First Data
may use a stockholder's affirmative vote in favor of the Stock Issuance as a
defense to any subsequent challenge to the Stock Issuance. An abstention, in
and of itself, will not be considered such a ratification; however, no
assurance can be given as to the effect that such an abstention would have on a
stockholder's right to challenge the Stock Issuance.
First Financial. Each holder of First Financial Common Stock is entitled to
one vote per share held of record on the record date. The approval of the
Merger Agreement requires the affirmative vote of a majority of the outstanding
shares of First Financial Common Stock entitled to vote thereon. The approval
of the First Financial Adjournment Matter requires the affirmative vote of a
majority of the shares present in person or represented by proxy and entitled
to vote thereon.
Abstentions will have the effect of votes against approval of the Merger
Agreement and the First Financial Adjournment Matter. In addition, brokers who
hold shares of First Financial Common Stock as nominees will not have
discretionary authority to vote such shares in the absence of instructions from
the beneficial owners thereof. Broker non-votes also will have the effect of a
vote against approval of the Merger Agreement and against the approval of the
First Financial Adjournment Matter. See "THE SPECIAL MEETINGS--Votes Required--
First Financial."
7
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Stockholders of First Financial should be aware that, under Georgia law, a
stockholder who votes to approve the Merger Agreement may be deemed to have
ratified the terms of the Merger Agreement, including the fairness thereof,
and, under certain circumstances, such stockholder may be precluded from
challenging the fairness of the Merger Agreement in a subsequent legal
proceeding. First Financial may use a stockholder's affirmative vote in favor
of the Merger Agreement as a defense to any subsequent challenge to the Merger
Agreement. An abstention, in and of itself, will not be considered such a
ratification; however, no assurance can be given as to the effect that such an
abstention would have on a stockholder's right to challenge the Merger
Agreement.
Record Date
The record date for the determination of holders of First Data Common Stock
and First Financial Common Stock entitled to notice of and to vote at the
Special Meetings is September 15, 1995. On that date, First Data had
outstanding 118,760,681 shares of First Data Common Stock, and First Financial
had outstanding 63,953,962 shares of First Financial Common Stock.
Security Ownership of Management.
As of September 15, 1995, directors and executive officers of First Data and
their affiliates were beneficial owners of an aggregate of 2,039,288 shares
(approximately 1.8%) of the outstanding shares of First Data Common Stock
(including 2,007,782 shares subject to options exercisable within 60 days). As
of September 15, 1995, directors and executive officers of First Financial and
their affiliates were beneficial owners of an aggregate of 2,676,654 shares
(approximately 4.2%) of the outstanding shares of First Financial Common Stock
(including 1,097,029 shares subject to options exercisable within 60 days,
including options that will become exercisable by virtue of the consummation of
the Merger).
THE MERGER
Effect of Merger. At the Effective Time, Sub will be merged into First
Financial, which will be the surviving corporation in the Merger (the
"Surviving Corporation"). As a result of the Merger, First Financial will
become a wholly owned subsidiary of First Data. Subject to certain provisions
described herein with respect to shares owned by First Data, First Financial,
Sub and the respective subsidiaries of First Data and First Financial, in the
Merger each issued and outstanding share of First Financial Common Stock will
be converted into 1.5859 validly issued, fully paid and nonassessable shares of
First Data Common Stock. Cash will be paid in lieu of fractional shares of
First Data Common Stock. See "THE MERGER--Merger Consideration" and "THE MERGER
AGREEMENT--Fractional Shares."
Recommendations of the Boards of Directors. The Board of Directors of First
Data believes that the Merger is advisable and fair to and in the best
interests of the stockholders of First Data and has unanimously approved (with
one director absent) the Merger Agreement, the Merger and the other related
transactions. The Board of Directors of First Financial believes that the
Merger is advisable and fair to and in the best interests of the stockholders
of First Financial and has unanimously approved and adopted the Merger
Agreement.
THE BOARD OF DIRECTORS OF FIRST DATA RECOMMENDS THAT THE HOLDERS OF FIRST
DATA COMMON STOCK APPROVE THE STOCK ISSUANCE.
THE BOARD OF DIRECTORS OF FIRST FINANCIAL RECOMMENDS THAT THE HOLDERS OF
FIRST FINANCIAL COMMON STOCK APPROVE THE MERGER AGREEMENT.
For additional information with respect to the determinations made by, and
the recommendations of, the First Data and First Financial Boards of Directors,
see "THE MERGER--Recommendations of the Boards of Directors; Reasons for the
Merger."
8
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Opinions of Financial Advisors. Smith Barney Inc. ("Smith Barney") has acted
as financial advisor to First Data in connection with the Merger and has
delivered a written opinion, dated June 12, 1995, to the Board of Directors of
First Data to the effect that, as of the date of such opinion and based upon
and subject to certain matters stated therein, the Conversion Number was fair,
from a financial point of view, to First Data. Smith Barney has reconfirmed
such opinion by delivery of a written opinion dated the date of this Joint
Proxy Statement/Prospectus. The full text of the written opinion of Smith
Barney dated the date of this Joint Proxy Statement/Prospectus, which sets
forth the assumptions made, matters considered and limitations on the review
undertaken, is attached as Annex II to this Joint Proxy Statement/Prospectus
and should be read carefully in its entirety. See "THE MERGER--Opinions of
Financial Advisors--Smith Barney Opinion to the First Data Board of Directors."
Morgan Stanley & Co. Incorporated ("Morgan Stanley") delivered its written
opinion, dated June 12, 1995, to the First Financial Board of Directors that
the Conversion Number (defined in such opinion as the Exchange Ratio) was fair
to the holders of First Financial Common Stock from a financial point of view.
Morgan Stanley subsequently delivered its opinion to the First Financial Board
of Directors that, as of the date of this Joint Proxy Statement/Prospectus, the
Conversion Number pursuant to the Merger Agreement is fair to the holders of
First Financial Common Stock from a financial point of view. The full text of
the written opinion of Morgan Stanley, dated the date of this Joint Proxy
Statement/Prospectus, which sets forth assumptions made, matters considered and
limitations on the review undertaken in connection with the opinion, is
attached as Annex III to this Joint Proxy Statement/Prospectus and is
incorporated herein by reference. Holders of First Financial Common Stock are
urged to, and should, read this opinion in its entirety. See "THE MERGER--
Opinions of Financial Advisors--Morgan Stanley Opinion to the First Financial
Board of Directors."
Effective Time of the Merger. The Merger will become effective upon the
filing of the Certificate of Merger with the Secretary of State of the State of
Georgia or such later date as is specified in such Certificate. The filing of
the Certificate of Merger will occur as soon as practicable following the
satisfaction or waiver of the conditions set forth in the Merger Agreement. See
"THE MERGER AGREEMENT--Conditions to the Merger."
Interests of Certain Persons in the Merger. Certain members of First
Financial's management and Board of Directors have interests in the Merger in
addition to their interests solely as stockholders of First Financial. Those
interests relate to, among other things, provisions in the Merger Agreement or
other agreements regarding the receipt of severance payments, the acceleration
of the release of restrictions on shares of restricted First Financial Common
Stock, the acceleration of vesting of certain options to acquire First
Financial Common Stock, the receipt of certain pro rated bonus payments and
indemnification of First Financial's officers and directors. See "THE MERGER--
Interests of Certain Persons in the Merger."
Conditions to the Merger. The obligations of First Data, Sub and First
Financial to consummate the Merger are subject to various conditions,
including, among other things, obtaining the requisite stockholder approvals,
the authorization for listing on the NYSE of the shares of First Data Common
Stock issuable pursuant to the Merger Agreement, the expiration or termination
of the applicable waiting period under the Hart-Scott-Rodino Anti-Trust
Improvements Act of 1976, as amended (the "HSR Act"), the receipt of an opinion
dated as of the Effective Time from Ernst & Young LLP that the Merger will
qualify for pooling of interests accounting treatment, the effectiveness of the
Registration Statement and the absence of any order or other legal restraint or
prohibition preventing the consummation of the Merger. The obligation of First
Data to consummate the Merger is subject to the fulfillment of various
additional conditions, including, among other things, that Mr. Patrick H.
Thomas, the Chairman of the Board, President and Chief Executive Officer of
First Financial, enter into a non-solicitation agreement and that there shall
not be instituted or pending any action or proceeding by a governmental entity
as a result of the Merger Agreement which would
9
<PAGE>
have a material adverse effect on First Data (assuming the Merger is
consummated). The obligation of First Financial to consummate the Merger is
subject to the fulfillment of various additional conditions, including, among
other things, the receipt of certain tax opinions from counsel to First
Financial. See "THE MERGER--Governmental and Regulatory Approvals," "--
Interests of Certain Persons in the Merger" and "THE MERGER AGREEMENT--
Conditions to the Merger."
On September 20, 1995, First Data entered into a consent decree (the "Consent
Decree") with the Federal Trade Commission (the "FTC") regarding the consumer
money transfer businesses of MoneyGramSM and Western Union Financial Services,
Inc., currently a wholly owned subsidiary of First Financial ("Western Union").
The execution of the Consent Decree terminated the waiting period under the HSR
Act, thereby satisfying a condition to the Merger. Under the terms of the
Consent Decree, First Data will be allowed to perform processing services for
each of MoneyGramSM and Western Union, but it will be permitted to retain the
sales and marketing functions of only one of the two companies. The Consent
Decree will become final upon acceptance by the FTC following a 60 day notice
and public comment period. The required divestiture must occur no later than
twelve months following the final acceptance of the Consent Decree by the FTC.
First Data and First Financial are evaluating their alternatives under the
Consent Decree. However, First Data and First Financial believe that it is more
likely than not that the required divestiture, when combined with the
negotiation of a processing agreement, will not have a material impact on the
post-Merger combined entity's ongoing results of operations. In addition, First
Data and the FTC entered into a "hold separate" agreement whereby the
MoneyGramSM business must be managed and maintained as a separate, ongoing
business, independent of all other First Data businesses and independent of the
Western Union business. The hold separate arrangement will continue until First
Data's interest in the sales and marketing function of either MoneyGramSM or
Western Union has been divested or the FTC has withdrawn its acceptance of the
Consent Decree pursuant to its rules.
Certain of the foregoing conditions may not be waived by the parties,
including stockholder approvals, the effectiveness of the Registration
Statement and the absence of any order or legal restraint. Although the receipt
of the accounting opinion of Ernst & Young LLP and the tax opinions of First
Financial's counsel may be waived by the parties, First Data and First
Financial intend, in the event either of such opinions are not or cannot be
delivered but the parties nonetheless desire to consummate the Merger, to file
with the Commission a post-effective amendment to the Registration Statement
and to resolicit the approval of the Stock Issuance and the Merger Agreement by
their respective stockholders pursuant to an amended Joint Proxy
Statement/Prospectus.
Termination of the Merger Agreement. The Merger Agreement may be terminated
at any time prior to the Effective Time under certain circumstances, including,
among other things, (i) by mutual written consent of First Data and First
Financial, (ii) by either First Data or First Financial if the Merger has not
been effected prior to the close of business on December 31, 1995, which date
may be extended under certain circumstances to August 31, 1996, (iii) by either
First Data or First Financial if the requisite stockholder approvals are not
obtained, (iv) by either First Data or First Financial in certain circumstances
involving a competing transaction and (iv) by First Data if the First Financial
Board of Directors withdraws or modifies its recommendation of the Merger,
recommends a competing transaction or fails to recommend against a tender or
exchange offer by a third party. See "THE MERGER AGREEMENT--Termination." The
Merger Agreement provides that if the Merger Agreement is terminated following
the modification or withdrawal by the First Financial Board of Directors of its
recommendation of the Merger, and the First Financial stockholders did not
approve the Merger prior to such termination, then First Financial will pay $10
million to First Data; provided that First Data will not be entitled to this
payment if First Data is entitled to a payment pursuant to the next sentence.
The Merger Agreement also provides that in the event of a termination in
certain situations in which there is a competing transaction with respect to
First Financial, or in the event that First Financial enters into certain
business combination transactions or certain acquisition
10
<PAGE>
events occur with another person within 12 months following termination under
certain events, First Data will receive a fee of $68 million. In addition, if
the First Data Board of Directors withdraws its recommendation for the Stock
Issuance and the First Data stockholders fail to approve the Stock Issuance,
then First Data will pay $10 million to First Financial; provided that First
Financial will not be entitled to this payment if First Financial is entitled
to a payment pursuant to the next sentence. The Merger Agreement provides that
if (a) the Merger Agreement is terminated following the failure of the First
Data stockholders to approve the Stock Issuance, (b) prior to the First Data
Special Meeting certain acquisition events with another person occur and (c)
within a year after the termination First Data enters into a business
combination agreement with another person, First Data will pay First Financial
a fee of $68 million.
No Stockholders' Rights of Appraisal. In accordance with the General
Corporation Law of the State of Delaware (the "DGCL"), stockholders of First
Data will not be entitled to appraisal rights in connection with the Merger. In
accordance with the Georgia Business Corporation Code (the "GBCC"),
stockholders of First Financial will not be entitled to appraisal rights in
connection with the Merger. See "THE SPECIAL MEETINGS--Appraisal Rights."
Certain Federal Income Tax Consequences. The obligation of First Financial to
consummate the Merger is conditioned upon the receipt of an opinion of
Sutherland, Asbill & Brennan, counsel to First Financial, to the effect that
the Merger will be treated for federal income tax purposes as a reorganization
within the meaning of section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and that no gain or loss will be recognized by First
Financial stockholders upon the receipt of First Data Common Stock in exchange
for First Financial Common Stock (except with respect to cash received in lieu
of a fractional share of First Data Common Stock). See "THE MERGER--Certain
Federal Income Tax Consequences."
Accounting Treatment of the Merger. The Merger is expected to be accounted
for as a "pooling of interests" in accordance with generally accepted
accounting principles. The obligations of First Data, Sub and First Financial
to consummate the Merger are subject to the receipt by First Data of an opinion
dated as of the Effective Time from Ernst & Young LLP that the Merger will
qualify for pooling of interests accounting treatment. See "THE MERGER--
Accounting Treatment" and "THE MERGER AGREEMENT--Conditions to the Merger."
Comparison of Rights of Holders of First Data Common Stock and First
Financial Common Stock. See "COMPARISON OF RIGHTS OF HOLDERS OF FIRST DATA
COMMON STOCK AND FIRST FINANCIAL COMMON STOCK" for a summary of the material
differences between the rights of holders of First Data Common Stock and First
Financial Common Stock.
Other Significant Considerations. In determining whether to approve the
transactions pursuant to the Merger Agreement, First Data and First Financial
stockholders should consider that the price of the First Data Common Stock may
vary from the price at the Effective Time, as well as from the prices at the
date of this Joint Proxy Statement/Prospectus and at the date of the Special
Meetings. Such variations may be the result of changes in the business,
operations or prospects of First Data or First Financial, market assessments of
the likelihood that the Merger will be consummated and the timing thereof,
regulatory considerations, general market and economic conditions and other
factors. Because the Effective Time may occur at a later date than the date of
the Special Meetings, there can be no assurance that the sales price of First
Data Common Stock on the date of the Special Meetings will be indicative of the
sales price of First Data Common Stock at the Effective Time. The Effective
Time will occur as soon as practicable following the Special Meetings and the
satisfaction or waiver of the other conditions set forth in the Merger
Agreement. See "THE MERGER AGREEMENT--Conditions to the Merger."
Stockholders of First Data and First Financial also should consider that the
Conversion Number is a fixed ratio in the Merger Agreement. As a result, the
Conversion Number will not be adjusted in the event of an increase or decrease
in the market price of either the First Data Common Stock or the First
Financial Common Stock, or both. First Data and First Financial stockholders
are urged to obtain current market quotations for the First Data Common Stock
and the First Financial Common Stock.
11
<PAGE>
Immediately prior to the Effective Time, there will be approximately 119
million shares of First Data Common Stock outstanding. Immediately following
the Effective Time, there will be approximately 223 million shares of First
Data Common Stock outstanding, assuming the absence of any exercise of options
or conversion of the 5% Debentures. The shares of First Data Common Stock
issued to stockholders of First Financial pursuant to the Merger Agreement will
comprise approximately 46.8% of the total number of shares of First Data Common
Stock outstanding after the Merger (and approximately 49.7% on a fully diluted
basis, assuming exercise of all options and conversion of the 5% Debentures).
12
<PAGE>
SELECTED FINANCIAL DATA
FIRST DATA CORPORATION
CONSOLIDATED SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth selected historical financial data for First
Data for each of the five years in the period ended December 31, 1994 and for
the six-month periods ended June 30, 1994 and 1995. Such data have been derived
from, and should be read in conjunction with, the audited consolidated
financial statements and other financial information contained in First Data's
Annual Report on Form 10-K for the year ended December 31, 1994 and the
unaudited consolidated interim financial statements contained in First Data's
Quarterly Report on Form 10-Q for the period ended June 30, 1995, including the
notes thereto, incorporated by reference herein as well as First Data's
Quarterly Report on Form 10-Q for the period ended June 30, 1994. See
"AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, (A) ENDED JUNE 30, (A)
-------------------------------------------- -------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- --------- ---------
(MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues, net........... $ 845.0 $1,026.2 $1,205.3 $1,490.3 $1,652.2 $ 785.4 $ 940.1
Operating income........ 169.4 221.6 265.5 310.3 347.2 170.2 185.6
Pretax income........... 166.5 191.1 231.6 290.9 356.1 152.3 241.3
Net income.............. 102.7 118.0 141.4 173.0 208.1 90.2 108.2
Depreciation and
amortization (b)....... 70.1 89.3 111.3 136.2 165.5 76.0 111.2
BALANCE SHEET DATA (AT
END OF PERIOD)
Total assets............ $2,219.0 $3,126.3 $3,839.6 $3,954.7 $5,419.4 $ 4,274.1 $ 7,396.3
Cash and cash
equivalents............ 17.3 130.3 159.6 298.0 166.2 203.2 111.4
Goodwill and other
intangibles............ 562.6 725.6 880.0 1,035.4 1,181.2 1,138.8 2,005.9
Total liabilities
(excluding long-term
debt).................. 1,555.1 2,115.8 2,694.1 2,478.9 3,929.4 2,726.9 5,168.4
Long-term debt.......... 164.6 443.9 351.3 521.3 474.7 514.1 468.3
Stockholders' equity.... 499.3 566.6 794.2 954.5 1,015.3 1,033.1 1,759.6
COMMON SHARE STATISTICS
(C)
Net income per common
share.................. $ 0.99 $ 1.13 $ 1.30 $ 1.56 $ 1.87 $ 0.81 $ 0.94
Cash dividend declared
per share.............. 0.77 0.50 0.21 0.12 0.12 0.03 0.06
</TABLE>
- --------
(a) Amounts include the effect of certain businesses acquired or disposed of
during the periods presented. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in First Data's
Annual Report on Form 10-K for the year ended December 31, 1994 and in
First Data's Quarterly Report on Form 10-Q for the period ended June 30,
1995.
(b) Includes amounts charged against revenues.
(c) Reflects retroactive recognition of a common stock dividend to American
Express Company of 104,113,626 shares declared in connection with First
Data's initial public offering in April 1992.
Note: Certain prior years' amounts have been restated to conform to the current
year's presentation.
13
<PAGE>
FIRST FINANCIAL MANAGEMENT CORPORATION
CONSOLIDATED SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth selected historical financial data for First
Financial for each of the five years in the period ended December 31, 1994 and
for the six-month periods ended June 30, 1994 and 1995. Such data have been
derived from, and should be read in conjunction with, the audited consolidated
financial statements and other financial information contained in First
Financial's Annual Report on Form 10-K for the year ended December 31, 1994 and
the unaudited consolidated interim financial statements contained in First
Financial's Quarterly Report on Form 10-Q for the period ended June 30, 1995,
including the notes thereto, incorporated by reference herein as well as First
Financial's Quarterly Report on Form 10-Q for the period ended June 30, 1994.
See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------- -----------------
1990 1991 1992(A) 1993 1994 1994 1995
-------- -------- -------- -------- -------- -------- --------
(MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues................ $ 816.3 $1,057.5 $1,508.4 $1,759.6 $2,207.5 $ 978.8 $1,466.3
Pretax income from
continuing operations.. 79.2 104.6 67.9 220.2 268.3 108.5 135.5
Income from continuing
operations............. 47.7 62.7 21.4 131.8 160.2 63.7 79.9
Depreciation and
amortization........... 45.2 58.7 84.5 77.8 97.7 46.0 66.5
BALANCE SHEET DATA (AT
END OF PERIOD)
Total assets............ $1,105.2 $1,297.0 $1,571.7 $1,645.9 $3,135.7 $1,760.1 $3,111.6
Long-term debt.......... 207.8 152.1 158.7 17.3 62.3 23.8 232.6
Convertible debentures.. 166.8 -- -- -- 447.1 -- 447.1
Shareholders' equity.... 600.7 997.6 1,124.9 1,253.5 1,429.8 1,325.5 1,554.0
COMMON SHARE STATISTICS
Income per share--
continuing operations
Primary................ $ 1.17 $ 1.32 $ 0.35 $ 2.12 $ 2.56 $ 1.02 $ 1.25
Fully diluted.......... 1.10 1.23 0.35 2.12 2.56 1.02 1.25
Cash dividends declared
per share.............. 0.07 0.07 0.10 0.10 0.10 0.05 0.05
Weighted average common
shares outstanding
Primary............... 40.8 47.4 60.1 62.0 62.9 62.5 69.6
Fully Diluted.......... 48.1 53.0 60.3 62.1 62.9 62.5 69.6
</TABLE>
- --------
(a) Includes loss of $79.6 million resulting from First Financial's sale of a
business unit.
14
<PAGE>
FIRST DATA CORPORATION AND
FIRST FINANCIAL MANAGEMENT CORPORATION
PRO FORMA COMBINED SELECTED FINANCIAL DATA (A)
(UNAUDITED)
The following table sets forth pro forma combined selected financial data for
each of the three years in the period ended December 31, 1994, and for the six-
month period ended June 30, 1995, giving effect to the Merger under the pooling
of interests method of accounting, reflecting certain assumptions described in
the notes to the unaudited pro forma condensed combined financial statements
included elsewhere herein, and for the year ended December 31, 1994 and the six
months ended June 30, 1995 also giving pro forma effect to First Data's
acquisition of CESI Holdings, Inc. ("CESI Holdings") in March 1995 and First
Financial's acquisition of Western Union in November 1994 as if such
acquisitions had taken place as of January 1, 1994. Pro forma per share amounts
reflect pro forma weighted average shares and common stock equivalents assuming
the conversion of each share of outstanding First Financial Common Stock and
each common stock equivalent that is dilutive to net income per share
computations into 1.5859 shares of First Data's Common Stock. The pro forma
combined selected financial data is presented for illustrative purposes only
and is not necessarily indicative of the operating results or financial
position that would have occurred if the Merger or the CESI Holdings or Western
Union acquisitions, both of which were accounted for as purchases, had been
consummated on the dates indicated, nor is it necessarily indicative of future
operating results or financial position. The pro forma combined selected
financial data has been derived from and should be read in conjunction with the
unaudited pro forma condensed combined financial statements, including the
notes thereto, included elsewhere in this Joint Proxy Statement/Prospectus. See
"THE MERGER--Accounting Treatment" and "UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS."
<TABLE>
<CAPTION>
SIX
MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------- JUNE 30,
1992 (C) 1993 1994 (F) 1995 (F)
-------- -------- -------- ---------
(MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA (B)
Revenues, net............................. $2,129.4 $2,515.5 $3,376.5 $ 1,784.6
Operating income.......................... 343.0 535.1 711.5 348.4
Pretax income from continuing operations.. 299.5 511.1 631.6 371.6
Income from continuing operations......... 162.8 304.8 363.8 183.4
Depreciation and amortization (d)......... 195.8 214.0 331.0 184.5
BALANCE SHEET DATA (AT END OF PERIOD) (E)
Total assets.............................. $10,500.6
Cash and cash equivalents................. 235.6
Goodwill and other intangibles............ 4,097.6
Total liabilities (excluding long-term
debt, senior convertible debentures and
pension obligations)..................... 6,043.7
Long-term debt............................ 682.6
Senior convertible debentures............. 447.1
Pension obligations assumed............... 149.6
Stockholders' equity...................... 3,177.6
COMMON SHARE STATISTICS
Income from continuing operations per
common share............................. $ 0.80 $ 1.46 $ 1.63 $ 0.83
Cash dividend declared per share.......... 0.21 0.12 0.12 0.06
</TABLE>
- --------
(a) First Financial and Western Union historical income statement and balance
sheet classifications were reclassified to be consistent with the
presentation used by First Data.
15
<PAGE>
(b) The income statement data presented in this table exclude the effect of (i)
the positive effects of potential increased revenues or operating synergies
and cost savings which may be achieved upon combining the resources of the
companies; (ii) investment banking, legal and miscellaneous transaction
costs of the Merger, currently estimated to be $52.3 million on an after-
tax basis; (iii) costs associated with termination benefits of certain
employees of First Financial, currently estimated to be $143.1 million on
an after-tax basis, and (iv) costs associated with the integration and
consolidation of the companies which are not presently estimable.
(c) The income statement data include a loss of $79.6 million resulting from
First Financial's sale of a business unit.
(d) Includes amounts charged against revenues.
(e) The balance sheet data include the $195.4 million impact of the costs noted
in (b)(ii) and (b)(iii) above.
(f) The following table sets forth pro forma historical condensed combined
income statement data for the year ended December 31, 1994 and the six
months ended June 30, 1994 and 1995 giving effect only to the Merger under
the pooling of interests method of accounting. This information is
consistent with the method of presentation above for the years ended
December 31, 1992 and 1993 and reflects the historical income statement
data, restated to give effect to the Merger.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, -----------------
1994 1994 1995
------------ -------- --------
(MILLIONS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Revenues, net............................. $2,884.0 $1,339.2 $1,746.2
Operating income.......................... 626.6 280.1 350.5
Pretax income from continuing operations.. 624.4 260.8 376.8
Income from continuing operations......... 368.3 153.9 188.1
Depreciation and amortization............. 263.2 122.0 177.7
Income from continuing operations per
common share............................. $ 1.75 $ 0.73 $ 0.86
</TABLE>
16
<PAGE>
COMPARATIVE PER SHARE DATA
Set forth below are income from continuing operations, cash dividends
declared, book value and tangible book value per common share data of First
Data and First Financial on both historical and pro forma combined bases. Pro
forma combined income from continuing operations per share is derived from the
pro forma combined information presented elsewhere herein, which gives effect
to the Merger under the pooling of interests method of accounting as if the
Merger had occurred at January 1, 1992, combining the results of First Data and
First Financial for the periods presented. For the year ended December 31, 1994
and the six months ended June 30, 1995, the pro forma combined income from
continuing operations per share also gives effect to First Data's acquisition
of CESI Holdings in March 1995 and First Financial's acquisition of Western
Union in November 1994 as if such acquisitions, accounted for as purchases, had
taken place January 1, 1994. Pro forma combined cash dividends declared per
share reflect First Data's cash dividends declared in the periods indicated.
The equivalent pro forma combined data for First Financial is based upon the
Conversion Number of 1.5859 shares of First Data Common Stock for each share of
First Financial Common Stock as provided in the Merger Agreement. Book value
and tangible book value per share for First Financial and for the pro forma
combined presentation is based upon outstanding common shares, adjusted in the
case of the pro forma combined presentation to include the shares of First Data
Common Stock to be issued in the Merger, and for December 31, 1994, the shares
of First Data Common Stock issued for the acquisition of CESI Holdings. The
information set forth below should be read in conjunction with the respective
audited and unaudited financial statements of First Data and First Financial
incorporated by reference in this Joint Proxy Statement/Prospectus and the
"UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS."
<TABLE>
<CAPTION>
EQUIVALENT PRO
FORMA COMBINED
FIRST DATA/ PER SHARE OF
FIRST FIRST
FINANCIAL FIRST FINANCIAL
FIRST DATA PRO FORMA FINANCIAL COMMON
HISTORICAL COMBINED(A) HISTORICAL STOCK(E)
---------- ----------- ---------- --------------
<S> <C> <C> <C> <C>
INCOME FROM CONTINUING
OPERATIONS:
December 31, 1992............ $ 1.30 $ 0.80 $ 0.35 $ 1.27
1993......................... 1.56 1.46 2.12 2.32
1994......................... 1.87 1.63 (b) 2.56 2.59 (b)
June 30, 1995.............. 0.94 0.83 (b) 1.25 1.32 (b)
CASH DIVIDENDS DECLARED:
December 31, 1992............ $ 0.21 $ 0.21 (c) $ 0.10 $ 0.33
1993......................... 0.12 0.12 (c) 0.10 0.19
1994......................... 0.12 0.12 (c) 0.10 0.19
June 30, 1995.............. 0.06 0.06 (c) 0.05 0.10
BOOK VALUE (AT END OF
PERIOD): (F)
December 31, 1994............ $ 9.43 $13.82 (d) $23.23 $21.92 (d)
June 30, 1995.............. 14.81 15.06 24.33 23.88
TANGIBLE BOOK VALUE (AT END
OF PERIOD): (F)
December 31, 1994............ $(1.54) $(4.45)(d) $(9.47) $(7.06)(d)
June 30, 1995.............. (2.07) (3.56) (8.42) (5.65)
</TABLE>
- --------
(a) The pro forma combined per common share data exclude the effect of (i) the
positive effects of potential increased revenues or operating synergies and
cost savings which may be achieved upon combining the resources of the
companies; (ii) investment banking, legal and miscellaneous transaction
costs of the
17
<PAGE>
Merger, currently estimated to be $52.3 million on an after-tax basis; (iii)
costs associated with termination benefits of certain employees of First
Financial, currently estimated to be $143.1 million on an after-tax basis;
and (iv) costs associated with the integration and consolidation of the
companies which are not presently estimable. Had the impact of (a)(ii) and
(a)(iii) been included at June 30, 1995, pro forma and equivalent pro forma
book value would have been $14.44 per share and $22.90 per share,
respectively, and pro forma and equivalent pro forma tangible book value
would have been ($4.18) and ($6.63) per share, respectively.
(b) The pro forma combined income from continuing operations and equivalent per
share data giving effect only to the Merger under the pooling of interests
method of accounting are $1.75 and $2.78, respectively, for the year ended
December 31, 1994 and $0.86 and $1.36, respectively, for the six months
ended June 30, 1995. This information is consistent with the method of
presentation above for the years ended December 31, 1992 and 1993.
(c) The First Data/First Financial pro forma combined cash dividends declared
represent First Data historical cash dividends declared. No assurance can
be given that equivalent dividends will be paid in the future. The amount
of future dividends payable by First Data will depend upon the earnings and
financial condition of First Data and other relevant factors, including,
without limitation, applicable governmental regulations and policies and
debt covenant restrictions.
(d) The pro forma combined book value and equivalent per share data giving
effect only to the Merger under the pooling of interests method of
accounting are $11.91 and $18.89, respectively, for the year ended December
31, 1994. The pro forma combined tangible book value and equivalent per
share data giving effect only to the Merger under the pooling of interests
method of accounting are ($3.65) and ($5.79), respectively, for the year
ended December 31, 1994.
(e) The equivalent pro forma combined per share of First Financial Common Stock
represents the First Data/First Financial Pro Forma Combined amounts
multiplied by 1.5859 (the Conversion Number).
(f) The dilutive impact of outstanding stock options is estimated to be less
than 3% and the assumed conversion of First Financial's 5% Debentures is
anti-dilutive.
18
<PAGE>
COMPARATIVE STOCK PRICES AND DIVIDENDS
The First Data Common Stock and the First Financial Common Stock are listed
and traded on the NYSE (Symbols: FDC and FFM, respectively). The following
table sets forth for the periods indicated the reported high and low sales
prices per share of First Data Common Stock and First Financial Common Stock on
the NYSE Composite Transactions Tape. The following table also sets forth the
cash dividends declared by First Data on First Data Common Stock and by First
Financial on First Financial Common Stock for the periods indicated.
<TABLE>
<CAPTION>
SALES PRICE
--------------- CASH
FIRST DATA COMMON STOCK HIGH LOW DIVIDENDS
- ----------------------- ------- ------- ---------
<S> <C> <C> <C>
1993
First Quarter...................................... $37.000 $31.250 $.03
Second Quarter..................................... 38.250 32.875 .03
Third Quarter...................................... 40.000 34.750 .03
Fourth Quarter..................................... 42.250 36.500 .03
1994
First Quarter...................................... $48.000 $40.625 $.03
Second Quarter..................................... 47.500 40.750 -- (1)
Third Quarter...................................... 50.250 40.500 .06(1)
Fourth Quarter..................................... 50.625 45.500 .03
1995
First Quarter...................................... $54.125 $46.000 $.03
Second Quarter (prior to merger announcement on
June 13, 1995) ................................... 58.625 51.375 .03
Second Quarter (subsequent to merger announcement
on June 13, 1995)................................. 57.375 55.000 --
Third Quarter (through September 25, 1995)......... 62.250 55.375 .03
<CAPTION>
SALES PRICE
--------------- CASH
FIRST FINANCIAL COMMON STOCK HIGH LOW DIVIDENDS
- ---------------------------- ------- ------- ---------
<S> <C> <C> <C>
1993
First Quarter...................................... $44.250 $38.250 $--
Second Quarter..................................... 42.375 36.000 .05
Third Quarter...................................... 55.125 42.375 --
Fourth Quarter..................................... 58.500 50.500 .05
1994
First Quarter...................................... $60.125 $51.125 $--
Second Quarter..................................... 59.125 52.125 .05
Third Quarter...................................... 62.000 52.000 --
Fourth Quarter..................................... 63.500 53.750 .05
1995
First Quarter...................................... $74.500 $60.625 $--
Second Quarter (prior to merger announcement on
June 13, 1995).................................... 76.875 69.750 .05
Second Quarter (subsequent to merger announcement
on June 13, 1995)................................. 85.500 80.625 --
Third Quarter (through September 25, 1995)......... 96.875 80.500 --
</TABLE>
- --------
(1) First Data declared its regular quarterly cash dividend for the second
quarter on July 27, 1994 and for the third quarter on September 28, 1994,
resulting in both dividends being declared in the third quarter.
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On June 12, 1995, the last trading day before the public announcement of the
execution of the Merger Agreement, the last sale prices of the First Data
Common Stock and First Financial Common Stock, as reported on the NYSE
Composite Transactions Tape, were $56 7/8 per share and $76 3/4 per share,
respectively. The equivalent pro forma combined market value per share of First
Financial Common Stock on June 12, 1995 was approximately $90, based on the
Conversion Number of 1.5859 multiplied by the market value per share of First
Data Common Stock on such date. Recent last sale prices of the First Data
Common Stock and the First Financial Common Stock as reported on the NYSE
Composite Transactions Tape are set forth on the cover page of this Joint Proxy
Statement/Prospectus. First Data and First Financial stockholders are urged to
obtain current market quotations for the First Data Common Stock and the First
Financial Common Stock.
Since the third quarter of 1992, First Data has paid quarterly cash dividends
on the shares of First Data Common Stock as set forth in the table above. First
Data currently expects that, following the consummation of the Merger, it will
maintain its current dividend policy of paying quarterly cash dividends of $.03
per share of First Data Common Stock. The timing and amount of future dividends
will be (i) dependent on First Data's results of operations, financial
condition, cash requirements and other relevant factors, (ii) subject to the
discretion of the Board of Directors of First Data, and (iii) payable only out
of First Data's surplus or current net profits (on a consolidated basis) in
accordance with the DGCL. The terms of First Data's debt facilities limit First
Data's ability to pay dividends. As of June 30, 1995, approximately $519.9
million was available for the payment of dividends under these restrictions.
20
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INTRODUCTION
This Joint Proxy Statement/Prospectus is being furnished to stockholders of
First Data in connection with the solicitation of proxies by the First Data
Board of Directors for use at the First Data Special Meeting to be held at
Suite 1400, 5660 New Northside Drive, Atlanta, Georgia, on October 26, 1995, at
11:00 a.m., Eastern time, and at any adjournments or postponements thereof.
This Joint Proxy Statement/Prospectus is also being furnished to stockholders
of First Financial in connection with the solicitation of proxies by the First
Financial Board of Directors for use at the First Financial Special Meeting to
be held at Suite 1400, 5660 New Northside Drive, Atlanta, Georgia, on October
26, 1995 at 9:00 a.m., Eastern time, and at any adjournments or postponements
thereof.
At the First Data Special Meeting, stockholders of First Data will be asked
to approve the Stock Issuance in connection with the consummation of the
transactions pursuant to the Merger Agreement, including the Merger, and to
approve the Charter Amendments, the Incentive Plan Amendment and the First Data
Adjournment Matter. APPROVALS OF THE CHARTER AMENDMENTS, THE INCENTIVE PLAN
AMENDMENT AND THE FIRST DATA ADJOURNMENT MATTER ARE NOT A CONDITION TO THE
CONSUMMATION OF THE MERGER. At the First Financial Special Meeting,
stockholders of First Financial will be asked to approve the Merger Agreement
and the First Financial Adjournment Matter. A conformed copy of the Merger
Agreement and a copy of the Incentive Plan, as proposed to be amended, appear
as Annex I and Annex IV, respectively, to this Joint Proxy
Statement/Prospectus.
This Joint Proxy Statement/Prospectus constitutes a prospectus of First Data
with respect to up to 117,284,398 shares of First Data Common Stock issuable to
First Financial stockholders pursuant to the Merger Agreement in the Merger,
assuming the exercise of all currently outstanding stock options of First
Financial, the conversion of the 5% Debentures and the issuance of shares of
First Financial Common Stock in connection with First Financial's acquisition
of EBP. This Joint Proxy Statement/Prospectus also constitutes a prospectus,
during the time periods described herein, with respect to resales of First Data
Common Stock received in the Merger by certain affiliates of First Financial.
See "THE MERGER--Reofferings and Resales of First Data Common Stock."
THE SPECIAL MEETINGS
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETINGS
First Data Special Meeting. At the First Data Special Meeting, holders of
shares of First Data Common Stock will consider and vote upon proposals to
approve the Stock Issuance, the Charter Amendments, the Incentive Plan
Amendment and the First Data Adjournment Matter. Holders of shares of First
Data Common Stock entitled to vote also will consider and vote upon any other
matter that may properly come before the First Data Special Meeting or at any
adjournments or postponements thereof. APPROVALS OF THE CHARTER AMENDMENTS, THE
INCENTIVE PLAN AMENDMENT AND THE FIRST DATA ADJOURNMENT MATTER ARE NOT A
CONDITION TO THE CONSUMMATION OF THE MERGER.
THE BOARD OF DIRECTORS OF FIRST DATA HAS UNANIMOUSLY APPROVED (WITH ONE
DIRECTOR ABSENT) THE MERGER AGREEMENT, THE MERGER AND THE OTHER TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE STOCK ISSUANCE, AND RECOMMENDS A VOTE FOR
THE APPROVAL OF THE STOCK ISSUANCE. SEE "THE MERGER--RECOMMENDATIONS OF THE
BOARDS OF DIRECTORS; REASONS FOR THE MERGER." THE BOARD OF DIRECTORS OF FIRST
DATA HAS ALSO UNANIMOUSLY APPROVED THE CHARTER AMENDMENTS, THE INCENTIVE PLAN
AMENDMENT AND THE FIRST DATA ADJOURNMENT MATTER AND RECOMMENDS A VOTE FOR THE
APPROVAL OF THE PROPOSALS RELATING THERETO. SEE "PROPOSED AMENDMENTS TO FIRST
DATA RESTATED CERTIFICATE OF INCORPORATION," "PROPOSED AMENDMENT TO FIRST DATA
1992 LONG-TERM INCENTIVE PLAN" AND "THE ADJOURNMENT MATTERS."
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<PAGE>
First Financial Special Meeting. At the First Financial Special Meeting,
holders of shares of First Financial Common Stock will consider and vote upon
proposals to approve the Merger Agreement and the First Financial Adjournment
Matter. Holders of shares of First Financial Common Stock entitled to vote also
will consider and vote upon any other matter that may properly come before the
First Financial Special Meeting or at any adjournments or postponements
thereof.
THE BOARD OF DIRECTORS OF FIRST FINANCIAL HAS UNANIMOUSLY APPROVED AND
ADOPTED THE MERGER AGREEMENT, AND RECOMMENDS A VOTE FOR THE APPROVAL OF THE
MERGER AGREEMENT. SEE "THE MERGER--RECOMMENDATIONS OF THE BOARDS OF DIRECTORS;
REASONS FOR THE MERGER." THE BOARD OF DIRECTORS ALSO UNANIMOUSLY RECOMMENDS A
VOTE FOR APPROVAL OF THE FIRST FINANCIAL ADJOURNMENT MATTER.
Subject to certain provisions described herein with respect to shares owned
by First Financial, First Data and their respective subsidiaries, in the Merger
each issued and outstanding share of First Financial Common Stock will be
converted into 1.5859 validly issued, fully paid and nonassessable shares of
First Data Common Stock. Cash will be paid in lieu of fractional shares of
First Data Common Stock. See "THE MERGER-- Merger Consideration" and "THE
MERGER AGREEMENT--Fractional Shares."
VOTES REQUIRED
First Data. Each holder of First Data Common Stock is entitled to one vote
per share held of record on the record date. The approval of the Stock Issuance
requires the affirmative vote of a majority of the votes cast on the proposal,
provided that the total votes cast on the proposal represent a majority of the
outstanding shares of First Data Common Stock entitled to vote thereon. The
approval of each of the Charter Amendments requires the affirmative vote of a
majority of the outstanding shares of First Data Common Stock. The approvals of
the Incentive Plan Amendment and the First Data Adjournment Matter require the
affirmative vote of the majority of shares present in person or represented by
proxy at the First Data Special Meeting and entitled to vote thereon.
Abstentions will be counted as shares present for purposes of determining the
presence of a quorum on all matters. See "--Record Dates; Stock Entitled to
Vote; Quorum." Abstentions with respect to the Stock Issuance proposal will not
have the effect of a vote for or against the matter; however, abstaining shares
will not be counted in determining whether a majority of the outstanding shares
of First Data Common Stock entitled to vote on the matter had cast votes.
Abstentions with respect to each of the Charter Amendments and with respect to
the Incentive Plan Amendment and the First Data Adjournment Matter will have
the effect of votes against the approval of such matters. In addition, brokers
who hold shares of First Data Common Stock as nominees will not have
discretionary authority to vote shares of First Data Common Stock in the
absence of instructions from the beneficial owners thereof. Votes which are not
cast for this reason ("broker non-votes") also will have the effect of a vote
against the Charter Amendments. Broker non-votes with respect to the Stock
Issuance, the Incentive Plan Amendment and the First Data Adjournment Matter
will not have the effect of a vote for or against the matter.
Stockholders of First Data should be aware that, under Delaware law, a
stockholder who votes to approve the Stock Issuance may be deemed to have
ratified the terms of the Stock Issuance, including the fairness thereof, and,
under certain circumstances, such stockholder may be precluded from challenging
the fairness of the Stock Issuance in a subsequent legal proceeding. First Data
may use a stockholder's affirmative vote in favor of the Stock Issuance as a
defense to any subsequent challenge to the Stock Issuance. An abstention, in
and of itself, will not be considered such a ratification; however, no
assurance can be given as to the effect that such an abstention would have on a
stockholder's right to challenge the Stock Issuance.
As of September 15, 1995, directors and executive officers of First Data and
their affiliates were beneficial owners of an aggregate of approximately
2,039,288 shares (approximately 1.8%) of the outstanding shares of First Data
Common Stock (including 2,007,782 shares subject to options exercisable within
60 days).
First Financial. Each holder of First Financial Common Stock is entitled to
one vote per share held of record on the record date. The Merger Agreement must
be approved by the affirmative vote of a majority of the outstanding shares of
First Financial Common Stock entitled to vote thereon. The First Financial
22
<PAGE>
Adjournment Matter must be approved by the affirmative vote of a majority of
the shares present at the First Financial Special Meeting in person or
represented by proxy and entitled to vote thereon.
Abstentions will be counted as shares present for purposes of determining the
presence of a quorum on all matters. See "--Record Dates; Stock Entitled to
Vote; Quorum." Abstentions will have the effect of votes against the approval
of the Merger Agreement and the First Financial Adjournment Matter. In
addition, brokers who hold shares of First Financial Common Stock as nominees
will not have discretionary authority to vote such shares in the absence of
instructions from the beneficial owners thereof. Broker non-votes also will
have the effect of votes against the approval of the Merger Agreement and the
First Financial Adjournment Matter.
Stockholders of First Financial should be aware that, under Georgia law, a
stockholder who votes to approve the Merger Agreement may be deemed to have
ratified the terms of the Merger Agreement, including the fairness thereof,
and, under certain circumstances, such stockholder may be precluded from
challenging the fairness of the Merger Agreement in a subsequent legal
proceeding. First Financial may use a stockholder's affirmative vote in favor
of the Merger Agreement as a defense to any subsequent challenge to the Merger
Agreement. An abstention, in and of itself, will not be considered such a
ratification; however, no assurance can be given as to the effect that such an
abstention would have on a stockholder's right to challenge the Merger
Agreement.
As of September 15, 1995, directors and executive officers of First Financial
and their affiliates were beneficial owners of an aggregate of 2,676,654 shares
(approximately 4.2%) of the outstanding shares of First Financial Common Stock
(including 1,097,029 shares subject to options exercisable within 60 days,
including options that will become exercisable by virtue of the consummation of
the Merger).
VOTING OF PROXIES
Shares represented by properly executed proxies received in time for the
Special Meetings and which have not been revoked will be voted at such meetings
in the manner specified by the holders thereof. PROXIES WHICH DO NOT CONTAIN AN
INSTRUCTION TO VOTE FOR OR AGAINST OR TO ABSTAIN FROM VOTING ON A PARTICULAR
MATTER DESCRIBED IN THE PROXY WILL BE VOTED IN FAVOR OF SUCH MATTER.
It is not expected that any matter other than those referred to herein will
be brought before either of the Special Meetings. If, however, other matters
are properly presented, the persons named as proxies will vote in accordance
with their judgment with respect to such matters, unless authority to do so is
withheld in the proxy.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed First Data or First Financial form of
proxy does not preclude a stockholder from voting in person. A stockholder may
revoke a proxy at any time prior to its exercise by submitting a later dated
proxy with respect to the same shares, by filing with the Secretary of First
Data (in the case of a First Data stockholder) or the Secretary of First
Financial (in the case of a First Financial stockholder) a duly executed
revocation, or by voting in person at the respective Special Meeting.
Attendance at the relevant Special Meeting will not in and of itself constitute
a revocation of a proxy.
RECORD DATES; STOCK ENTITLED TO VOTE; QUORUM
First Data. Only holders of record of First Data Common Stock at the close of
business on September 15, 1995 (the "First Data Record Date") will be entitled
to receive notice of and to vote at the First Data Special Meeting. On the
First Data Record Date, First Data had outstanding 118,760,681 shares of First
Data Common Stock. The holders of First Data Common Stock are entitled to one
vote per share on each matter submitted to a vote at the First Data Special
Meeting. The holders of a majority of the shares of First Data Common Stock
entitled to vote must be present in person or by proxy at the First Data
Special Meeting in order for a quorum to be present. Shares of First Data
Common Stock represented by proxies which are
23
<PAGE>
marked "abstain" or which are not marked as to any particular matter or matters
will be counted as shares present for purposes of determining the presence of a
quorum on all matters. Proxies relating to "street name" shares that are voted
by brokers will be counted as shares present for purposes of determining the
presence of a quorum on all matters but will not be treated as shares having
voted at the First Data Special Meeting as to any proposal as to which
authority to vote is withheld by the broker.
In the event a quorum is not present in person or by proxy at the First Data
Special Meeting, the First Data Special Meeting is expected to be adjourned or
postponed. For a further discussion on adjournment and the possible reasons
therefor, see "THE ADJOURNMENT MATTERS."
First Financial. Only holders of record of First Financial Common Stock at
the close of business on September 15, 1995 (the "First Financial Record Date")
will be entitled to receive notice of and to vote at the First Financial
Special Meeting. On the First Financial Record Date, First Financial had
63,953,962 outstanding shares of First Financial Common Stock. The holders of
First Financial Common Stock are entitled to one vote per share on each matter
submitted to a vote at the First Financial Special Meeting. The holders of a
majority of the outstanding shares of First Financial Common Stock entitled to
vote must be present in person or by proxy at the First Financial Special
Meeting in order for a quorum to be present. Shares of First Financial Common
Stock represented by proxies which are marked "abstain" or which are not marked
as to any particular matter or matters will be counted as shares present for
purposes of determining the presence of a quorum on all matters. Proxies
relating to "street name" shares that are voted by brokers will be counted as
shares present for purposes of determining the presence of a quorum on all
matters but will not be treated as shares having voted at the First Financial
Special Meeting as to any proposal as to which authority to vote is withheld by
the broker.
In the event a quorum is not present in person or by proxy at the First
Financial Special Meeting, the First Financial Special Meeting is expected to
be adjourned or postponed. For a further discussion on adjournment and the
possible reasons therefor, See "THE ADJOURNMENT MATTERS."
APPRAISAL RIGHTS
At the First Data Special Meeting, holders of shares of First Data Common
Stock will consider and vote upon proposals to approve the Stock Issuance, the
Charter Amendments, the Incentive Plan Amendment and the First Data Adjournment
Matter. Because Sub, rather than First Data, will be the actual party to the
Merger with First Financial, holders of First Data Common Stock will not be
entitled to appraisal rights under the DGCL. Because the First Financial Common
Stock and the First Data Common Stock are listed on the NYSE, holders of shares
of First Financial Common Stock are not entitled to appraisal rights under the
GBCC. See "COMPARISON OF RIGHTS OF HOLDERS OF FIRST DATA COMMON STOCK AND FIRST
FINANCIAL COMMON STOCK--Appraisal Rights."
SOLICITATION OF PROXIES; GENERAL
Subject to the Merger Agreement, each of First Data and First Financial will
bear the cost of the solicitation of proxies from its own stockholders, except
that First Data and First Financial will share equally the cost of printing and
mailing this Joint Proxy Statement/Prospectus, including related filing fees.
In addition to solicitation by mail, the directors, officers and employees of
each corporation and its subsidiaries may solicit proxies from stockholders of
such corporation by telephone, in person or by other means. These directors,
officers and employees will not be additionally compensated for such
solicitation but may be reimbursed for out-of-pocket expenses in connection
therewith. Arrangements also will be made with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of solicitation
material to the beneficial owners of shares held of record by such persons, and
First Data and First Financial will reimburse such custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses in connection
therewith.
24
<PAGE>
Morrow & Co., Inc. will assist in the solicitation of proxies by First Data
and First Financial for an aggregate fee of $15,000, plus reimbursement of
reasonable out-of-pocket expenses.
HOLDERS OF FIRST FINANCIAL COMMON STOCK SHOULD NOT SEND STOCK CERTIFICATES
WITH THEIR PROXY CARDS. If the Merger Agreement is approved and the Merger is
consummated, materials for submitting First Financial stock certificates in
exchange for First Data stock certificates will be provided to the First
Financial stockholders.
Representatives of Ernst & Young LLP and Deloitte & Touche LLP are expected
to be present at the First Data Special Meeting and the First Financial Special
Meeting, respectively, where they will have the opportunity to make a statement
if they desire to do so and will be available to respond to appropriate
questions.
THE MERGER
The description of the Merger and the Merger Agreement contained in this
Joint Proxy Statement/Prospectus is qualified in its entirety by reference to
the Merger Agreement, a copy of which is included as Annex I to this Joint
Proxy Statement/Prospectus and is incorporated herein by reference.
GENERAL
First Data, Sub and First Financial have entered into the Merger Agreement,
which provides that, subject to the satisfaction or waiver (where permissible)
of the conditions set forth therein (see "THE MERGER AGREEMENT--Conditions to
the Merger"), Sub will be merged into First Financial, and First Financial will
be the Surviving Corporation and a wholly owned subsidiary of First Data. As
soon as practicable after the satisfaction or waiver (where permissible) of the
conditions under the Merger Agreement, the Certificate of Merger will be filed
with the Secretary of State of the State of Georgia, and the time of such
filing will be the Effective Time unless otherwise provided in the Certificate
of Merger.
BACKGROUND OF THE MERGER
First Financial has utilized Morgan Stanley for investment banking and
financial advisory services since 1987 and continuing through the acquisition
by First Financial of Western Union Financial Services, Inc. in 1994 and the
pending acquisition of Employee Benefit Plans, Inc. In late 1994, First
Financial's senior management began consulting with Morgan Stanley as part of
First Financial's standing practice to analyze from time to time on a regular
basis strategic alternatives in light of existing conditions and developments
in the information services and transaction processing industry. In connection
with this ongoing process, First Financial's senior management concluded that
it should explore the feasibility of a combination with another company engaged
in or interested in entering that industry, while continuing its strategic
direction of growth through acquisitions. Its principal reasons for this
conclusion were indications that much larger companies with greater financial
or other resources might commence competing activities, as well as continuing
consolidation among companies already engaged in these activities. First
Financial's senior management was concerned that the company might be placed at
a competitive disadvantage as a result of the greater resources of these
competitors and the potentially broader scope of their activities.
First Financial's consultations with Morgan Stanley confirmed senior
management's conclusion that, as a result of the size of First Financial and
the nature of its assets, only a limited number of companies with specific
characteristics would be realistic candidates as parties to a business
combination. As a services company with a high proportion of intangible assets
(primarily goodwill relating to service contracts with customers), First
Financial did not have assets that would lend themselves to use in financing a
leveraged transaction, and any transaction involving purchase accounting would
result in an amount of goodwill and resulting earnings charges that were
unlikely to be acceptable to any public company. Accordingly, it was
25
<PAGE>
concluded that any feasible business combination would likely have to be
structured as a stock for stock merger accounted for as a pooling of interests.
As an additional benefit, such a stock for stock merger would likely qualify as
tax-free to the First Financial stockholders. Moreover, in the light of the
magnitude of First Financial's earnings and its relatively high price-earnings
ratio, a merger partner would have to be either (a) a company at least
approximately as large as First Financial with a comparable or higher price-
earnings ratio or (b) an extremely large company that could absorb the
potentially significant dilution in earnings that would result from the market
premium for First Financial stockholders that First Financial's senior
management would insist upon for such transaction. First Financial's senior
management concluded that, in either case, the merger partner would have to be
engaged in the information services and transaction processing industry or have
a strategic reason for entering the industry.
Working with Morgan Stanley, First Financial's management identified the
small number of potential merger candidates who might meet these requirements.
As authorized by First Financial, during the early months of 1995, Morgan
Stanley approached these companies (other than First Data) to ascertain whether
there was any interest in discussing a business combination with First
Financial. There were preliminary discussions with several of these companies,
but the only expressions of interest were either for a merger of equals
transaction without any premium for stockholders of First Financial or for a
transaction at a price unacceptable to First Financial's management as not
providing adequate value to its stockholders.
As a further step in this process, in May 1995, First Financial authorized
Morgan Stanley to contact First Data in order to discuss a possible business
combination transaction involving First Data and First Financial in which the
outstanding capital stock of First Financial would be converted, on a tax free
basis, into shares of First Data and which would be accounted for on a pooling
of interests basis. Like First Financial, First Data is an information services
company whose primary business area is transaction processing. First Data's
competing bid for Western Union in 1994 had indicated its significant interest
in acquiring that business, and its acquisition of CESI Holdings, Inc. in early
1995 represented its interest in the business of processing merchant credit
card transactions, which is First Financial's largest business area. Because of
managements' familiarity with each other and the similarity of the two
companies' business operations and size, as well as their price-earnings
ratios, First Financial and Morgan Stanley thought that a combination of the
two companies might be feasible on a basis that would provide added value for
both companies and their stockholders. On May 30, 1995, Scott R. Brakebill, a
Managing Director of Morgan Stanley, met with Henry C. Duques, Chairman of the
Board and Chief Executive Officer of First Data, to indicate that First
Financial was interested in exploring whether such a business combination was
desirable. As a result of such conversation, on May 31, 1995, Messrs. Duques
and Brakebill and Patrick H. Thomas, Chairman of the Board and Chief Executive
Officer of First Financial, met in New York to discuss whether to explore such
a possible business combination. Messrs. Duques and Thomas agreed to instruct
Sidley & Austin, counsel to First Data, and Shearman & Sterling and Sutherland,
Asbill & Brennan, counsel to First Financial, to identify and analyze certain
legal and regulatory issues potentially arising from such a business
combination.
During the evening of June 1, 1995, the legal advisors, Mr. M. Tarlton
Pittard of First Financial and Messrs. Lee Adrean, Walter M. Hoff and David J.
Trienen of First Data met in New York to review preliminarily such legal and
regulatory issues. This group, joined by Mr. David P. Bailis of First Data,
continued its preliminary discussions the next morning.
On June 5, 1995, Mr. Brakebill telephoned Mr. Duques to indicate that, based
upon First Financial's review of the legal and regulatory issues identified to
date, First Financial had concluded that it would be interested in continuing
to explore the possibility of a business combination.
On June 7, 1995, First Financial and First Data executed a confidentiality
agreement pursuant to which the parties agreed to hold confidential the
information exchanged by the parties. Also on June 7, 1995, the parties each
commenced a due diligence review of the other, commenced discussions of
possible synergies and cost savings that might result from the possible
business combination and exchanged and reviewed
26
<PAGE>
preliminary drafts of the Merger Agreement. The drafts contemplated a business
combination involving a merger of a wholly owned subsidiary of First Data into
First Financial, with such merger resulting in First Financial becoming a
wholly owned subsidiary of First Data and the outstanding shares of First
Financial being converted into shares of First Data. Discussions involving the
senior managements of First Data and First Financial and their respective
advisors concerning numerous financial, legal, accounting and regulatory issues
(including the terms of a possible merger agreement), and their respective due
diligence reviews, continued through June 7, 8 and 9, 1995. Throughout such
negotiations, it was mutually understood that any transaction would have to be
structured in a manner that enabled pooling of interests accounting treatment
(in order to avoid the recognition of goodwill by First Data and the resulting
earnings charges) and tax free treatment for the stockholders of First
Financial. The reverse-triangular merger structure discussed from the outset
and reflected in the Merger Agreement was consistent with such understanding.
In the morning of June 9, 1995, Messrs. Duques and Thomas met to discuss the
status of negotiations and to continue to explore the possibility of a
potential business combination and a possible exchange ratio for converting the
shares of First Financial into shares of First Data. As a result of such
meeting, beginning in the afternoon of June 9, 1995, both First Financial and
First Data held meetings of their respective Boards of Directors in order to
discuss the current status of discussions and significant issues arising from
such discussions. During the meeting of the First Financial Board in Atlanta,
the First Financial Board received detailed reports and information concerning
the businesses and operations of First Financial and First Data, the status of
the discussions, the proposed structure of the combination, the possible
business rationale for the proposed combination, various strategic alternatives
for First Financial and the principal terms of the proposed merger agreement
and considered various legal, accounting and financial issues regarding the
combination. During the telephonic meeting of the First Data Board, the First
Data Board reviewed the contacts and discussions that had occurred to date
involving the senior managements and advisors of First Data and First
Financial, the possible business rationale for the proposed business
combination and various issues regarding the proposed business combination.
Upon the completion of such Board meetings, Messrs. Thomas and Duques spoke
by telephone to discuss various issues regarding the proposed business
combination, including a possible exchange ratio. They agreed that it was
desirable to have their respective senior management teams and advisors
continue discussions.
Following the meeting of the First Data Board, First Data retained Smith
Barney as its financial advisor with respect to the proposed business
combination.
Discussions between the parties and their respective financial and legal
advisors regarding various financial and legal issues continued throughout June
10 and June 11, 1995.
During the evening of June 11, 1995, the Board of First Financial held a
telephonic meeting to review the status of the discussions and to consider
certain legal, accounting and financial issues, including certain significant
provisions of the Merger Agreement. The First Financial Board authorized its
senior management to continue discussions.
During the evening of June 11, 1995 and continuing into the early morning of
June 12, 1995, the First Data Board met in New York to consider the proposed
business combination. The First Data Board reviewed with its legal and
financial advisors the status of the discussions, the business rationale for,
and the possible financial implications of, the proposed business combination,
certain principal provisions of a draft Merger Agreement, and various
financial, legal, accounting and other issues relating to the proposed business
combination.
The First Data Board met again in the late morning continuing into the early
afternoon of June 12, 1995. The Board further considered the status of
discussions, various alternative strategic growth opportunities that might be
available to First Data in the absence of pursuing the proposed business
combination, an update by representatives of Smith Barney of the valuation
methodologies to be utilized by
27
<PAGE>
Smith Barney for purposes of its financial analysis and various financial,
legal, accounting and other issues relating to the proposed business
combination.
The parties and their respective financial and legal advisors met in New York
throughout the day on June 12, 1995 in an attempt to finalize the Merger
Agreement and to agree upon the Conversion Number. After several hours of
negotiations, and subject to the approval of their respective Boards, the
parties agreed late in the afternoon that the Conversion Number would be fixed
at 1.5859. In addition, the outstanding issues under the Merger Agreement were
resolved.
Late in the afternoon of June 12, 1995, the Boards of First Financial and
First Data each met to consider the final terms of the proposed business
combination.
After a detailed discussion of the Conversion Number and other legal,
accounting and financial issues during its telephonic meeting, the Board of
First Financial received the opinion of Morgan Stanley that the Conversion
Number (defined by Morgan Stanley for purposes of its opinion as the Exchange
Ratio) was fair to the stockholders of First Financial from a financial point
of view. See "THE MERGER--Opinions of Financial Advisors--Morgan Stanley
Opinion to the First Financial Board of Directors." The Board of First
Financial then determined that the Merger, upon the terms and conditions set
forth in the Merger Agreement, is fair to, and in the best interests of, the
stockholders of First Financial and unanimously approved and adopted the Merger
Agreement and the Merger and resolved to recommend to the stockholders of First
Financial that they vote to approve the Merger Agreement.
At its late afternoon meeting on June 12, 1995, the Board of First Data
further considered the proposed business combination and reviewed the financial
analysis of Smith Barney. Smith Barney also delivered to the Board its opinion
to the effect that, as of such date and based upon and subject to certain
matters stated in such opinion, the Conversion Number was fair, from a
financial point of view, to First Data. See "THE MERGER--Opinions of Financial
Advisors--Smith Barney Opinion to the First Data Board of Directors."
Thereafter, the Board authorized the execution of the Merger Agreement and the
issuance of First Data Common Stock required to be issued in connection with
the Merger and resolved to recommend to the stockholders of First Data that
they vote to approve the Stock Issuance.
Late in the evening of June 12, 1995, the parties executed the Merger
Agreement and related documents and, prior to the beginning of trading on the
New York Stock Exchange on the morning of June 13, 1995, issued a press release
announcing the transaction. On September 19, 1995, the parties executed an
amendment to the Merger Agreement in connection with the settlement of certain
litigation. See "CERTAIN LITIGATION."
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS; REASONS FOR THE MERGER
Recommendations of the First Data Board of Directors; Reasons for the Merger.
At special meetings of the First Data Board of Directors held on June 9, 11 and
12, 1995 (with two meetings held on June 12), First Data's management and (in
the case of the meetings held on June 11 and 12) representatives of Smith
Barney made presentations concerning the business and prospects of First
Financial, First Data and the potential combination of the two companies. At a
meeting held on June 12, 1995, the Board of Directors of First Data by
unanimous vote (with one director absent) determined that the Merger is
advisable and fair to and in the best interests of the holders of shares of
First Data Common Stock, approved the Merger Agreement, the Merger and the
other transactions contemplated thereby and resolved to recommend that the
holders of shares of First Data Common Stock vote in favor of the Stock
Issuance.
In reaching these conclusions, the First Data Board of Directors considered,
with the assistance of management and its legal and financial advisors, among
other things, the following factors:
(i) information concerning the financial performance and condition,
business operations, assets, liabilities and prospects of First Data and
First Financial and their respective projected future values and prospects
as separate entities and on a combined basis;
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(ii) the possible strategic growth opportunities that might be available
to First Data absent the Merger, including the continuation and expansion
of merchant alliances and other merchant services and acquisitions of
information processing companies serving the financial services industry;
(iii) the strategic fit between First Data and First Financial and the
complementary nature of their respective businesses;
(iv) projected operating synergies and cost savings, including possible
synergies and cost savings with respect to (a) the consolidation of
corporate, administrative and support functions, (b) the elimination of
certain costs associated with First Financial's Office of the Chairman, (c)
enhanced purchasing power with respect to vendors, (d) the elimination of
public reporting obligations of First Financial and (e) other unspecified
opportunities (it being recognized that such opportunities were likely in a
combination of large complementary businesses but that, until the Merger
was completed or nearly completed, many of those opportunities could not be
identified with specificity);
(v) current industry, economic and market conditions, including the
consolidation in the financial services industry, increased automation and
the presence of large companies with strong electronic processing
capabilities;
(vi) the structure of the transaction, including the expected accounting
treatment of the Merger as a pooling of interests (thereby avoiding the
reduction in earnings due to the amortization of goodwill which would
result under purchase accounting);
(vii) the terms of the Merger Agreement, including the amount and the
form of consideration, the parties' representations, warranties, covenants
and agreements, and the conditions to their respective obligations set
forth in the Merger Agreement;
(viii) the increased number of shares of First Data Common Stock that
would be held by public stockholders after the Merger;
(ix) the analyses and recommendation of the transaction by First Data's
management; and
(x) the financial analyses of its financial advisor, Smith Barney, and
the opinion of Smith Barney as to the fairness to First Data of the
Conversion Number from a financial point of view (see "--Opinions of
Financial Advisors--Smith Barney Opinion to the First Data Board of
Directors").
The foregoing discussion of the information and factors considered and given
weight by the First Data Board of Directors is not intended to be exhaustive.
In view of the variety of factors considered in connection with its evaluation
of the Merger, the First Data Board of Directors did not find it practicable to
and did not quantify or otherwise assign relative weights to the specific
factors considered in reaching its determination. In addition, individual
members of the First Data Board of Directors may have given different weights
to different factors.
THE FIRST DATA BOARD OF DIRECTORS RECOMMENDS THAT THE HOLDERS OF FIRST DATA
COMMON STOCK VOTE FOR APPROVAL OF THE STOCK ISSUANCE.
Recommendation of the First Financial Board of Directors; Reasons for the
Merger. At special meetings of the First Financial Board of Directors held on
June 9, June 11 and June 12, 1995, First Financial's management and
representatives of Morgan Stanley made presentations concerning the business
and prospects of First Financial and the potential combination of First
Financial and First Data. The First Financial Board of Directors also received
presentations concerning, and reviewed the terms of, the Merger Agreement with
members of First Financial management and its legal counsel and financial
advisors and discussed the accounting treatment of the Merger with its
independent accountants. At the special meeting on June 12, 1995, the Board of
Directors of First Financial unanimously determined that the Merger, upon the
terms and conditions set forth in the Merger Agreement, is fair to and in the
best interests of the stockholders of First Financial. Accordingly, the First
Financial Board of Directors has unanimously approved and adopted the Merger
Agreement and unanimously recommends that the holders of outstanding
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shares of First Financial Common Stock vote in favor of the approval of the
Merger Agreement at the First Financial Special Meeting. In reaching its
determination, the First Financial Board of Directors consulted with First
Financial's management, as well as its legal counsel and financial advisors,
and considered a number of factors, including, without limitation, the
following:
(i) The consideration to be received by First Financial's stockholders in
the Merger, including the fact that the Conversion Number of 1.5859 shares
of First Data Common Stock per share of First Financial Common Stock
represented a substantial premium over the then-prevailing ratio of the
market prices of First Data Common Stock and First Financial Common Stock.
With respect to the Conversion Number, the First Financial Board of
Directors noted the fact that the Conversion Number is fixed and,
accordingly, will not be adjusted to reflect any increases or decreases in
the market price of the shares of First Data Common Stock.
(ii) The opportunity for First Financial stockholders to receive First
Data Common Stock in a transaction that is tax-free for federal income tax
purposes (except for cash received in lieu of fractional shares of First
Data Common Stock) and thus continue to participate in the growth of the
business conducted by First Financial and First Data after the Merger and
in the potential appreciation in the value of First Data Common Stock
without paying current United States federal income tax.
(iii) First Financial's and First Data's respective businesses
(including, without limitation, the range of services provided), assets,
liabilities, managements, strategic objectives, competitive positions and
prospects, including particularly the factors discussed below.
(iv) The financial condition, results of operations and cash flows of
each of First Financial and First Data, both on a historical and on a
prospective basis. In this regard the First Financial Board of Directors
believes that First Data historically had been, and the combined First
Data/First Financial prospectively is reasonably likely (absent unforeseen
circumstances) to continue to be, a relatively strong financial performer,
with generally superior results of operations, cash flows and prospects.
(v) The strategic fit between First Financial and First Data, resulting
in projected significant operating synergies and cost savings expected at
this time to be available to the combined First Data/First Financial,
including possible synergies and cost savings with respect to (a) the
consolidation of corporate, administrative and support functions, (b) the
elimination of certain costs associated with First Financial's Office of
the Chairman, (c) enhanced purchasing power with respect to vendors, (d)
the elimination of public reporting obligations of First Financial and (e)
other unspecified opportunities (it being recognized that such
opportunities were likely in a combination of large complementary
businesses but that, until the Merger was completed or nearly completed,
many of those opportunities could not be identified with specificity);
(vi) Current stock market conditions and historical stock market prices,
volatility and trading information with respect to First Financial Common
Stock and First Data Common Stock and the earnings per share of First
Financial Common Stock and First Data Common Stock. In this regard, the
First Financial Board of Directors considered the high growth rates and
high market price to earnings multiple that First Financial had enjoyed
historically. The First Financial Board of Directors believed, however,
that, given the uncertainties in the financial services industry generally,
as well as the other factors discussed in point (xiv) below, the combined
company would be better able to maintain a high earnings per share and
stable market price and to offer the stockholders of First Financial the
best opportunity to continue to realize increases in the value of their
equity.
(vii) The presentation of Morgan Stanley delivered to First Financial's
Board of Directors on June 12, 1995, including Morgan Stanley's opinion to
the effect that, as of the date of such opinion, the Conversion Number
(defined in such opinion as the Exchange Ratio) was fair from a financial
point of view to the holders of shares of First Financial Common Stock. See
"--Opinions of Financial Advisors--Morgan Stanley Opinion to the First
Financial Board of Directors."
(viii) The expected accounting treatment of the Merger as a pooling of
interests (thereby avoiding the reduction in earnings of First Data which
would result from the amortization of goodwill under purchase accounting).
See "--Accounting Treatment."
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(ix) The analysis and recommendation of the Merger by First Financial's
management.
(x) The terms and conditions of the Merger Agreement, including the
amount and the form of the consideration, the parties' representations,
warranties, covenants and agreements, and the conditions to their
respective obligations set forth in the Merger Agreement. The First
Financial Board of Directors, based on presentations by its financial and
legal advisors, deemed the terms of the Merger Agreement, including terms
addressing the fixed exchange ratio without a collar limitation, the
limited representations and warranties of First Financial, the limited
conditions to First Data's obligation to close the Merger, the ability of
First Financial to consider competing merger proposals, and the absence of
lock-up, stock or asset options, to be generally favorable to First
Financial when compared to other transactions of a similar nature. See "THE
MERGER AGREEMENT."
(xi) The terms of the Merger Agreement that permit First Financial's
Board of Directors, in the exercise of its fiduciary duties and subject to
certain conditions, to engage in discussions or negotiations with, or
furnish information concerning First Financial and its subsidiaries,
business, properties or assets to, any third party that makes a Takeover
Proposal (as defined in the Merger Agreement) (although First Financial is
not permitted by the Merger Agreement to solicit, initiate or encourage any
third-party bids). In that regard, First Financial's Board of Directors
noted that the Merger Agreement provides that, under certain circumstances
involving a completed or prospective third party transaction, First
Financial would be obligated to pay First Data up to $70 million. The Board
of Directors did not view the fee provisions of the Merger Agreement as
unreasonably impeding any interested third party from proposing a superior
transaction. See "THE MERGER AGREEMENT--Termination."
(xii) The review of other strategic alternatives, including possible
business combinations with other companies. Based upon their review of
other strategic alternatives, as well as the advantages that could be
achieved from a First Data/First Financial combination, the First Financial
Board of Directors did not believe that a transaction (whether in the form
of a business combination or otherwise) with any other company could
reasonably be expected to offer advantages comparable to those presented by
a business combination with First Data.
(xiii) The possible strategic growth opportunities that might be
available to First Financial absent the Merger.
(xiv) The uncertainties in the information services and transaction
processing industry, including the likelihood of continuing consolidation
of the industry (such as the acquisition in early 1995 by First Data of the
merchant credit card processing businesses of CESI Holdings, Inc.), the
possibility of changes in the industry (such as indications that major
telecommunications companies, other financial services companies or
financial institutions might develop new technologies or systems for
consumer funds transfers and purchases of merchandise that would compete
with credit card transactions and First Financial's consumer funds transfer
system), and indications of the possible entry into the transaction
processing business by companies with larger financial or other competitive
resources, which might place First Financial at a competitive disadvantage.
The First Financial Board of Directors considered the possibility that all
of these changes in the industry, depending on their nature, could be
disadvantageous to First Financial. In this regard, the First Financial
Board of Directors believed that, although the uncertainties of the
financial services industry could also be advantageous to First Financial
and disadvantageous to First Data, the combined company would be better
able to respond to the changes in the industry and to take advantage of the
opportunities that such changes might bring.
(xv) The fact that stockholders of First Financial will not receive the
full benefit of any future growth in the value of their equity that First
Financial may have achieved as an independent company, and the potential
disadvantage to First Financial stockholders who receive First Data Common
Stock in the event that First Data does not perform as well in the future
as First Financial may have performed as an independent company.
The foregoing discussion of information and factors considered and given
weight by the First Financial Board of Directors is not intended to be
exhaustive. In view of the wide variety of factors considered in connection
with its evaluation of the terms of the Merger, the First Financial Board of
Directors did not find
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it practicable to, and did not, quantify or otherwise attempt to assign
relative weights to the specific factors considered in reaching their
determinations. In addition, individual members of the First Financial Board of
Directors may have given different weights to different factors.
THE FIRST FINANCIAL BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
HOLDERS OF OUTSTANDING SHARES OF FIRST FINANCIAL COMMON STOCK VOTE FOR APPROVAL
OF THE MERGER AGREEMENT.
OPINIONS OF FINANCIAL ADVISORS
SMITH BARNEY OPINION TO THE FIRST DATA BOARD OF DIRECTORS
Smith Barney was retained by First Data to act as its financial advisor in
connection with the Merger. In connection with such engagement, First Data
requested that Smith Barney evaluate the fairness, from a financial point of
view, to First Data of the consideration to be paid by First Data in the
Merger. On June 12, 1995, at a meeting of the Board of Directors of First Data
held to evaluate the proposed Merger, Smith Barney rendered an oral opinion
(subsequently confirmed by delivery of a written opinion dated such date), to
the Board of Directors of First Data to the effect that, as of such date and
based upon and subject to certain matters stated in such opinion, the
Conversion Number was fair, from a financial point of view, to First Data.
Smith Barney has reconfirmed such opinion by delivery of a written opinion
dated the date of this Joint Proxy Statement/Prospectus.
In arriving at its opinion, Smith Barney reviewed the Merger Agreement and,
in connection with its opinion dated the date hereof, this Joint Proxy
Statement/Prospectus, and held discussions with certain senior officers,
directors and other representatives and advisors of First Data and certain
senior officers and other representatives and advisors of First Financial
concerning the businesses, operations and prospects of First Data and First
Financial. Smith Barney examined certain publicly available business and
financial information relating to First Data and First Financial as well as
certain financial forecasts and other data for First Data and First Financial
which were provided to Smith Barney by or otherwise discussed with the
respective managements of First Data and First Financial, including information
relating to certain strategic implications and operational benefits anticipated
from the Merger and analysts' estimates as to the future financial performance
of First Data and First Financial. Smith Barney reviewed the financial terms of
the Merger as set forth in the Merger Agreement in relation to, among other
things: current and historical market prices and trading volumes of the First
Data Common Stock and First Financial Common Stock; the historical and
projected earnings and operating data of First Data and First Financial; and
the capitalization and financial condition of First Data and First Financial.
Smith Barney considered, to the extent publicly available, the financial terms
of certain other similar transactions recently effected which Smith Barney
considered relevant in evaluating the Merger and analyzed certain financial,
stock market and other publicly available information relating to the
businesses of other companies whose businesses Smith Barney considered relevant
in evaluating those of First Data and First Financial. Smith Barney also
evaluated the potential pro forma financial impact of the Merger on First Data.
In addition to the foregoing, Smith Barney conducted such other analyses and
examinations and considered such other financial, economic and market criteria
as Smith Barney deemed appropriate to arrive at its opinion. Smith Barney noted
that its opinion was necessarily based upon information available, and
financial, stock market and other conditions and circumstances existing and
disclosed, to Smith Barney as of the date of its opinion.
In rendering its opinion, Smith Barney assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information publicly available or furnished to or otherwise reviewed
by or discussed with Smith Barney. With respect to financial forecasts and
other information provided to or otherwise reviewed by or discussed with Smith
Barney, the managements of First Data and First Financial advised Smith Barney
that such forecasts and other information were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
respective managements of First Data and First Financial as to the future
financial performance of First Data and First Financial and the strategic
implications and operational benefits anticipated from the Merger. Smith Barney
assumed, with the consent of the Board of Directors of First Data, that the
Merger will be treated as a pooling of interests in accordance with generally
accepted accounting principles and as a tax-free reorganization for
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federal income tax purposes. Smith Barney's opinion relates to the relative
values of First Data and First Financial. Smith Barney did not express any
opinion as to what the value of the First Data Common Stock actually will be
when issued pursuant to the Merger or the price at which the First Data Common
Stock will trade subsequent to the Merger. In addition, Smith Barney did not
make or obtain an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of First Data or First Financial nor did
Smith Barney make any physical inspection of the properties or assets of First
Data or First Financial. Smith Barney was not asked to consider, and its
opinion does not address, the relative merits of the Merger as compared to any
alternative business strategies that might exist for First Data or the effect
of any other transaction in which First Data might engage. In addition,
although Smith Barney evaluated the Conversion Number from a financial point of
view, Smith Barney was not asked to and did not recommend the specific
consideration payable in the Merger. No other limitations were imposed by First
Data on Smith Barney with respect to the investigations made or procedures
followed by Smith Barney in rendering its opinion.
THE FULL TEXT OF THE WRITTEN OPINION OF SMITH BARNEY DATED THE DATE OF THIS
JOINT PROXY STATEMENT/PROSPECTUS, WHICH SETS FORTH THE ASSUMPTIONS MADE,
MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO
AS ANNEX II AND IS INCORPORATED HEREIN BY REFERENCE. FIRST DATA STOCKHOLDERS
ARE URGED TO READ THIS OPINION CAREFULLY IN ITS ENTIRETY. SMITH BARNEY'S
OPINION IS DIRECTED ONLY TO THE FAIRNESS OF THE CONVERSION NUMBER FROM A
FINANCIAL POINT OF VIEW, DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER OR
RELATED TRANSACTIONS AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE FIRST DATA SPECIAL
MEETING. THE SUMMARY OF THE OPINION OF SMITH BARNEY SET FORTH IN THIS JOINT
PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF SUCH OPINION.
In preparing its opinion to the Board of Directors of First Data, Smith
Barney performed a variety of financial and comparative analyses, including
those described below performed by Smith Barney in connection with its opinion
rendered to the Board of Directors of First Data on June 12, 1995. The summary
of such analyses does not purport to be a complete description of the analyses
underlying Smith Barney's opinion. The preparation of a fairness opinion is a
complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances and, therefore, such an opinion
is not readily susceptible to summary description. Accordingly, Smith Barney
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and factors, without considering all analyses and
factors, could create a misleading or incomplete view of the processes
underlying such analyses and its opinion. Smith Barney did not attribute
particular weight to any specific valuation range solely as a result of the
breadth of such range. The ranges of valuations resulting from any particular
analysis were utilized by Smith Barney merely as points of reference for the
Board of Directors of First Data and should not be taken to be Smith Barney's
view of the actual value of First Financial. In its analyses, Smith Barney made
numerous assumptions with respect to First Data, First Financial, industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of First Data and First
Financial, such as the impact of competition on the businesses of First Data
and First Financial and the financial information services industry generally,
industry growth and the absence of any material adverse change in the financial
condition and prospects of First Data, First Financial or the financial
information services industry or in the financial markets in general. No
company, business or transaction used in such analyses as a comparison is
identical to First Data, First Financial or the Merger, nor is an evaluation of
the results of such analyses entirely mathematical. The estimates contained in
such analyses are not necessarily indicative of actual values or predictive of
future results or values, which may be significantly more or less favorable
than those suggested by such analyses. In addition, analyses relating to the
value of businesses or securities do not purport to be appraisals or to reflect
the prices at which businesses or securities actually may be sold. Accordingly,
such analyses and estimates are inherently subject to substantial uncertainty.
The following is a summary of the material analyses performed by Smith Barney
in connection with its opinion dated June 12, 1995. In connection with its
opinion dated the date of this Joint Proxy
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Statement/Prospectus, Smith Barney performed procedures to update certain of
its analyses and reviewed the assumptions on which such analyses were based and
the factors considered in connection therewith. The assumptions made and
factors considered in connection with Smith Barney's opinions dated June 12,
1995 and the date of this Joint Proxy Statement/Prospectus were substantially
similar.
With respect to the cost savings and other potential synergies resulting from
the Merger referenced in Smith Barney's analyses described below, Smith Barney
assumed, based on discussions with the management of First Data that, on a
combined basis, First Data and First Financial would be able to realize
improvements in pre-tax income through synergies and cost reductions (e.g.,
consolidation of administrative and support functions and enhanced purchasing
power with respect to vendors) and revenue enhancements (e.g., cross selling of
products). The potential pre-tax income impact of total cost savings and
revenue enhancements was assumed to be approximately $137 million in 1996 and
$181 million in 1997.
Comparable Company Analysis. Using publicly available information, Smith
Barney analyzed, among other things, the market values and trading multiples of
First Data, First Financial and the following selected companies which
possessed general business, operating and financial characteristics
representative of companies in the financial information services industry:
Automatic Data Processing Inc.; Electronic Data Systems Corporation; Equifax,
Inc.; National Data Corporation; SPS Transaction Services, Inc.; and Total
System Services, Inc. (the "Comparable Companies"). Smith Barney compared
market values as multiples of, among other things, operational measures that
are affected by the capital structure of a company such as latest 12 months net
income, and adjusted market values (equity value, plus total debt, less cash,
plus preferred stock) as multiples of operational measures that are not
affected by the capital structure of a company such as latest 12 months sales,
earnings before interest, taxes, depreciation and amortization ("EBITDA") and
earnings before interest and taxes ("EBIT"). The ranges of multiples of latest
12 months net income, sales, EBITDA and EBIT for the Comparable Companies
(excluding outliers) were as follows: (i) latest 12 months net income: 20.5x to
46.5x (with a mean of 30.7x and a median of 30.0x); (ii) latest 12 months
sales: 1.7x to 4.5x (with a mean of 3.1x and a median of 3.0x); (iii) latest 12
months EBITDA: 8.8x to 16.5x (with a mean of 12.5x and a median of 13.1x); and
(iv) latest 12 months EBIT: 11.9x to 24.5x (with a mean of 18.5x and a median
of 17.9x). The multiples of latest 12 months net income, sales, EBITDA and EBIT
for First Data were 32.4x, 4.5x, 13.6x and 19.0x, respectively. The multiples
of latest 12 months net income, sales, EBITDA and EBIT for First Financial were
33.5x, 2.4x, 14.7x and 20.3x, respectively. Smith Barney also compared debt to
capitalization ratios, profit margins, historical sales and EBIT growth and
projected earnings per share ("EPS") growth of the Comparable Companies with
those of First Data and First Financial. These measurements provided a
rationalization for the trading values of the Comparable Companies. EPS
projections for the Comparable Companies, First Data and First Financial were
based on estimates of 15 investment banking firms, as compiled by Institutional
Brokers' Estimate System ("I/B/E/S"). EPS estimates of such analysts for fiscal
years 1995 and 1996 were $2.25 per share and $2.70 per share, respectively, for
First Data, and $3.05 and $3.65 per share, respectively, for First Financial.
All multiples were based on closing stock prices on June 9, 1995. Applying the
mean and median multiples of the Comparable Companies to First Financial's
corresponding financial statistics resulted in equity reference ranges for
First Financial of approximately $70 to $85 per share assuming no cost savings
or other potential synergies anticipated from the Merger were achieved, and
approximately $81 to $101 per share assuming certain cost savings and other
potential synergies anticipated from the Merger were achieved.
Comparable Merger and Acquisition Transactions Analysis. Using publicly
available information, Smith Barney analyzed, among other things, the implied
purchase price and adjusted transaction value multiples paid in the following
selected merger and acquisition transactions in the data processing services
industry occurring during the six-year period beginning in August 1989
(acquiror/target): First Financial/Western Union (New Valley Corp.) (11/94);
First Data/Card Establishment Services, Inc. (11/94); National Data
Corporation/General Computer Corporation (9/94); First Data/Envoy Corporation
(financial business) (8/94); First Financial/GENEX Services Inc. (7/94); Fiserv
Inc./Data-Link Systems, Inc. (12/93); CYBERTEK Corporation/Policy Management
Systems Corporation (6/93); Fiserv Inc./Datatronix Financial Services (6/93);
Medaphis Corporation/CompMed Inc. (12/92); ALLTEL Corporation/TDS Healthcare
Systems Corporation (12/92); MEDSTAT Systems, Inc./Inforum, Inc. (11/92);
Automatic Data Processing Inc./Bank America Corporation (5/92); Computer Power,
Inc./ALLTEL Corporation (12/91);
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Fiserv Inc./Citicorp Information Data Processing (4/91); Equifax,
Inc./Telecredit Inc. (11/90); Kansas City Southern Industries Inc./DST Systems,
Inc. (5/90); NYNEX/Stockholder Systems (4/90); ALLTEL Corporation/Systematics,
Inc. (3/90); SunGard Data Systems, Inc./Warrington Financial Systems, Inc.
(2/90); and SunGard Data Systems, Inc./DYATRON Corporation (8/89)
(collectively, the "Comparable Transactions"). Smith Barney compared equity
purchase prices as multiples of, among other things, latest 12 months and
projected net income, and adjusted transaction values (equity value, plus total
debt, less cash and cash equivalents, plus preferred stock) as multiples of
latest 12 months revenue, EBITDA and EBIT. The ranges of multiples of net
income, projected net income, revenue, EBITDA and EBIT for the Comparable
Transactions for which public information was available were as follows: (i)
net income: 12.5x to 29.6x (with a mean of 19.5x and a median of 18.5x); (ii)
projected net income: 12.1x to 28.8x (with a mean of 19.0x and a median of
17.7x); (iii) revenue: 0.8x to 3.6x (with a mean of 1.8x and a median of 1.7x);
(iv) EBITDA: 6.4x to 14.7x (with a mean of 10.5x and a median of 10.2x); and
(v) EBIT: 5.9x to 26.0x (with a mean of 13.8x and a median of 11.7x). All
multiples for the Comparable Transactions were based on information available
at the time of announcement of such transaction, without taking into account
differing market and other conditions occurring during the six-year period
during which the Comparable Transactions occurred. The mean and median
multiples of the Comparable Transactions excluded outliers and therefore were
not derived from each of the Comparable Transactions. Applying the mean
multiples of the Comparable Transactions to First Financial's corresponding
financial statistics resulted in an equity reference range for First Financial
of approximately $70 to $100 per share.
Discounted Cash Flow Analysis. Smith Barney performed a discounted cash flow
analysis of the projected free cash flow of First Financial for the fiscal
years ending December 31, 1996 through 1999, based on EPS estimates of 15
investment banking firms as compiled by I/B/E/S for fiscal year 1996 of $3.65
per share and extrapolated by Smith Barney for fiscal years 1997 through 1999
based on estimates of such investment banking firms as to the growth rate
potential for First Financial. The earnings growth potential of First Financial
as reported by I/B/E/S indicated a five-year EPS growth rate for First
Financial of between 18% to 25% (with a mean of approximately 20%). Smith
Barney assumed, for purposes of its extrapolations for fiscal years 1997
through 1999, a growth rate for First Financial's earnings before interest,
taxes and amortization ("EBITA") of approximately 20% per year. For purposes of
this analysis, Smith Barney utilized discount rates of 12.5%, 15.0% and 17.5%
and terminal multiples of First Financial's 1999 unlevered net income of 20.0x
to 26.0x. Smith Barney arrived at such discount rates based on its judgment of
the weighted average cost of capital of publicly traded financial information
services companies, and arrived at such terminal multiples based on its review
of the trading characteristics of the common stock of the Comparable Companies.
This analysis resulted in equity reference ranges for First Financial of
approximately $74 to $112 per share assuming no cost savings or other potential
synergies anticipated from the Merger were achieved, and approximately $85 to
$128 per share assuming certain cost savings and other potential synergies
anticipated from the Merger were achieved.
Premium Analysis. Smith Barney compared the implied premium payable in the
Merger with the premiums paid in the following selected stock-for-stock
transactions occurring during the three-year period beginning in June 1992 and
involving companies of approximately equal market value, based on stock prices
one day, one month and three months prior to the announcement date of such
transactions (acquiror/target): Bell Sports Corporation/American Recreation
Company Holdings, Inc. (2/95); Frontier Corporation/ALC Communications
Corporation (4/95); Vencor, Inc./Hillhaven Corp. (1/95); Martin Marietta
Corporation/ Lockheed Corporation (8/94); Harnischfeger Industries, Inc./Joy
Technologies, Inc. (8/94); Tyco International Ltd./Kendall International, Inc.
(7/94); U.S.A. Waste Services, Inc./Envirofil, Inc. (1/94); Sun Healthcare
Group, Inc./The Mediplex Group, Inc. (1/94); Columbia Healthcare
Corporation/HCA-Hospital Corporation of America (10/93); Viacom, Inc./Paramount
Communications, Inc. (9/93); MEDSTAT Systems, Inc./Inforum Inc. (12/92); and
LDDS Communications, Inc./Advanced Telecommunications Corporation (6/92). The
transactions reviewed by Smith Barney for purposes of such comparison were not
limited to the financial information services industry. The results of the
premium analysis indicated mean premiums paid in such transactions one day, one
month and three months prior to the announcement date of such transactions of
approximately 26.8%, 38.4% and 39.7%, respectively, and median premiums of
approximately 25.4%, 34.4% and 38.1%, respectively, as compared to the implied
premium payable in the Merger, based on a closing sale price of First Data
Common Stock on June 9, 1995 of $56.75, of approximately 18.4%. This analysis
did not take into account differing market and other
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conditions occurring during the three-year period during which these
transactions occurred, and no further material assessments were made by Smith
Barney in respect of such analysis.
Pro Forma Merger Analysis. Smith Barney analyzed certain pro forma effects
resulting from the Merger, including, among other things, the impact of the
Merger on the projected EPS of First Data for the fiscal years ended 1995
through 1998, based on estimates of 15 investment banking firms as compiled by
I/B/E/S for fiscal years 1995 and 1996 and projections provided by the
management of First Data as to cost savings and other potential synergies
anticipated from the Merger. The estimates of analysts as to the EPS of First
Data and First Financial in fiscal years 1995 and 1996 were $2.25 per share and
$2.70 per share, respectively, for First Data, and $3.05 per share and $3.65
per share, respectively, for First Financial. The results of the pro forma
merger analysis suggested that the Merger would be dilutive by approximately
8.4% to First Data's EPS in fiscal year 1995 had the Merger been consummated as
of January 1, 1995 and accretive in fiscal years 1996, 1997 and 1998 by
approximately 3.9%, 4.9% and 0.4%, respectively, assuming attainment of
substantial cost savings and revenue enhancements anticipated from the Merger.
The actual results achieved by the combined company may vary from projected
results and the variations may be material. Immediately following consummation
of the Merger, stockholders of First Data and First Financial would own
approximately 50.9% and 49.1%, respectively, of the combined company.
Exchange Ratio Analysis. Smith Barney compared the Conversion Number with the
historical ratio of the daily closing prices of First Data Common Stock and
First Financial Common Stock during the periods April 9, 1992 to June 9, 1995
and the 12 months preceding June 9, 1995. The exchange ratios of the daily
closing prices of one share of First Data Common Stock to one share of First
Financial Common Stock ranged from a low of 0.9732 to a high of 1.5102 (with an
average of 1.2510) during the period April 9, 1992 to June 9, 1995 and ranged
from a low of 1.0796 to a high of 1.4327 (with an average of 1.2694) during the
latest 12 months preceding June 9, 1995, as compared to the Conversion Number
of 1.5859. This analysis was utilized primarily to provide a historical
perspective for the manner in which the public trading market valued First
Financial Common Stock relative to First Data Common Stock during the
respective periods.
Stock Trading History Analysis. Smith Barney compared the relative market
performance of First Data and First Financial against the Comparable Companies
and the S&P 500 Index during the last 12 months and three years. During the
period June 9, 1992 to June 9, 1995, market prices for First Data Common Stock,
First Financial Common Stock, the common stock of the Comparable Companies and
the companies included in the S&P 500 Index increased approximately 140%, 174%,
64% and 29%, respectively. During the period June 9, 1994 to June 9, 1995,
market prices for First Data Common Stock, First Financial Common Stock, the
common stock of the Comparable Companies and the companies included in the S&P
500 Index increased approximately 26%, 32%, 21% and 15%, respectively. This
analysis was utilized primarily to provide a historical perspective for the
manner in which the public trading market valued First Financial Common Stock,
First Data Common Stock, the common stock of the Comparable Companies and
companies included in the S&P 500 Index during the respective periods.
Other Factors and Comparative Analyses. In rendering its opinion, Smith
Barney considered certain other factors and conducted certain other comparative
analyses, including, among other things, a review of (i) the historical and
projected financial results of First Data and First Financial; and (ii) the pro
forma ownership of the combined company.
Pursuant to the terms of Smith Barney's engagement, First Data has agreed to
pay Smith Barney for its services in connection with the Merger an aggregate
financial advisory fee of $10 million, a significant portion of which is
contingent upon consummation of the Merger. First Data also has agreed to
reimburse Smith Barney for reasonable travel and other out-of-pocket expenses
incurred by Smith Barney in performing its services, including the reasonable
fees and expenses of its legal counsel, and to indemnify Smith Barney and
related persons against certain liabilities, including liabilities under the
federal securities laws, arising out of Smith Barney's engagement.
Smith Barney has advised First Data that, in the ordinary course of business,
Smith Barney and its affiliates may actively trade the securities of First Data
and First Financial for its own account or for the account of its customers
and, accordingly, may at any time hold a long or short position in such
securities. Smith Barney has in the past provided, and is currently providing,
financial advisory and investment banking
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services to First Data and its affiliates unrelated to the proposed Merger,
including, among other things, financial advisory services relating to previous
transactions involving First Data and other companies engaged in the
transaction and merchant credit card processing businesses, and has received,
and will receive, compensation for such services. In addition, Smith Barney and
its affiliates (including Travelers Group Inc. and its affiliates) maintain
business relationships with First Data and may also maintain business
relationships with First Financial.
Smith Barney is a nationally recognized investment banking firm and was
selected by First Data based on Smith Barney's experience, expertise and
familiarity with First Data and its business. Smith Barney regularly engages in
the valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
MORGAN STANLEY OPINION TO THE FIRST FINANCIAL BOARD OF DIRECTORS
First Financial retained Morgan Stanley to act as First Financial's financial
advisor in connection with the Merger and related matters based upon its
qualifications, expertise and reputation, as well as Morgan Stanley's prior
investment banking relationship and familiarity with First Financial. At the
June 12, 1995 meeting of the First Financial Board, Morgan Stanley rendered an
oral opinion to the First Financial Board that, as of such date, the Conversion
Number (defined in such opinion as the Exchange Ratio) was fair from a
financial point of view to the holders of shares of First Financial Common
Stock. Morgan Stanley subsequently delivered to the First Financial Board a
written opinion dated June 12, 1995 confirming its oral opinion that, as of
such date, the Conversion Number was fair from a financial point of view to the
holders of shares of First Financial Common Stock. Morgan Stanley subsequently
confirmed its June 12, 1995 opinion by delivery of a written opinion as of the
date of this Joint Proxy Statement/Prospectus. Morgan Stanley has not
identified any material changes in the business or prospects of First Financial
or First Data as compared to such business and prospects on June 12, 1995.
THE FULL TEXT OF MORGAN STANLEY'S OPINION, DATED THE DATE OF THIS JOINT PROXY
STATEMENT/PROSPECTUS, WHICH SETS FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE,
PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW
UNDERTAKEN, IS ATTACHED AS ANNEX III TO THIS JOINT PROXY STATEMENT/PROSPECTUS
AND IS INCORPORATED HEREIN BY REFERENCE. FIRST FINANCIAL'S STOCKHOLDERS ARE
URGED TO READ THE MORGAN STANLEY OPINION IN ITS ENTIRETY. MORGAN STANLEY'S
OPINION ADDRESSES ONLY THE FAIRNESS OF THE EXCHANGE RATIO (AS DEFINED THEREIN)
FROM A FINANCIAL POINT OF VIEW TO THE HOLDERS OF FIRST FINANCIAL COMMON STOCK
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF FIRST FINANCIAL
COMMON STOCK AS TO HOW TO VOTE AT THE FIRST FINANCIAL SPECIAL MEETING. THE
SUMMARY OF THE OPINION OF MORGAN STANLEY SET FORTH IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION.
In connection with rendering its opinion, Morgan Stanley, among other things,
(i) analyzed certain publicly available financial statements and other
information of First Financial and First Data; (ii) reviewed certain business,
operating and financial information relating to First Financial, furnished to
Morgan Stanley by First Financial; (iii) discussed the past and current
operations and financial condition and the prospects of First Financial with
senior executives of First Financial; (iv) reviewed certain public research
reports concerning First Financial prepared by certain equity research analysts
and discussed these research reports, including financial projections contained
therein, with senior executives of First Financial; (v) discussed certain
business, operating and financial information relating to First Data with
senior executives of First Data; (vi) reviewed certain public research reports
concerning First Data prepared by certain equity research analysts and
discussed these research reports, including financial projections contained
therein, with senior executives of First Data; (vii) discussed the past and
current operations and financial condition and the prospects of First Data with
senior executives of First Data, and analyzed the pro forma impact of the
Merger on First Data's earnings per share ("EPS"), consolidated capitalization
and financial ratios; (viii) reviewed the reported prices and trading activity
for First Financial Common Stock and First Data Common Stock; (ix) compared the
financial performance of First Financial and the prices and trading activity of
the First Financial Common Stock with that of certain other comparable publicly
traded companies and their
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securities; (x) compared the financial performance of First Data and the prices
and trading activity of the First Data Common Stock with that of certain other
comparable publicly traded companies and their securities; (xi) discussed with
senior managements of First Financial and First Data their views of the
strategic rationale for the Merger and the economic benefits of the Merger to
First Data; (xii) reviewed the financial terms, to the extent publicly
available, of certain comparable acquisition transactions; (xiii) participated
in discussions and negotiations among representatives of First Financial and
First Data and their financial and legal advisors and reviewed the Merger
Agreement; and (xiv) performed such other analysis as Morgan Stanley deemed
appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon without
independent verification the accuracy and completeness of the information
reviewed for purposes of its opinion. Morgan Stanley relied upon the
assumptions of the management of First Financial and had discussions with the
management of First Data regarding cost savings and other synergies that will
result from the Merger. Morgan Stanley has not made any independent valuation
or appraisal of the assets or liabilities of First Financial, nor has it been
furnished with any such appraisals. Morgan Stanley's opinion is necessarily
based on economic, market and other conditions as in effect on, and the
information made available to Morgan Stanley as of, the date of its opinion.
The following is a brief summary of the analyses performed by Morgan Stanley
in preparation of its presentations to the First Financial Board on June 9,
June 11 and June 12, 1995 and its written opinion dated June 12, 1995 to the
First Financial Board:
First Financial Common Stock Performance. Morgan Stanley's analysis of First
Financial's Common Stock performance consisted of a historical analysis of
closing prices and trading volumes from January 1, 1992 to June 12, 1995; First
Financial's indexed price performance relative to the S&P 400 and relative to a
Comparable Index, which included Automatic Data Processing, Inc., Comdata
Holdings Corporation, Electronic Data Systems Corp., Equifax Inc., National
Data Corp., Paychex Inc., SPS Transaction Services Inc., Total System Services,
Inc., and First Data; and the high and low prices in the twelve months ended
June 12, 1995. In the twelve months ended June 12, 1995, First Financial Common
Stock reached a high of $76.75 per share and a low of $52.00 per share. Most
significantly, the analysis illustrated that First Financial Common Stock and
the Comparable Index have outperformed the S&P 400 in 1995 reflecting the
positive growth prospects for First Financial and the companies in the
Comparable Index relative to the broader market represented by the S&P 400.
There has been no sustained performance distinction between First Financial
Common Stock and the Comparable Index in the period covered by the analysis.
Comparable Company Analysis. Comparable company analysis examines a company's
operating performance relative to a group of publicly traded peers. Based on
relative performance and outlook for a company versus its peers, this analysis
enables an implied unaffected market trading value to be determined. Morgan
Stanley analyzed the operating performance of First Financial and First Data
relative to eight information services companies deemed by Morgan Stanley to be
reasonably comparable to First Financial and First Data. These companies are as
follows: Automatic Data Processing, Inc., Comdata Holdings Corporation,
Electronic Data Systems Corp., Equifax Inc., National Data Corp., Paychex Inc.,
SPS Transaction Services and Total System Services, Inc. (These eight companies
along with First Financial and First Data constitute the "Comparable
Companies"). The Comparable Companies were selected based on general business,
operating and financial characteristics representative of companies in
industries in which First Financial and First Data operate. Historical
financial information used in connection with the ratios provided below with
respect to the Comparable Companies is as of the most recent financial
statements publicly available for each company.
Morgan Stanley analyzed the relative performance and value for First
Financial and First Data by comparing certain market trading statistics for
First Financial and First Data with the Comparable Companies. Information
analyzed in regard to the Comparable Companies included (i) current market
price, (ii) high and low market prices in the 52 weeks prior to June 9, 1995,
(iii) equity value, (iv) aggregate value (equity value plus total debt and
minority interest less cash), (v) EPS estimates, (vi) market price to EPS
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ratios, (vii) ratios of aggregate value to revenues and to earnings before
interest and taxes ("EBIT"), (viii) EPS growth rates and (ix) various operating
statistics. Market information used in calculating the ratios provided below is
as of June 9, 1995. Market price to EPS estimates for 1995 and 1996 and the
ratio of aggregate value to latest twelve months EBIT were deemed by Morgan
Stanley to be among the most significant market trading statistics in the
valuation analyses because of the characteristics of the industries in which
First Data and First Financial operate. The P/E estimates for First Financial
in 1995 and 1996 were 24.9x and 20.8x, respectively, and for First Data, were
25.2x and 21.0x, respectively; the median for the Comparable Companies were
23.2x and 19.8x, respectively. (EPS estimates for 1995 and 1996 and EPS growth
rates for First Financial, First Data, and the Comparable Companies were
estimates provided by Institutional Brokers Estimate System ("IBES"). The IBES
estimates for First Financial and First Data were consistent within a
relatively narrow range with the analysts' estimates discussed under
"Discounted Cash Flow Analysis" and "Contribution Analysis" and which were
discussed with management of each company. P/E ratios were calculated by
dividing the closing price on June 9, 1995 by the EPS.) The ratio of aggregate
value to the latest publicly reported twelve month EBIT for First Financial was
18.6x and for First Data was 17.8x; the median for the Comparable Companies was
17.1x. These market trading statistics other than market price to EPS estimates
and the ratio of aggregate value to latest twelve months EBIT were presented to
the Board of Directors as background information only.
No company utilized in the comparable companies analysis as a comparison is
identical to First Financial or First Data. In evaluating the comparable
companies, Morgan Stanley made judgments and assumptions with regard to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of First
Financial or First Data, such as the impact of competition on the business of
First Financial or First Data and the industry generally, industry growth and
the absence of any adverse material change in the financial condition and
prospects of First Financial or First Data or the industry or in the financial
markets in general. Mathematical analysis (such as determining the average or
median) is not in itself a meaningful method of using comparable company data.
Comparable Transaction Analysis. Morgan Stanley performed an analysis of
precedent transactions involving information services companies in order to
obtain a valuation range for First Financial Common Stock based upon selected
merger and acquisition transactions in the information services industry which,
in Morgan Stanley's judgment, were deemed to be comparable to the Merger for
purposes of this analysis. Multiples of aggregate value (aggregate value equals
the fully diluted equity value of the transaction plus any debt assumed less
cash and option proceeds) to be received by the stockholders of First Financial
in the Merger to revenues and earnings before interest, taxes and pension
expense ("EBITP") were compared with multiples paid in certain other comparable
merger and acquisition transactions from September 21, 1989 through May 11,
1995. The comparison included a total of 26 transactions. The transactions
included (acquiree/acquiror): Employee Benefit Plans, Inc. and First Financial
(5/95); Card Establishment Services, Inc. and First Data (11/94); Western Union
Financial Services and First Financial (9/94); Envoy Corporation (Financial
Business) and First Data (8/94); Newtrend Group and Computer Associates (7/94);
GENEX Corporation and First Financial (6/94); Sequa Corporation (ARC
Professional Services Group) and Computer Sciences Corporation (1/94); Vantage
Computer Systems and Continuum (8/93); TDS Healthcare Systems and Alltel
Corporation (8/93); Paxus Corporation Limited and Continuum Company (6/93);
First Financial (Basis Information Tech.) and Fiserv, Inc. (12/92); Dun &
Bradstreet, Inc. (Datastream) and Primark (8/92); McDonnell Douglas Corp.
(Telecheck, Payment Services) and First Financial (7/92); Citicorp (Citicorp
Establishment Services) and Welsh, Carson, Anderson & Stowe, Prudential Equity
Investors and William Blair & Co. (7/92); BankAmerica Corporation (Business
Services Division) and Automatic Data Processing, Inc. (2/92); Teradata
Corporation and AT&T Corporation (12/91); Computer Power, Inc. and Alltel
Corporation (12/91); Alta Health Strategies and First Financial (11/91); Signet
LTD and American Express (First Data Resources) (1/91); Dun & Bradstreet
Corporation (Neodata Services) and private investors (8/90); Dun & Bradstreet
Corporation (Zytron) and First Financial (7/90); Telecredit Inc. and Equifax,
Inc. (6/90); Epsilon Data Management Inc. and American Express Co. (5/90);
Systematics Inc.
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and Alltel Corporation (3/90); Bowater Industries Plc. (RS Means) and Southam,
Inc. (11/89) and Telerate Inc. and Dow Jones & Co., Inc. (9/89). Information
analyzed in regard to the precedent transactions included (i) equity value,
(ii) aggregate value (equity value plus total debt and minority interest less
cash and equivalents), (iii) last twelve months P/E, (iv) next twelve months
P/E, (v) equity value to book value ratios, (vi) ratios of aggregate value to
last twelve months revenue and last twelve months operating income (equal to
EBITP), and (vii) the premium paid to the stock price one month prior and one
day prior to the transaction. Since many of the transactions analyzed did not
involve public disclosure, many of the aforementioned statistics were
unavailable or inapplicable. Thus, the mean and median values calculated for
each statistic were not based on all 26 transactions in all cases. In its
presentation to the Board, Morgan Stanley emphasized the ratios of aggregate
value to last twelve months revenue and last twelve months operating income.
Statistics on the ratio of aggregate value to last twelve months revenue were
available on 21 transactions and on 12 transactions for the ratio of aggregate
value to last twelve months operating income. Based on an analysis of those
transactions, a range of 2.00x to 2.50x last twelve months revenue and 16.0x to
19.0x last twelve months EBITP were applied to First Financial's corresponding
financial statistic to suggest per share equity value ranges of $73.72 to
$94.20 and $64.25 to $77.83, respectively. The multiples applied to First
Financial's relevant financial statistics were taken from the high end of the
precedent transaction range. Multiples from the high end of the range were
selected based on Morgan Stanley's judgment regarding the similarity in growth
rates, profitability and other operating characteristics between First
Financial and companies at the high end of the range in precedent transactions.
No transaction utilized in the comparable transaction analysis is identical
to the Merger. In evaluating the precedent transactions, Morgan Stanley made
judgments and assumptions with regard to industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of First Financial or First Data, such as the
impact of competition on the business of First Financial and the industry
generally, industry growth and the absence of any adverse material change in
the financial condition and prospects of First Financial or the industry or in
the financial markets in general. Mathematical analysis (such as determining
the average or median) is not in itself a meaningful method of using comparable
transaction data.
Discounted Cash Flow Analysis. Morgan Stanley conducted a discounted cash
flow analysis to estimate the present value of the stand-alone unleveraged free
cash flows that First Financial and First Data are expected to generate if
First Financial and First Data perform in accordance with scenarios based upon
certain financial forecasts. Morgan Stanley analyzed two sets of financial
forecasts for each company, a base case ("Base Case") and an upside case
("Upside Case") which differs from the Base Case in that it employs a higher
growth rate for net sales in each year after 1997. The Base Case for First
Financial was based on a Morgan Stanley equity research report dated May 8,
1995 following confirmatory discussions with First Financial management.
Revenues, EBITDAP margins, EBITP margins, depreciation and amortization for
1995 and 1996 were taken from such Morgan Stanley equity research report. The
projections for these items from 1997 to 2004 were prepared by Morgan Stanley
and based on extrapolations from the preceding years following confirmatory
discussions with First Financial management. In addition, projections of tax
rates, capital expenditures and working capital were all prepared by Morgan
Stanley and based on assumptions discussed with First Financial management.
Similarly, the Base Case for First Data was based on a Morgan Stanley equity
research report dated May 30, 1995 following confirmatory discussions with
First Data management. In each case, the EPS estimates for 1995 and 1996 were
consistent within a relatively narrow range with other analysts' reports and
were discussed with management of each company. Revenues, EBITDA margins and
EBIT margins for 1995 and 1996 were taken from the Morgan Stanley equity
research report. The projections for these items from 1997 to 2004 were
prepared by Morgan Stanley and based on extrapolations from the preceding years
following confirmatory discussions with First Data management. In addition,
projections of tax rates, depreciation, amortization, capital expenditures and
working capital were all prepared by Morgan Stanley and based on extrapolations
from the preceding years following confirmatory discussions with First Data
management. To arrive at valuations of First Financial and First Data, Morgan
Stanley discounted the estimated unleveraged free cash flows that resulted from
the aforementioned
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assumptions over a ten-year period ending with the 2004 calendar year using a
range of discount rates of 12.0% to 13.0%. This discount rate range was chosen
based upon a weighted average cost of capital analysis. Unleveraged free cash
flows were calculated as the after-tax operating earnings of First Financial
and First Data, respectively, plus depreciation and amortization, plus (or
minus) net changes in non-cash working capital, minus projected capital
expenditures. Morgan Stanley added to the present values of the cash flows the
terminal values of First Financial and First Data, respectively, in the year
2004, and discounted the terminal value back using the range of discount rates
described above. The terminal value is calculated using the perpetuity method,
assuming a range of perpetual growth rates of between 4% and 5%. The range of
perpetual growth rates was selected to reflect the potential for ongoing growth
in cash flows assuming reasonable long-term levels of sales growth, operating
margins, working capital needs, depreciation and capital expenditures. Based on
this analysis, Morgan Stanley calculated per share equity values of First
Financial ranging from $76.47 to $96.24 for the Base Case and $86.16 to $109.16
for the Upside Case on a fully diluted basis. The per share equity values
calculated for First Data ranged from $53.48 to $66.66 for the Base Case and
$61.30 to $77.02 for the Upside Case on a fully diluted basis.
Historical Exchange Ratio Analysis. Morgan Stanley analyzed the historical
exchange ratio between First Financial Common Stock and First Data Common Stock
over several time periods. For each time period selected, the high, average and
low exchange ratios were calculated. The time periods selected for analysis
were as follows: April 9, 1992 to June 12,1995, last one year, last six months,
last 90 days, last 60 days, last 30 days, last 10 days, and close price on June
12, 1995 (for which only one exchange ratio was calculated). The average
exchange ratio for each aforementioned time period was 1.251, 1.270, 1.293,
1.324, 1.295, 1.277, 1.321 and 1.349, respectively. The highest exchange ratio
achieved in any time period reviewed by Morgan Stanley was 1.510. The
Conversion Number is higher than the historical exchange ratios between First
Financial Common Stock and First Data Common Stock.
Contribution Analysis. An analysis of the exchange ratio implied by each
company's contribution of operating cash flows and earnings was also analyzed.
Operating cash flows are earnings before interest, taxes, depreciation,
amortization and pension expense ("EBITDAP"). The exchange ratio implied by
First Financial's EBITDAP to First Data's EBITDAP in 1994 was 1.358. The
exchange ratio implied by First Financial's EBITP, a measure of operating
income, to First Data's EBITP in 1994 was 1.316. The exchange ratios implied by
a ratio of First Financial's 1995 and 1996 EPS to First Data's 1995 and 1996
EPS as estimated by research analysts were 1.374 and 1.360, respectively.
(Research analyst estimates for First Financial were the average of the
estimates contained in a May 8, 1995 equity report by Morgan Stanley and a
April 24, 1995 equity report by CS First Boston. The May 8th Morgan Stanley
report provided EPS estimates for First Financial of $3.05 and $3.75 for 1995
and 1996, respectively. The April 24th CS First Boston report provided EPS
estimates for First Financial of $3.05 and $3.65 for 1995 and 1996,
respectively. EPS estimates for First Data were based on research analyst
estimates following confirmatory discussions with First Data management. These
estimates were $2.22 and $2.72 in 1995 and 1996, respectively). The foregoing
analysts' estimates which Morgan Stanley relied on were consistent within a
relatively narrow range with other analysts' reports and were discussed with
management of each company. The exchange ratios implied by optimistic estimates
for EPS of First Financial in 1995 and 1996 compared to analysts' estimates for
First Data's EPS were 1.450 and 1.522, respectively. (The optimistic estimates
for First Financial EPS for 1995 and 1996 were $3.22 and $4.14, respectively).
The Conversion Number is higher than the exchange ratios implied by the
companies' respective contributions of operating cash flows and earnings on any
of the foregoing bases.
Discounted Cash Flow Contribution Analysis. A final valuation methodology
employed by Morgan Stanley was an assessment of the exchange ratio implied by
First Financial's discounted cash flow equity value to First Data's discounted
cash flow equity value (the actual discounted cash flow values are described
above). The exchange ratios implied by the low end and high end of First
Financial's Base Case to First Data's Base Case were 1.430 and 1.444. The
exchange ratios implied by the low end and high end of First Financial's Upside
Case to First Data's Upside Case were 1.406 and 1.417. The Conversion Number is
higher than the exchange ratios implied by the discounted cash flow analysis of
First Financial and of First Data.
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Pro Forma Merger Analysis. Morgan Stanley prepared a pro forma analysis of
the impact of the Merger on the ownership profile and EPS of First Data. Based
on the Conversion Number and assuming the conversion of all of First
Financial's outstanding stock options and convertible debt, First Financial
stockholders would own 49.2% of First Data's shares on a fully diluted basis
after the Merger. Morgan Stanley determined that, without significant corporate
and operational synergies, the Merger would be dilutive to First Data's EPS by
approximately 8.5%. However, after the inclusion of approximately $70 to $75
million of immediately quantifiable annual after-tax cost savings, consisting
primarily of the elimination of redundant corporate expenses and the
elimination of restricted stock award amortization which had then been
identified and estimated by First Financial management, the analysis provided
modest EPS accretion.
In connection with its opinion dated as of the date of this Joint Proxy
Statement/Prospectus, Morgan Stanley confirmed the appropriateness of its
reliance on the analyses used to render its June 12, 1995 opinion by reviewing
the assumptions upon which such analyses were based and the factors considered
in connection therewith.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. Morgan
Stanley believes that its analyses must be considered as a whole and that
selecting portions of its analyses, without considering all analyses, would
create an incomplete view of the process underlying its opinion. In addition,
Morgan Stanley may have given various analyses more or less weight than other
analyses, and may have deemed various assumptions more or less probable than
other assumptions, so that the ranges of valuations resulting from any
particular analysis described above should not be taken to be Morgan Stanley's
view of the actual value of First Financial.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of First Data or First
Financial, such as the impact of competition on the businesses of First Data
and First Financial and their respective industries generally, industry growth
and the absence of any material adverse change in the financial condition and
prospects of First Data, First Financial or their respective industries or in
the financial markets in general. The analyses performed by Morgan Stanley are
not necessarily indicative of actual values, which may be significantly more or
less favorable than suggested by such analyses. Such analyses were prepared
solely as a part of Morgan Stanley's analysis of the fairness of the Conversion
Number to the holders of First Financial Common Stock and were provided to the
First Financial Board in connection with the delivery of Morgan Stanley's
opinion dated June 12, 1995. The analyses do not purport to be appraisals or to
reflect the prices at which First Financial might actually be sold. Because
such estimates are inherently subject to uncertainty, none of First Financial,
Morgan Stanley or any other person assumes responsibility for their accuracy.
In addition, as described above, Morgan Stanley's opinion and presentation to
the First Financial Board was one of many factors taken into consideration by
the First Financial Board in making its determination to approve the Merger.
Consequently, the Morgan Stanley analyses described above should not be viewed
as determinative of the First Financial Board's or First Financial management's
opinion with respect to the value of First Financial or of whether the First
Financial Board or First Financial management would have been willing to agree
to a different exchange ratio.
The First Financial Board retained Morgan Stanley based upon its experience
and expertise. Morgan Stanley is an internationally recognized investment
banking and advisory firm. Morgan Stanley, as part of its investment banking
business, is continuously engaged in the valuation of businesses and securities
in connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and other purposes.
Morgan Stanley is a full service securities firm engaged in securities trading
and brokerage activities, as well as providing investment banking and financial
advisory services. In the ordinary course of its trading and brokerage
activities, Morgan Stanley or its affiliates may at any time hold long or short
positions, and may trade or otherwise effect transactions, for its own account
or the accounts of customers, in debt or equity
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securities of First Financial or First Data. As of the date of this Joint Proxy
Statement/Prospectus, Morgan Stanley owned securities of First Financial in two
accounts: in one account, Morgan Stanley held $8,288,000 principal amount of 5%
Debentures and held a short position of 107,100 shares of First Financial
Common Stock; in the other account, Morgan Stanley held 35,800 shares of First
Financial Common Stock and held a short position of 2,200 shares of First
Financial Common Stock. In the past, Morgan Stanley and its affiliates have
provided financial advisory and financing services to First Financial and have
received customary fees for the rendering of these services. Recent services
rendered by Morgan Stanley include serving as financial advisor in the
acquisition of Western Union Financial Services, Inc. and the proposed
acquisition of Employee Benefit Plans, Inc. by First Financial and serving as
underwriter for the issuance of the 5% Debentures. Morgan Stanley received
customary fees for the rendering of such services.
The consideration to be received by the stockholders of First Financial
pursuant to the Merger was determined through negotiations between First
Financial and First Data and was approved by the Board of Directors of First
Financial. Morgan Stanley provided advice to First Financial during the course
of such negotiations, but did not make a recommendation with respect to the
amount of the Conversion Number.
First Financial has paid Morgan Stanley an exposure fee of $3.65 million.
First Financial has also agreed to pay an advisory fee based on time spent on
the engagement, estimated to be between $150,000 and $250,000, and a
transaction fee of $22 million against which the advisory fee and the exposure
fee will be credited, which will become payable only upon the consummation of
the Merger. In addition, First Financial has agreed, among other things, to
reimburse Morgan Stanley for all reasonable out-of-pocket expenses incurred in
connection with the services provided by Morgan Stanley and to indemnify and
hold harmless Morgan Stanley and certain related parties to the full extent
lawful from and against certain liabilities and expenses, including certain
liabilities under the federal securities laws, in connection with its
engagement.
MERGER CONSIDERATION
Subject to certain provisions described herein with respect to shares of
First Financial Common Stock owned by First Data, First Financial or any
subsidiary of First Data or First Financial, upon consummation of the Merger
each issued and outstanding share of First Financial Common Stock will be
converted into 1.5859 (the "Conversion Number") validly issued, fully paid and
nonassessable shares of First Data Common Stock.
Fractional shares of First Data Common Stock will not be issued in the
Merger. Holders of First Financial Common Stock otherwise entitled to a
fractional share of First Data Common Stock will be paid cash in lieu of such
fractional shares determined and paid as described in "THE MERGER AGREEMENT--
Fractional Shares" below.
The Conversion Number was determined through negotiations between First Data
and First Financial and was derived by dividing $90 per share of First
Financial Common Stock by $56.75, the per share closing price of the First Data
Common Stock on June 9, 1995. Based on the number of shares of First Financial
Common Stock, the number of First Financial stock options, the principal amount
of the 5% Debentures outstanding on the First Financial Record Date and the
number of shares of First Financial Common Stock issuable in connection with
the acquisition of Employee Benefit Plans, Inc., a maximum of 117,284,398
shares of First Data Common Stock may be issued in respect of shares of First
Financial Common Stock in the Merger.
Any shares of First Financial Common Stock owned by First Financial or any of
its subsidiaries or by First Data, Sub or any other subsidiary of First Data
will automatically be cancelled at the Effective Time and will cease to exist
and no capital stock of First Data or other consideration will be delivered in
exchange therefor.
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EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the filing of the Certificate of Merger
with the Secretary of State of the State of Georgia or such later date as is
specified in such Certificate. The filing of the Certificate of Merger will
occur as soon as practicable following the satisfaction or waiver (where
permissible) of the conditions set forth in the Merger Agreement. See "THE
MERGER AGREEMENT--Conditions to the Merger."
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES
The conversion of First Financial Common Stock into First Data Common Stock
will occur at the Effective Time. As soon as practicable after the Effective
Time, First Data will deposit with Norwest Bank Minnesota, N.A., as exchange
agent (the "Exchange Agent"), in trust for the holders of certificates which
immediately prior to the Effective Time represented shares of First Financial
Common Stock (the "Certificates") certificates representing the shares of First
Data Common Stock issuable in exchange for outstanding shares of First
Financial Common Stock and cash as required to make payments in lieu of any
fractional shares of First Data Common Stock (such cash and shares of First
Data Common Stock, together with any dividends or distributions with respect
thereto payable as described below, being hereinafter referred to as the
"Exchange Fund").
As soon as practicable after the Effective Time, First Data will cause the
Exchange Agent to mail to each holder of record of a Certificate whose shares
are converted into shares of First Data Common Stock a letter of transmittal
(which will be in customary form, specifying that delivery will be effected,
and risk of loss and title to the Certificates will pass, only upon actual
delivery of the Certificates to the Exchange Agent and will contain
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of First Data Common Stock and cash in
lieu of fractional shares). Upon surrender of a Certificate for cancellation to
the Exchange Agent, together with such letter of transmittal, duly executed,
the holder of such Certificate will be entitled to receive in exchange therefor
a certificate representing that number of whole shares of First Data Common
Stock into which the shares represented by the surrendered Certificate have
been converted at the Effective Time pursuant to the Merger, and cash in lieu
of fractional shares and certain dividends and other distributions as described
below, and the Certificate so surrendered will be cancelled.
FIRST FINANCIAL STOCKHOLDERS SHOULD NOT FORWARD FIRST FINANCIAL STOCK
CERTIFICATES TO THE EXCHANGE AGENT UNTIL THEY HAVE RECEIVED THE LETTER OF
TRANSMITTAL.
No dividends or other distributions that are declared on or after the
Effective Time on First Data Common Stock, or are payable to the holders of
record thereof on or after the Effective Time, will be paid to any person
entitled by reason of the Merger to receive a certificate representing First
Data Common Stock until such person surrenders the related Certificate or
Certificates, as provided above, and no cash payment in lieu of fractional
shares will be paid to any such person until such person shall so surrender the
related Certificate or Certificates. Subject to the effect of applicable law,
there will be paid to each record holder of a new certificate representing such
First Data Common Stock: (i) at the time of such surrender or as promptly as
practicable thereafter, the amount of any dividends or other distributions
theretofore paid with respect to the shares of First Data Common Stock
represented by such new certificate and having a record date on or after the
Effective Time and a payment date prior to such surrender; (ii) at the
appropriate payment date or as promptly as practicable thereafter, the amount
of any dividends or other distributions payable with respect to such shares of
First Data Common Stock and having a record date on or after the Effective Time
but prior to such surrender and a payment date on or subsequent to such
surrender; and (iii) at the time of such surrender or as promptly as
practicable thereafter, the amount of any cash payable with respect to a
fractional share of First Data Common Stock to which such holder is entitled.
In no event shall the person entitled to receive such dividends or other
distributions be entitled to receive interest on such dividends or other
distributions. If any cash or certificate representing shares of First Data
Common Stock is to be paid to or
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issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it will be a condition of such exchange that
the Certificate so surrendered will be properly endorsed and otherwise in
proper form for transfer and that the person requesting such exchange will pay
to the Exchange Agent any transfer or other taxes required by reason of the
issuance of certificates for such shares of First Data Common Stock in a name
other than that of the registered holder of the Certificate surrendered, or
will establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not applicable.
First Data or the Exchange Agent will be entitled to deduct and withhold from
the consideration otherwise payable pursuant to the Merger Agreement to any
holder of shares of First Financial Common Stock such amounts as First Data or
the Exchange Agent is required to deduct and withhold with respect to the
making of such payment under the Code or under any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by First Data or
the Exchange Agent, such withheld amounts shall be treated for all purposes of
the Merger Agreement as having been paid to the holder of the shares of First
Financial Common Stock in respect of which such deduction and withholding was
made by First Data or the Exchange Agent.
GOVERNMENTAL AND REGULATORY APPROVALS
The Merger is subject to the expiration or termination of the applicable
waiting period under the HSR Act. Certain aspects of the Merger will require
notification to, and filings with, certain securities and other authorities in
certain states, including jurisdictions where First Data and First Financial
currently operate.
HSR Act. Under the HSR Act and the rules promulgated thereunder by the FTC,
the Merger may not be consummated until notifications have been given and
certain information has been furnished to the FTC and the Antitrust Division of
the Department of Justice (the "Antitrust Division") and the applicable waiting
period has expired or been terminated. On June 13, 1995, First Data and First
Financial filed notification and report forms under the HSR Act with the FTC
and the Antitrust Division. On July 13, 1995, a request for additional
information was issued to the parties by the FTC concerning the provision of
certain services with respect to which First Financial and First Data are
currently competitors. On September 20, 1995, First Data entered into a Consent
Decree with the FTC regarding the consumer money transfer businesses of
MoneyGramSM and Western Union. The execution of the Consent Decree terminated
the waiting period under the HSR Act, thereby satisfying a condition to the
Merger. Under the terms of the Consent Decree, First Data will be allowed to
perform processing services for each of MoneyGramSM and Western Union, but it
will be permitted to retain the sales and marketing functions of only one of
the two companies. The Consent Decree will become final upon acceptance by the
FTC following a 60 day notice and public comment period. The required
divestiture must occur no later than twelve months following the final
acceptance of the Consent Decree by the FTC. First Data and First Financial are
evaluating their alternatives under the Consent Decree. However, First Data and
First Financial believe that it is more likely than not that the required
divestiture, when combined with the negotiation of a processing agreement, will
not have a material impact on the post-Merger combined entity's ongoing results
of operations. In addition, First Data and the FTC entered into a "hold
separate" agreement whereby the MoneyGramSM business must be managed and
maintained as a separate, ongoing business, independent of all other First Data
businesses and independent of the Western Union business. The hold separate
arrangement will continue until First Data's interest in the sales and
marketing function of either MoneyGramSM or Western Union has been divested or
the FTC has withdrawn its acceptance of the Consent Decree pursuant to its
rules. At any time before or after consummation of the Merger, notwithstanding
that the waiting period under the HSR Act has been terminated, the Antitrust
Division or the FTC could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
consummation of the Merger or seeking divestiture of substantial assets of
First Data or First Financial. At any time before or after the Effective Time,
and notwithstanding that the waiting period under the HSR Act has been
terminated, any state could take such action under the antitrust laws as it
deems necessary or desirable in the public interest. Such action could include
seeking to enjoin the consummation of the Merger or seeking divestiture of
substantial assets of First Data and First Financial. Private parties may also
seek to take legal action under the antitrust laws under certain circumstances.
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Based on information available to them, First Data and First Financial
believe that the Merger can be effected in compliance with federal and state
antitrust laws. However, there can be no assurance that a challenge to the
consummation of the Merger on antitrust grounds will not be made or that, if
such a challenge were made, First Data and First Financial would prevail or
would not be required to accept certain adverse conditions in order to
consummate the Merger. The obligations of First Data and First Financial to
consummate the Merger are subject to the condition that there shall be no
preliminary or permanent injunction or other order by any court or governmental
or regulatory authority making the Merger or any of the transactions
contemplated by the Merger Agreement illegal. Each party has agreed to use
reasonable efforts to defend any such challenge or order and to seek to have
any such order vacated or reversed.
Other. In addition to the foregoing, consummation of the Merger will require,
among other things, (i) filings and consents under state and foreign laws
pertaining to debt collection, issuance of payment instruments or money
transmission, (ii) compliance with the Federal Change in Bank Control Act of
1978 and related notification to the Federal Deposit Insurance Corporation,
(iii) approval by the Georgia Department of Banking and Finance for First Data
to become a bank holding company under applicable Georgia law by acquiring
control of First Financial's special purpose bank, (iv) approval by the State
of Oklahoma Department of Insurance with respect to certain insurance company
acquisitions of First Financial, (v) the obtaining of certain
telecommunications reseller licenses and (vi) certain approvals by the Federal
Communications Commission. First Data and First Financial believe that none of
the foregoing regulatory requirements will delay the consummation of the
Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The obligation of First Financial to consummate the Merger is conditioned
upon the receipt of an opinion from Sutherland, Asbill & Brennan, counsel to
First Financial, in form and substance reasonably satisfactory to First
Financial, dated as of the Effective Time, substantially to the effect that for
federal income tax purposes (i) the Merger will constitute a "reorganization"
within the meaning of section 368(a) of the Code and First Data, First
Financial and Sub will each be a party to that reorganization within the
meaning of Section 368(b) of the Code; (ii) no gain or loss will be recognized
by First Financial or First Data as a result of the Merger; (iii) no gain or
loss will be recognized by the stockholders of First Financial upon the
conversion of their shares of First Financial Common Stock into shares of First
Data Common Stock pursuant to the Merger, except with respect to cash, if any,
received in lieu of fractional shares of First Data Common Stock; (iv) the
aggregate tax basis of the shares of First Data Common Stock received in
exchange for shares of First Financial Common Stock pursuant to the Merger
(including fractional shares of First Data Common Stock for which cash is
received) will be the same as the aggregate tax basis of such shares of First
Financial Common Stock; (v) the holding period for shares of First Data Common
Stock received in exchange for shares of First Financial Common Stock pursuant
to the Merger will include the holder's holding period for such shares of First
Financial Common Stock, provided such shares of First Financial Common Stock
were held as capital assets by the holder at the Effective Time; and (vi) a
stockholder of First Financial who receives cash in lieu of a fractional share
of First Data Common Stock will recognize gain or loss equal to the difference,
if any, between such stockholder's basis in the fractional share (as described
in clause (iv) above) and the amount of cash received.
In rendering its opinion, Sutherland, Asbill & Brennan will assume the
correctness of representations from First Data and First Financial as to
various factual matters which are based on standards applied by the Internal
Revenue Service as a condition to issuing an advance ruling that a merger will
qualify as a tax-free reorganization. First Data and First Financial have
provided such representations in exhibits to the Merger Agreement and in a
supplemental letter from First Data.
Some states and localities, including the State of New York and City of New
York, impose taxes on stockholders upon certain transfers (including transfers
such as the Merger) of stock of a corporation holding an interest in real
property (including leases) located therein. Any tax returns required to be
filed in connection with such taxes will be filed by First Financial on behalf
of the stockholders of First Financial,
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and First Financial will pay any such taxes due thereon (the portion of any
such payment attributable to each stockholder of First Financial being referred
to herein as the "Real Property Tax Payment").
The payment by First Financial of any Real Property Tax Payment should
generally be treated for federal income tax purposes as a deemed distribution
by First Financial to each First Financial stockholder, taxable to such
stockholder as a dividend. Any income taxes owing on account of such deemed
distribution will be the responsibility of the First Financial stockholders.
Although there is no direct authority on the question, there is a reasonable
basis to conclude that, if treated as a distribution from First Financial and
taxed in the manner described above, any Real Property Tax Payment should
result in an increase of equal amount in the tax basis of each stockholder's
First Financial Common Stock and thereby (under the rules described above)
result in a corresponding increase in the tax basis of the First Data Common
Stock received in the Merger.
The foregoing discussion is intended only as a summary of certain federal
income tax consequences of the Merger and does not purport to be a complete
analysis or description of all potential tax effects of the Merger. In
addition, the discussion does not address all of the tax consequences that may
be relevant to particular taxpayers in light of their personal investment
circumstances or to taxpayers subject to special treatment under the Code (for
example, insurance companies, financial institutions, dealers in securities,
tax-exempt organizations, foreign corporations, other foreign entities and
individuals who are not citizens or residents of the United States for federal
income tax purposes).
No information is provided herein with respect to the tax consequences, if
any, of the Merger under applicable foreign, state, local and other tax law.
The foregoing discussion is based upon the provisions of the Code, applicable
Treasury Regulations thereunder, Internal Revenue Service rulings and judicial
decisions as in effect as of the date hereof. There can be no assurance that
future legislative, administrative or judicial changes or interpretations will
not affect the accuracy of the statements or conclusions set forth herein. Any
such change could apply retroactively and could affect the accuracy of such
discussion. No rulings have or will be sought from the Internal Revenue Service
concerning the tax consequences of the Merger.
THE FOREGOING DISCUSSION SHOULD NOT BE CONSTRUED AS TAX ADVICE. EACH
STOCKHOLDER OF FIRST FINANCIAL IS URGED TO CONSULT SUCH STOCKHOLDER'S OWN TAX
ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE MERGER,
INCLUDING THE APPLICATION OF FOREIGN, STATE, LOCAL AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
The Merger is expected to qualify as a "pooling of interests" for accounting
and financial reporting purposes. Under this method of accounting, the recorded
assets and liabilities of First Data and First Financial will be carried
forward to the combined corporation at their recorded amounts, income of the
combined corporation will include income of First Data and First Financial for
the entire fiscal year in which the combination occurs, and the reported income
of the separate corporations for prior periods will be combined and restated as
income of the combined corporation.
The obligations of First Data, Sub and First Financial to consummate the
Merger is subject to the receipt by First Data of an opinion dated as of the
Effective Time from Ernst & Young LLP, in form and substance reasonably
satisfactory to First Data and First Financial, that the Merger will qualify
for pooling of interests accounting treatment under Accounting Principles Board
Opinion No. 16 if closed and consummated in accordance with the Merger
Agreement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of First Financial management have interests in the Merger in
addition to their interests solely as stockholders of First Financial, as
described below.
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First Financial has entered into employment or change in control agreements
with each of its executive officers. The Merger will constitute a "Change in
Control" under these agreements and upon termination of their employment these
executive officers will receive severance payments as follows: Thomas,
$20,746,000; Pittard, $3,454,000; Marschel, $2,100,000; Kane, $3,406,000;
Hutto, $1,680,000 and Macchia, $1,350,000. The aforementioned executive
officers will also receive payments for reimbursement of "parachute" excise
taxes relating to the severance payments (and any taxes on any such
reimbursements) as follows: Thomas, $11,024,000; Pittard, $1,491,000; Marschel,
$1,096,000; Kane, $1,661,000; Hutto, $854,000; and Macchia, $690,000. Mr. Amman
does not have a change in control provision in his employment agreement but he
is entitled to three years' notice of any involuntary employment termination.
Upon the approval of the Merger by First Financial's stockholders, all shares
of restricted First Financial Common Stock previously issued pursuant to First
Financial option plans shall be released from all applicable restrictions
pursuant to the terms of such plans. First Financial executive officers hold
shares of restricted First Financial Common Stock subject to this accelerated
release of restrictions as follows: Thomas, 594,500; Pittard, 18,848; Amman,
51,000; Marschel, 51,000; Kane, 18,848; Hutto, 19,777; and Macchia, 15,801.
Certain of the aforementioned executive officers will also receive payments for
reimbursement of "parachute" excise taxes relating to the accelerated release
of restrictions (and any taxes on such reimbursement) as follows (based upon an
assumed value of $90 per share of First Financial Common Stock): Thomas,
$28,432,000; Pittard, $364,000; Kane $411,000; Hutto, $363,000; and Macchia,
$316,000.
The Merger Agreement provides that each First Financial option outstanding at
the Effective Time, including those held by directors, officers or employees of
First Financial, will be assumed by First Data and thereafter will constitute
an option to acquire, on the same terms and conditions as were applicable under
each assumed First Financial option, that number of shares of First Data Common
Stock equal to the product of the Conversion Number times the number of shares
of First Financial Common Stock subject to each First Financial option. The
options will be exercisable at an exercise price per share equal to the option
price per share of First Financial Common Stock subject to each First Financial
option divided by the Conversion Number. Pursuant to the terms of the
outstanding First Financial options, certain options that are not yet
exercisable will vest and become immediately exercisable as of the Effective
Time. First Financial's executive officers and directors hold First Financial
options subject to this accelerated vesting to purchase shares of First
Financial Common Stock at average exercise prices as follows: Thomas,
500,000/$57.25; Pittard, 14,000/$53.11; Amman, 40,000/$68.63; Marschel,
40,000/$72.75; Kane, 14,000/$53.11; Hutto, 11,000/$46.34; and Macchia,
6,000/$55.55. Certain of the aforementioned executive officers will also
receive payments for reimbursement of "parachute" excise taxes relating to the
accelerated vesting of the options as follows (based upon an assumed value of
$90 per share of First Financial Common Stock and a December 31, 1995 Effective
Time): Thomas, $3,841,000; Pittard, $57,000; Kane, $65,000; Hutto, $55,000; and
Macchia, $25,000.
Subject to certain timing requirements and limitations, holders of shares of
restricted First Financial Common Stock and First Financial options may elect
to surrender to or have withheld by First Financial a number of shares of First
Financial Common Stock sufficient to satisfy estimated federal, state and local
withholding and other tax obligations with respect to the release of
restrictions on such restricted shares or the exercise of such options. Any
such surrenders (i) would be valued at fair market value of First Financial
Common Stock on the date of release of such restrictions or exercise of such
options, (ii) would reduce the number of shares of First Financial Common Stock
outstanding or issuable with respect to such restricted shares or options, and
(iii) would result in cash payments by First Financial of the amount of such
taxes.
The Merger Agreement provides that, notwithstanding the terms of First
Financial's incentive bonus plans, upon the involuntary termination of any
First Financial employee (other than Mr. Thomas, whose incentive bonus was
granted in shares of restricted First Financial Common Stock which is included
in the discussion of restricted stock above) at the closing of the Merger or by
the Surviving Corporation following the closing of the Merger, but prior to the
payment of incentive bonuses for 1995, such employee shall receive
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a prorated portion of his target incentive bonus for 1995 (assuming 100%
attainment of performance objectives). First Financial's executive officers
(other than Mr. Thomas) could be entitled to maximum cash incentive bonuses as
follows: Pittard, $1,000,000; Amman, $300,000; Marschel, $300,000; Kane,
$1,000,000; Hutto, $520,000; and Macchia, $200,000.
Pursuant to the Merger Agreement, First Data has agreed that for six years
after the Effective Time it will indemnify and hold harmless all past and
present officers and directors of First Financial and its subsidiaries to the
same extent such persons are indemnified as of the date of the Merger Agreement
by First Financial pursuant to its Restated Articles of Incorporation, Bylaws
and indemnification agreements. First Data has agreed that for a period of not
less than six years from the Effective Time it will cover First Financial's
current directors and officers with an insurance and indemnification policy
that provides coverage for events occurring at or prior to the Effective Time
that is no less favorable than the existing First Financial policy, subject to
payment of a maximum annual premium not in excess of 300% of the last annual
premium paid under First Financial's current policy.
Pursuant to First Financial's Directors' Restricted Stock Award Plan and its
1990 Directors Stock Option Plan, members of First Financial's Board of
Directors who are not employed by First Financial have been granted First
Financial options and restricted First Financial Common Stock. Pursuant to the
terms of these awards, all shares subject to restrictions shall be released
from all applicable restrictions and all unvested options will be fully vested
upon approval of the Merger by the stockholders of First Financial. The non-
employee members of the Board of Directors, Messrs. Cohen, Coleman, Kelly,
Leslie, Presley and Williams, each hold 1,416 restricted shares subject to this
accelerated release of restrictions, and each hold options subject to this
accelerated vesting to purchase 1,500 shares of First Financial Common Stock at
$54.56 per share.
It is a condition to the obligations of First Data and Sub to effect the
Merger that Mr. Patrick H. Thomas enter into a non-solicitation agreement with
First Data. The terms of the non-solicitation agreement generally provide that,
for a period of twelve months after the termination of his employment with
First Financial, Mr. Thomas will not: (i) solicit any business of the type
conducted by First Financial within 12 months prior to the date of his
termination from customers or prospective customers of First Financial with
whom Mr. Thomas had direct business contact or gained certain information, in
each case within 2 years prior to the date of Mr. Thomas' termination, or
request or advise any such customers or prospective customers to withdraw,
cancel or curtail their business dealings with First Financial or (ii) recruit
or solicit any employee of First Financial with whom Mr. Thomas had contact
within 2 years prior to his termination, with certain enumerated exceptions, to
leave the employment of First Financial. In addition, First Data and Mr. Thomas
have agreed that, on or prior to the Closing, they will negotiate in good faith
with respect to the terms of a mutually satisfactory consulting agreement
pursuant to which Mr. Thomas would serve as a special advisor to the Board of
Directors of First Data for a period of one year following the Closing.
Compensation for such consulting services is expected to consist of a nominal
fee per meeting attended plus expenses together with indemnification and
exculpation relating thereto.
George L. Cohen, a director of First Financial, is a partner in the law firm
of Sutherland, Asbill & Brennan, which advised First Financial with respect to
various aspects of the Merger and which will give a tax opinion pursuant to the
Merger Agreement in connection with the closing of the Merger.
For additional information regarding the benefits to be received by the
foregoing individuals, see "THE MERGER AGREEMENT--Employee Benefit Plans." For
information concerning the beneficial ownership of First Financial securities
by the directors and officers of First Financial, see "SECURITY OWNERSHIP OF
MANAGEMENT AND CERTAIN BENEFICIAL OWNERS--First Financial."
STOCK EXCHANGE LISTING
It is a condition to the parties' obligations under the Merger Agreement that
the shares of First Data Common Stock issuable pursuant to the Merger Agreement
shall have been approved for listing on the NYSE, subject to official notice of
issuance.
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REOFFERINGS AND RESALES OF FIRST DATA COMMON STOCK
Rule 145. The First Data Common Stock to be issued pursuant to the Merger
will be freely transferable, except that shares issued to any First Financial
stockholder who may be deemed to be an "affiliate" (as defined under the
Securities Act and generally including, without limitation, directors, certain
executive officers and beneficial owners of 10% or more of a class of capital
stock) of First Financial for purposes of Rule 145 under the Securities Act
will not be transferable except as permitted by Rule 145, as described below,
or otherwise in compliance with the Securities Act.
Pursuant to the Merger Agreement, First Financial has agreed to use its
reasonable best efforts to cause each person who is an affiliate of First
Financial within the meaning of Rule 145 under the Securities Act to deliver to
First Data, on or prior to the Effective Time, a written agreement
(collectively the "Pooling Agreements") to the effect that such affiliate will
not sell, transfer or otherwise dispose of any shares of First Data Common
Stock issued to such person pursuant to the Merger, except pursuant to an
effective registration statement or in compliance with Rule 145 or an exemption
from the registration requirements of the Securities Act, and that such
affiliate will not, during the "Pooling Period" (as hereinafter defined), sell,
transfer or otherwise dispose of or reduce such affiliate's risk with respect
to any shares of First Financial Common Stock or any shares of First Data
Common Stock received in the Merger until after such time as financial results
covering at least 30 days of post-Merger combined operations have been
published, except as permitted by published guidance from the Commission. Each
of the First Financial affiliates signatory to the Pooling Agreements will be
permitted, during the Pooling Period (as hereinafter defined), to sell up to
10% of the shares of First Financial Common Stock owned by such affiliate and
up to 10% of the shares of First Data Common Stock received in the Merger (as
calculated pursuant to applicable accounting guidelines), provided that such
sales of First Data Common Stock are made in compliance with Rule 145. Each of
the First Financial affiliates may also during the Pooling Period make
charitable contributions or bona fide gifts of First Financial Common Stock and
First Data Common Stock as permitted by published guidelines from the
Commission. Under the Merger Agreement, the "Pooling Period" is defined to be
the period commencing 30 days prior to the Effective Time and ending on the
date of the publication of the post-Merger financial results. First Data has
agreed to "publish," in a manner that satisfies the "publication" requirements
under applicable Commission rules or accounting releases, such post-Merger
financial results no later than 15 days following the first month-end that is
more than 30 days after the Effective Time.
Reofferings By First Financial Affiliates Pursuant to this Joint Proxy
Statement/Prospectus. Following the expiration of the Pooling Period, shares of
First Data Common Stock received by affiliates of First Financial in the Merger
may be reoffered or resold pursuant to this Joint Proxy Statement/Prospectus
for a period (the "Effectiveness Period") commencing on the date (the
"Commencement Date") of the expiration of the Pooling Period and ending on the
later of (i) the date which is 30 days after the Commencement Date and (ii) the
date which is 90 days after the Effective Time. If First Data determines in
good faith that resales of shares of First Data Common Stock by such affiliates
of First Financial pursuant to this Joint Proxy Statement/Prospectus (the
"Selling Stockholders") would materially interfere with, or require premature
disclosure of, any material financing, acquisition, reorganization or business
combination involving First Data, the Surviving Corporation or any of their
respective subsidiaries, then, upon written notice to such Selling
Stockholders, First Data will be entitled to suspend sales of shares of First
Data Common Stock by such Selling Stockholders pursuant to this Joint Proxy
Statement/Prospectus for a period of up to 30 days, provided that the
Effectiveness Period will be extended by the aggregate number of days of any
such suspension. Notwithstanding anything to the contrary in this paragraph,
First Data has agreed to take all actions necessary to cause sales to be
permitted pursuant to this Joint Proxy Statement/Prospectus for at least one 15
consecutive day period commencing on or after the Commencement Date and ending
on or prior to the 90th day following the Effective Time.
Plan of Distribution. The First Data Common Stock reoffered hereby may be
sold from time to time in one or more transactions at fixed prices, at
prevailing market prices at the time of sale, at varying prices determined at
the time of sale or at negotiated prices. The sale of the First Data Common
Stock may be
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effected in transactions (which may involve crosses or block transactions) (i)
on any national securities exchange or quotation service on which the First
Data Common Stock may be listed or quoted at the time of sale, (ii) in the
over-the-counter-market, or (iii) in transactions otherwise than on such
exchanges or in the over-the-counter-market. At the time a particular offering
of the First Data Common Stock is made, a Supplement to this Joint Proxy
Statement/Prospectus, if required, will be distributed which will set forth the
aggregate amount of First Data Common Stock being offered and the terms of the
offering, including the name or names of any underwriters, broker/dealers or
agents, any discounts, commissions and other terms constituting compensation
from the Selling Stockholders and any discounts, commissions or concessions
allowed or reallowed or paid to broker/dealers.
Registration Rights. In addition to the foregoing, under the Merger
Agreement, First Data has agreed that, at the request of the affiliates of
First Financial, it would enter into an agreement to register under the
Securities Act for resale the shares of First Data Common Stock received by
such affiliates in the Merger. The principal terms of such registration rights
will include the following: (i) all of such affiliates will collectively be
entitled to one demand registration, which First Data may delay for up to 60
days if First Data determines in good faith that the filing of the registration
statement would materially interfere with, or require premature disclosure of,
any material financing, acquisition, reorganization or business combination
involving First Data or any of its subsidiaries; (ii) the affiliates may
collectively choose the lead underwriter, subject to reasonable approval of
First Data; (iii) all expenses of the registration (including, but not limited
to, filing fees, reasonable counsel fees of First Data and the counsel fees of
the affiliates, accounting fees and printing costs) will be borne by the
affiliates selling shares under such registration; (iv) the affiliates
participating in the registration and First Data will provide customary cross
indemnification and contribution; and (v) the registration rights will
terminate on the earlier of (A) the second anniversary of the Effective Time
and (B) the completion of a sale of shares of First Data Common Stock effected
pursuant to such registration statement.
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THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement,
which appears as Annex I to this Joint Proxy Statement/Prospectus and is
incorporated herein by reference. The following summary includes the material
terms of such agreement but is not necessarily complete and is qualified in its
entirety by reference to the Merger Agreement.
TERMS OF THE MERGER
The Merger Agreement provides that, upon the terms and subject to the
conditions contained therein, including the approval of the Stock Issuance by
the holders of First Data Common Stock and the approval of the Merger Agreement
by the holders of First Financial Common Stock, Sub will be merged with and
into First Financial at the Effective Time, and First Financial will continue
as the Surviving Corporation.
After the conditions precedent to the Merger have been fulfilled or waived
(where permissible), the filing of a duly executed Certificate of Merger will
be made with the Secretary of State of the State of Georgia, and the Merger
will become effective at the Effective Time, which will occur upon the filing
thereof or such later time established by the Certificate of Merger (provided
that such later date is not more than 30 days after the Certificate of Merger
is filed).
Pursuant to the Merger Agreement, as of the Effective Time, all shares of
First Financial Common Stock that are held in the treasury of First Financial
or by any wholly-owned subsidiary of First Financial and any shares of First
Financial Common Stock owned by First Data or by any wholly-owned subsidiary of
First Data will be cancelled and no capital stock of First Data or other
consideration will be delivered in exchange therefor.
Each issued and outstanding share of common stock of Sub, par value $.01 per
share, will be converted into one validly issued, fully paid and nonassessable
share of common stock of the Surviving Corporation.
Subject to the terms and conditions of the Merger Agreement, each share of
First Financial Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares to be cancelled) will be converted into
1.5859 (such number being the "Conversion Number") validly issued, fully paid
and nonassessable shares of First Data Common Stock. All such shares of First
Financial Common Stock, when so converted, will no longer be outstanding and
will automatically be cancelled and retired and each holder of a Certificate
representing any such shares will cease to have any rights with respect
thereto, except the right to receive certain dividends and other distributions,
certificates representing the shares of First Data Common Stock into which such
shares are converted and any cash, without interest, in lieu of fractional
shares to be issued or paid in consideration therefor upon the surrender of
such Certificate.
In the event of any reclassification, stock split or stock dividend with
respect to First Data Common Stock, any change or conversion of First Data
Common Stock into other securities or any other dividend or distribution with
respect to First Data Common Stock other than normal quarterly cash dividends
as the same may be adjusted from time to time pursuant to the terms of the
Merger Agreement (or if a record date with respect to any of the foregoing
should occur) prior to the Effective Time, appropriate and proportionate
adjustments, if any, will be made to the Conversion Number, and all references
to the Conversion Number in the Merger Agreement will be deemed to be to the
Conversion Number as so adjusted.
SURRENDER AND PAYMENT
First Data has authorized Norwest Bank Minnesota, N.A. to act as Exchange
Agent. As soon as practicable after the Effective Time, First Data will deposit
with the Exchange Agent, in trust for the holders of shares of First Financial
Common Stock converted in the Merger, certificates representing the shares of
First Data Common Stock issuable pursuant to the Merger Agreement in exchange
for outstanding shares of
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First Financial Common Stock and cash, as required to make payments in lieu of
any fractional shares (such cash and shares of First Data Common Stock,
together with any dividends or distributions with respect thereto, being the
"Exchange Fund"). The Exchange Agent will deliver the First Data Common Stock
issuable pursuant to the Merger Agreement out of the Exchange Fund.
As soon as practicable after the Effective Time, First Data will cause the
Exchange Agent to mail to each record holder of a Certificate or Certificates
which immediately prior to the Effective Time represented outstanding shares of
First Financial Common Stock converted in the Merger a letter of transmittal
(which will be in customary form, will specify that delivery will be effected,
and risk of loss and title to the Certificates will pass, only upon actual
delivery of the Certificates to the Exchange Agent, and will contain
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of First Data Common Stock and cash in
lieu of fractional shares). Upon surrender for cancellation to the Exchange
Agent of a Certificate, together with such duly executed letter of transmittal,
the holder of such Certificate will be entitled to receive in exchange therefor
a certificate representing that number of whole shares of First Data Common
Stock into which the shares represented by the surrendered Certificate will
have been converted at the Effective Time, cash in lieu of any fractional
shares, and certain dividends and other distributions in accordance with the
Merger Agreement, and any Certificate so surrendered will forthwith be
cancelled.
All shares of First Data Common Stock issued upon the surrender for exchange
of Certificates in accordance with the terms of the Merger Agreement (including
any cash paid pursuant to the Merger Agreement) will be deemed to have been
issued in full satisfaction of all rights pertaining to the shares of First
Financial Common Stock represented by such Certificates.
FRACTIONAL SHARES
No certificates or scrip representing fractional shares of First Data Common
Stock will be issued upon the surrender for exchange of Certificates, and no
First Data dividend or other distribution or stock split will relate to any
fractional share, and no fractional share will entitle the owner thereof to
vote or to any other rights of a security holder of First Data. In lieu of any
such fractional share, each holder of First Financial Common Stock who would
otherwise have been entitled to a fraction of a share of First Data Common
Stock upon surrender of Certificates for exchange will receive cash (without
interest) in an amount equal to the product of such fractional part of a share
of First Data Common Stock multiplied by the per share closing price on the
NYSE of First Data Common Stock (as reported in the NYSE Composite
Transactions) on the date of the Effective Time (or, if the shares of First
Data Common Stock do not trade on the NYSE on such date, the first date of
trading of the First Data Common Stock on the NYSE after the Effective Time).
CONDITIONS TO THE MERGER
The respective obligations of First Data, First Financial and Sub to effect
the Merger will be subject to the fulfillment of certain conditions at or prior
to the Effective Time, including: (a) approval of the Merger Agreement by the
requisite vote of stockholders of First Financial and approval of the Stock
Issuance by the requisite vote of the stockholders of First Data; (b) the
authorization for listing on the NYSE, subject to official notice of issuance,
of the shares of First Data Common Stock issuable in the Merger, upon
conversion of the 5% Debentures and upon exercise of First Financial stock
options; (c) expiration or termination of the waiting period (and any extension
thereof) applicable to the consummation of the Merger under the HSR Act; (d)
all authorizations, consents, orders, declarations or approvals of, or filings
with, or terminations or expirations of waiting periods imposed by, any
governmental entity, which the failure to obtain, make or occur would have the
effect of making the Merger or any of the transactions contemplated by the
Merger Agreement illegal or would have a material adverse effect on First Data
(assuming the Merger had taken place), will have been obtained, will have been
made or will have occurred; (e) receipt, by First Data, of an opinion dated as
of the Effective Time of Ernst & Young LLP that the Merger will qualify for
pooling of
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interests accounting treatment under Accounting Principles Board Opinion No. 16
if closed and consummated in accordance with the Merger Agreement; (f) no stop
order suspending the effectiveness of the Registration Statement shall have
been issued by the Commission and no proceedings for that purpose shall have
been initiated or, to the knowledge of First Data or First Financial,
threatened by the Commission; (g) no court or other governmental entity having
jurisdiction over First Financial or First Data, or any of their respective
subsidiaries, shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order which
is then in effect and has the effect of making the Merger or any of the
transactions contemplated by the Merger Agreement illegal. See "THE MERGER--
Governmental and Regulatory Approvals."
The obligations of First Financial to effect the Merger are also subject to
the satisfaction of certain conditions at or prior to the Effective Time,
including: (a) each of the representations and warranties of First Data and Sub
(except as specified in the Merger Agreement) that is qualified by materiality
shall be true and correct on and as of the Effective Time as if made on and as
of the Effective Time (except to the extent they relate to a particular date),
and each of the representations and warranties of First Data and Sub that is
not so qualified shall be true and correct in all material respects on and as
of the Effective Time as if made on and as of the Effective Time (except to the
extent they relate to a particular date); each of First Data and Sub shall have
performed in all material respects each of its agreements contained in the
Merger Agreement required to be performed on or prior to the Effective Time;
and First Financial shall have received from First Data and Sub a certificate
to that effect; and (b) First Financial shall have received an opinion of
Sutherland, Asbill & Brennan relating to certain tax matters. See "THE MERGER--
Certain Federal Income Tax Consequences."
The obligations of First Data and Sub to effect the Merger are subject to the
satisfaction of certain conditions at or prior to the Effective Time,
including: (a) each of the representations and warranties of First Financial
(except as specified) that is qualified by materiality shall be true and
correct on and as of the Effective Time as if made on and as of the Effective
Time (except to the extent they relate to a particular date), and each of the
representations and warranties of First Financial (except as specified) that is
not so qualified shall be true and correct in all material respects on and as
of the Effective Time as if made on and as of the Effective Time (except to the
extent they relate to a particular date); First Financial shall have performed
in all material respects each of its agreements contained in the Merger
Agreement required to be performed on or prior to the Effective Time; and First
Data shall have received from First Financial a certificate to that effect; (b)
a non-solicitation agreement shall have been entered into by Mr. Patrick H.
Thomas, the Chairman of the Board, President and Chief Executive Officer of
First Financial, and such agreement shall have remained in full force and
effect without breach thereof by Mr. Thomas; and (c) there shall not be
instituted or pending any suit, action or proceeding by a governmental entity
as a result of the Merger Agreement or any of the transactions contemplated
therein which would have a material adverse effect on First Data (assuming that
the Merger had occurred).
Certain of the foregoing conditions may not be waived by the parties,
including stockholder approvals, the effectiveness of the Registration
Statement and the absence of any order or legal restraint. Although the receipt
of the accounting opinion of Ernst & Young LLP and the tax opinion of First
Financial's counsel may be waived by the parties, First Data and First
Financial intend, in the event either of such opinions are not or cannot be
delivered but the parties nonetheless desire to consummate the Merger, to file
with the Commission a post-effective amendment to the Registration Statement
and to resolicit the approval of the Stock Issuance and the Merger Agreement by
their respective stockholders pursuant to an amended Joint Proxy
Statement/Prospectus.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties of
First Data and Sub, including, among other things; (a) that the documents filed
by First Data with the Commission since January 1, 1993 do not contain material
misstatements or omissions; (b) that the information supplied by First Data
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and Sub to be included herein and in the Registration Statement in connection
with the Merger will be free from material misstatements and omissions; (c)
that there has been no material adverse change with respect to First Data and
its subsidiaries except as disclosed in its documents filed with the
Commission; (d) as to governmental licenses and permits, and compliance with
laws; (e) as to compliance with relevant tax laws; (f) with respect to actions
and proceedings of any governmental entity pending against or involving First
Data or its subsidiaries; (g) as to employee benefit plans and labor matters
(assuming that the Merger had occurred); (h) as to compliance with worker
safety laws and environmental laws; (i) as to intellectual property; (j) as to
actions taken or not taken that would jeopardize the contemplated tax and
accounting treatment of the Merger; (k) as to certain liabilities and (l) as to
brokers. In addition, the Merger Agreement contains representations and
warranties by each of First Data and Sub as to, among other things, its
organization, capital structure, authority to enter into the Merger Agreement
and the binding effect of the Merger Agreement.
The Merger Agreement also contains similar customary representations and
warranties of First Financial, as well as additional representations and
warranties, including, among other things: (a) as to the receipt of a fairness
opinion from Morgan Stanley; and (b) that the Board of Directors has taken all
action necessary to exempt First Data, its subsidiaries and affiliates, the
Merger, the Merger Agreement and the transactions contemplated thereby from
certain state takeover statutes.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, each of First Data and First Financial has
agreed that, during the period from the date of the Merger Agreement through
the Effective Time (except as otherwise expressly permitted by the terms of the
Merger Agreement), it will, and it will cause its respective subsidiaries to,
in all material respects, carry on their respective businesses in the ordinary
course as conducted as of the date of the Merger Agreement and, to the extent
consistent therewith, use reasonable best efforts to preserve intact their
current business organizations, keep available the services of their current
officers and employees and preserve their relationships with customers,
suppliers and others having business dealings with them to the end that their
goodwill and ongoing businesses will be unimpaired at the Effective Time.
Actions by First Data. Without limiting the generality of the foregoing, and
except as otherwise expressly contemplated by the Merger Agreement, First Data
will not, and will not permit any of its subsidiaries to, without the prior
written consent of First Financial: (a) (1) declare, set aside or pay any
dividends on, or make any other distributions in respect of, any of its capital
stock, or otherwise make any payments to its stockholders in their capacity as
such (other than (A) regular quarterly dividends of not more than $.03 per
share on First Data Common Stock, and (B) dividends and other distributions by
subsidiaries), (2) other than in the case of any subsidiary, split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock or (3) subject to the limitations of the Merger Agreement,
purchase, redeem or otherwise acquire any shares of capital stock of First Data
or any of its subsidiaries or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities, other than
the repurchase of shares of First Data Common Stock pursuant to any open market
repurchase program; (b) issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants or
options to acquire any such shares, voting securities, equity equivalent or
convertible securities, other than (1) the issuance of stock options and shares
of First Data Common Stock to employees of First Data or any of its
subsidiaries, (2) the issuance of shares of First Data Common Stock pursuant to
a merger agreement relating to Envoy Corporation, (3) the issuance of
securities in connection with the formation of any joint venture or alliance
with respect to merchant acquiring business (a "Merchant Alliance") or in
connection with any acquisition permitted by the Merger Agreement, (4) in
addition to the foregoing, the issuance of shares of First Data Common Stock or
securities convertible into or exchangeable for shares of First Data Common
Stock, provided that the aggregate amount of such issued or issuable shares of
First Data Common Stock does not exceed 20 million and (5) the issuance by any
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wholly owned subsidiary of First Data of its capital stock to First Data or
another wholly owned subsidiary of First Data; (c) amend its charter or by-
laws, other than the Charter Amendments; (d) other than in connection with a
Merchant Alliance, acquire or agree to acquire any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets, unless (1) in the good faith
judgment of First Data, the consummation of such acquisition would not result
in a downgrading by Moody's Investors Service, Inc. ("Moody's") of First Data's
senior unsecured long-term debt below "Baa3," (2) the entering into a
definitive agreement relating to or the consummation of such acquisition would
not (A) impose any material delay in the obtaining of, or significantly
increase the risk of not obtaining, any authorizations, consents, orders,
declarations or approvals of any governmental entity necessary to consummate
the Merger or the expiration or termination of any applicable waiting period,
(B) significantly increase the risk of any governmental entity entering an
order prohibiting the consummation of the Merger or (C) significantly increase
the risk of not being able to remove any such order on appeal or otherwise, (3)
in the case of any individual acquisition, the aggregate consideration does not
exceed $1.5 billion and (4) in the case of the acquisition of any company or
business the principal executive offices of which or a substantial portion of
the assets of which are located in the United States and the aggregate
consideration exceeds $50 million, First Data acquires directly or indirectly
all of the voting stock or equity interests or assets of such company or
business; (e) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets, other than (1) as contemplated by the
Stock Purchase Agreement between First Data and HBO & Company (providing for
the sale of certain of First Data's businesses to HBO & Company), (2)
transactions in the ordinary course of business consistent with past practice
and not material to First Data and its subsidiaries taken as a whole, (3) as
may be required by any governmental entity, or (4) subject to the terms of the
Merger Agreement, dispositions involving an aggregate consideration not in
excess of $200 million; (f) incur any indebtedness for borrowed money,
guarantee any such indebtedness or make any loans, advances or capital
contributions to, or other investments in, any other person, other than (1) (A)
in the ordinary course of business consistent with past practice, (B)
indebtedness, loans, advances, capital contributions and investments incurred
with or by any Merchant Alliance and (C) indebtedness, loans, advances, capital
contributions and investments between First Data and any of its wholly owned
subsidiaries or between any of such wholly owned subsidiaries and (2) the
incurrence of indebtedness or guarantees which does not result in a downgrading
by Moody's of First Data's senior unsecured long-term debt below "Baa3,"
provided that, prior to any such incurrence, First Data shall have obtained a
preliminary indication from Moody's that the incurrence of the indebtedness or
guarantee is not expected to result in the downgrading of First Data's senior
unsecured long-term debt below "Baa3"; (g) knowingly violate or knowingly fail
to perform any material obligation or duty imposed upon it or any subsidiary by
any applicable material federal, state or local law, rule, regulation,
guideline or ordinance; (h) take any action, other than reasonable and usual
actions in the ordinary course of business consistent with past practice, with
respect to accounting policies or procedures (other than actions required to be
taken by generally accepted accounting principles); or (i) authorize, recommend
or announce an intention to do any of the foregoing, or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing.
Actions by First Financial. Without limiting the generality of the foregoing,
and except as otherwise expressly contemplated by the Merger Agreement, First
Financial will not, and will not permit any of its subsidiaries to, without the
prior written consent of First Data: (a) (1) declare, set aside or pay any
dividends on, or make any other distributions in respect of, any of its capital
stock, or otherwise make any payments to its stockholders in their capacity as
such (other than (A) regular semi-annual dividends of not more than $.05 per
share on First Financial Common Stock and (B) dividends and other distributions
by subsidiaries), (2) other than in the case of any subsidiary, split, combine
or reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock or (3) subject to the limitations set forth in the Merger
Agreement, purchase, redeem or otherwise acquire any shares of capital stock of
First Financial or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities; (b) except as provided
in the Merger Agreement, issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants or
options to acquire
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any such shares, voting securities, equity equivalent or convertible
securities, other than (1) the issuance of shares of First Financial Common
Stock upon the exercise of First Financial stock options outstanding on the
date of the Merger Agreement in accordance with their then current terms, (2)
the issuance of shares of First Financial Common Stock upon the conversion of
the 5% Debentures, (3) the issuance of shares of First Financial Common Stock
pursuant to the terms of the merger agreement relating to Employee Benefit
Plans, Inc., (4) the issuance of shares of First Financial Common Stock having
a value of up to $50 million which First Financial expects to issue as part of
its prefunding of certain pension plan obligations; (5) the issuance of shares
of First Financial Common Stock pursuant to First Financial stock options or
restricted stock grants in the amounts and to the employees referenced in the
Merger Agreement, and (6) the issuance, in the aggregate, of up to 6.4 million
shares of First Financial Common Stock in connection with acquisitions
permitted by the Merger Agreement; (c) amend its charter or by-laws; (d) except
as provided for in the Merger Agreement, acquire or agree to acquire any
business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire any
assets, unless (1) in the good faith judgment of First Financial, the
consummation of such acquisition would not result in a downgrading by Moody's
of First Financial's senior unsecured long-term debt below "Baa3," (2) the
entering into of a definitive agreement relating to or the consummation of such
acquisition would not (A) impose any material delay in the obtaining, or
significantly increase the risk of not obtaining, any authorizations, consents,
orders, declarations or approvals of any governmental entity necessary to
consummate the Merger, or the expiration or termination of any applicable
waiting period, (B) significantly increase the risk of any governmental entity
entering an order prohibiting the consummation of the Merger or (C)
significantly increase the risk of not being able to remove any such order on
appeal or otherwise, (3) in the case of any individual acquisition, the
aggregate consideration does not exceed $1.0 billion and (4) in the case of the
acquisition of any company or business the principal executive offices of which
or a substantial portion of the assets of which are located in the United
States and the aggregate consideration exceeds $50 million, First Financial
acquires, directly or indirectly, all of the outstanding voting stock or equity
interests or assets of such company or business; (e) except as provided for in
the Merger Agreement, sell, lease or otherwise dispose of, or agree to sell,
lease or otherwise dispose of, any of its assets, except for (1) transactions
in the ordinary course of business consistent with past practice and not
material to First Financial and its subsidiaries taken as a whole, (2) as may
be required by any governmental entity and (3) subject to the terms of the
Merger Agreement, dispositions involving an aggregate consideration not in
excess of $100 million; (f) incur any indebtedness for borrowed money,
guarantee any such indebtedness or make any loans, advances or capital
contributions to, or other investments in, any other person, other than (1)(A)
in the ordinary course of business consistent with past practices and (B)
indebtedness, loans, advances, capital contributions and investments between
First Financial and any of its wholly owned subsidiaries or between any of such
wholly owned subsidiaries and (2) the incurrence of indebtedness or guarantees
which does not result in a downgrading by Moody's of First Financial's senior
unsecured long term debt below "Baa3," provided that, prior to any such
incurrence, First Financial shall have obtained a preliminary indication that
the incurrence of the indebtedness or guarantee is not expected to result in
the downgrading of First Financial's senior unsecured long term debt below
"Baa3"; (g) except as provided for in the Merger Agreement, alter the corporate
structure or ownership of First Financial or any subsidiary; (h) except as
provided for in the Merger Agreement, enter into or adopt, or amend any
existing, severance plan, agreement or arrangement or enter into or amend any
First Financial benefit plan or employment or consulting agreement, other than
as required by law; (i) except as provided for in the Merger Agreement,
increase the compensation payable or to become payable to its officers or
employees, except for increases in the ordinary course of business consistent
with past practice in salaries or wages of employees of First Financial or any
of its subsidiaries who are not officers of First Financial or any of its
subsidiaries, or grant any severance or termination pay to, or enter into any
employment or severance agreement with, any director or officer of First
Financial or any of its subsidiaries (other than certain employment or
severance agreements), or establish, adopt, enter into, or, except as may be
required to comply with applicable law, amend in any material respect or take
action to enhance in any material respect or accelerate any rights or benefits
under, any plan or arrangement for the benefit of any director, officer or
employee; (j) knowingly violate or knowingly fail to perform any material
obligation or duty imposed upon it or any subsidiary by any applicable material
federal, state or local law, rule, regulation,
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guideline or ordinance; (k) take any action, other than reasonable and usual
actions in the ordinary course of business consistent with past practice, with
respect to accounting policies or procedures (other than actions required to be
taken by generally accepted accounting principles); (l) except as provided for
in the Merger Agreement, make any tax election or settle or compromise any
material federal, state, local or foreign income tax liability; or (m)
authorize, recommend, propose or announce an intention to do any of the
foregoing, or enter into any contract, agreement, commitment or arrangement to
do any of the foregoing.
During the period from the date of the Merger Agreement through the Effective
Time, First Financial will not terminate, amend, modify or waive any provision
of any confidentiality or standstill agreement to which First Financial or any
of its subsidiaries is a party (other than any involving First Data), unless
the Board of Directors of First Financial concludes in good faith on the basis
of the advice of its outside counsel that the failure to do so would violate
the fiduciary obligations of the Board.
FIRST FINANCIAL STOCK OPTIONS
At the Effective Time, each First Financial stock option will be assumed by
First Data. All references to First Financial in the First Financial stock
option plans, the applicable stock option or other awards agreements issued
thereunder and in any other First Financial stock options will be deemed to
refer to First Data. Each First Financial stock option will be converted into a
stock option to purchase a number of shares of First Data Common Stock equal to
the number of shares of First Financial Common Stock that could have been
purchased (assuming full exercisability) under such First Financial stock
option multiplied by the Conversion Number, at an exercise price per share of
First Data Common Stock equal to the per share option exercise price specified
in the First Financial stock option divided by the Conversion Number. Pursuant
to their original terms, all First Financial stock options will become fully
vested as of the Effective Time.
Upon the approval of the Merger at the First Financial Special Meeting, in
accordance with their original terms, all shares of restricted First Financial
Common Stock issued pursuant to the First Financial benefit plans will be
released from all restrictions pursuant to such plans, and certificates for
such shares will be delivered to the registered owners free of any legend
referring to restrictions under such plans to the extent provided in such
plans.
EMPLOYEE BENEFIT PLANS
Continuation of Benefits. Pursuant to the Merger Agreement, First Data will
cause the Surviving Corporation to maintain for a period of one year after the
Effective Time the First Financial benefit plans in effect on the date of the
Merger Agreement or to provide benefits to employees of First Financial and its
subsidiaries that are no less favorable than those provided by First Data and
its subsidiaries to their own employees. In the event that the employees of
First Financial or any of its subsidiaries are included in any benefit plan of
First Data or any of First Data's subsidiaries, First Data and its subsidiaries
will provide each such employee (a) with respect to any welfare plans, full
credit for service with First Financial and each of First Financial's
subsidiaries (and their respective predecessors) (collectively, "Prior
Service") for purposes of eligibility to participate in, vesting and payment of
benefits under, and eligibility for any subsidized benefit provided under any
such welfare plan of First Data or any of First Data's subsidiaries, and (b)
with respect to First Data's Incentive Savings Plans, full credit for such
Prior Service for purposes of eligibility to participate in such plan and
vesting in matching contributions thereunder.
Change in Control Payments. First Financial, First Data and Sub each
acknowledges in the Merger Agreement that consummation of the transactions
contemplated by the Merger Agreement will constitute a change in control of
First Financial under the terms of First Financial's employee plans, programs,
arrangements and contracts containing provisions triggering payment, vesting or
other rights upon a change in control or similar transactions. At the Closing,
First Financial will pay all amounts and benefits payable under such plans at
the time of a change in control of First Financial, in accordance with the
respective
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terms of such plans. After the closing, First Data will cause the Surviving
Corporation to pay (a) all amounts and benefits payable after the closing under
such plans in accordance with the terms thereof and (b) all amounts payable by
First Financial, but not paid by First Financial, prior to the Closing under
such plans in accordance with the terms thereof. At the closing, all shares of
restricted First Financial Common Stock issued pursuant to the First Financial
option plans will, pursuant to the original terms of such plans, be released
from all restrictions pursuant to such plans, and certificates for such shares
will be delivered to the registered owners free of any legend referring to
restrictions under such plans to the extent provided in such plans.
With respect to each of Messrs. Thomas, Pittard, Kane and Hutto, First
Financial, First Data and Sub each acknowledges and agrees in the Merger
Agreement that the employment of such employee will be terminated as of the
Closing, and that, pursuant to his employment or change in control agreement
with First Financial, at the Closing such executive will receive from First
Financial amounts calculated in accordance with the provisions of such
agreements. See "THE MERGER--Interests of Certain Persons in the Merger."
With respect to each of Messrs. Marschel and Macchia, and certain other
executives of First Financial, First Data and Sub each acknowledges and agrees
in the Merger Agreement that at the Closing each such executive will have "good
reason" to terminate his employment pursuant to his employment or change in
control agreement with First Financial, and that the amounts payable to such
executive if he elects to terminate his employment, or his employment is
terminated by the Surviving Corporation, at or following the closing will be
calculated in accordance with such agreements. See "THE MERGER--Interests of
Certain Persons in the Merger."
Incentive Compensation. Regardless of the provisions of First Financial's
annual incentive bonus plans; (a) upon the involuntary termination of the
employment of any employee of First Financial at or following the Closing but
prior to the time incentive bonuses for 1995 have been paid, such employee will
promptly receive (subject to such employee executing a release of claims) a
bonus equal to the target incentive bonus for 1995 (assuming 100% attainment of
performance objectives); (b) upon the voluntary resignation of any such
employee at or following the Effective Time but prior to the time incentive
bonuses are paid for 1995 such employee will forfeit any incentive bonus for
1995; and (c) any such employee whose employment by First Financial continues
until the time incentive bonuses for 1995 have been paid will be paid a bonus
in accordance with the applicable plan, but in no event less than the amount
payable assuming 100% attainment of performance goals.
Prior to the Effective Time, First Financial will adjust in a reasonable and
appropriate manner the performance targets established under First Financial's
annual incentive bonus plans for 1995 to reflect the effects of the
transactions contemplated in the Merger Agreement and pay incentive bonuses in
cash or stock for 1995 in accordance with such plans, as adjusted. Such
adjustment may take into consideration the payment of transactional fees,
expenses and extraordinary compensation, the impact of disruption in operations
and anticipated changes in organizational structure and business plans.
NO SOLICITATION
Pursuant to the Merger Agreement, from and after the date of the Merger
Agreement, First Financial will not, and will not permit any of its officers,
directors, employees, attorneys, financial advisors, agents or other
representatives or those of any of its subsidiaries to, directly or indirectly,
solicit, initiate or encourage (including by way of furnishing information) any
takeover proposal or offer for First Financial from any person, or engage in or
continue discussions or negotiations relating thereto; provided, however, that
First Financial may engage in discussions or negotiations with, or furnish
information concerning First Financial and its subsidiaries, business,
properties or assets to, any third party which makes a takeover proposal if the
Board of Directors of First Financial concludes in good faith on the basis of
the advice of its outside counsel
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that the failure to take such action would violate the fiduciary obligations of
such Board under applicable law. First Financial will promptly (but in no case
later than 24 hours) notify First Data of any takeover proposal, including the
material terms and conditions thereof. As used in the Merger Agreement,
"takeover proposal" means any proposal or offer, or any expression of interest
by any third party relating to First Financial's willingness or ability to
receive or discuss a proposal or offer, other than a proposal or offer by First
Data or any of its subsidiaries or as permitted under the Merger Agreement, for
a tender or exchange offer, a merger, consolidation or other business
combination involving First Financial or any of its subsidiaries or any
proposal to acquire in any manner a substantial equity interest in, or a
substantial portion of the assets of, First Financial or any of its
subsidiaries.
INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE
The Merger Agreement provides that for six years from and after the Effective
Time, First Data agrees to, and to cause the Surviving Corporation to,
indemnify and hold harmless all past and present officers and directors of
First Financial and of its subsidiaries to the full extent such persons may be
indemnified as of the date of the Merger Agreement by First Financial pursuant
to First Financial's Restated Articles of Incorporation and By-Laws and
indemnification agreements for acts or omissions occurring at or prior to the
Effective Time. In addition, First Data will cause the Surviving Corporation to
provide, for an aggregate period of not less than six years from the Effective
Time, First Financial's current directors and officers with an insurance and
indemnification policy that provides coverage for events occurring at or prior
to the Effective Time that is no less favorable than First Financial's existing
policy or, if substantially equivalent insurance coverage is unavailable, the
best available coverage; provided, however, the Surviving Corporation will not
be required to pay an annual premium for such insurance in excess of 300
percent of the last annual premium paid prior to the date of the Merger
Agreement, but in such case will purchase as much coverage as possible for such
amount.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after any approval of the matters presented in
connection with the Merger by the stockholders of First Financial or First
Data: (a) by mutual written consent of First Financial and First Data; (b) by
either First Data or First Financial if the other party shall have failed to
comply in any material respect with any of its covenants or agreements
contained in the Merger Agreement required to be complied with prior to the
date of such termination, which failure to comply has not been cured within
five business days following receipt by such other party of written notice of
such failure to comply; provided, however, that if any such breach is curable
by the breaching party through the exercise of the breaching party's best
efforts and for so long as the breaching party shall be so using its best
efforts to cure such breach, the non-breaching party may not terminate the
Merger Agreement pursuant to this clause; (c) by either First Data or First
Financial if there has been (1) a breach by the other party (in the case of
First Data, including any material breach by Sub) of any representation or
warranty that is not qualified as to materiality which has the effect of making
such representation or warranty not true and correct in all material respects
or (2) a breach by the other party (in the case of First Data, including any
material breach by Sub) of any representation or warranty that is qualified as
to materiality, in each case of the foregoing clauses (c)(1) and (c)(2) which
breach has not been cured within five business days following receipt by the
breaching party of written notice of the breach; provided, however, that if any
such breach is curable by the breaching party through the exercise of the
breaching party's best efforts and for so long as the breaching party shall be
so using its best efforts to cure such breach, the non-breaching party may not
terminate the Merger Agreement pursuant to this clause; (d) by First Data or
First Financial if: (1) the Merger has not been effected on or prior to the
close of business on December 31, 1995 (the "Termination Date"), provided,
however, that (A) the right to terminate the Merger Agreement pursuant to this
clause will not be available to any party whose failure to fulfill any of its
obligations contained in the Merger Agreement has been the cause of, or
resulted in, the failure of the Merger to have occurred on or prior to the
aforesaid date; (B) the Termination Date may be extended prior to the
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termination thereof by written notice of either First Data or First Financial
to the other to a date not later than March 31, 1996, if the Merger shall not
have been consummated as a result of First Financial or First Data having
failed by December 31, 1995 to receive all required regulatory approvals or
consents (other than those relating to or arising under applicable federal
antitrust laws) with respect to the Merger; (C) the Termination Date may be
extended prior to the termination thereof by written notice of either First
Data or First Financial to the other to the later of (x) the date that is 50
days following the date on which the parties fully complied with a request by
the applicable federal antitrust authority for additional information under the
HSR Act and (y) if the parties have agreed with the applicable federal
antitrust authority to not consummate the Merger until a certain date, the date
that is 30 days following such agreed date; (D) if the applicable federal
antitrust authority seeks an order with respect to the legality of the Merger
under applicable federal antitrust laws, the Termination Date may be extended
prior to the termination thereof by written notice of either First Data or
First Financial to the other to the date that is 30 days following the date on
which a ruling with respect to such an order is entered by a trial court or
administrative body; and (E) if such order has been entered which had the
effect of enjoining the consummation of the Merger and any party to the Merger
Agreement has commenced an appeal thereof, the Termination Date may be extended
prior to the termination of the Merger Agreement by written notice of either
First Data or First Financial to the other to the date which is 30 days
following the issuance of a decision by the applicable appeals court with
respect to such an appeal; provided, further, that, notwithstanding anything to
the contrary in this clause (d)(1), in no event will the Termination Date be
extended beyond August 31, 1996; or (2) any court or other governmental entity
having jurisdiction over a party to the Merger Agreement has issued an order,
decree or ruling or taken any other action permanently enjoining, restraining
or otherwise prohibiting the transactions contemplated by the Merger Agreement
and such order, decree, ruling or other action has become final and
nonappealable; provided, that a preliminary injunction preventing the
consummation of the Merger that has been entered and affirmed on appeal by a
United States Court of Appeals will be deemed an order which is final and non-
appealable for the purpose of this clause (2); (e) by First Data or First
Financial if the stockholders of First Financial do not approve the Merger
Agreement at the First Financial Special Meeting; (f) by First Data or First
Financial if the stockholders of First Data do not approve the Stock Issuance
at the First Data Special Meeting; (g) by First Data or First Financial if the
Board of Directors of First Financial reasonably determines that a takeover
proposal constitutes a Superior Proposal (as defined below); provided, however,
that First Financial may not terminate the Merger Agreement pursuant to this
clause unless and until three business days have elapsed following delivery to
First Data of a written notice of such determination by the Board of Directors
of First Financial; (h) by First Data if (1) the Board of Directors of First
Financial has not recommended, or has resolved not to recommend, or has
modified or withdrawn its recommendation of the Merger or declaration that the
Merger is advisable and fair to and in the best interest of First Financial and
its stockholders, or has resolved to do so, (2) the Board of Directors of First
Financial has recommended to the stockholders of the First Financial any
takeover proposal or has resolved to do so or (3) a tender offer or exchange
offer for 30% or more of the outstanding shares of capital stock of First
Financial is commenced, and the Board of Directors of First Financial fails to
recommend against acceptance of such tender offer or exchange offer by its
stockholders.
"Superior Proposal" means a bona fide proposal or offer made by a third party
to acquire First Financial pursuant to a tender or exchange offer, a merger,
consolidation or other business combination or a sale of all or substantially
all of the assets of First Financial and its subsidiaries on terms which a
majority of the members of the Board of Directors of First Financial determines
in its good faith reasonable judgment (based on the advice of independent
financial advisors) to be more favorable to First Financial and to its
stockholders than the transactions contemplated in the Merger Agreement,
provided that in making such determination the Board considers the likelihood
that such third party is able to consummate such proposed transaction.
FEES AND EXPENSES
Regardless of whether the Merger is consummated, except as described below
upon certain events of termination of the Merger Agreement and with respect to
certain real estate transfer and gains taxes, all costs and expenses incurred
in connection with the Merger Agreement and the transactions contemplated
thereby
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will be paid by the party incurring such costs and expenses; provided that all
printing expenses and filing fees shall be divided equally between First Data
and First Financial. Notwithstanding the foregoing: (i) If any event referred
to in clause (h)(1) under "--Termination" above occurs, the Merger Agreement is
terminated thereafter by First Financial or First Data (whether or not pursuant
to such clause) and prior to such termination the stockholders of First
Financial did not approve the Merger Agreement, then First Financial will pay
to First Data a fee of $10 million in cash, provided, however, that if First
Data is entitled to a payment pursuant to the immediately following clause
First Data shall not be entitled to any payment pursuant to this clause (i);
(ii) If (A) the Merger Agreement is terminated by First Financial pursuant to
clause (d)(1) under "--Termination" above, and within twelve months after such
a termination a Superior First Financial Acquisition Transaction (as
hereinafter defined) occurs; (B) (x) the Merger Agreement is terminated by
First Financial or First Data at a time when First Data is entitled to
terminate the Merger Agreement pursuant to clause (e) under "--Termination"
above, (y) prior to the First Financial Special Meeting but after the date of
the Merger Agreement a First Financial Third Party Acquisition Event (as
hereinafter defined) has occurred and (z) by reason thereof or otherwise the
event referred to in clause (D) of the definition of First Financial Third
Party Acquisition Event occurs after the date hereof but prior to the first
anniversary of such termination; (C) the Merger Agreement is terminated by
First Financial or First Data pursuant to clause (g) under "--Termination"
above; or (D) the Merger Agreement is terminated by First Data pursuant to
clause (h)(1) or (h)(2) under "--Termination" above, following the occurrence
of a First Financial Third Party Acquisition Event; then, in each case of the
foregoing clauses (ii)(A), (ii)(B), (ii)(C) and (ii)(D), First Financial will
pay to First Data a fee of $68 million in cash, provided, however, that if
First Data is entitled to payment pursuant to this clause (ii), First Data will
not be entitled to any payment pursuant to clause (i) of this paragraph.
In addition, if the Board of Directors of First Data fails to recommend to
First Data's stockholders the approval of the Stock Issuance or withdraws such
recommendation and the Merger Agreement is terminated by First Data or First
Financial at a time when First Financial is entitled to terminate the Merger
Agreement pursuant to clause (f) under "--Termination" above, then First Data
will pay to First Financial a fee of $10 million in cash, provided, however,
that if First Financial is entitled to a payment pursuant to the immediately
following paragraph, First Financial will not be entitled to any payment
pursuant to this paragraph.
If (A) the Merger Agreement is terminated by First Financial or First Data
when First Financial is entitled to terminate the Merger Agreement pursuant to
clause (f) under "--Termination" above, (B) prior to the First Data Special
Meeting but after the date of the Merger Agreement a First Data Third Party
Acquisition Event (as hereinafter defined) has occurred and (C) by reason
thereof or otherwise the event referred to in clause (D) of the definition of
First Data Third Party Acquisition Event occurs after the date of the Merger
Agreement but prior to the first anniversary of such termination, then First
Data will pay to First Financial a fee of $68 million in cash, provided,
however, if First Financial is entitled to payment pursuant to this paragraph,
First Financial will not be entitled to any payment pursuant to the immediately
preceding paragraph.
For purposes of the Merger Agreement, a "First Financial Third Party
Acquisition Event" means any of the following events: (A) any person, other
than First Data or its affiliates, acquires or becomes the beneficial owner of
30% or more of the outstanding shares of First Financial Common Stock; (B) any
new group is formed which, at the time of formation, beneficially owns 30% or
more of the outstanding shares of First Financial Common Stock, other than a
group which includes or may be reasonably deemed to include First Data or its
affiliates; (C) any person, other than First Data or its affiliates, has
commenced a tender or exchange offer for 30% or more of the then outstanding
shares of First Financial Common Stock or publicly proposed any bona fide
merger, consolidation or acquisition of all or substantially all the assets of
First Financial, or other similar business combination involving First
Financial; (D) First Financial enters into, or announces that it proposes to
enter into, an agreement, including, without limitation, an agreement in
principle, providing for a merger or other business combination involving First
Financial or the acquisition of a substantial interest in, or a substantial
portion of the assets, business or operations of, First Financial
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(other than the transactions contemplated by the Merger Agreement); (E) any
person, other than First Data or its affiliates, is granted an option or right
to acquire or otherwise become the beneficial owner of shares of First
Financial Common Stock which, together with all shares of First Financial
Common Stock beneficially owned by such person, results or would result in such
person being the beneficial owner of 30% or more of the outstanding shares of
First Financial Common Stock; or (F) there is a public announcement with
respect to a plan or intention by First Financial or any person, other than
First Data and its affiliates, to effect any of the foregoing transactions. For
the purposes of this Fees and Expenses section, the terms "group" and
"beneficial owner" are defined by reference to Section 13(d) of the Exchange
Act.
For purposes of the Merger Agreement, a "First Data Third Party Acquisition
Event" means any of the following events: (A) any person acquires or becomes
the beneficial owner of 30% or more of the outstanding shares of First Data
Common Stock (other than by reason of an issuance of shares of First Data
Common Stock pursuant to the Merger Agreement); (B) any new group is formed
which, at the time of formation, beneficially owns 30% or more of the
outstanding shares of First Data Common Stock (other than a group which
includes or may be reasonably deemed to include First Data or any of its
affiliates); (C) any person shall have commenced a tender or exchange offer for
30% or more of the then outstanding shares of First Data Common Stock or
publicly proposed any bona fide merger, consolidation or acquisition of all or
substantially all the assets of First Data, or other similar business
combination involving First Data; (D) First Data enters into, or announces that
it proposes to enter into, an agreement, including, without limitation, an
agreement in principle, providing for a merger or other business combination
involving First Data (other than the Merger Agreement) or the acquisition of a
substantial interest in, or a substantial portion of the assets, business or
operations of, First Data or (E) there is a public announcement with respect to
a plan or intention by any person to effect any of the foregoing transactions.
For purposes of the Merger Agreement, a "Superior First Financial Acquisition
Transaction" means the event referred to in clause (D) of First Financial Third
Party Acquisition Event above, provided that the financial and other terms of
the transaction referred to therein are, when considered in the aggregate, more
favorable to the First Financial stockholders than the financial and other
terms of the Merger.
AMENDMENT
The Merger Agreement may be amended by the parties thereto, by or pursuant to
action taken by their respective Boards of Directors, at any time before or
after approval of the Merger by the stockholders of First Data and First
Financial, but, after any such approval, no amendment shall be made which by
law requires further approval by such stockholders without such further
approval.
WAIVER
The Merger Agreement provides that, at any time prior to the Effective Time,
the parties thereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties thereto, (b) waive any
inaccuracies in the representations and warranties contained therein or in any
document delivered pursuant thereto and (c) waive compliance with any of the
agreements or conditions contained therein which may legally be waived.
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UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
give effect to the Merger of First Data and First Financial under the pooling
of interests method of accounting. A pro forma condensed combined balance sheet
is provided as of June 30, 1995, giving effect to the Merger as though it had
been consummated on that date. Pro forma condensed combined income statements
are provided for the years ended December 31, 1992, 1993 and 1994 and the six
months ended June 30, 1995 giving effect to the Merger as though it had
occurred at the beginning of the earliest period presented. For the year ended
December 31, 1994 and the six months ended June 30, 1995, the pro forma
condensed combined income statements also give effect to First Data's
acquisition of CESI Holdings in March 1995 and First Financial's acquisition of
Western Union in November 1994 as if such acquisitions had taken place as of
January 1, 1994. For further detail relating to First Data's acquisition of
CESI Holdings for the year ended December 31, 1994 and the six months ended
June 30, 1995 see First Data's Current Reports on Form 8-K dated March 23, 1995
and September 1, 1995, respectively, incorporated by reference herein. For
further detail relating to First Financial's acquisition of Western Union for
the year ended December 31, 1994 see First Financial's Current Report on Form
8-K dated March 28, 1995 incorporated by reference herein. See "AVAILABLE
INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." The data
presented for the year ended December 31, 1994 combine CESI Holdings' results
of operations and First Data's results of operations for the year ended
December 31, 1994, Western Union's results of operations for the period January
1, 1994 to October 31, 1994, and First Financial's results of operations for
the year ended December 31, 1994 which included Western Union's results of
operations from November 1, 1994. The data presented for the six months ended
June 30, 1995 combine CESI Holdings' results of operations for the period
January 1, 1995 through March 8, 1995; First Data's results of operations for
the six months ended June 30, 1995 which included CESI Holdings' results of
operations from March 9, 1995, and First Financial's results of operations for
the six months ended June 30, 1995. The pro forma information is based on the
historical consolidated financial statements of each of First Data, First
Financial, CESI Holdings and Western Union and has been prepared under the
assumptions and adjustments set forth below and in the accompanying notes to
the pro forma condensed combined financial statements.
The unaudited pro forma condensed combined financial statements have been
prepared by the managements of First Data and First Financial based upon their
respective consolidated financial statements, as well as available information
and certain assumptions which the managements believe are reasonable. Pro forma
combined per share amounts are based on the Conversion Number of 1.5859 shares
of First Data Common Stock for each share of First Financial Common Stock. The
unaudited pro forma condensed combined income statements, which include results
of operations as if the Merger had been consummated on January 1, 1992, do not
reflect the merger expenses anticipated to be incurred or the effects of
potential increased revenues or operating synergies and cost savings
anticipated to result from the Merger. In addition to the assumptions contained
herein relating to the Merger of First Data and First Financial, the pro forma
condensed combined statements of income for the year ended December 31, 1994
and the six months ended June 30, 1995 also reflect a number of assumptions
related to the amortization of goodwill, the issuance of common stock and
convertible debt and other adjustments related to the preliminary purchase
price allocations of CESI Holdings and Western Union, as further explained in
First Data's and First Financial's Current Reports cited above. These pro forma
financial statements are presented for illustrative purposes only, and
therefore are not necessarily indicative of the operating results and financial
position that might have been achieved had the Merger, First Data's acquisition
of CESI Holdings and First Financial's acquisition of Western Union occurred as
of an earlier date, nor are they necessarily indicative of operating results
and financial position which may occur in the future. The pro forma condensed
combined statements of income do not give pro forma effect to the November 30,
1994 disposition of First Data's Cable Services Group, Inc. subsidiary, the
June 6, 1995 acquisition of ENVOY Corporation by First Data or the June 17,
1995 disposition of First Data's subsidiary First Data Health Systems
Corporation, as they would have had
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less than a 5% effect on pro forma earnings in the aggregate. It also does not
give effect to the pending acquisition of Employee Benefit Plans, Inc. by First
Financial as the effect on pro forma earnings in the aggregate would be
immaterial.
The unaudited pro forma condensed combined financial statements should be
read in conjunction with the historical consolidated financial statements and
notes thereto in the companies' separate Annual Reports on Form 10-K for the
year ended December 31, 1994 and Quarterly Reports on Form 10-Q for the period
ended June 30, 1995, incorporated by reference herein. See "AVAILABLE
INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
On September 20, 1995, First Data entered into a Consent Decree with the FTC
regarding the consumer money transfer businesses of MoneyGramSM and Western
Union. The execution of the Consent Decree terminated the waiting period under
the HSR Act, thereby satisfying a condition to the Merger. Under the terms of
the Consent Decree, First Data will be allowed to perform processing services
for each of MoneyGramSM and Western Union, but it will be permitted to retain
the sales and marketing functions of only one of the two companies. The Consent
Decree will become final upon acceptance by the FTC following a 60 day notice
and public comment period. The required divestiture must occur no later than
twelve months following the final acceptance of the Consent Decree by the FTC.
First Data and First Financial are evaluating their alternatives under the
Consent Decree. However, First Data and First Financial believe that it is more
likely than not that the required divestiture, when combined with the
negotiation of a processing agreement, will not have a material impact on the
post-Merger combined entity's ongoing results of operations. In addition, First
Data and the FTC entered into a "hold separate" agreement whereby the
MoneyGramSM business must be managed and maintained as a separate, ongoing
business, independent of all other First Data businesses and independent of the
Western Union business. The hold separate arrangement will continue until First
Data's interest in the sales and marketing function of either MoneyGramSM or
Western Union has been divested or the FTC has withdrawn its acceptance of the
Consent Decree pursuant to its rules.
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FIRST DATA CORPORATION AND
FIRST FINANCIAL MANAGEMENT CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1995
(MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST FIRST PRO FORMA PRO FORMA
DATA FINANCIAL ADJUSTMENTS COMBINED
-------- --------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents........... $ 111.4 $ 124.2 $ $ 235.6
Short-term investments.............. 58.2 -- 58.2
Equity securities available for
sale............................... 209.5 -- 209.5
Proceeds including proceeds due from
financial instruments sold......... 3,794.9 118.2 3,913.1
Funds and funds due relating to
merchant processing................ 284.8 236.3 521.1
Accounts receivable, less allowance. 303.9 182.4 486.3
Land, buildings and equipment at
cost, net of depreciation.......... 367.3 160.4 527.7
Goodwill and other intangibles, net
of amortization.................... 2,005.9 2,091.7 4,097.6
Other assets........................ 260.4 191.1 451.5
-------- -------- ------- ---------
$7,396.3 $3,104.3 $ -- $10,500.6
======== ======== ======= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Drafts outstanding.................. $ 58.1 $ -- $ $ 58.1
Liabilities relating to financial
instruments sold................... 3,753.0 118.3 3,871.3
Liabilities relating to merchant
processing......................... 277.4 221.5 498.9
Short-term debt..................... 372.0 18.3 390.3
Long-term debt...................... 468.3 214.3 682.6
Senior convertible debentures....... -- 447.1 447.1
Pension obligations assumed......... -- 149.6 149.6
Accounts payable, accrued expenses
and other liabilities.............. 707.9 381.2 136.0 1,225.1
-------- -------- ------- ---------
Total liabilities............... 5,636.7 1,550.3 136.0 7,323.0
-------- -------- ------- ---------
Stockholders' equity:
Common stock...................... 1.2 6.4 (5.4) 2.2
Capital surplus................... 939.7 965.5 4.7 1,909.9
Retained earnings................. 843.2 642.2 (195.4) 1,290.0
Treasury stock, at cost........... (36.9) (0.7) 0.7 (36.9)
Other............................. 12.4 (59.4) 59.4 12.4
-------- -------- ------- ---------
Total stockholders' equity...... 1,759.6 1,554.0 (136.0) 3,177.6
-------- -------- ------- ---------
$7,396.3 $3,104.3 $ -- $10,500.6
======== ======== ======= =========
</TABLE>
See "Notes to Unaudited Pro Forma Condensed Combined Financial Statements."
66
<PAGE>
FIRST DATA CORPORATION AND
FIRST FINANCIAL MANAGEMENT CORPORATION
PRO FORMA CONDENSED COMBINED
STATEMENTS OF INCOME
(MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1992 YEAR ENDED DECEMBER 31, 1993
----------------------------- ------------------------------
FIRST FIRST PRO FORMA FIRST FIRST PRO FORMA
DATA FINANCIAL COMBINED DATA FINANCIAL COMBINED
-------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues, net........... $1,205.3 $924.1 $2,129.4 $1,490.3 $1,025.2 $2,515.5
Expenses:
Human resources....... 494.3 366.3 860.6 618.5 401.2 1,019.7
Equipment, supplies
and facilities....... 184.7 175.2 359.9 213.6 177.5 391.1
Depreciation and
amortization......... 97.5 84.5 182.0 117.8 77.8 195.6
Professional,
advertising and
other, net........... 163.3 141.0 304.3 230.1 143.9 374.0
Loss in business unit
sold................. -- 79.6 79.6 -- -- --
-------- ------ -------- -------- -------- --------
939.8 846.6 1,786.4 1,180.0 800.4 1,980.4
-------- ------ -------- -------- -------- --------
Operating income........ 265.5 77.5 343.0 310.3 224.8 535.1
Interest expense........ (33.9) (9.6) (43.5) (41.4) (4.6) (46.0)
Other income............ -- -- -- 22.0 -- 22.0
-------- ------ -------- -------- -------- --------
Pretax income from
continuing operations.. 231.6 67.9 299.5 290.9 220.2 511.1
Income taxes............ 90.2 46.5 136.7 117.9 88.4 206.3
-------- ------ -------- -------- -------- --------
Income from continuing
operations............. $ 141.4 $ 21.4 $ 162.8 $ 173.0 $ 131.8 $ 304.8
======== ====== ======== ======== ======== ========
Weighted average number
of common shares and
common stock
equivalents............ 108.9 60.1 204.2 111.1 62.0 209.4
Income from continuing
operations per common
share.................. $ 1.30 $ 0.35 $ 0.80 $ 1.56 $ 2.12 $ 1.46
</TABLE>
See "Notes to Unaudited Pro Forma Condensed Combined Financial Statements."
67
<PAGE>
FIRST DATA CORPORATION AND
FIRST FINANCIAL MANAGEMENT CORPORATION
PRO FORMA CONDENSED COMBINED
STATEMENTS OF INCOME
(MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
YEAR ENDED DECEMBER 31, 1994 1995
-------------------------------- -----------------------------
PRO FORMA PRO FORMA PRO FORMA
FIRST FIRST FIRST
DATA & FINANCIAL & DATA &
CESI WESTERN PRO FORMA CESI FIRST PRO FORMA
HOLDINGS UNION COMBINED HOLDINGS FINANCIAL COMBINED
--------- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues, net........... $1,862.3 $1,514.2 $3,376.5 $978.5 $806.1 $1,784.6
Expenses:
Human resources....... 697.2 522.4 1,219.6 379.4 266.9 646.3
Equipment, supplies
and facilities....... 284.4 261.4 545.8 159.7 126.7 286.4
Depreciation and
amortization......... 178.4 130.7 309.1 101.4 66.5 167.9
Professional,
advertising and
other, net........... 333.9 256.6 590.5 154.5 181.1 335.6
-------- -------- -------- ------ ------ --------
1,493.9 1,171.1 2,665.0 795.0 641.2 1,436.2
-------- -------- -------- ------ ------ --------
Operating income........ 368.4 343.1 711.5 183.5 164.9 348.4
Interest expense........ (57.4) (54.4) (111.8) (28.3) (20.7) (49.0)
Western Union pension
cost................... -- (18.3) (18.3) -- (8.7) (8.7)
Other income............ 50.2 -- 50.2 80.9 -- 80.9
-------- -------- -------- ------ ------ --------
Pretax income from
continuing operations.. 361.2 270.4 631.6 236.1 135.5 371.6
Income taxes............ 157.4 110.4 267.8 132.6 55.6 188.2
-------- -------- -------- ------ ------ --------
Income from continuing
operations............. $ 203.8 $ 160.0 $ 363.8 $103.5 $ 79.9 $ 183.4
======== ======== ======== ====== ====== ========
Weighted average number
of common shares and
common stock
equivalents............ 121.4 69.0 230.8 118.8 69.6 229.2
Income from continuing
operations per common
share.................. $ 1.68 $ 2.49 $ 1.63 $ 0.87 $ 1.25 $ 0.83
</TABLE>
See "Notes to Unaudited Pro Forma Condensed Combined Financial Statements."
68
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited pro forma condensed combined financial statements give effect
to the Merger of First Data and First Financial under the pooling of interests
accounting method. The pro forma condensed combined statements of income for
the year ended December 31, 1994 and the six months ended June 30, 1995 also
give effect to First Data's acquisition of CESI Holdings in March 1995 and
First Financial's acquisition of Western Union in November 1994 as if such
acquisitions had taken place as of January 1, 1994. In accordance with the
Commission's reporting rules, the pro forma condensed combined statements of
income, and the historical statements from which they are derived, present only
income from continuing operations, and therefore do not include income
attributable to First Financial's discontinued operations of $30.1 million in
1992.
The pro forma condensed combined statements of income exclude: (i) the
positive effects of potential increased revenues or operating synergies and
cost savings which may be achieved upon combining the resources of the
companies; (ii) investment banking, legal and miscellaneous transaction costs
of the Merger, currently estimated to be $52.3 million on an after-tax basis;
(iii) costs associated with termination benefits of certain employees of First
Financial, currently estimated to be $143.1 million on an after-tax basis, and
(iv) costs associated with the integration and consolidation of the companies.
The estimate of costs associated with termination benefits assumes a market
value for First Financial Common Stock of $90 per share, which approximates the
equivalent combined market value per share of First Financial Common Stock on
the date of the Merger Agreement, June 12, 1995, reflecting the Conversion
Number of 1.5859. Plans for integration and consolidation of the companies'
operations are currently being developed, but the associated costs are not
presently estimable. The accounting policies utilized by First Data and First
Financial are currently being studied from a conformity perspective; however,
the impact of any potential adjustment is not presently estimated to be
material.
In addition to the assumptions contained herein relating to the Merger of
First Data and First Financial, the pro forma condensed combined statements of
income for the year ended December 31, 1994 and the six months ended June 30,
1995 also reflect a number of assumptions related to the amortization of
goodwill, the issuance of common stock and convertible debt and other
adjustments related to the preliminary purchase price allocations of CESI
Holdings and Western Union, as further explained in First Data's and First
Financial's Current Reports incorporated by reference herein.
The pro forma condensed combined balance sheet as of June 30, 1995 includes,
in accordance with the Commission's reporting rules, the impact of all
transactions, whether of a recurring or nonrecurring nature, that can be
reasonably estimated and should be reflected as of that date. Therefore, the
pro forma condensed combined balance sheet reflects a pro forma adjustment, net
of related taxes, of $195.4 million, for the current estimated amounts of
transaction and termination costs related to the Merger, as discussed above.
The First Financial historical income statement and balance sheet
classifications presented herein were reclassified to be consistent with the
presentation used by First Data. Historically, First Financial presented its
revenues on a gross basis including interchange fees. Interchange fees
represent a standardized fee charged by the Visa and MasterCard credit card
associations to compensate card issuing banks for the risk of transaction
fraud, processing expenses and funding costs and are settled net with the card
issuing banks. First Data presents revenues on a net basis in its consolidated
financial statements as generally there is no risk to a merchant acquirer
associated with the interchange fees. First Financial's interchange fees were
$506.6 million, $639.0 million and $869.1 million for the years ended December
31, 1992, 1993 and 1994, respectively, and $377.8 million and $487.6 million
for the six months ended June 30, 1994 and 1995, respectively.
69
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS--(CONTINUED)
2. PRO FORMA ADJUSTMENTS
Stockholders' Equity
Stockholders' equity as of June 30, 1995 has been adjusted to reflect the
following:
Common stock is adjusted for the assumed issuance of approximately 101
million shares of First Data Common Stock in exchange for approximately 64
million shares of First Financial Common Stock issued and outstanding as of
June 30, 1995, utilizing the Conversion Number of 1.5859. The number of
shares of First Data Common Stock to be issued at consummation of the
Merger will be based upon the actual number of shares of First Financial
Common Stock outstanding at that time.
Capital surplus is adjusted for: (i) the effects of the aforementioned
issuance of shares of First Data Common Stock having a par value of $.01
per share in exchange for First Financial Common Stock having a par value
of $.10 per share and (ii) the assumed cancellation of 20,000 shares of
First Financial Common Stock held in treasury as of June 30, 1995.
Other stockholders' equity is adjusted for the recognition of
approximately $59.4 million of deferred compensation associated with the
accelerated vesting of restricted stock awards.
As of the effective date of the Merger, all rights with respect to shares of
First Financial Common Stock potentially issuable pursuant to First Financial
stock option plans and convertible debentures shall immediately convert to
equivalent rights with respect to First Data Common Stock utilizing the
Conversion Number.
Income per Common Share
Pro forma weighted average shares and common stock equivalents for each of
the three years in the period ended December 31, 1994 and the six month period
ended June 30, 1995 reflect the conversion of each share of outstanding First
Financial Common Stock and each common stock equivalent that is dilutive to net
income per share computations to 1.5859 shares of First Data Common Stock. Pro
forma weighted average shares and common stock equivalents for the year ended
December 31, 1994 and June 30, 1995 also reflect the assumed issuance as of
January 1, 1994 of the shares issued by First Data in its acquisition of CESI
Holdings. Common stock equivalents consist of shares issuable under each of the
companies' stock option plans, shares issuable in connection with First
Financial's outstanding warrants (which were exercised in the quarter ended
June 30, 1995) and an assumed conversion into common stock of First Financial's
senior convertible debentures issued in December 1994.
70
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS--(CONTINUED)
3. PRO FORMA HISTORICAL CONDENSED COMBINED INCOME STATEMENT DATA
The following table sets forth pro forma historical condensed combined income
statement data for the year ended December 31, 1994 and the six-month periods
ended June 30, 1994 and 1995 giving effect only to the Merger under the pooling
of interests method of accounting. This information is consistent with the
method of presentation used for the years ended December 31, 1992 and 1993 and
reflects the historical income statement data, restated to give effect to the
Merger.
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
YEAR ENDED DECEMBER 31, 1994 ENDED JUNE 30, 1994 ENDED JUNE 30, 1995
------------------------------ --------------------------- ---------------------------
FIRST FIRST PRO FORMA FIRST FIRST PRO FORMA FIRST FIRST PRO FORMA
DATA FINANCIAL COMBINED DATA FINANCIAL COMBINED DATA FINANCIAL COMBINED
-------- --------- --------- ------ --------- --------- ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues, net........... $1,652.2 $1,231.8 $2,884.0 $785.4 $553.8 $1,339.2 $940.1 $806.1 $1,746.2
Expenses................ 1,305.0 952.4 2,257.4 615.2 443.9 1,059.1 754.5 641.2 1,395.7
-------- -------- -------- ------ ------ -------- ------ ------ --------
Operating income........ 347.2 279.4 626.6 170.2 109.9 280.1 185.6 164.9 350.5
Interest expense........ (41.3) (8.8) (50.1) (21.5) (1.4) (22.9) (25.2) (20.7) (45.9)
Western Union pension
cost................... -- (2.3) (2.3) -- -- -- -- (8.7) (8.7)
Other income............ 50.2 -- 50.2 3.6 -- 3.6 80.9 -- 80.9
-------- -------- -------- ------ ------ -------- ------ ------ --------
Pretax income........... 356.1 268.3 624.4 152.3 108.5 260.8 241.3 135.5 376.8
Income taxes............ 148.0 108.1 256.1 62.1 44.8 106.9 133.1 55.6 188.7
-------- -------- -------- ------ ------ -------- ------ ------ --------
Net income.............. $ 208.1 $ 160.2 $ 368.3 $ 90.2 $ 63.7 $ 153.9 $108.2 $ 79.9 $ 188.1
======== ======== ======== ====== ====== ======== ====== ====== ========
Weighted average number
of common shares and
common stock
equivalents............ 111.2 62.9 211.0 111.5 62.5 210.6 115.6 69.6 226.0
Net income per common
share.................. $ 1.87 $ 2.56 $ 1.75 $ 0.81 $ 1.02 $ 0.73 $ 0.94 $ 1.25 $ 0.86
</TABLE>
71
<PAGE>
DESCRIPTION OF FIRST DATA CAPITAL STOCK
GENERAL
As of the date hereof, First Data's authorized capital stock consists of
300,000,000 shares of First Data Common Stock and 10,000,000 shares of
preferred stock, par value $1.00 per share (the "Preferred Stock"). As of
September 15, 1995, 118,760,681 shares of First Data Common Stock were issued
and outstanding. As of such date, no shares of Preferred Stock were
outstanding. The following summary description of the capital stock of First
Data does not purport to be complete and is qualified in its entirety by
reference to First Data's Restated Certificate of Incorporation and to the
DGCL. See "AVAILABLE INFORMATION."
FIRST DATA COMMON STOCK
Holders of First Data Common Stock are entitled to one vote for each share
held on all matters submitted to a vote of stockholders of First Data and do
not have cumulative voting rights. Accordingly, holders of a majority of the
shares of First Data Common Stock entitled to vote in any election of directors
of First Data may elect all of the directors standing for election. Holders of
First Data Common Stock are entitled to receive ratably such dividends, if any,
as may be declared by the Board of Directors of First Data out of funds legally
available therefor, subject to any preferential dividend rights of outstanding
Preferred Stock and certain dividend limitations contained in First Data's
outstanding debt facilities. See "SUMMARY--Comparative Stock Prices and
Dividends." Upon the liquidation, dissolution or winding up of First Data, the
holders of First Data Common Stock are entitled to receive ratably the net
assets of First Data available after the payment of all debts and other
liabilities and subject to the prior rights of any outstanding Preferred Stock.
Holders of First Data Common Stock have no preemptive, subscription, redemption
or conversion rights. All outstanding shares of First Data Common Stock are
duly authorized, validly issued, fully paid and nonassessable. The rights,
preferences and privileges of holders of First Data Common Stock are subject
to, and may be adversely affected by, the rights of the holders of shares of
any series of Preferred Stock which First Data may designate and issue in the
future.
PREFERRED STOCK
The Board of Directors of First Data has the authority to issue the Preferred
Stock in one or more classes or series and to fix the designations, powers,
preferences and rights of the shares of each such class or series, including
dividend rates, conversion rights, voting rights, terms of redemption and
liquidation preferences and the number of shares constituting each such class
or series, without any further vote or action by the stockholders of First
Data. The ability of the Board of Directors of First Data to issue Preferred
Stock, while providing flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding voting stock of First Data. As of the date hereof,
First Data has no present plans to issue any of the Preferred Stock.
For a discussion of other provisions of First Data's Restated Certificate of
Incorporation and By-laws which may delay, defer or prevent a tender offer or
other takeover attempt, see "COMPARISON OF RIGHTS OF HOLDERS OF FIRST DATA
COMMON STOCK AND FIRST FINANCIAL COMMON STOCK--Anti-Takeover Provisions."
STATUTORY PROVISIONS
First Data has elected, pursuant to a provision of its Restated Certificate
of Incorporation, not to be governed by Section 203 of the DGCL. Section 203 of
the DGCL prohibits certain transactions between a Delaware corporation and an
"interested stockholder," which is defined as a person who, together with any
affiliates and/or associates of such person, beneficially owns, directly or
indirectly, 15 percent or more of the
72
<PAGE>
outstanding voting shares of a Delaware corporation. This provision prohibits
certain business combinations (defined broadly to include mergers,
consolidations, sales or other dispositions of assets having an aggregate value
in excess of 10 percent of the consolidated assets of the corporation, and
certain transactions that would increase the interested stockholder's
proportionate share ownership in the corporation) between an interested
stockholder and a corporation for a period of three years after the date the
interested stockholder acquired its stock, unless (i) the business combination
is approved by the corporation's board of directors prior to the date the
interested stockholder acquired shares; (ii) the interested stockholder
acquired at least 85 percent of the voting stock of the corporation in the
transaction in which it became an interested stockholder; or (iii) the business
combination is approved by a majority of the board of directors and by the
affirmative vote of two-thirds of the votes entitled to be cast by
disinterested stockholders at an annual or special meeting. A Delaware
corporation, pursuant to a provision in its certificate of incorporation or by-
laws, may choose not to be governed by Section 203 of the DGCL in which case
such election becomes effective one year after its adoption.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the First Data Common Stock is Norwest
Bank Minnesota, National Association.
COMPARISON OF RIGHTS OF HOLDERS OF FIRST DATA COMMON STOCK
AND FIRST FINANCIAL COMMON STOCK
The following summary compares certain rights of First Data stockholders
under the DGCL and First Data's Restated Certificate of Incorporation and
Bylaws with the rights of First Financial stockholders under the GBCC and the
First Financial Restated Articles of Incorporation and Bylaws.
First Data is incorporated under the laws of the State of Delaware. First
Financial is incorporated under the laws of the State of Georgia. First
Financial stockholders, whose rights as stockholders are currently governed by
Georgia law and First Financial's Restated Articles of Incorporation and Bylaws
will become, upon consummation of the Merger, stockholders of First Data, and
their rights will be governed by Delaware law and First Data's Restated
Certificate of Incorporation and Bylaws.
The following summary does not purport to be a complete statement of the
rights of First Financial stockholders under the DGCL and the First Data
Restated Certificate of Incorporation and Bylaws as compared with their rights
under First Financial's Restated Articles of Incorporation and Bylaws and the
GBCC. The summary is qualified in its entirety by First Financial's Restated
Articles of Incorporation and Bylaws, First Data's Restated Certificate of
Incorporation and Bylaws, the GBCC and the DGCL, to which stockholders are
referred.
LIABILITY OF DIRECTORS
Both the GBCC and the DGCL allow a corporation to limit the personal
liability of directors with certain exceptions. As permitted by the GBCC, the
First Financial Restated Articles of Incorporation provide that a director is
not liable to First Financial or its stockholders for monetary damages for
breaches of his duty of care or other duties except for (i) misappropriation of
business opportunities, (ii) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
authorization of an unlawful distribution or (iv) any transaction involving
improper personal benefits to the director.
First Data's Restated Certificate of Incorporation provides that no director
shall be personally liable to First Data or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for (i) any breach
of the director's duty of loyalty to First Data or its stockholders, (ii) acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) unlawful payment of a
73
<PAGE>
dividend or an unlawful stock purchase or redemption or (iv) any transaction
from which the director derived an improper personal benefit.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The First Financial Bylaws contain provisions for the indemnification of
First Financial's officers and directors to the fullest extent permitted by the
GBCC. The GBCC authorizes a corporation to indemnify a director or officer
against loss or expense incurred in connection with any action, suit or
proceeding (other than an action by or in the right of First Financial in which
the director was adjudged liable to the corporation) if it is determined that
the director or officer acted in a manner he or she believed in good faith to
be in or not opposed to the best interests of the corporation and, in the case
of any criminal proceeding, had no reasonable cause to believe his or her
conduct was unlawful and, in the case of adjudicated liability, only if the
director or officer did not derive an improper personal benefit. In proceedings
to obtain a judgment in favor of the corporation, indemnification is only
prohibited if the director or officer is adjudged liable to the corporation or
is subjected to injunctive relief in favor of the corporation and such director
or officer has appropriated any business opportunity of the corporation, has
derived an improper personal benefit, was involved in an unlawful distribution,
or committed an act or omission that involved intentional misconduct or a
knowing violation of law.
First Data's Restated Certificate of Incorporation requires the corporation
to indemnify to the fullest extent permitted by the DGCL any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by reason of the fact that he is or was a
director, officer, employee or agent of First Data, or is or was serving at the
request of First Data as a director, officer, trustee, employee or agent of or
in any other capacity with another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Expenses incurred in defending such an action by a director must be paid by
First Data in advance of final disposition of the action as authorized by the
Board of Directors upon receipt of an undertaking by or on behalf of the
indemnified person to repay such amount if it is ultimately determined that he
is not entitled to be indemnified by the corporation as authorized in the
Restated Certificate of Incorporation. Reimbursement of expenses incurred by an
officer, trustee, employee or agent of First Data is not required, but is at
the discretion of the Board of Directors.
As to actions by or in the right of the corporation, the DGCL and First
Data's Bylaws prohibit indemnification of a person serving as a director,
officer, employee or agent of First Data, or serving at the request of First
Data as a director, officer, trustee, employee or agent of or in any other
capacity with another corporation, partnership, joint venture, trust or other
enterprise, in respect of any claim, issue or matter as to which such person
has been adjudged liable to First Data unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought
determines that, despite the adjudication of liability but in view of all the
circumstances, such person is entitled to indemnity for such expenses which
such court deems proper.
DIRECTORS
First Financial's Bylaws provide for a Board of Directors consisting of not
less than three nor more than nine persons, each serving for a term of one year
or until his earlier death, resignation or removal. First Data's Restated
Certificate of Incorporation and Bylaws provide for a Board of no less than one
nor more than fifteen directors. Members of the First Data Board of Directors
serve for a term of three years in three staggered classes such that one-third
of the corporation's directors are elected each year. Directors of First
Financial may be removed, with or without cause, by the affirmative vote of the
holders of the majority of
74
<PAGE>
the shares of First Financial Common Stock, and Board vacancies may be filled
by the majority vote of the remaining directors or, in the event such vacancy
is not so filled, or if no director remains, by the stockholders. Directors of
First Data may be removed by the holders of a majority of shares of First Data
Common Stock, but only for cause, and Board vacancies may be filled only by a
vote of majority of the directors then in office.
DIVIDENDS AND DISTRIBUTIONS
Unless provided otherwise by its articles of incorporation, a Georgia
corporation may pay dividends or make other distributions with respect to its
shares if after the dividend or distribution the corporation has the ability to
pay its debts as they become due and has net assets in excess of all senior
claims upon dissolution. First Financial's Articles of Incorporation do not
further limit First Financial's ability to pay dividends or make other
distributions on First Financial Common Stock except to the extent that
preferred stock of First Financial (none of which is outstanding) has
preference as to dividends.
The terms of First Financial's credit agreements prohibit First Financial
from paying more than two cash dividends in any given fiscal year and from
declaring any dividend that would cause a default under the terms of the credit
agreements or that would exceed 5% of First Financial's consolidated net income
for the four consecutive fiscal quarters ended prior to the date of such
declaration.
A Delaware corporation, unless otherwise restricted by its certificate of
incorporation, may pay dividends out of surplus, or if no surplus exists, out
of net profits for the fiscal year in which the dividend is declared and/or for
the preceding fiscal year (but the directors may not declare and pay dividends
out of such net profits if the amount of capital of the corporation is less
than the aggregate amount of capital represented by the issued and outstanding
stock of all classes having preference upon the distribution of assets). First
Data's Restated Certificate of Incorporation contains no provisions restricting
dividends on First Data's Common Stock except to the extent that outstanding
preferred stock of First Data (none of which is outstanding) has preference as
to dividends. The terms of First Data's debt facilities limit First Data's
ability to pay dividends. As of June 30, 1995, approximately $519.9 million was
available for payment of dividends under these restrictions. See "SUMMARY--
Comparative Stock Prices and Dividends."
SPECIAL STOCKHOLDER MEETINGS; ACTION WITHOUT A MEETING
Georgia law provides that a special meeting of stockholders of a publicly-
held corporation may be called by the board of directors or any person
authorized to do so by the articles of incorporation or bylaws, and a meeting
must be called by the corporation upon the written demand of the holders of at
least 25% (or any greater or lesser percentage as may be provided in the
articles of incorporation or bylaws) of the outstanding shares entitled to vote
on the issue to be considered at the special meeting. The First Financial
Bylaws provide that a special meeting may be called by the written request of
the holders of as much as 75% of the outstanding shares of First Financial
Common Stock or by the Board of Directors, the Chairman of the Board or the
President. The First Financial Bylaws require that written notice stating the
purpose or purposes for which the meeting is called, and the place, day and
time of all special meetings be given to stockholders.
Under the DGCL, special meetings of stockholders may be called by the board
of directors or by such person or persons as may be authorized by the
certificate of incorporation or by the bylaws. The By-laws of First Data
provide that special meetings may be called by the Chairman, the President, the
Secretary, the Chairman of the Executive Committee, American Express Company
(and its successors) or at the request of a majority of the Board of Directors.
Under Georgia law stockholders may act without a meeting by unanimous written
consent or if the articles of incorporation so authorize, subject to certain
limitations, by the written consent of the holders having not less than the
percentage of stock required to authorize the action taken at a meeting at
which all shares entitled to vote thereon were present. The First Financial
Restated Articles of Incorporation and
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<PAGE>
By-laws do not permit action by less than unanimous written consent. As
permitted by the DGCL, the First Data Restated Certificate of Incorporation
requires stockholder action to be effected only at a duly called annual or
special meeting and does not permit action to be taken in writing in lieu of
such a meeting.
STOCKHOLDER PROPOSALS
The Bylaws of both First Financial and First Data require stockholders to
provide advance notice of proposals of business or nominations for director to
be considered at a meeting of stockholders. First Financial's By-laws require
that the matter of business or nomination be (1) described or named in the
notice of meeting of stockholders or an accompanying proxy statement; (2)
approved for consideration or nomination by the Board of Directors, or (3)
described or named in a written notice by a stockholder to the Secretary of
First Financial to be delivered not less than 5 days prior to the meeting date.
First Data's By-laws require that nominations and business proposals be made at
any annual meeting of stockholders (1) by or at the direction of the Board or
(2) by any stockholder of record whose notice of nomination is delivered not
less than sixty nor more than ninety days prior to the anniversary date of the
immediately preceding annual meeting of stockholders.
STOCKHOLDER INSPECTION RIGHTS
As permitted by the GBCC, First Financial's Bylaws prohibit stockholders
owning two percent or less of the outstanding common stock of First Financial
from inspecting or copying the accounting or stockholder records of the
corporation. Under the GBCC, this prohibition does not affect a stockholder's
right to inspect a stockholders list prepared in anticipation of, and available
at, an annual meeting.
Under the DGCL, any stockholder may inspect the books and records of a
corporation so long as such inspection is for a proper purpose.
AMENDMENT OF THE ARTICLES OR CERTIFICATE OF INCORPORATION AND BYLAWS
Under Georgia law, certain provisions of the First Financial Restated
Articles of Incorporation may be amended by action of the Board of Directors
without stockholder approval. In particular, the Board can (i) for so long as
First Financial continues to have a single class of shares outstanding, effect
a stock split or change or eliminate the par value of its common stock, (ii)
change First Financial's corporate name, or (iii) issue preferred stock in one
or more series as established by the Board, pursuant to the authority granted
by the Restated Articles of Incorporation, in each case upon an appropriate
amendment to the Restated Articles of Incorporation and without stockholder
approval. Any provision of the First Financial Restated Articles of
Incorporation may be amended upon recommendation by the Board of Directors and
approval by a majority of the votes entitled to be cast on the amendment.
The DGCL requires the affirmative vote of the holders of a majority of the
shares entitled to vote to amend First Data's Restated Certificate of
Incorporation. Article "Seventh" of First Data's Restated Certificate of
Incorporation, which requires that stockholder action be taken at an annual or
special meeting and prohibits stockholder action by written consent in lieu of
such a meeting, may only be amended by the affirmative vote of the holders of
more than 80% of the voting power of First Data's outstanding voting stock.
With the exception of Article Nine of the First Financial Bylaws, the First
Financial Bylaws may be amended by action of the majority of the Board of
Directors or by action of the holders of a majority of the outstanding shares
of First Financial Common Stock, except that provisions limiting the powers of
the Board of Directors established by the GBCC, creating staggered terms of
directors, or fixing greater quorum or voting requirements for stockholders
than those provided by the GBCC, may be added only by stockholders under
Georgia law. Article Nine of the First Financial Bylaws adopts elective
provisions of the GBCC relating to certain business combinations, and may only
be amended or repealed in accordance with the provisions of the GBCC. See "--
Anti-Takeover Provisions."
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<PAGE>
The First Data By-laws currently may be amended by majority vote of the First
Data stockholders. See "PROPOSED AMENDMENTS TO FIRST DATA RESTATED CERTIFICATE
OF INCORPORATION--The By-laws Amendment Proposal."
APPRAISAL RIGHTS
Subject to the exception provided below, under the GBCC, stockholders who
comply with the procedures for enforcing appraisal rights may exercise such
rights, under certain circumstances, upon the merger of a corporation, the
consummation of a plan of share exchange to which the corporation is the
acquired party, the sale or other disposition of all or substantially all the
corporate assets, an amendment of the articles of incorporation that materially
and adversely affects rights in respect of a dissenter's shares in ways
specified in the GBCC, or any corporate action taken pursuant to a stockholder
vote to the extent that the close corporation sections of the GBCC or the
articles of incorporation, by-laws or a resolution of the Board provides that
stockholders are entitled to appraisal. Unless the articles of incorporation or
resolution of the board of directors provide otherwise, however, holders of any
class of shares which are listed on a "national securities exchange" or are
held of record by more than 2,000 stockholders do not have appraisal rights
under Georgia law if the stockholder receives shares of the surviving
corporation or another corporation whose shares are listed on a national
securities exchange or are held of record by at least 2,000 stockholders. Since
neither First Financial's Articles of Incorporation nor a Board of Directors
resolution approving the Merger provides otherwise, and the First Financial
Common Stock and First Data Common Stock satisfy the "national securities
exchange" condition, First Financial's stockholders will not have appraisal
rights.
Like the GBCC, the DGCL provides for stockholder appraisal rights in
connection with mergers and consolidations generally, but does not permit
appraisal rights for holders of any class or series of stock which, at the
record date fixed to determine stockholders entitled to receive notice of and
to vote at the meeting to act upon the agreement of merger or consolidation,
were either (i) listed on a national securities exchange or designated as a
national market system security on an inter-dealer quotation system by the
National Association of Securities Dealers, Inc. or (ii) held of record by more
than 2,000 holders, so long as stockholders receive shares of the surviving
corporation or another corporation whose shares are so listed or designated or
held of record by more than 2,000 holders. Like First Financial Common Stock,
First Data Common Stock is listed on the New York Stock Exchange and thus
satisfies the "national securities exchange" requirement.
ANTI-TAKEOVER PROVISIONS
Georgia law contains certain elective provisions which impose supermajority
voting requirements or a fair pricing procedure for certain business
combinations with a beneficial owner of 10% or more of the voting power of the
outstanding voting shares of the corporation unless a "fair price" test is met,
which could have the effect of discouraging takeover attempts not supported by
the target corporation's Board of Directors. First Financial has adopted bylaws
specifically electing to be subject to these provisions.
Under the "fair price provision," any Business Combination (as defined in the
GBCC) would require the unanimous approval of the Continuing Directors, (as
defined in the GBCC), provided that the Continuing Directors constitute at
least three members of the Board of Directors at the time of such approval, or
the recommendation of at least two-thirds of the Continuing Directors and the
approval of a majority of the votes entitled to be cast by holders of voting
shares, other than voting shares beneficially owned by the Interested
Shareholder (as defined in the GBCC) who is, or whose affiliate is, a party to
the Business Combination. If, however, the Interested Shareholder has not
ceased to be an Interested Shareholder at any time within the three years prior
to consummation of the Business Combination and has not increased its
percentage ownership of shares in First Financial by more than one percent in
any twelve month period, the normal majority vote of stockholders would apply.
The normal majority vote of stockholders would also be applicable if, among
other things, an Interested Shareholder offers to pay a certain formula price
based upon the fair market value of the shares as of certain dates to ensure
that all First Financial stockholders receive a fair price for their shares.
In addition, both Georgia and Delaware law contain certain "business
combination" statutes, although First Data has elected not to be governed by
the applicable Delaware statute. Business combination provisions
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<PAGE>
under both Georgia and Delaware law prohibit certain business combinations
between a corporation and any person who has acquired beneficial ownership of
10% (Delaware, 15%) or more of the voting stock of the corporation (an
"interested stockholder") for a period of five (Delaware, three) years from the
date such stockholder became an interested stockholder, unless (i) such
interested stockholder, prior to becoming an interested stockholder, obtained
the approval of the Board of Directors of either the business combination or
the transaction that resulted in such person becoming an interested
stockholder, (ii) such interested stockholder became the beneficial owner of at
least 90% (Delaware, 85%) of the outstanding shares of voting stock of the
corporation (excluding shares owned by persons who are directors, officers,
their affiliates or associates and by subsidiaries of the corporation and
certain employee stock plans) in the same transaction in which the interested
stockholder became an interested stockholder or (iii) on or subsequent to the
date the interested stockholder became an interested stockholder, either (a)
under the DGCL, the business combination is approved by the Board of Directors
and is authorized at a meeting of stockholders by the affirmative vote of at
least two-thirds of the voting stock that is not owned by the interested
stockholder or (b) under the GBCC, the interested stockholder, subsequent to
becoming an interested stockholder, becomes the beneficial owner of at least
90% of the outstanding voting stock of the corporation (excluding shares owned
by persons who are directors or officers, their affiliates or associates and by
subsidiaries of the corporation and certain employee stock plans) and the
business combination is approved by holders of a majority of the voting stock
entitled to vote, excluding voting stock beneficially owned by the interested
stockholder or by persons who are directors or officers and by subsidiaries and
certain employee stock plans. First Financial has adopted bylaws specifically
electing to be subject to these provisions. While similar provisions exist
under the DGCL, a Delaware corporation may elect, through an amendment to its
bylaws or certificate of incorporation, not to be governed by these provisions.
First Data has made such election and, therefore, is not subject to the terms
of such provisions.
Certain provisions of the Restated Certificate of Incorporation and By-laws
of First Data may be deemed to have an anti-takeover effect and may delay,
defer or prevent a tender offer or other takeover attempt that a stockholder
might consider to be in its best interest, including those attempts that might
result in a premium over the market price for the shares held by stockholders.
Such provisions include staggered terms for First Data's directors and the
requirement of advance notice of proposals of business or nominations for
director. See "--Directors" and "--Stockholder Proposals."
STOCKHOLDER APPROVAL OF MERGERS AND ASSET SALES
Unless the board of directors requires a greater vote, the GBCC requires a
merger of First Financial to be approved by the holders of a majority of the
then outstanding shares of First Financial Common Stock.
Under Georgia law, unless the articles of incorporation specify otherwise,
action by the stockholders of the surviving corporation on a plan of merger is
not required if (i) the articles of incorporation of the surviving corporation
will not differ, with certain exceptions, from its articles before the merger,
(ii) each stockholder of the surviving corporation whose shares were
outstanding immediately before the effective date of the merger will hold the
same number of shares, with identical designations, preferences, limitations
and relative rights, immediately after the merger, and (iii) the number and
kinds of shares outstanding immediately after the merger, plus the number and
kind of shares issuable as a result of the merger and by the conversion of
securities issued pursuant to the merger or the exercise of rights and warrants
issued pursuant to the merger, will not exceed the total number and kind of
shares of the surviving corporation authorized by its articles of incorporation
immediately before the merger. The NYSE, however, may require stockholder
approval as a prerequisite to listing shares to be issued in certain mergers or
other acquisition transactions, such as where the transaction would result in
the present or potential increase of 20% or more in the outstanding shares of
common stock of the acquiring corporation.
Under Delaware law, no vote of stockholders of a constituent corporation
surviving a merger is necessary to authorize the merger if (1) the agreement of
merger does not amend in any respect the certificate of incorporation of such
constituent corporation, (2) each share of stock of such constituent
corporation
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<PAGE>
outstanding immediately prior to the effective date of the merger is to be an
identical outstanding or treasury share of the surviving corporation, and (3)
either no shares of common stock of the surviving corporation and no shares,
securities or obligations convertible into such stock are to be issued or
delivered under the plan of merger, or the authorized unissued shares or the
treasury shares of common stock of the surviving corporation to be issued or
delivered plus those initially issuable upon conversion of any other shares to
be issued or delivered under such plan do not exceed 20% of the shares of
common stock of such corporation outstanding immediately prior to the effective
date of the merger.
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
FIRST DATA
Principal Holders of First Data Common Stock. The following table sets forth,
based on the number of shares outstanding as of September 15, 1995, the
percentage of ownership of the First Data Common Stock by the persons believed
by First Data to own beneficially more than 5% of the First Data Common Stock
based upon Schedule 13G filings dated as of December 31, 1994:
<TABLE>
<CAPTION>
AMOUNT AND
NME AND ADDRESSA NATURE OF BENEFICIAL
OFBENEFICIAL OWNER OWNERSHIP PERCENT
- ------------------- -------------------- -------
<S> <C> <C>
American Express Company
American Express Tower
World Financial Center
New York, NY 10285............................ 22,619,900(1) 19.0%
(shared voting and
dispositive power)
Janus Capital Corporation (2)
100 Fillmore Street, Suite 300
Denver, CO 80208.............................. 11,412,320 9.6%
(shared voting and
dispositive power)
Provident Investment Counsel (3)
300 North Lake Avenue
Pasadena, CA 91101-4022....................... 6,185,649 5.2%
(shared voting and
dispositive power)
</TABLE>
- --------
(1) Pursuant to the terms of an October 1993 offering by American Express
Company of 6 1/4% Exchangeable Notes Due October 15, 1996 ("DECS"),
American Express may, at its option, consummate the mandatory exchange
thereunder at maturity by delivering shares of First Data Common Stock. If
American Express exercises such option and uses its current holdings of
First Data Common Stock without acquiring any additional shares, its
ownership interest in First Data would be substantially reduced. However,
American Express is under no obligation to exercise such option to deliver
First Data Common Stock pursuant to the terms of the DECS or, if it so
elects, that it will use all or any portion of its current holdings of
First Data Common Stock to make such delivery.
(2) A separate Schedule 13G was filed in the name of Thomas H. Bailey. As
stated in Item 4 of that Schedule 13G, Mr. Bailey owns approximately 12.2%
of Janus Capital. In addition to being a stockholder of Janus Capital, Mr.
Bailey serves as President and Chairman of the Board of Janus Capital and
filed a joint statement with Janus Capital as a result of such stock
ownership and positions which may be deemed to enable him to exercise
control over Janus Capital. According to such Schedule 13G, Mr. Bailey does
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<PAGE>
not own of record any shares of First Data Common Stock. However, as a
result of his position, Mr. Bailey may be deemed to have the power to
exercise or to direct the exercise of such voting and/or dispositive power
that Janus Capital may have with respect to First Data Common Stock held by
the managed portfolios described therein. All shares reported herein have
been acquired by the managed portfolios described therein, and Mr. Bailey
specifically disclaims beneficial ownership over any shares of First Data
Common Stock that he or Janus Capital may be deemed to beneficially own.
Furthermore, Mr. Bailey does not have the right to receive any dividends
from, or the proceeds from the sale of, the securities held in the managed
portfolios and disclaims any ownership associated with such rights.
(3) A separate Schedule 13G was filed in the name of Robert M. Kommerstad.
According to that Schedule 13G, Mr. Kommerstad controls Provident
Investment Counsel by virtue of his position as the sole voting trustee of
a voting trust which holds all of the outstanding securities of Provident.
According to such Schedule 13G, Mr. Kommerstad's ownership of First Data
Common Stock is indirect as a result of his ownership in Provident
Investment Advisors.
First Data Common Stock Ownership by Directors and Executive Officers. The
following table sets forth, as of September 15, 1995, the beneficial ownership
of First Data Common Stock by all directors, each of the executive officers
named in the Summary Compensation Table contained in First Data's Proxy
Statement dated March 31, 1995 and all directors and executive officers as a
group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF OUTSTANDING
NAME BENEFICIAL OWNERSHIP (1) COMMON STOCK
- ---- ------------------------ ----------------------
<S> <C> <C>
Directors
Ben Burdetsky.................. 5,051(2) (9)
Courtney F. Jones.............. 7,136(2) (9)
James D. Robinson III.......... 15,636(2) (9)
Charles T. Russell............. 2,800(2) (9)
Bernard L. Schwartz............ 12,253(2) (9)
Garen K. Staglin............... 11,136(2) (9)
Executive Officers
Henry C. Duques................ 963,984(3) (9)
Charles T. Fote................ 305,364(4) (9)
Walter M. Hoff................. 271,861(5) (9)
Robert J. Levenson............. 228,846(6) (9)
Edward C. Nafus................ 139,380(7) (9)
All directors and executive
officers as a group (13
persons)...................... 2,039,288(8) 1.7%
</TABLE>
- --------
(1) The number of shares reported includes options that are exercisable within
60 days of September 15, 1995.
(2) Includes 27,360 shares issuable upon exercise of options held by all
directors in the aggregate.
(3) Includes 963,980 shares issuable upon exercise of options.
(4) Includes 304,892 shares issuable upon exercise of options.
(5) Includes 271,822 shares issuable upon exercise of options.
(6) Includes 224,846 shares issuable upon exercise of options.
(7) Includes 139,323 shares issuable upon exercise of options.
(8) Includes 2,007,782 shares issuable upon exercise of options.
(9) Less than one percent.
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<PAGE>
FIRST FINANCIAL
The following table sets forth, as of September 15, 1995, the beneficial
ownership of First Financial Common Stock by all directors, each of the
executive officers named in the Summary Compensation Table contained in First
Financial's Proxy Statement dated March 27, 1995 and all directors and
executive officers as a group. As of September 15, 1995, no person known to
First Financial owned beneficially more than 5% of the First Financial Common
Stock. As of September 15, 1995, there were 63,953,962 shares of First
Financial Common Stock outstanding.
<TABLE>
<CAPTION>
NAME OF
BENEFICIAL AMOUNT AND NATURE OF
OWNER BENEFICIAL OWNERSHIP(1,2,3) PERCENT OF CLASS
- ---------- --------------------------- ----------------
<S> <C> <C>
Patrick H. Thomas................. 1,523,580 2.4%
George L. Cohen................... 17,809 *
Robert E. Coleman................. 19,552 *
Jack R. Kelly, Jr................. 19,748 *
Henry A. Leslie................... 10,624 *
M. Tarlton Pittard................ 156,255 *
Charles B. Presley................ 9,342 *
Virgil R. Williams................ 506,304 *
Richard D. Jackson(4)............. 1,433 *
Stephen D. Kane................... 104,231 *
Randolph L.M. Hutto............... 51,831 *
All Executive Officers and
Directors as a Group (14
persons)......................... 2,676,654 4.2%
</TABLE>
- --------
*Less than 1%
(1) Except as otherwise indicated in Note 2, the persons included in the table
have sole voting and investment power with respect to the shares listed as
beneficially owned by them.
(2) The shares of First Financial Common Stock beneficially owned include:
shares subject to options exercisable currently or within 60 days, some of
which will become so exercisable by virtue of the consummation of the
Merger (Mr. Thomas--741,700, Mr. Pittard--104,983, Messrs. Cohen, Coleman
and Kelly--9,000 each, Mr. Leslie--6,000, Mr. Presley--4,500, Mr.
Williams--3,000, Mr. Kane--61,096, Mr. Hutto--30,000 and the Group--
1,097,029); shares issued pursuant to restricted share awards under First
Financial's incentive stock plans, as to which the holders have voting
rights, but not the right to transfer until expiration of the applicable
restrictions (Mr. Thomas--594,500, Mr. Pittard--18,848, Mr. Kane--18,848,
Mr. Hutto--19,777 and the Group--769,774); restricted shares issued under
the Directors' Restricted Stock Award Plan to each director not employed by
First Financial, as to which the participants have voting rights, but not
the right to transfer until expiration of applicable restrictions (Messrs.
Cohen, Coleman, Kelly, Leslie, Presley and Williams--1,416 each and the
Group--8,496); shares held by wives or children (Mr. Thomas--300, Mr.
Cohen--451, Mr. Kane--10 and the Group--761); 2,250 shares held by one
member of the Group as trustee of a trust benefiting his minor children;
and shares held by the trustee of the First Financial Savings Plus Plan as
to which the participants have voting rights and limited withdrawal rights
(Mr. Thomas--7,693, Mr. Pittard--3,008, Mr. Jackson--1,423, Mr. Kane--
7,751, Mr. Hutto--202 and the Group--20,328); and 1,425 shares held by the
trustee of the Sutherland, Asbill & Brennan Partners Retirement Trust as to
which Mr. Hutto has voting and disposition rights and limited withdrawal
rights.
(3) None of First Financial's executive officers or directors owns any of the
5% Debentures.
(4) Mr. Jackson resigned as Vice Chairman of First Financial effective July 31,
1995.
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<PAGE>
INFORMATION CONCERNING FIRST FINANCIAL
AFFILIATES AS SELLING STOCKHOLDERS
The following table sets forth certain information with respect to affiliates
of First Financial who, as Selling Stockholders, may offer pursuant to this
Joint Proxy Statement/Prospectus from time to time during the Effectiveness
Period some or all of the shares of First Data Common Stock received by them in
the Merger. See "THE MERGER--Reofferings and Resales of First Data Common
Stock." Because each of such Selling Stockholders will determine, in such
Selling Stockholder's sole discretion, the number of shares of First Data
Common Stock to be offered by such Selling Stockholder during the Effectiveness
Period, no estimate can be given as to the number of shares of First Data
Common Stock that will be held by the Selling Stockholders upon termination of
any such sales. However, in no event will the number of shares offered by the
Selling Stockholders pursuant to this Joint Proxy Statement/Prospectus exceed
the number of shares of First Data Common Stock specified below (assuming the
exercise of all First Financial stock options). Each of the Selling
Stockholders has represented to First Data and First Financial that he does not
have, and within the past three years has not had, any position, office or
other material relationship with First Data or any of its predecessors or
affiliates, except as otherwise disclosed in this Joint Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
NAME OF NUMBER OF SHARES OF FIRST
SELLING DATA COMMON STOCK
STOCKHOLDER TO BE RECEIVED IN THE MERGER
----------- ----------------------------
<S> <C>
Patrick H. Thomas........................... 2,416,245
George L. Cohen............................. 28,243
Robert E. Coleman........................... 31,007
Jack R. Kelly, Jr........................... 31,318
Henry A. Leslie............................. 16,848
M. Tarlton Pittard.......................... 247,804
Charles B. Presley.......................... 14,815
Virgil R. Williams.......................... 802,947
Robert J. Amman............................. 160,175
Stephen D. Kane............................. 165,299
Randolph L. M. Hutto........................ 82,198
Richard Macchia............................. 85,551
Glen W. Marschel............................ 160,175
</TABLE>
In addition to sales pursuant to this Joint Proxy Statement/Prospectus, each
of the Selling Stockholders will be permitted to resell shares of First Data
Common Stock pursuant to, and subject to the limitations under, Rule 145 under
the Securities Act. See "THE MERGER--Reofferings and Resales of First Data
Common Stock."
PROPOSED AMENDMENTS TO FIRST DATA
RESTATED CERTIFICATE OF INCORPORATION
At the First Data Special Meeting, stockholders of First Data will be asked
to approve and adopt the Stock Amendment, which would increase the number of
authorized shares of First Data Common Stock, and the By-laws Amendment, which
would confer upon the First Data Board the power to adopt, amend or repeal the
By-laws of First Data.
THE BOARD OF DIRECTORS OF FIRST DATA UNANIMOUSLY RECOMMENDS A VOTE FOR THE
APPROVAL OF THE STOCK AMENDMENT PROPOSAL AND THE BY-LAWS AMENDMENT PROPOSAL.
THE STOCK AMENDMENT PROPOSAL
The Board of Directors of First Data has declared advisable and has
unanimously recommended that the stockholders of First Data adopt an amendment
to the Restated Certificate of Incorporation of First Data to increase the
authorized number of shares of First Data Common Stock from 300,000,000 to
600,000,000. No change is being proposed with respect to First Data's
authorized number of shares of Preferred Stock.
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<PAGE>
As of September 15, 1995, First Data had 118,760,681 shares of First Data
Common Stock issued and outstanding and 12,602,236 shares of First Data Common
Stock reserved for future issuance pursuant to First Data's 1992 Long-Term
Incentive Plan, the 1993 Directors Stock Option Plan and First Data's stock
purchase plans (collectively, the "First Data Plans"). After consummation of
the Merger, approximately 223,067,902 shares are expected to be issued and
outstanding and an additional 25,579,413 shares reserved for future issuance
pursuant to the First Data Plans, upon exercise of First Financial stock
options (which will be exercisable for First Data Common Stock) and upon
conversion of First Financial's 5% Debentures (which will be convertible into
First Data Common Stock). Without an increase in the number of authorized
shares of First Data Common Stock, following the Merger there will be
approximately 50,585,298 authorized shares of First Data Common Stock available
for issuance.
The proposed increase in the authorized number of shares of First Data Common
Stock has been recommended by the Board of Directors because the availability
of additional shares for issuance, without the delay and expense of obtaining
the approval of stockholders at a special meeting, will afford First Data
greater flexibility in acting upon proposed transactions. The additional
authorized shares will be available for general corporate needs, such as any
future stock splits, stock dividends or issuances under the First Data Plans.
The additional shares could also be used for such purposes as raising
additional capital for the operations of First Data or in connection with
acquisitions. The terms of any future issuance of First Data Common Stock will
be dependent largely on market and financial conditions and other factors
existing at the time of issuance and sale. Such additional authorized shares
would be available for issuance without further action by the stockholders of
First Data, except as provided under the DGCL or the rules of any national
securities exchange on which the First Data Common Stock is at the time listed.
Such additional flexibility which would be afforded to First Data if the
proposed Stock Amendment were adopted could be used by the incumbent Board of
Directors to make a change in control of First Data more difficult. For
example, the issuance of shares of First Data Common Stock in a public or
private sale, merger or similar transaction would increase the number of
outstanding shares, thereby possibly diluting the interest of a party
attempting to obtain control of First Data. The Stock Amendment has not been
proposed for an anti-takeover purpose, and as of the date of this Joint Proxy
Statement/Prospectus, the Board of Directors is not aware of any attempt to
bring about a change in control of First Data.
The additional shares of First Data Common Stock for which authorization is
being sought would be part of the existing class of First Data Common Stock
and, if and when issued, would have the same rights and privileges as the
shares of First Data Common Stock presently outstanding.
If the Stock Amendment is approved, the first paragraph of Article FOURTH of
the current Restated Certificate of Incorporation will be amended to read in
its entirety as follows:
"FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 600,000,000 shares of Common Stock, each having
a par value of $.01 per share, and 10,000,000 shares of Preferred Stock,
each having a par value of $1.00 per share."
THE BY-LAWS AMENDMENT PROPOSAL
Unless a corporation's certificate of incorporation states otherwise, the
DGCL provides that the power to amend or repeal a corporation's by-laws, or to
adopt new by-laws, is reserved to the stockholders. Currently, First Data's
Restated Certificate of Incorporation does not expressly empower the Board of
Directors to alter or amend First Data's By-laws or to adopt new By-laws. First
Data believes it to be important for the Board of Directors to have this power
in order to provide flexibility to the Board in its management of the day-to-
day affairs of First Data. The power to adopt, amend or repeal the By-laws
will, among other things, provide the Board with the ability, as otherwise
allowed by the DGCL, to modify the duties and obligations of First Data's
officers, to increase or decrease the size of the Board and to make other
changes to administrative procedures specified in the By-laws.
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<PAGE>
If the proposed By-laws Amendment were adopted, the stockholders would
nevertheless retain the concurrent power under the DGCL to adopt, amend or
repeal First Data's By-laws in an annual or special meeting of First Data
stockholders. Any such stockholder action must comply with First Data's By-law
provisions regarding advance notice of stockholder proposals and requires the
affirmative vote of a majority of the shares present or represented by proxy at
the annual or special meeting and entitled to vote thereon.
Such additional flexibility which would be afforded to the Board if the
proposed By-laws Amendment were adopted could be used by the incumbent Board of
Directors to make a change in control of First Data more difficult. The By-laws
Amendment has not been proposed for an anti-takeover purpose, and as of the
date of this Joint Proxy Statement/Prospectus, the Board of Directors is not
aware of any attempt to bring about a change in control of First Data.
If the By-laws Amendment proposal is approved at the First Data Special
Meeting, the First Data Board of Directors currently intends to amend the First
Data By-laws to eliminate the right of American Express Company, the former
parent company of First Data ("American Express"), to call special meetings of
First Data stockholders. The right of American Express to call special meetings
was included in the By-laws in connection with First Data's initial public
offering in April 1992. Following such initial public offering, American
Express remained the majority stockholder of First Data. As of September 15,
1995, American Express owned approximately 19% of First Data's outstanding
shares, some or all of which shares may be delivered by American Express to
holders of American Express' DECS securities in satisfaction of its obligations
thereunder. See "SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL
OWNERS--First Data." As a result, First Data no longer believes it appropriate
to confer upon American Express the right to call special meetings. In addition
to the special meeting provision, the First Data Board currently intends to
delete from the By-laws certain provisions relating to American Express which
became inoperative following the reduction of American Express' ownership
interest in First Data Common Stock below 20%.
If the By-laws Amendment is approved, the Restated Certificate of
Incorporation will include the following new Article NINTH:
"NINTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, amend or
repeal the By-laws of the Corporation."
PROPOSED AMENDMENT TO FIRST DATA
1992 LONG-TERM INCENTIVE PLAN
At the First Data Special Meeting, stockholders of First Data will be asked
to approve and adopt an amendment to First Data's 1992 Long-Term Incentive Plan
(the "Incentive Plan") to increase the number of shares of First Data Common
Stock issuable thereunder.
THE BOARD OF DIRECTORS OF FIRST DATA UNANIMOUSLY RECOMMENDS A VOTE FOR THE
APPROVAL AND ADOPTION OF THE INCENTIVE PLAN AMENDMENT.
First Data's long-term success depends upon its ability to attract, retain
and encourage dedicated, competent and resourceful key employees. To further
these goals, the First Data Board adopted and the stockholders approved the
Incentive Plan in April 1992.
The purpose of the Incentive Plan is to direct the attention and efforts of
participating employees to the long-term performance of First Data and its
subsidiaries, by relating incentive compensation to the achievement of long-
term corporate economic objectives. The Incentive Plan is also designed to
retain, reward and motivate participating employees by providing an opportunity
for investment in First Data and the advantages inherent in stock ownership in
First Data.
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PROPOSED AMENDMENT
The total number of shares of First Data Common Stock authorized for issuance
under the Incentive Plan is 12,790,000. As of September 15, 1995, options to
purchase 12,428,755 shares of First Data Common Stock had been granted under
the Incentive Plan and a total of 361,245 shares remained available for grant.
The proposed amendment would increase the number of shares of First Data Common
Stock authorized for issuance under the Incentive Plan by 11,000,000, from
12,790,000 to 23,790,000, provided that no more than 4,000,000 shares would be
available for issuance in connection with awards of restricted stock and
performance grants. Pursuant to the proposed amendment, shares of First Data
Common Stock and options to purchase such shares which are tendered in
connection with the exercise of options to purchase First Data Common Stock
would be available for issuance under new Awards. If any shares issued as
restricted stock or otherwise subject to repurchase or forfeiture rights are
reacquired by First Data pursuant to such rights, or if any award is cancelled,
terminates or expires unexercised, any shares of First Data Common Stock that
would otherwise have been issuable pursuant thereto will be available for
issuance under new awards. A copy of the Incentive Plan, as proposed to be
amended, is attached as Annex IV to this Joint Proxy Statement/Prospectus and
is incorporated by reference herein.
The First Data Board believes that the Incentive Plan Amendment is necessary
in order to recruit and retain a pool of skilled and experienced employees. In
particular, the Compensation Committee of the First Data Board (the
"Compensation Committee") expects that if the proposed amendment is approved by
stockholders, a portion of the additional shares of First Data Common Stock
authorized for issuance under the Incentive Plan would be made available
following the consummation of the Merger for grants and awards to key employees
of First Financial.
On July 26, 1995, the Compensation Committee adopted the proposed amendment
and recommended that it be approved by the First Data Board. On such date, the
First Data Board approved the proposed amendment and recommended that it be
submitted to First Data stockholders for approval. In connection with the
adoption of the proposed amendment, pursuant to authority delegated by the
First Data Board, the Compensation Committee also adopted amendments to the
Incentive Plan which, among other things, (i) require that each stock option
granted under the Incentive Plan following adoption of such amendments have an
exercise price which is not less than 100% of the fair market value of the
shares of First Data Common Stock at the time such stock option is granted,
(ii) require that the vesting period for all shares of restricted stock and all
performance grants be not less than one year, (iii) delete from the Incentive
Plan provisions permitting First Data to assist persons to whom an award has
been made in obtaining financing from First Data or one of its affiliates or
from a bank or other third party to be used for the exercise of a grant or the
payment of taxes in respect thereof, (iv) delete from the Incentive Plan
provisions permitting the Compensation Committee to grant any type of award
deemed by the Compensation Committee to be consistent with the purposes of the
Incentive Plan, thereby limiting the types of awards which may be granted under
the Incentive Plan to those expressly identified therein, (v) expressly permit
the award of restricted stock in the form of phantom stock (which provides for
a cash payment equivalent to the fair market value of a specified number of
shares of First Data Common Stock upon the lapse of restrictions and, in the
discretion of the Compensation Committee, dividend equivalents thereon) and
(vi) permit the Compensation Committee, in its discretion, to allow an optionee
to transfer stock options to a family member or family trust in compliance with
all applicable securities laws.
SUMMARY OF INCENTIVE PLAN
The following is a description of the principal features of the Incentive
Plan, as amended. This description is qualified in its entirety by reference to
the Incentive Plan, as amended, attached as Annex IV to this Joint Proxy
Statement/Prospectus.
The Incentive Plan provides for the grant to key employees and other key
individuals who perform services for First Data and its affiliates
("Participants") the following types of incentive awards: stock options, stock
appreciation rights ("SARs"), restricted stock, performance units, performance
grants and awards to
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Participants who are foreign nationals or are employed or performing services
outside of the United States. As of September 15, 1995, First Data has granted
options under the Incentive Plan to 1,667 employees. No other awards have been
granted under the Incentive Plan.
The Compensation Committee has the exclusive discretion to select the
Participants and to determine the type, size and terms of each award, to modify
the terms of awards, to determine when awards will be granted and paid, and to
make all other determinations which it deems necessary or desirable in the
interpretation and administration of the Incentive Plan. The Incentive Plan is
scheduled to terminate in February 2002, unless extended for up to an
additional five years by action of the First Data Board. With limited
exceptions, including termination of employment as a result of death,
disability or retirement, or except as otherwise determined by the Compensation
Committee (such as Related Employment as defined in the Incentive Plan), rights
to these forms of contingent compensation are forfeited if a recipient's
employment or performance of services terminates within a specified period
following the award. Generally, a Participant's rights and interest under the
Incentive Plan will not be transferable except by will or by the laws of
descent and distribution, provided that, pursuant to the amendments adopted on
July 26, 1995, options granted under the Incentive Plan may be transferred to a
Participant's family member or family trust, provided that such transfer would
not prevent compliance with all applicable securities laws, including Rule 16b-
3 under the Exchange Act.
Options, which include nonqualified stock options (including purchased stock
options, as described below) and incentive stock options, are rights to
purchase a specified number of shares of First Data Common Stock at a price
fixed by the Compensation Committee. As a result of the amendments described
above adopted by the Compensation Committee on July 26, 1995, the option price
may not be less than the fair market value of the First Data Common Stock
subject to such option at the time the option is granted, as determined by the
Compensation Committee, and, in the case of an incentive stock option granted
to an employee who owns stock representing more than ten percent of the voting
power of all classes of stock of First Data or of any of its subsidiaries, the
option price may not be less than 110% of such fair market value at the time
the option is granted.
In the case of purchased stock options, a specified number of nonqualified
stock options (with an option price as described above) are offered for grant
to selected Participants in exchange for a purchase price, specified by the
Compensation Committee, which is payable at the time of grant. Options
generally will expire not later than ten years after the date on which they are
granted. Options will become exercisable at such time and in such installments
as the Compensation Committee shall determine. Payment of the option price must
be made in full at the time of exercise in such form (including, but not
limited to, cash, First Data Common Stock or the surrender of another
outstanding award or bonus payment or any combination thereof) as the
Compensation Committee may determine.
Pursuant to the terms of the purchased stock options granted to date, such
options generally become exercisable as to one-third of the shares subject to
such options on the first through third anniversaries of the grant date. All
purchased stock options have been granted with an exercise price per share
equal to 100% of the fair market value of the First Data Common Stock on the
date of grant. The purchase price per share of these options has been equal to
10% of the fair market value of the stock on the date of grant (the "Purchased
Stock Option Purchase Price"). Pursuant to the terms of such purchased stock
options, if a Participant's employment with First Data is terminated for any
reason (other than for cause as defined in the Incentive Plan by First Data or
voluntarily by the Participant), such Participant will be entitled to receive
the Purchased Stock Option Purchase Price plus interest credited at the prime
rate in effect from time to time from the grant date as announced by Morgan
Guaranty Trust Company of New York (the "Prime Rate") for all shares subject to
such purchased stock option that are not exercisable at the time of such
termination of employment. If such Participant's employment with First Data is
terminated by First Data for cause, the Participant will not be entitled to
payment in respect of shares subject to the purchased stock option, whether or
not exercisable at the time of such termination. If such Participant's
employment with First Data is
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terminated for any other reason, such Participant will be entitled to receive
for each share subject to the purchased stock option that is exercisable at the
time of such termination, the lesser of (i) the excess, if any, of the fair
market value of the average sale price of such shares in the ten trading days
preceding such date of termination over the exercise price per share of such
option, or (ii) the Purchased Stock Option Purchase Price plus interest at the
Prime Rate credited from the grant date (collectively with the payment, if any,
provided for in the second preceding sentence as if it were applicable, the
"Purchased Stock Option Termination Payment").
A SAR may be granted alone, or a holder of an option or other award may be
granted a related SAR either at the time of grant or by amendment thereafter.
Upon exercise of a SAR, the holder must surrender the SAR and surrender,
unexercised, any related option or other award, and the holder will receive in
exchange, at the election of the Compensation Committee, cash or First Data
Common Stock or other consideration or any combination thereof, equal in value
to (or, in the discretion of the Compensation Committee, less than) the
difference between the exercise price or option price per share and the fair
market value per share on the last business day preceding the date of exercise,
times the number of shares subject to the SAR or option or other award, or
portion thereof, which is exercised. No SARs have been granted to date.
A restricted stock award is an award of a given number of shares of First
Data Common Stock which are subject to a restriction against transfer and a
repurchase option of First Data during a period set by the Compensation
Committee. During the restricted period, the Participant generally has the
right to vote and receive dividends on the shares. Pursuant to the amendments
described above, adopted by the Compensation Committee on July 26, 1995, the
restricted period for all shares of restricted stock may not be less than one
year. Also pursuant to such amendments, restricted stock may be awarded in the
form of phantom stock which provides for a cash payment equivalent to the fair
market value of a specified number of shares of First Data Common Stock upon
the lapse of restrictions and, in the discretion of the Compensation Committee,
dividend equivalents thereon. No restricted stock has been awarded to date.
Performance grants are awards whose final value, if any, is determined by the
degree to which specified performance objectives have been achieved during an
award period set by the Compensation Committee, subject to such adjustments as
the Compensation Committee may approve based on relevant factors. Performance
objectives are based on such measures as, including, without limitation,
industry targets; corporate, business unit or Participant performance; or any
combination of the foregoing. A target value of an award will be established
(and may be amended thereafter) by the Compensation Committee and may be a
fixed dollar amount or an amount that is determinable from other criteria
specified by the Compensation Committee. Payment of the final value of an award
will be made as promptly as practicable after the end of the award period or at
such other time or times as the Compensation Committee may determine. Pursuant
to the amendments described above, adopted by the Compensation Committee on
July 26, 1995, the award period for performance grants may not be less than one
year.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion addresses certain anticipated federal income tax
consequences to recipients of awards made under the Incentive Plan under
current law.
An optionee to whom a nonqualified stock option is granted will recognize no
income at the time of the grant. When an optionee exercises a nonqualified
stock option, he will generally recognize ordinary compensation income equal to
the difference, if any, between the fair market value of the First Data Common
Stock received at such time and the exercise price. The tax basis of such
shares to the optionee will be equal to the exercise price paid plus the amount
includable in his gross income as compensation. The holding period for such
shares will normally commence on the day on which he recognizes taxable income
in respect of such shares. An optionee to whom a purchased stock option is
granted will recognize no income at the time of grant. When an optionee
exercises a purchased stock option, he will generally recognize ordinary
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compensation income equal to the difference, if any, between the fair market
value of the First Data Common Stock he receives at such time and the sum of
the exercise price for such shares, plus the portion of the cash amount paid in
satisfaction of the Purchased Stock Option Purchase Price allocable to such
shares. When an optionee receives, in connection with his termination of
employment, the Purchased Stock Option Termination Payment, he will generally
recognize ordinary income equal to the excess, if any, of the aggregate
Purchased Stock Option Termination Payment over the cash amount paid in
satisfaction of the Purchased Stock Option Purchase Price.
An employee to whom an incentive stock option which qualifies under Section
422 of the Code is granted will generally recognize no income at the time of
grant or at the time of exercise. However, upon the exercise of an incentive
stock option, the excess of the fair market value of the First Data Common
Stock over the exercise price thereof may result in the optionee being subject
to an alternative minimum tax ("AMT") under applicable provisions of the Code.
In order to obtain incentive stock option treatment for federal income tax
purposes, an employee (i) must be an employee of First Data or a subsidiary
continuously from the date of grant until any termination of employment and
(ii) in the event of such a termination, must exercise an incentive stock
option within three months after such termination, except if disabled, in which
case exercise may occur within one year from the date of termination of
employment, and in the case of death, exercise may occur within such period as
determined by the Compensation Committee. When an optionee sells the First Data
Common Stock received upon exercise of an incentive stock option more than one
year after exercise and more than two years after the date of grant of such
incentive stock option, he will recognize a long term capital gain or loss
equal to the difference, if any, between the sale price of such shares at such
time and the exercise price. If the employee does not hold such shares for
either period, when he sells such shares (a "disqualifying disposition") he
will recognize ordinary compensation income equal to the lesser of (i) the
difference, if any, between the fair market value of such shares on the date of
exercise and the exercise price, or (ii) the difference, if any, between the
sale price and the exercise price. Any other gain or loss on such sale (in
addition to the ordinary income mentioned above), will be capital gain or loss.
The tax basis of such shares to the employee, for purposes of computing such
other gain or loss, should be equal to the exercise price paid (plus the amount
includable in his gross income as compensation, if any).
The inclusion of SARs in a nonqualified stock option or an incentive stock
option will normally not result in taxable income to the optionee. At the time
of exercise, an optionee should recognize ordinary compensation income in an
amount equal to the cash and the fair market value of the First Data Common
Stock he receives to satisfy his SAR. The tax basis of any such shares received
by the optionee pursuant to an SAR should be equal to the amount includable in
his gross income as compensation in respect of such shares, and the optionee's
holding period therefor should normally commence on the day on which he
recognizes taxable income in respect of such shares.
An employee who receives First Data Common Stock pursuant to a restricted
stock award should not, unless he elects otherwise, recognize any taxable
income upon the receipt of such award, but should recognize taxable
compensation income at the time his interest in such shares is no longer
subject to the repurchase option imposed by the Incentive Plan, in an amount
equal to the fair market value of such shares at such time. A recipient of a
restricted stock award may, however, elect under Section 83(b) of the Code to
recognize taxable compensation at the time of grant in an amount equal to the
fair market value of such shares on the date of grant. The tax basis of such
shares to the recipient should be equal to the amount includable in his gross
income as compensation, and his holding period for such shares should normally
commence on the day following the date on which such shares are valued for
purposes of determining the amount of such income. Dividends paid on restricted
stock awards prior to the date taxable compensation is recognized in respect of
such shares should be included as compensation for federal income tax purposes
when received.
An employee to whom a performance grant award is made should recognize no
taxable income at the time such award is made. Such person should recognize
taxable income, however, at the time cash or First Data Common Stock is paid to
him pursuant to such award, and the amount of such income should be the amount
of such cash and the fair market value at such time of such shares. The tax
basis of any such shares
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received by such person pursuant to a performance grant award should be equal
to the amount includable in his gross income as compensation in respect of such
shares and the holding period therefor should normally commence on the day
following the date on which he recognizes taxable income in respect of such
shares. Any income equivalents paid to a recipient with respect to his
performance grant award should generally be regarded for federal income tax
purposes as compensation.
If the recipient of an award is an officer who is subject to Section 16(b) of
the Exchange Act ("Insider"), the tax consequences may be different than those
described above. Generally, an Insider will not recognize income on receipt of
First Data Common Stock until he is no longer subject to such liability with
respect to the disposition of such First Data Common Stock. However, by filing
an election under Section 83(b) of the Code with the Internal Revenue Service
no later than 30 days after the date of transfer of property (e.g., after
exercise of a nonqualified stock option that was granted within six months of
such exercise), an Insider may elect to be taxed at the time of such transfer.
Any compensation includable in the gross income of a recipient will be
subject to appropriate federal income tax withholding.
The company for which an individual is performing services will generally be
allowed to deduct amounts that are includable in the income of such person as
ordinary compensation income at the time such amounts are so includable,
provided that such amounts qualify as reasonable compensation for personal
services actually rendered.
The discussion set forth above is intended only as a summary and does not
purport to be a complete enumeration or analysis of all potential tax effects
relevant to recipients of awards under the Incentive Plan.
No determination has been made by the Compensation Committee regarding the
future grant of specific awards under the Incentive Plan. No awards were
granted under the Incentive Plan during 1994. During 1995, options to purchase
80,643 shares of First Data Common Stock were granted to Lee Adrean, Executive
Vice President of First Data. The following table sets forth the total number
of options granted under the Incentive Plan to the individuals and groups
indicated in such table through September 15, 1995, the number of options
outstanding on such date and the net dollar value of such outstanding options.
All options have been granted with an exercise price per share equal to 100% of
the fair market value of the First Data Common Stock on the date of the grant.
<TABLE>
<CAPTION>
NET DOLLAR
TOTAL VALUE OF
OPTIONS OPTIONS OUTSTANDING
NAME AND POSITION GRANTED OUTSTANDING OPTIONS
- ----------------- ---------- ----------- ------------
<S> <C> <C> <C>
Henry C. Duques
Chairman of the Board and CEO.............. 1,208,520 1,208,520 $ 38,272,948
Lee Adrean
Executive Vice President................... 80,643 80,643 $ 403,215
Charles T. Fote
Executive Vice President................... 369,222 369,222 $ 12,617,642
Walter M. Hoff
Executive Vice President................... 319,610 319,610 $ 11,594,272
Robert J. Levenson
Executive Vice President................... 362,276 362,276 $ 8,218,557
Edward C. Nafus
Executive Vice President................... 246,493 203,993 $ 6,243,583
Executive Group............................. 2,712,920 2,668,920 $ 80,383,996
Non-Executive Director Group................ 143,106 139,054 1,711,933
Non-Executive Officer Employee Group........ 10,465,882 8,283,736 $243,614,008
</TABLE>
On September 15, 1995, the closing price per share of the First Data Common
Stock was $61.375.
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THE ADJOURNMENT MATTERS
At the Special Meetings, the respective stockholders of First Data and First
Financial will consider and vote upon proposals to permit adjournment of their
respective Special Meetings, including adjournments to obtain a quorum and/or
solicit additional stockholder votes in favor of the Stock Issuance, the
Charter Amendments and the Incentive Plan Amendment, in the case of the First
Data Special Meeting, and the Merger Agreement, in the case of the First
Financial Special Meeting. To the extent that a stockholder of First Data or
First Financial intends to vote against any of the foregoing proposals, such
stockholder would have a disincentive to vote in favor of the First Data
Adjournment Matter or the First Financial Adjournment Matter, as the case may
be.
For a discussion of the effects of abstentions and broker non-votes on the
First Data Adjournment Matter and the First Financial Adjournment Matter, see
"THE SPECIAL MEETINGS--Votes Required."
BUSINESS OF FIRST DATA
First Data and its subsidiaries provide high-quality, high-volume information
processing and related services to specific client groups: the transaction
card, payment instruments, teleservices, mutual fund, receivables and
information management industries. In 1994, First Data heightened its strategic
focus on the financial sector businesses. Consistent with this focus, in 1994
First Data sold its cable services and hotel reservation businesses and in 1995
sold its health system business.
First Data's annual revenues have grown from $845 million in 1990 to $1.65
billion in 1994. First Data's revenue growth has been derived from five
sources: internal growth (which consists primarily of increased transaction
processing for existing clients); the sale of ancillary products and enhanced
services to existing clients; the addition of new clients in existing product
lines; expansion into existing adjacent markets where First Data can provide
similar data processing services to new client groups; and acquisitions.
First Data's business strategy is to generate recurring revenue by developing
long-term contractual relationships with clients that have decided to outsource
various information processing services. First Data's diverse client base is
comprised of over 2,500 customers, ranging from Fortune 500 companies to
individually owned and operated businesses. A majority of First Data's revenues
are generated from agreements with terms generally of two to five years
duration.
First Data's information processing facilities comprise integrated networks
of computer hardware, proprietary software and other telecommunications and
operations systems. First Data has data centers which are capable of servicing
a wide range of client groups, allowing it to process transactions for hundreds
of clients in a rapid and cost effective manner and to take advantage of
economies-of-scale when adding new clients. On an ongoing basis, First Data
enhances its proprietary systems and invests in selected new technology in
order to provide the flexibility and functionality necessary to process an
increasingly larger volume and variety of transactions.
On March 9, 1995, First Data acquired Card Establishment Services, Inc.
("CES") and its parent holding company. CES, a leading merchant transaction
processor, processes approximately 460 million transactions annually for
approximately 205,000 merchant outlets. In the merger with the parent of CES
(the "Holdings Merger"), First Data paid approximately $540 million in a
combination of First Data Common Stock and cash. First Data believes that the
Holdings Merger provides First Data with enhanced technological, operational
and distributional capabilities as well as additional economies of scale. In
addition, First Data believes that the Holdings Merger complements current
First Data product offerings by strengthening both "front-end" (the provision
of network, communication and point-of-sale system management services to
merchants, such as electronic authorizations, employment and maintenance of
point-of-sale ("POS") hardware used by merchants and the provision of periodic
operating systems upgrades used in the merchant business to comply with card
association rules) and "back-office" (merchant accounting, chargebacks,
retrievals, terminal management, sales support and credit and risk management
services relating to the merchant business) transaction processing
capabilities.
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On June 6, 1995, First Data consummated the acquisition of the financial
services electronic transaction processing business of Envoy Corporation for
consideration consisting of three million shares of First Data Common Stock and
up to an additional $21 million in First Data Common Stock if certain
performance-based criteria are achieved.
On June 17, 1995, First Data consummated the sale of its Health Systems Group
to HBO & Company ("HBOC") in exchange for four million shares of HBOC common
stock.
First Data regularly considers acquisition opportunities as well as other
forms of business combinations and divestitures. Historically, First Data has
been involved in numerous transactions of various magnitudes for consideration
which has included cash or securities (including First Data Common Stock) or
combinations thereof. First Data continues to evaluate and pursue transaction
opportunities as they arise. In evaluating opportunities for future expansion,
First Data targets markets in which it believes it can achieve and sustain a
strong competitive position. No assurance can be given with respect to the
timing, likelihood or the financial or business effect of any possible
transaction.
First Data's principal executive offices are located at 401 Hackensack
Avenue, Hackensack, New Jersey 07601, and its telephone number is (201) 525-
4702.
For further information concerning First Data, see "AVAILABLE INFORMATION"
and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
BUSINESS OF FIRST FINANCIAL
First Financial is a worldwide leader in information services, offering a
vertically integrated set of data processing, storage and management products
for the capture, manipulation and distribution of data. Services include
merchant and consumer payment services (involving credit cards, debit cards,
checks and nonbank immediate money transfers); debt collection and accounts
receivable management; data imaging, micrographics and electronic database
management; health care claims processing and integrated management and cost
containment services; and the development and marketing of data communications
and information processing systems, including in-store marketing programs and
systems for supermarkets.
On May 12, 1995, First Financial entered into an Agreement and Plan of Merger
(the "EBP Agreement") to acquire Employee Benefit Plans, Inc., a Delaware
corporation ("EBP"). Pursuant to the EBP Agreement, and subject to the terms
and conditions thereof, each holder of outstanding shares of EBP's $.01 par
value common stock ("EBP Common Stock") will become entitled to receive 0.1975
of a share of First Financial Common Stock and cash in lieu of fractional
shares. Outstanding options and rights to acquire EBP Common Stock would,
following consummation of the acquisition, entitle the holder to acquire shares
of First Financial Common Stock and, upon consummation of the Merger, shares of
First Data Common Stock, in each case based on the applicable conversion ratio.
First Financial estimates the EBP transaction to have a total value of
approximately $172.5 million, based on the closing price of First Financial
Common Stock on September 15, 1995.
EBP, through its subsidiaries EBP HealthPlans, Inc. and EBPLife Insurance
Company, provides managed health care products and services to companies
throughout the United States. EBP's products and services include health
insurance coverages, benefit plan design and consulting, claims administration
and processing, medical cost management programs, health care provider
networks, and a managed pharmacy program. EBP tailors the delivery of its
managed health care products and services to meet the needs of customers in
specific geographic areas of the United States. EBP's customers are primarily
small and medium sized companies seeking to minimize their health care costs
while providing quality medical benefit plans to their employees. EBP provides
its managed health care products and services to more than 2,100 customers with
approximately 1.1 million members.
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First Financial's principal executive offices are located at Suite 1400, 5660
New Northside Drive, Atlanta, Georgia 30328, and its telephone number is 770-
857-0001.
For further information concerning First Financial, see "AVAILABLE
INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
CERTAIN LITIGATION
Following the June 13, 1995 public announcement of the execution of the
Merger Agreement, four separate class action lawsuits were filed by First
Financial stockholders in the Superior Court of Fulton County, Georgia, against
First Data, First Financial and the individual directors of First Financial
seeking to enjoin the Merger and recover compensatory damages in unspecified
amounts, together with costs, expenses and attorneys' fees (Frishman v. Thomas,
et al.; Civil Action No. E38255; Coopersmith v. First Financial Management
Corporation, et al.; Civil Action No. E38296; Backer v. Thomas, et al.; Civil
Action No. E38304; and Booth v. First Financial Management Corporation, et al.;
Civil Action No. E38329). The complaints, which purport to be brought on behalf
of all similarly situated First Financial stockholders, allege that the First
Financial directors violated their fiduciary duties and obligations to First
Financial stockholders in approving the Merger by failing to take steps to
assure maximum value and return to First Financial stockholders. First
Financial believes that the litigation is without merit.
Pursuant to arms-length negotiations, and in the interest of avoiding the
burden and expense of further litigation, the defendants in these complaints
have reached an agreement in principle with the plaintiffs relating to the
settlement of such litigation. The settlement contemplated by the agreement in
principle would be subject to the execution of a definitive settlement
agreement and court approval. The settlement contemplated by the agreement in
principle provides for (i) a change in the latest extension of the final
Termination Date of the Merger Agreement from May 31, 1996 to August 31, 1996,
(ii) the reduction in the fees payable in certain events of termination from
$70 million to $68 million, (iii) the opportunity of plaintiffs' counsel to
review and offer comments on this Joint Proxy Statement/Prospectus and (iv) the
defendants' agreement not to oppose an application by plaintiffs' counsel to
the court for an award of attorneys' fees not to exceed $425,000 plus
reasonably documented expenses not to exceed $25,000, which amounts, if
approved, will be paid by First Financial on behalf of the defendants. The
agreement in principle also contemplates that the class will be certified for
settlement purposes only, that the litigation will be dismissed with prejudice
and that all claims with respect to the Merger, the Merger Agreement and this
Joint Proxy Statement/Prospectus, including any federal or state securities law
or other claims, shall be fully and finally released, settled and discharged.
On September 19, 1995, First Data, First Financial and Sub entered into an
amendment to the Merger Agreement to reflect the changes contemplated by the
agreement in principle to settle the litigation.
LEGAL OPINIONS
The validity of the First Data Common Stock being offered hereby is being
passed upon for First Data by Thomas A. Rossi, Esq., Senior Counsel to First
Data. Mr. Rossi beneficially owns 2,849 shares of First Data Common Stock.
Sutherland, Asbill & Brennan, counsel to First Financial, will deliver an
opinion concerning certain federal income tax consequences of the Merger. See
"THE MERGER--Certain Federal Income Tax Consequences." George L. Cohen, a
partner in Sutherland, Asbill & Brennan, is a director of First Financial.
Attorneys at Sutherland, Asbill & Brennan participating in matters relating to
the Merger beneficially own 18,794 shares of First Financial Common Stock.
EXPERTS
The financial statements and schedules appearing in First Data's 1994 10-K
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated
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by reference herein. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
With respect to the unaudited consolidated interim financial information of
First Data for the periods ended March 31, 1994 and 1995 and June 30, 1994 and
1995 incorporated by reference herein, Ernst & Young LLP have reported that
they have applied limited procedures in accordance with professional standards
for a review of such information. However, their separate reports, included in
First Data's Quarterly Reports on Form 10-Q for the periods ended March 31 and
June 30, 1995, incorporated herein by reference, state that they did not audit
and they do not express an opinion on such interim financial information.
Accordingly, the degree of reliance on their reports on such information should
be restricted in light of the limited nature of the review procedures applied.
The independent auditors are not subject to the liability provisions of Section
11 of the Securities Act for their reports on the unaudited interim financial
information because such reports are not "reports" or a "part" of the
Registration Statement prepared or certified by the auditors within the meaning
of Sections 7 and 11 of the Securities Act.
The consolidated financial statements of CESI Holdings, Inc. at June 30, 1994
and for the year then ended, appearing in First Data's Current Report on Form
8-K dated March 23, 1995, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The financial statements of First Financial at December 31, 1994 and 1993,
and for each of the three years in the period ended December 31, 1994
incorporated by reference in this Joint Proxy Statement/Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as set forth in the
report thereon appearing in First Financial's 1994 10-K, and are incorporated
herein by reference in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The financial statements of Western Union Financial Services, Inc.
incorporated in this Joint Proxy Statement/Prospectus by reference to First
Data's Form 8-K dated July 14, 1995 have been so incorporated in reliance upon
the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in accounting and auditing.
Representatives of Ernst & Young LLP and Deloitte & Touche LLP are expected
to be present at the First Data Special Meeting and the First Financial Special
Meeting, respectively, where they will have the opportunity to make a statement
if they desire to do so and will be available to respond to appropriate
questions.
OTHER INFORMATION AND STOCKHOLDER PROPOSALS
The First Data management and the First Financial management know of no other
matters that may properly be, or which are likely to be, brought before the
First Data Special Meeting or the First Financial Special Meeting,
respectively. However, if any other matters are properly brought before such
Special Meetings, the persons named in the enclosed proxy or their substitutes
will vote the proxies in accordance with the recommendations of management,
unless such authority is withheld.
In order to be considered for inclusion in the proxy statement for the next
annual meeting, if any, of stockholders of First Financial, any stockholder
proposal intended to be presented at the meeting must be received by First
Financial on or before December 15, 1995. The annual meeting will be held only
if the Merger is not consummated.
In order to be considered for inclusion in the proxy statement for the next
annual meeting of stockholders of First Data, any stockholder proposal intended
to be presented at the meeting must be received by First Data on or before
December 1, 1995.
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ANNEX I
Agreement and Plan of Merger dated as of June 12, 1995, as amended, among First
Data Corporation,FDC Merger Corp. and First Financial Management Corporation
COMPOSITE CONFORMED
<PAGE>
AGREEMENT AND PLAN OF MERGER
AMONG
FIRST DATA CORPORATION,
FDC MERGER CORP.
AND
FIRST FINANCIAL MANAGEMENT CORPORATION
DATED AS OF JUNE 12, 1995, AS AMENDED
COMPOSITE CONFORMED
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE MERGER
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Section 1.1 The Merger.................................................. 1
Section 1.2 Effective Time.............................................. 1
Section 1.3 Effects of the Merger....................................... 1
Section 1.4 Charter and By-laws......................................... 2
Section 1.5 Conversion of Securities.................................... 2
Section 1.6 Parent to Make Certificates Available....................... 2
Section 1.7 Dividends; Transfer Taxes; Withholding...................... 3
Section 1.8 No Fractional Securities.................................... 3
Section 1.9 Return of Exchange Fund..................................... 4
Section 1.10 Adjustment of Conversion Number............................. 4
Section 1.11 No Further Ownership Rights in Company Common Stock......... 4
Section 1.12 Closing of Company Transfer Books........................... 4
Section 1.13 Lost Certificates........................................... 4
Section 1.14 Restricted Stock............................................ 4
Section 1.15 Senior Convertible Debentures............................... 4
Section 1.16 Further Assurances.......................................... 5
Section 1.17 Closing..................................................... 5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Section 2.1 Organization, Standing and Power............................ 5
Section 2.2 Capital Structure........................................... 6
Section 2.3 Authority................................................... 6
Section 2.4 Consents and Approvals; No Violation........................ 7
Section 2.5 SEC Documents and Other Reports............................. 7
Section 2.6 Registration Statement and Joint Proxy Statement............ 8
Section 2.7 Absence of Certain Changes or Events........................ 8
Section 2.8 Permits and Compliance...................................... 9
Section 2.9 Tax Matters................................................. 9
Section 2.10 Actions and Proceedings..................................... 9
Section 2.11 Certain Agreements.......................................... 10
Section 2.12 ERISA....................................................... 10
Section 2.13 Compliance with Certain Laws................................ 10
Section 2.14 Liabilities................................................. 11
Section 2.15 Labor Matters............................................... 11
Section 2.16 Intellectual Property....................................... 11
Section 2.17 Pooling of Interests; Reorganization........................ 11
Section 2.18 Required Vote of Parent Stockholders........................ 11
Section 2.19 Operations of Sub........................................... 11
Section 2.20 Brokers..................................................... 12
</TABLE>
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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Section 3.1 Organization, Standing and Power........................... I-12
Section 3.2 Capital Structure.......................................... I-12
Section 3.3 Authority.................................................. I-13
Section 3.4 Consents and Approvals; No Violation....................... I-13
Section 3.5 SEC Documents and Other Reports............................ I-14
Section 3.6 Registration Statement and Joint Proxy Statement........... I-14
Section 3.7 Absence of Certain Changes or Events....................... I-15
Section 3.8 Permits and Compliance..................................... I-15
Section 3.9 Tax Matters................................................ I-16
Section 3.10 Actions and Proceedings.................................... I-16
Section 3.11 Certain Agreements......................................... I-16
Section 3.12 ERISA...................................................... I-16
Section 3.13 Compliance with Certain Laws............................... I-17
Section 3.14 Liabilities................................................ I-17
Section 3.15 Labor Matters.............................................. I-18
Section 3.16 Intellectual Property...................................... I-18
Section 3.17 Opinion of Financial Advisor............................... I-18
Section 3.18 State Takeover Statutes.................................... I-18
Section 3.19 Required Vote of Company Stockholders...................... I-18
Section 3.20 Pooling of Interests; Reorganization....................... I-18
Section 3.21 Brokers.................................................... I-18
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger..................... I-19
Section 4.2 No Solicitation............................................ I-22
Section 4.3 Third Party Standstill Agreements.......................... I-23
Section 4.4 Pooling of Interests; Reorganization....................... I-23
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Meetings....................................... I-23
Preparation of the Registration Statement and the Joint
Section 5.2 Proxy Statement............................................ I-24
Section 5.3 Employee Benefits Matters.................................. I-24
Section 5.4 Access to Information...................................... I-24
Section 5.5 Compliance with the Securities Act; Pooling Period......... I-24
Section 5.6 Stock Exchange Listings.................................... I-25
Section 5.7 Fees and Expenses.......................................... I-25
Section 5.8 Company Stock Options; Stock Purchase Plan................. I-27
Section 5.9 Reasonable Best Efforts; Pooling of Interests.............. I-28
Section 5.10 Public Announcements....................................... I-29
Section 5.11 Real Estate Transfer and Gains Tax......................... I-29
Section 5.12 State Takeover Laws........................................ I-29
Section 5.13 Indemnification; Directors and Officers Insurance.......... I-29
Section 5.14 Notification of Certain Matters............................ I-29
Section 5.15 Resignation of Directors................................... I-30
</TABLE>
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ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
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Section 6.1 Conditions to Each Party's Obligation to Effect the Merger. I-30
Conditions to Obligation of the Company to Effect the
Section 6.2 Merger..................................................... I-31
Conditions to Obligations of Parent and Sub to Effect the
Section 6.3 Merger..................................................... I-32
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination................................................ I-32
Section 7.2 Effect of Termination...................................... I-34
Section 7.3 Amendment.................................................. I-34
Section 7.4 Waiver..................................................... I-34
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations, Warranties and Agreements. I-34
Section 8.2 Notices.................................................... I-35
Section 8.3 Interpretation............................................. I-36
Section 8.4 Counterparts............................................... I-36
Section 8.5 Entire Agreement; No Third-Party Beneficiaries............. I-36
Section 8.6 Governing Law.............................................. I-36
Section 8.7 Assignment................................................. I-36
Section 8.8 Severability............................................... I-36
Section 8.9 Enforcement of this Agreement.............................. I-36
</TABLE>
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AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger, dated as of June 12, 1995 (this "Agreement"),
among First Data Corporation, a Delaware corporation ("Parent"), FDC Merger
Corp., a Georgia corporation and a wholly-owned subsidiary of Parent ("Sub"),
and First Financial Management Corporation, a Georgia corporation (the
"Company") (Sub and the Company being hereinafter collectively referred to as
the "Constituent Corporations").
WITNESSETH:
Whereas, the respective Boards of Directors of Parent, Sub and the Company
have approved and declared advisable the merger of Sub and the Company (the
"Merger"), upon the terms and subject to the conditions set forth herein,
whereby each issued and outstanding share of Common Stock, par value $.10 per
share, of the Company ("Company Common Stock") not owned directly or indirectly
by Parent or the Company will be converted into shares of Parent Common Stock,
par value $.01 per share ("Parent Common Stock");
Whereas, the respective Boards of Directors of Parent and the Company have
determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is in the best interest of their
respective stockholders;
Whereas, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
Whereas, it is intended that the Merger shall be recorded for accounting
purposes as a pooling of interests.
Now, Therefore, in consideration of the premises, representations, warranties
and agreements herein contained, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions hereof,
and in accordance with the Georgia Business Corporation Code (the "GBCC"), Sub
shall be merged with and into the Company at the Effective Time (as hereinafter
defined). Following the Merger, the separate corporate existence of Sub shall
cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Sub in accordance with the GBCC.
Section 1.2 Effective Time. The Merger shall become effective when a
Certificate of Merger (the "Certificate of Merger"), executed in accordance
with the relevant provisions of the GBCC, is filed with the Secretary of State
of the State of Georgia; provided, however, that, upon mutual consent of the
Constituent Corporations, the Certificate of Merger may provide for a later
date of effectiveness of the Merger not more than 30 days after the date the
Certificate of Merger is filed. When used in this Agreement, the term
"Effective Time" shall mean the later of the date and time at which the
Certificate of Merger is filed or such later time established by the
Certificate of Merger. The filing of the Certificate of Merger shall be made on
the date of the Closing (as defined in Section 1.17).
Section 1.3 Effects of the Merger. The Merger shall have the effects set
forth in Section 14-2-1106 of the GBCC.
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Section 1.4 Charter and By-laws. At the Effective Time, the Restated Articles
of Incorporation of the Company, as in effect immediately prior to the
Effective Time, shall be amended so that Article V of such Restated Articles of
Incorporation reads in its entirety as follows: "The total number of shares of
all classes of capital stock which the Corporation shall have authority to
issue is 100 shares of Common Stock, par value $.01 per share." As so amended,
such Restated Articles of Incorporation shall be the Articles of Incorporation
of the Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law; provided, however, that in no event shall the
provisions of Article VIII of the Restated Articles of Incorporation of the
Company as in effect immediately prior to the Effective Time be amended after
the Effective Time in any manner prior to the sixth anniversary of the
Effective Time. At the Effective Time, the By-laws of the Company, as in effect
immediately prior to the Effective Time, shall be the By-laws of the Surviving
Corporation until thereafter changed or amended as provided therein or by the
Articles of Incorporation of the Surviving Corporation or by applicable law.
Section 1.5 Conversion of Securities. As of the Effective Time, by virtue of
the Merger and without any action on the part of Sub, the Company or the
holders of any securities of the Constituent Corporations:
(a) Each issued and outstanding share of common stock, par value $.01 per
share, of Sub shall be converted into one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) All shares of Company Common Stock that are held in the treasury of
the Company or by any wholly-owned Subsidiary of the Company and any shares
of Company Common Stock owned by Parent or by any wholly-owned Subsidiary
of Parent shall be cancelled and no capital stock of Parent or other
consideration shall be delivered in exchange therefor.
(c) Subject to the provisions of Sections 1.8 and 1.10 hereof, each share
of Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares to be cancelled in accordance with
Section 1.5(b)) shall be converted into 1.5859 (such number being the
"Conversion Number") validly issued, fully paid and nonassessable shares of
Parent Common Stock. All such shares of Company Common Stock, when so
converted, shall no longer be outstanding and shall automatically be
cancelled and retired and each holder of a certificate representing any
such shares shall cease to have any rights with respect thereto, except the
right to receive any dividends and other distributions in accordance with
Section 1.7, certificates representing the shares of Parent Common Stock
into which such shares are converted and any cash, without interest, in
lieu of fractional shares to be issued or paid in consideration therefor
upon the surrender of such certificate in accordance with Section 1.6.
Section 1.6 Parent to Make Certificates Available. (a) Exchange of
Certificates. Parent shall authorize a commercial bank reasonably acceptable to
the Company (or such other person or persons as shall be acceptable to Parent
and the Company) to act as Exchange Agent hereunder (the "Exchange Agent"). As
soon as practicable after the Effective Time, Parent shall deposit with the
Exchange Agent, in trust for the holders of shares of Company Common Stock
converted in the Merger, certificates representing the shares of Parent Common
Stock issuable pursuant to Section 1.5(c) in exchange for outstanding shares of
Company Common Stock and cash, as required to make payments in lieu of any
fractional shares pursuant to Section 1.8 (such cash and shares of Parent
Common Stock, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund"). The Exchange
Agent shall, pursuant to irrevocable instructions, deliver the Parent Common
Stock contemplated to be issued pursuant to Section 1.5(c) out of the Exchange
Fund. Except as contemplated by Sections 1.8 and 1.9, the Exchange Fund shall
not be used for any other purpose.
(b) Exchange Procedures. As soon as practicable after the Effective Time,
Parent shall cause the Exchange Agent to mail to each record holder of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock converted in the Merger
(the "Certificates") a letter of transmittal (which shall be in customary form,
shall specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon actual delivery of the Certificates to
I-2
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the Exchange Agent, and shall contain instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing shares
of Parent Common Stock and cash in lieu of fractional shares). Upon surrender
for cancellation to the Exchange Agent of a Certificate, together with such
letter of transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing that number
of whole shares of Parent Common Stock into which the shares represented by the
surrendered Certificate shall have been converted at the Effective Time
pursuant to this Article I, cash in lieu of any fractional share in accordance
with Section 1.8 and certain dividends and other distributions in accordance
with Section 1.7, and any Certificate so surrendered shall forthwith be
cancelled.
Section 1.7 Dividends; Transfer Taxes; Withholding. No dividends or other
distributions that are declared on or after the Effective Time on Parent Common
Stock, or are payable to the holders of record thereof on or after the
Effective Time, will be paid to any person entitled by reason of the Merger to
receive a certificate representing Parent Common Stock until such person
surrenders the related Certificate or Certificates, as provided in Section 1.6,
and no cash payment in lieu of fractional shares will be paid to any such
person pursuant to Section 1.8 until such person shall so surrender the related
Certificate or Certificates. Subject to the effect of applicable law, there
shall be paid to each record holder of a new certificate representing such
Parent Common Stock: (i) at the time of such surrender or as promptly as
practicable thereafter, the amount of any dividends or other distributions
theretofore paid with respect to the shares of Parent Common Stock represented
by such new certificate and having a record date on or after the Effective Time
and a payment date prior to such surrender; (ii) at the appropriate payment
date or as promptly as practicable thereafter, the amount of any dividends or
other distributions payable with respect to such shares of Parent Common Stock
and having a record date on or after the Effective Time but prior to such
surrender and a payment date on or subsequent to such surrender; and (iii) at
the time of such surrender or as promptly as practicable thereafter, the amount
of any cash payable with respect to a fractional share of Parent Common Stock
to which such holder is entitled pursuant to Section 1.8. In no event shall the
person entitled to receive such dividends or other distributions be entitled to
receive interest on such dividends or other distributions. If any cash or
certificate representing shares of Parent Common Stock is to be paid to or
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of such exchange that
the Certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer and that the person requesting such exchange shall pay
to the Exchange Agent any transfer or other taxes required by reason of the
issuance of certificates for such shares of Parent Common Stock in a name other
than that of the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not applicable. Parent or the Exchange Agent shall be entitled to deduct
and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of shares of Company Common Stock such amounts as
Parent or the Exchange Agent is required to deduct and withhold with respect to
the making of such payment under the Code or under any provision of state,
local or foreign tax law. To the extent that amounts are so withheld by Parent
or the Exchange Agent, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the shares of Company
Common Stock in respect of which such deduction and withholding was made by
Parent or the Exchange Agent.
Section 1.8 No Fractional Securities. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates pursuant to this Article I, and no Parent dividend or
other distribution or stock split shall relate to any fractional share, and no
fractional share shall entitle the owner thereof to vote or to any other rights
of a security holder of Parent. In lieu of any such fractional share, each
holder of Company Common Stock who would otherwise have been entitled to a
fraction of a share of Parent Common Stock upon surrender of Certificates for
exchange pursuant to this Article I will be paid an amount in cash (without
interest), rounded to the nearest cent, determined by multiplying (i) the per
share closing price on the New York Stock Exchange, Inc. (the "NYSE") of Parent
Common Stock (as reported in the NYSE Composite Transactions) on the date of
the Effective Time (or, if the shares of Parent Common Stock do not trade on
the NYSE on such date, the first date of trading of shares of Parent Common
Stock on the NYSE after the Effective Time) by (ii) the fractional interest to
which
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such holder would otherwise be entitled. As promptly as practicable after the
determination of the amount of cash, if any, to be paid to holders of
fractional share interests, the Exchange Agent shall so notify the Parent, and
the Parent shall deposit such amount with the Exchange Agent and shall cause
the Exchange Agent to forward payments to such holders of fractional share
interests subject to and in accordance with the terms of Section 1.7 and this
Section 1.8.
Section 1.9 Return of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the former stockholders of the Company for one year
after the Effective Time shall be delivered to Parent, upon demand of Parent,
and any such former stockholders who have not theretofore complied with this
Article I shall thereafter look only to Parent for payment of their claim for
Parent Common Stock, any cash in lieu of fractional shares of Parent Common
Stock and any dividends or distributions with respect to Parent Common Stock.
Neither Parent nor the Surviving Corporation shall be liable to any former
holder of Company Common Stock for any such shares of Parent Common Stock, cash
and dividends and distributions held in the Exchange Fund which is delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law.
Section 1.10 Adjustment of Conversion Number. In the event of any
reclassification, stock split or stock dividend with respect to Parent Common
Stock, any change or conversion of Parent Common Stock into other securities or
any other dividend or distribution with respect to the Parent Common Stock
other than normal quarterly cash dividends as the same may be adjusted from
time to time pursuant to the terms of this Agreement (or if a record date with
respect to any of the foregoing should occur) prior to the Effective Time,
appropriate and proportionate adjustments, if any, shall be made to the
Conversion Number, and all references to the Conversion Number in this
Agreement shall be deemed to be to the Conversion Number as so adjusted.
Section 1.11 No Further Ownership Rights in Company Common Stock. All shares
of Parent Common Stock issued upon the surrender for exchange of Certificates
in accordance with the terms hereof (including any cash paid pursuant to
Section 1.8) shall be deemed to have been issued in full satisfaction of all
rights pertaining to the shares of Company Common Stock represented by such
Certificates.
Section 1.12 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of shares
of Company Common Stock shall thereafter be made on the records of the Company.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation, the Exchange Agent or the Parent, such Certificates shall be
cancelled and exchanged as provided in this Article I.
Section 1.13 Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond, in such
reasonable amount as the Surviving Corporation may direct (but consistent with
the practices the Parent applies to its own stockholders), as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the shares of Parent Common Stock, any cash in lieu of fractional
shares of Parent Common Stock to which the holders thereof are entitled
pursuant to Section 1.8 and any dividends or other distributions to which the
holders thereof are entitled pursuant to Section 1.7.
Section 1.14 Restricted Stock. Any unvested shares of restricted stock,
whether granted pursuant to the Company Stock Option Plans (as hereinafter
defined) or otherwise, shall, to the extent required in the plan, agreement or
instrument pursuant to which such shares were granted (and without any
voluntary action by the Company), vest and become free of all restrictions
immediately prior to the Effective Time and shall be convertible into Parent
Common Stock pursuant to Section 1.5.
Section 1.15 Senior Convertible Debentures. Parent acknowledges that, at the
Effective Time, by virtue of the Merger and without any further action on the
part of the Company, the 5% Senior Convertible
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Debentures of the Company due 1999 (the "5% Debentures") shall be convertible
into shares of Parent Common Stock pursuant to the terms of the indenture
governing the 5% Debentures. Parent shall execute with the Trustee for the 5%
Debentures a supplemental indenture (which shall conform to the Trust Indenture
Act of 1939, as amended, as in force at the date of execution of such
supplemental indenture) providing that each 5% Debenture shall be convertible
into shares of Parent Common Stock as contemplated by the indenture governing
the 5% Debentures. Parent shall promptly cause notice of the execution of such
supplemental indenture to be mailed to each holder of the 5% Debentures in
accordance with the indenture governing the 5% Debentures and shall take such
other actions as may be appropriate or required by such indenture, or
otherwise, to implement the terms of the indenture, as currently supplemented
and as supplemented in connection with the Merger.
Section 1.16 Further Assurances. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations, or (b) otherwise to carry out the purposes of
this Agreement, the Surviving Corporation and its proper officers and directors
or their designees shall be authorized to execute and deliver, in the name and
on behalf of either of the Constituent Corporations, all such deeds, bills of
sale, assignments and assurances and to do, in the name and on behalf of either
Constituent Corporation, all such other acts and things as may be necessary,
desirable or proper to vest, perfect or confirm the Surviving Corporation's
right, title or interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of such Constituent Corporation and otherwise
to carry out the purposes of this Agreement.
Section 1.17 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") and all actions specified in this Agreement to occur
at the Closing shall take place at the offices of Sutherland, Asbill & Brennan,
999 Peachtree Street, N.E., Atlanta, Georgia at 10:00 a.m., local time, no
later than the second business day following the day on which the last of the
conditions set forth in Article VI shall have been fulfilled or waived or at
such other time and place as Parent and the Company shall agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant to the Company as
follows:
Section 2.1 Organization, Standing and Power. Each of Parent and Sub is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and Georgia, respectively, and has the requisite
corporate power and authority to carry on its business as now being conducted.
Each Subsidiary of Parent is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized and has
the requisite corporate power and authority to carry on its business as now
being conducted, except where the failure to be so organized, existing or in
good standing or to have such power or authority would not, individually or in
the aggregate, have a Material Adverse Effect (as hereinafter defined) on
Parent. Parent and each of its Subsidiaries are duly qualified to do business,
and are in good standing, in each jurisdiction where the character of their
properties owned or held under lease or the nature of their activities makes
such qualification necessary, except where the failure to be so qualified would
not, individually or in the aggregate, have a Material Adverse Effect on
Parent. For purposes of this Agreement (a) "Material Adverse Change" or
"Material Adverse Effect" means, when used with respect to Parent or the
Company, as the case may be, any change or effect that is materially adverse to
the assets, liabilities, results of operation or financial condition of Parent
and its Subsidiaries, taken as a whole, or the Company and its Subsidiaries,
taken as a whole, as the case may be, and (b) "Subsidiary" means any
corporation, partnership, joint venture or other legal entity of which Parent
or the Company, as the case may be (either
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alone or through or together with any other Subsidiary), owns, directly or
indirectly, 50% or more of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation, partnership, joint venture or
other legal entity.
Section 2.2 Capital Structure. As of the Effective Time, the authorized
capital stock of Parent will consist of 300,000,000 shares of Parent Common
Stock and 10,000,000 shares of Preferred Stock, par value $1.00 per share (the
"Parent Preferred Stock"); provided, however, that if Parent's stockholders, at
or prior to the Parent Stockholder Meeting (as defined in Section 5.1), approve
an amendment to Parent's Restated Certificate of Incorporation which increases
the authorized capital stock of Parent, then the authorized capital stock as of
the Effective Time will be as so increased. At the close of business on June 9,
1995, (i) 119,088,819 shares of Parent Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable and
free of preemptive rights, (ii) 437,666 shares of Parent Common Stock were held
in the treasury of Parent or by the Subsidiaries of Parent and (iii) 12,783,096
shares of Parent Common Stock were reserved for future issuance pursuant to
Parent's 1992 Long-Term Incentive Plan, the 1993 Directors Stock Option Plan
and Parent's stock purchase plans. No shares of Parent Preferred Stock are
outstanding. All of the shares of Parent Common Stock issuable in exchange for
Company Common Stock at the Effective Time in accordance with this Agreement
will be, when so issued, duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights. As of the date of this Agreement,
except for (a) this Agreement, (b) the Agreement and Plan of Reorganization and
Merger dated August 16, 1994, as amended (the "Envoy Agreement"), between
Parent and Envoy Corporation, a Delaware corporation, and (c) stock options
covering not in excess of 11,100,000 shares of Parent Common Stock
(collectively, the "Parent Stock Options"), there are no options, warrants,
calls, rights or agreements to which Parent or any of its Subsidiaries is a
party or by which any of them is bound obligating Parent or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of Parent or any of its Subsidiaries
or obligating Parent or any of its Subsidiaries to grant, extend or enter into
any such option, warrant, call, right or agreement. Each outstanding share of
capital stock of each Subsidiary of Parent is duly authorized, validly issued,
fully paid and nonassessable and, except as disclosed in the Parent SEC
Documents (as hereinafter defined), each such share is owned by Parent or
another Subsidiary of Parent, free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
voting rights, charges and other encumbrances of any nature whatsoever. Except
as set forth in Section 2.2 of the Parent Letter, Exhibit 21 to Parent's Annual
Report on Form 10-K for the year ended December 31, 1994, as filed with the
Securities and Exchange Commission (the "SEC") (the "Parent Annual Report"), is
a true, accurate and correct statement in all material respects of all of the
information required to be set forth therein by the regulations of the SEC.
Section 2.3 Authority. The respective Boards of Directors of Parent and Sub
have on or prior to the date of this Agreement declared the Merger advisable
and adopted this Agreement in accordance with the General Corporation Law of
the State of Delaware (the "Delaware Law") and the GBCC, respectively. Each of
Parent and Sub has all requisite corporate power and authority to enter into
this Agreement and, subject to approval by the stockholders of Parent of this
Agreement and the issuance of Parent Common Stock in connection with the Merger
(the "Share Issuance"), to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by Parent and Sub and the consummation
by Parent and Sub of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Sub,
subject to (x) approval by the stockholders of Parent of the Share Issuance and
(y) the filing of appropriate Merger documents as required by the GBCC. This
Agreement has been duly executed and delivered by Parent and Sub and (assuming
the valid authorization, execution and delivery of this Agreement by the
Company) this Agreement constitutes the valid and binding obligation of Parent
and Sub enforceable against each of them in accordance with its terms. The
Share Issuance and the filing of a registration statement on Form S-4 with the
SEC by Parent under the Securities Act of 1933, as amended (together with the
rules and regulations promulgated thereunder, the "Securities Act"), for the
purpose of registering the shares of Parent Common Stock to be issued in the
Merger (together with any amendments or supplements thereto, whether prior to
or after the effective date thereof, the "Registration Statement") have been
duly authorized by Parent's Board of Directors.
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Section 2.4 Consents and Approvals; No Violation. Assuming that all consents,
approvals, authorizations and other actions described in this Section 2.4 have
been obtained and all filings and obligations described in this Section 2.4
have been made, and except as set forth in Section 2.4 of the letter dated the
date hereof and delivered on the date hereof by Parent to the Company, which
letter relates to this Agreement and is designated therein as the "Parent
Letter" (the "Parent Letter"), the execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give to
others a right of termination, cancellation or acceleration of any obligation
or the loss of a material benefit under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets
of Parent or any of its Subsidiaries under, any provision of (i) the Restated
Certificate of Incorporation or By-laws of Parent, (ii) any provision of the
comparable charter or organization documents of any of Parent's Subsidiaries,
(iii) any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or license
applicable to Parent or any of its Subsidiaries or (iv) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Parent or any
of its Subsidiaries or any of their respective properties or assets, other
than, in the case of clauses (ii), (iii) or (iv), any such violations,
defaults, rights, liens, security interests, charges or encumbrances that,
individually or in the aggregate, would not have a Material Adverse Effect on
Parent, or prevent the consummation of any of the transactions contemplated
hereby. No filing or registration with, or authorization, consent or approval
of, any domestic (federal and state), foreign or supranational court,
commission, governmental body, regulatory agency, authority or tribunal (a
"Governmental Entity") is required by or with respect to Parent or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
Parent or Sub or is necessary for the consummation of the Merger and the other
transactions contemplated by this Agreement, except for (i) in connection, or
in compliance, with the provisions of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the Securities Act and
the Securities Exchange Act of 1934, as amended (together with the rules and
regulations promulgated thereunder, the "Exchange Act"), (ii) the filing of the
Certificate of Merger with the Secretary of State of the State of Georgia and
appropriate documents with the relevant authorities of other states in which
the Company or any of its Subsidiaries is qualified to do business, (iii) such
filings and consents as may be required under any environmental, health or
safety law or regulation pertaining to any notification, disclosure or required
approval triggered by the Merger or by the transactions contemplated by this
Agreement, (iv) such filings, authorizations, orders and approvals as may be
required by state takeover laws (the "State Takeover Approvals"), (v) such
filings as may be required in connection with the taxes described in Section
5.11, (vi) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the laws of any foreign
country in which the Company or any of its Subsidiaries conducts any business
or owns any property or assets, (vii) such filings and consents as may be
required under any state or foreign laws pertaining to debt collection, the
issuance of payment instruments or money transmission, (viii) applicable
requirements, if any, of state securities or "blue sky" laws ("Blue Sky Laws")
and the NYSE, (ix) compliance with the Federal Change in Bank Control Act of
1978 and related notification to the Federal Deposit Insurance Corporation, (x)
approval by the Georgia Department of Banking and Finance for Parent to become
a bank holding company under applicable Georgia law by acquiring control of the
Company's special purpose bank, (xi) approval by the State of Oklahoma
Department of Insurance based on a Form A Acquisition of Control Application,
(xii) pre-acquisition approval by the State of California Department of
Insurance, (xiii) telecommunications reseller licenses, (xv) any approvals
required by the Federal Communications Commission and (xvi) such other
consents, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not, individually or in the
aggregate, have a Material Adverse Effect on Parent, or prevent the
consummation of any of the transactions contemplated hereby.
Section 2.5 SEC Documents and Other Reports. Parent has filed all required
documents with the SEC since January 1, 1993 (the "Parent SEC Documents"). As
of their respective dates, the Parent SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as
the case may be, and, at the respective times they were filed, none of the
Parent SEC Documents
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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, in light of the circumstances under which they were made, not
misleading. Except as set forth in Section 2.5 of the Parent Letter, the
consolidated financial statements (including, in each case, any notes thereto)
of Parent included in the Parent SEC Documents complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles (except, in the case
of the unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto) and fairly presented in all material respects
the consolidated financial position of Parent and its consolidated Subsidiaries
as at the respective dates thereof and the consolidated results of their
operations and their consolidated cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein). Except as set
forth in Section 2.5 of the Parent Letter, as disclosed in the Parent SEC
Documents or as required by generally accepted accounting principles, Parent
has not, since December 31, 1994, made any change in the accounting practices
or policies applied in the preparation of financial statements.
Section 2.6 Registration Statement and Joint Proxy Statement. None of the
information to be supplied by Parent or Sub for inclusion or incorporation by
reference in the Registration Statement or the joint proxy statement/prospectus
included therein (together with any amendments or supplements thereto, the
"Joint Proxy Statement") relating to the Stockholder Meetings (as defined in
Section 5.1) will (i) in the case of the Registration Statement, at the time it
becomes effective, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading or (ii) in the case of the Joint
Proxy Statement, at the time of the mailing of the Joint Proxy Statement, the
time of each of the Stockholder Meetings and at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. If at any
time prior to the Effective Time any event with respect to Parent, its officers
and directors or any of its Subsidiaries shall occur which is required to be
described in the Joint Proxy Statement or the Registration Statement, such
event shall be so described, and an appropriate amendment or supplement shall
be promptly filed with the SEC and, as required by law, disseminated to the
stockholders of Parent and the Company. The Registration Statement will comply
(with respect to Parent) as to form in all material respects with the
provisions of the Securities Act, and the Joint Proxy Statement will comply
(with respect to Parent) as to form in all material respects with the
provisions of the Exchange Act.
Section 2.7 Absence of Certain Changes or Events. Except as disclosed in
Parent SEC Documents filed with the SEC prior to the date of this Agreement,
since December 31, 1994, (A) Parent and its Subsidiaries have not incurred any
material liability or obligation (indirect, direct or contingent), or entered
into any material oral or written agreement or other transaction, that is not
in the ordinary course of business or that would result in a Material Adverse
Effect on Parent, excluding any changes and effects resulting from changes in
economic, regulatory or political conditions or changes in conditions generally
applicable to the industries in which Parent and Subsidiaries of Parent are
involved and except for any such changes or effects resulting from this
Agreement, the transactions contemplated hereby or the announcement thereof;
(B) Parent and its Subsidiaries have not sustained any loss or interference
with their business or properties from fire, flood, windstorm, accident or
other calamity (whether or not covered by insurance) that has had a Material
Adverse Effect on Parent; (C) other than any indebtedness incurred by Parent
after the date hereof as permitted by Section 4.1(a)(vi), there has been no
material change in the consolidated indebtedness of Parent and its
Subsidiaries, and no dividend or distribution of any kind declared, paid or
made by Parent on any class of its stock, except for regular quarterly
dividends of not more than $.03 per share on Parent Common Stock; and (D) there
has been no event causing a Material Adverse Effect on Parent, excluding any
changes and effects resulting from changes in economic, regulatory or political
conditions or changes in conditions generally applicable to the industries in
which Parent and Subsidiaries of Parent are involved and except for any such
changes or effects resulting from this Agreement, the transactions contemplated
hereby or the announcement thereof.
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Section 2.8 Permits and Compliance. Each of Parent and its Subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Entity necessary for Parent or any of its Subsidiaries to
own, lease and operate its properties or to carry on its business as it is now
being conducted (the "Parent Permits"), except where the failure to have any of
the Parent Permits would not, individually or in the aggregate, have a Material
Adverse Effect on Parent, and, as of the date of this Agreement, no suspension
or cancellation of any of the Parent Permits is pending or, to the Knowledge of
Parent (as hereinafter defined herein), threatened, except where the suspension
or cancellation of any of the Parent Permits would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. Neither Parent nor any of
its Subsidiaries is in violation of (A) its charter, by-laws or other
organizational documents, (B) any applicable law, ordinance, administrative or
governmental rule or regulation or (C) any order, decree or judgment of any
Governmental Entity having jurisdiction over Parent or any of its Subsidiaries,
except, in the case of clauses (A), (B) and (C), for any violations that,
individually or in the aggregate, would not have a Material Adverse Effect on
Parent. Except as disclosed in the Parent SEC Documents filed prior to the date
of this Agreement or in Section 2.8 of the Parent Letter, as of the date hereof
there is no contract or agreement that is material to the business, financial
condition or results of operations of Parent and its Subsidiaries, taken as a
whole. Except as set forth in the Parent SEC Documents or Section 2.8 of the
Parent Letter, prior to the date of this Agreement, no event of default or
event that, but for the giving of notice or the lapse of time or both, would
constitute an event of default exists or, upon the consummation by Parent of
the transactions contemplated by this Agreement, will exist under any
indenture, mortgage, loan agreement, note or other agreement or instrument for
borrowed money, any guarantee of any agreement or instrument for borrowed money
or any lease, contractual license or other agreement or instrument to which
Parent or any of its Subsidiaries is a party or by which Parent or any such
Subsidiary is bound or to which any of the properties, assets or operations of
Parent or any such Subsidiary is subject, other than any defaults that,
individually or in the aggregate, would not have a Material Adverse Effect on
Parent. Set forth in Section 2.8 of the Parent Letter is a description of any
material changes to the amount and terms of the indebtedness of the Parent and
its Subsidiaries as described in the Parent Annual Report. "Knowledge of
Parent" means the actual knowledge of the individuals identified in Section 2.8
of the Parent Letter.
Section 2.9 Tax Matters. (a) Each of Parent and its Subsidiaries has filed
all Tax Returns required to have been filed (or extensions have been duly
obtained) and has paid all Taxes required to have been paid by it, except where
failure to file such Tax Returns or pay such Taxes would not, in the aggregate,
have a Material Adverse Effect on Parent. For purposes of this Agreement: (i)
"Tax" (and, with correlative meaning, "Taxes") means any federal, state, local
or foreign income, gross receipts, property, sales, use, license, excise,
franchise, employment, payroll, withholding, alternative or added minimum, ad
valorem, transfer or excise tax, or any other tax, custom, duty, governmental
fee or other like assessment or charge of any kind whatsoever, together with
any interest or penalty, imposed by any governmental authority and (ii) "Tax
Return" means any return, report or similar statement required to be filed with
respect to any Tax (including any attached schedules), including, without
limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
(b) The representations set forth in the Parent Tax Certificate attached to
the Parent Letter are true and correct.
Section 2.10 Actions and Proceedings. Except as set forth in the Parent SEC
Documents, there are no outstanding orders, judgments, injunctions, awards or
decrees of any Governmental Entity against or involving Parent or any of its
Subsidiaries, or against or involving any of the present or former directors,
officers, employees, consultants, agents or stockholders of Parent or any of
its Subsidiaries, as such, any of its or their properties, assets or business
or any Parent Plan (as hereinafter defined) that, individually or in the
aggregate, would have a Material Adverse Effect on Parent. As of the date of
this Agreement, there are no actions, suits or claims or legal, administrative
or arbitrative proceedings or investigations pending or, to the Knowledge of
Parent, threatened against or involving Parent or any of its Subsidiaries or
any of its or their present or former directors, officers, employees,
consultants, agents or stockholders, as such, any of its or
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their properties, assets or business or any Parent Plan that, individually or
in the aggregate, would have a Material Adverse Effect on Parent. As of the
date hereof, there are no actions, suits, labor disputes or other litigation,
legal or administrative proceedings or governmental investigations pending or,
to the Knowledge of Parent, threatened against or affecting Parent or any of
its Subsidiaries or any of its or their present or former officers, directors,
employees, consultants, agents or stockholders, as such, or any of its or their
properties, assets or business relating to the transactions contemplated by
this Agreement.
Section 2.11 Certain Agreements. As of the date of this Agreement, neither
Parent nor any of its Subsidiaries is a party to any oral or written agreement
or plan, including any stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan, any of the benefits of which will
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement, other than agreements and
plans as to which the value of such increases and accelerations does not
exceed, in the aggregate, $5 million.
Section 2.12 ERISA. Each Parent Plan complies in all material respects with
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the
Code and all other applicable statutes and governmental rules and regulations,
and (i) no "reportable event" (within the meaning of Section 4043 of ERISA) has
occurred with respect to any Parent Plan, (ii) neither Parent nor any of its
ERISA Affiliates (as hereinafter defined) has withdrawn from any Parent
Multiemployer Plan (as hereinafter defined) or instituted, or is currently
considering taking, any action to do so, and (iii) no action has been taken, or
is currently being considered, to terminate any Parent Plan subject to Title IV
of ERISA. No Parent Plan, nor any trust created thereunder, has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA), whether
or not waived. With respect to the Parent Plans, no event has occurred and, to
the Knowledge of Parent, there exists no condition or set of circumstances, in
connection with which Parent or any ERISA Affiliate could be subject to any
liability under the terms of such Parent Plans, ERISA, the Code or any other
applicable law which would have a Material Adverse Effect on Parent. All Parent
Plans that are intended to be qualified under Section 401(a) of the Code have
been determined by the Internal Revenue Service to be so qualified, and Parent
is not aware of any reason why any Parent Plan is not so qualified in
operation. Neither Parent nor any of its ERISA Affiliates has been notified by
any Parent Multiemployer Plan that such Parent Multiemployer Plan is currently
in reorganization or insolvency under and within the meaning of Section 4241 or
4245 of ERISA or that such Parent Multiemployer Plan intends to terminate or
has been terminated under Section 4041A of ERISA. Neither Parent nor any of its
ERISA Affiliates has any liability or obligation under any welfare plan to
provide benefits after termination of employment to any employee or dependent
other than as required by ERISA or as disclosed in the Parent Annual Report. As
used herein, (i) "Parent Plan" means a "pension plan" (as defined in Section
3(2) of ERISA (other than a Parent Multiemployer Plan)) or a "welfare plan" (as
defined in Section 3(1) of ERISA) established or maintained by Parent or any of
its ERISA Affiliates or as to which Parent or any of its ERISA Affiliates has
contributed or otherwise may have any liability, (ii) "Parent Multiemployer
Plan" means a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA)
to which Parent or any of its ERISA Affiliates is or has been obligated to
contribute or otherwise may have any liability, and (iii) with respect to any
person, "ERISA Affiliate" means any trade or business (whether or not
incorporated) which is under common control or would be considered a single
employer with such person pursuant to Section 414(b), (c), (m) or (o) of the
Code and the regulations promulgated under those sections or pursuant to
Section 4001(b) of ERISA and the regulations promulgated thereunder.
Section 2.13 Compliance with Certain Laws. The properties, assets and
operations of Parent and its Subsidiaries are in compliance in all material
respects with all applicable federal, state, local and foreign laws, rules and
regulations, orders, decrees, judgments, permits and licenses relating to
public and worker health and safety (collectively, "Worker Safety Laws") and
the protection and clean-up of the environment and activities or conditions
related thereto, including, without limitation, those relating to the
generation, handling, disposal, transportation or release of hazardous
materials (collectively, "Environmental Laws"), except for any violations that,
individually or in the aggregate, would not have a Material Adverse Effect on
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Parent. With respect to such properties, assets and operations, including any
previously owned, leased or operated properties, assets or operations, there
are no past, present or reasonably anticipated future events, conditions,
circumstances, activities, practices, incidents, actions or plans of Parent or
any of its Subsidiaries that may interfere with or prevent compliance or
continued compliance in all material respects with applicable Worker Safety
Laws and Environmental Laws, other than any such interference or prevention as
would not, individually or in the aggregate with any such other interference or
prevention, have a Material Adverse Effect on Parent. The term "hazardous
materials" shall mean those substances that are regulated by or form the basis
for liability under any applicable Environmental Laws.
Section 2.14 Liabilities. Except as fully reflected or reserved against in
the financial statements included in the Parent Annual Report, or disclosed in
the footnotes thereto, Parent and its Subsidiaries had no liabilities
(including, without limitation, tax liabilities) at the date of such financial
statements, absolute or contingent, other than liabilities that, individually
or in the aggregate, would not have a Material Adverse Effect on Parent, and
had no liabilities (including, without limitation, tax liabilities) that were
not incurred in the ordinary course of business. Except as so reflected,
reserved or disclosed, Parent and its Subsidiaries have no commitments, other
than any commitments which, individually or in the aggregate, would not have a
Material Adverse Effect on Parent.
Section 2.15 Labor Matters. Except as set forth in Section 2.15 of the Parent
Letter, neither Parent nor any of its Subsidiaries is a party to any collective
bargaining agreement or labor contract. Neither Parent nor any of its
Subsidiaries has engaged in any unfair labor practice with respect to any
persons employed by or otherwise performing services primarily for Parent or
any of its Subsidiaries (the "Parent Business Personnel"), and there is no
unfair labor practice complaint or grievance against Parent or any of its
Subsidiaries by the National Labor Relations Board or any comparable state
agency pending or threatened in writing with respect to the Parent Business
Personnel, except where such unfair labor practice, complaint or grievance
would not have a Material Adverse Effect on Parent. There is no labor strike,
dispute, slowdown or stoppage pending or, to the Knowledge of Parent,
threatened against or affecting Parent or any of its Subsidiaries which may
interfere with the respective business activities of Parent or any of its
Subsidiaries, except where such dispute, strike or work stoppage would not have
a Material Adverse Effect on Parent.
Section 2.16 Intellectual Property. Parent and its Subsidiaries have all
patents, trademarks, trade names, service marks, trade secrets, copyrights and
other proprietary intellectual property rights (collectively, "Intellectual
Property Rights") as are necessary in connection with the business of Parent
and its Subsidiaries, taken a whole, except where the failure to have such
Intellectual Property Rights would not have a Material Adverse Effect on
Parent. Neither Parent nor any of its Subsidiaries has infringed any
Intellectual Property Rights of any third party other than any infringements
that, individually or in the aggregate, would not have a Material Adverse
Effect on Parent.
Section 2.17 Pooling of Interests; Reorganization. To the Knowledge of
Parent, neither Parent nor any of its Subsidiaries has (i) taken any action or
failed to take any action which action or failure would jeopardize the
treatment of the Merger as a pooling of interests for accounting purposes or
(ii) taken any action or failed to take any action which action or failure
would jeopardize the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code.
Section 2.18 Required Vote of Parent Stockholders. The affirmative vote of a
majority of the votes cast on the Share Issuance is required to approve the
Share Issuance, provided that the total votes cast on the proposal represent a
majority of the outstanding shares of Parent Common Stock. No other vote of the
stockholders of Parent is required by law, the Restated Certificate of
Incorporation or By-laws of Parent or otherwise in order for Parent to
consummate the Merger and the transactions contemplated hereby.
Section 2.19 Operations of Sub. Sub is a direct, wholly-owned subsidiary of
Parent, was formed solely for the purpose of engaging in the transactions
contemplated hereby, has engaged in no other business activities and has
conducted its operations only as contemplated hereby.
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Section 2.20 Brokers. No broker, investment banker or other person, other
than Smith Barney Inc., the fees and expenses of which will be paid by Parent
(and as reflected in an agreement between Smith Barney Inc. and Parent, a copy
of which has been furnished to the Company), is entitled to any broker's,
finder's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 3.1 Organization, Standing and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Georgia and has the requisite corporate power and authority to carry
on its business as now being conducted. Each Subsidiary of the Company is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate (in the
case of a Subsidiary that is a corporation) or other power and authority to
carry on its business as now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power or authority
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. The Company and each of its Subsidiaries are duly qualified to do
business, and are in good standing, in each jurisdiction where the character of
their properties owned or held under lease or the nature of their activities
makes such qualification necessary, except where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
Section 3.2 Capital Structure. As of the Effective Time, the authorized
capital stock of the Company will consist of 150,000,000 shares of Company
Common Stock and 5,000,000 shares of Preferred Stock, par value $1.00 per share
("Company Preferred Stock"). At the close of business on May 31, 1995, (i)
63,831,211 shares of Company Common Stock were issued and outstanding, all of
which were validly issued, fully paid and nonassessable and free of preemptive
rights, (ii) 20,000 shares of Company Common Stock were held in the treasury of
the Company or by the Subsidiaries of the Company, (iii) 6,293,590 shares of
Company Common Stock were reserved for future issuance pursuant to the
Company's 1988 Incentive Stock Plan, 1990 Directors Stock Option Plan,
Directors Restricted Stock Plan, 1990 Employee Stock Purchase Plan, 1982
Incentive Stock Plan, Employee Stock Purchase Plan or pursuant to any plans
assumed by the Company in connection with any acquisition, business combination
or similar transaction (collectively, the "Company Stock Option Plans"), (iv)
6,480,435 shares of Company Common Stock were reserved for issuance upon the
conversion of the 5% Debentures into shares of Company Common Stock pursuant to
the terms of the 5% Debentures, (v) 1,734,600 shares of Company Common Stock
were reserved for issuance upon consummation of the EBP Merger (as hereinafter
defined) and (vi) 1,350,000 shares of Company Common Stock were reserved for
issuance in connection with certain contingent payments described in Section
3.2 of the letter dated the date hereof and delivered on the date hereof by the
Company to Parent, which letter relates to this Agreement and is designated
therein as the Company Letter (the "Company Letter"). Shares of Company Common
Stock having a value of up to $50 million are currently expected to be issued
by the Company as part of its prefunding of certain pension plan obligations.
No shares of Company Preferred Stock are outstanding. As of the date of this
Agreement, except (a) as provided in the 5% Debentures and the indenture
relating thereto, (b) for stock options covering not in excess of 1,827,492
shares of Company Common Stock issued under the Company Stock Option Plans
(collectively, the "Company Stock Options"), (c) up to 1,734,600 shares of
Company Common Stock to be issued in connection with the EBP Merger, (d) up to
231,000 shares of Company Common Stock issuable under the Company's Employee
Stock Purchase Plan and (e) up to 50,000 shares of Company Common Stock
issuable in connection with certain contingent payments described in Section
3.2 of the Company Letter, there are no options, warrants, calls, rights or
agreements to which the Company or any of its Subsidiaries is a party or by
which any of them is bound obligating the Company or any of its Subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or
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sold, additional shares of capital stock of the Company or any of its
Subsidiaries or obligating the Company or any of its Subsidiaries to grant,
extend or enter into any such option, warrant, call, right or agreement. Each
outstanding share of capital stock of each Subsidiary of the Company that is a
corporation is duly authorized, validly issued, fully paid and nonassessable
and, except as disclosed in the Company SEC Documents (as hereinafter defined)
or Section 3.2 of the Company Letter, each such share is owned by the Company
or another Subsidiary of the Company, free and clear of all security interests,
liens, claims, pledges, options, rights of first refusal, agreements,
limitations on voting rights, charges and other encumbrances of any nature
whatsoever. Except as disclosed in Section 3.2 of the Company Letter, Exhibit
21.1 to the Company's Annual Report on Form 10-K for the year ended December
31, 1994, as filed with the SEC (the "Company Annual Report"), is a true,
accurate and correct statement in all material respects of all of the
information required to be set forth therein by the regulations of the SEC.
Section 3.3 Authority. The Board of Directors of the Company has on or prior
to the date of this Agreement (a) unanimously declared the Merger advisable and
fair to and in the best interest of the Company and its stockholders, (b)
approved this Agreement in accordance with the GBCC, (c) resolved to recommend
the approval of this Agreement by the Company's stockholders and (d) directed
that this Agreement be submitted to the Company's stockholders for approval.
The Company has all requisite corporate power and authority to enter into this
Agreement and, subject to approval by the stockholders of the Company of this
Agreement, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of the Company, subject to (x)
approval of this Agreement by the stockholders of the Company and (y) the
filing of appropriate Merger documents as required by the GBCC. This Agreement
has been duly executed and delivered by the Company and (assuming the valid
authorization, execution and delivery of this Agreement by Parent and Sub)
constitutes the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms. The filing of the Joint Proxy
Statement with the SEC has been duly authorized by the Company's Board of
Directors.
Section 3.4 Consents and Approvals; No Violation. Assuming that all consents,
approvals, authorizations and other actions described in this Section 3.4 have
been obtained and all filings and obligations described in this Section 3.4
have been made, and except as set forth in Section 3.4 of the Company Letter,
the execution and delivery of this Agreement do not, and the consummation of
the transactions contemplated hereby and compliance with the provisions hereof
will not, result in any violation of, or default (with or without notice or
lapse of time, or both) under, or give to others a right of termination,
cancellation or acceleration of any obligation or the loss of a material
benefit under, or result in the creation of any lien, security interest, charge
or encumbrance upon any of the properties or assets of the Company or any of
its Subsidiaries under, any provision of (i) the Restated Articles of
Incorporation or By-Laws of the Company, (ii) any provision of the comparable
charter or organization documents of any of the Company's Subsidiaries, (iii)
any loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license applicable to
the Company or any of its Subsidiaries or (iv) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or any of
its Subsidiaries or any of their respective properties or assets, other than,
in the case of clauses (ii), (iii) or (iv), any such violations, defaults,
rights, liens, security interests, charges or encumbrances that, individually
or in the aggregate, would not have a Material Adverse Effect on the Company,
or prevent the consummation of any of the transactions contemplated hereby. No
filing or registration with, or authorization, consent or approval of, any
Governmental Entity is required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
the Company or is necessary for the consummation of the Merger and the other
transactions contemplated by this Agreement, except for (i) in connection, or
in compliance, with the provisions of the HSR Act, the Securities Act and the
Exchange Act, (ii) the filing of the Certificate of Merger with the Secretary
of State of the State of Georgia and appropriate documents with the relevant
authorities of other states in which the Company or any of its Subsidiaries is
qualified to do business, (iii) such filings and consents as may be required
under any environmental, health or safety law or
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regulation pertaining to any notification, disclosure or required approval
triggered by the Merger or by the transactions contemplated by this Agreement,
(iv) such filings, authorizations, orders and approvals as may be required to
obtain the State Takeover Approvals, (v) such filings as may be required in
connection with the taxes described in Section 5.11, (vi) such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under the laws of any foreign country in which the Company or
any of its Subsidiaries conducts any business or owns any property or assets,
(vii) such filings and consents as may be required under any state or foreign
laws pertaining to debt collection, the issuance of payment instruments or
money transmission, (viii) applicable requirements, if any, of Blue Sky Laws
and the NYSE, (ix) compliance with the Federal Change in Bank Control Act of
1978 and related notification to the Federal Deposit Insurance Corporation, (x)
approval by the Georgia Department of Banking and Finance for Parent to become
a bank holding company under applicable Georgia law by acquiring control of the
Company's special purpose bank, (xi) approval by the State of Oklahoma
Department of Insurance based on a Form A Acquisition of Control Application,
(xii) pre-acquisition approval by the State of California Department of
Insurance, (xiii) telecommunications reseller licenses, (xv) any approvals
required by the Federal Communications Commission, (xvi) as set forth in
Section 3.4 of the Company Letter, and (xvii) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made would not, individually or in the aggregate, have a
Material Adverse Effect on the Company or prevent the consummation of any of
the transactions contemplated hereby.
Section 3.5 SEC Documents and Other Reports. The Company has filed all
required documents with the SEC since January 1, 1993 (the "Company SEC
Documents"). As of their respective dates, the Company SEC Documents complied
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and, at the respective times they were filed,
none of the Company SEC Documents 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, in light of the circumstances under
which they were made, not misleading. The consolidated financial statements
(including, in each case, any notes thereto) of the Company included in the
Company SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with generally
accepted accounting principles (except, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated therein or in the notes
thereto) and fairly presented in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as at the
respective dates thereof and the consolidated results of their operations and
their consolidated cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein). Except as disclosed in the Company SEC
Documents or as required by generally accepted accounting principles, the
Company has not, since December 31, 1994, made any change in the accounting
practices or policies applied in the preparation of financial statements.
Section 3.6 Registration Statement and Joint Proxy Statement. None of the
information to be supplied by the Company for inclusion or incorporation by
reference in the Registration Statement or the Joint Proxy Statement will (i)
in the case of the Registration Statement, at the time it becomes effective,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading or (ii) in the case of the Joint Proxy Statement, at the
time of the mailing of the Joint Proxy Statement, the time of each of the
Stockholder Meetings and at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If at any time prior
to the Effective Time any event with respect to the Company, its officers and
directors or any of its Subsidiaries shall occur which is required to be
described in the Joint Proxy Statement or the Registration Statement, such
event shall be so described, and an appropriate amendment or supplement shall
be promptly filed with the SEC and, as required by law, disseminated to the
stockholders of Parent and the Company. The Registration Statement will comply
(with respect to the Company) as to form in all material respects with the
provisions of the Securities Act, and the Joint Proxy
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Statement will comply (with respect to the Company) as to form in all material
respects with the provisions of the Exchange Act.
Section 3.7 Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Documents filed with the SEC prior to the date of this Agreement or
in Section 3.7 of the Company Letter, since December 31, 1994, (A) the Company
and its Subsidiaries have not incurred any material liability or obligation
(indirect, direct or contingent), or entered into any material oral or written
agreement or other transaction, that is not in the ordinary course of business
or that would result in a Material Adverse Effect on the Company, excluding any
changes and effects resulting from changes in economic, regulatory or political
conditions or changes in conditions generally applicable to the industries in
which the Company and Subsidiaries of the Company are involved and except for
any such changes or effects resulting from this Agreement, the transactions
contemplated hereby or the announcement thereof; (B) the Company and its
Subsidiaries have not sustained any loss or interference with their business or
properties from fire, flood, windstorm, accident or other calamity (whether or
not covered by insurance) that has had a Material Adverse Effect on the
Company; (C) other than any indebtedness incurred by the Company after the date
hereof as permitted by Section 4.1(b)(vi), there has been no material change in
the consolidated indebtedness of the Company and its Subsidiaries, and no
dividend or distribution of any kind declared, paid or made by the Company on
any class of its stock, except for the regular semi-annual dividend of not more
than $.05 per share on Company Common Stock; and (D) there has been no event
causing a Material Adverse Effect on the Company, excluding any changes and
effects resulting from changes in economic, regulatory or political conditions
or changes in conditions generally applicable to the industries in which the
Company and Subsidiaries of the Company are involved and except for any such
changes or effects resulting from this Agreement, the transactions contemplated
hereby or the announcement thereof.
Section 3.8 Permits and Compliance. Each of the Company and its Subsidiaries
is in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Entity necessary for the Company or any of its Subsidiaries
to own, lease and operate its properties or to carry on its business as it is
now being conducted (the "Company Permits"), except where the failure to have
any of the Company Permits would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, and, as of the date of this Agreement,
no suspension or cancellation of any of the Company Permits is pending or, to
the Knowledge of the Company (as hereinafter defined), threatened, except where
the suspension or cancellation of any of the Company Permits would not,
individually or in the aggregate, have a Material Adverse Effect on Company.
Neither the Company nor any of its Subsidiaries is in violation of (A) its
charter, by-laws or other organizational documents, (B) any applicable law,
ordinance, administrative or governmental rule or regulation or (C) any order,
decree or judgment of any Governmental Entity having jurisdiction over the
Company or any of its Subsidiaries, except, in the case of clauses (A), (B) and
(C), for any violations that, individually or in the aggregate, would not have
a Material Adverse Effect on the Company. Except as disclosed in the Company
SEC Documents filed prior to the date of this Agreement or in Section 3.8 of
the Company Letter, as of the date hereof there is no contract or agreement
that is material to the business, financial condition or results of operations
of the Company and its Subsidiaries, taken as a whole. Except as set forth in
the Company SEC Documents, prior to the date of this Agreement, no event of
default or event that, but for the giving of notice or the lapse of time or
both, would constitute an event of default exists or, upon the consummation by
the Company of the transactions contemplated by this Agreement, will exist
under any indenture, mortgage, loan agreement, note or other agreement or
instrument for borrowed money, any guarantee of any agreement or instrument for
borrowed money or any lease, contractual license or other agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any such Subsidiary is bound or to which any of the
properties, assets or operations of the Company or any such Subsidiary is
subject, other than any defaults that, individually or in the aggregate, would
not have a Material Adverse Effect on the Company. Set forth in Section 3.8 of
the Company Letter is a description of any material changes to the amount and
terms of the indebtedness of the Company and its Subsidiaries as described in
the Company Annual Report. "Knowledge of the Company" means the actual
knowledge of the individuals identified on Section 3.8 of the Company Letter.
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Section 3.9 Tax Matters. (a) Each of the Company and its Subsidiaries has
filed all Tax Returns required to have been filed (or extensions have been duly
obtained) and has paid all Taxes required to have been paid by it, except where
failure to file such Tax Returns or pay such Taxes would not, in the aggregate,
have a Material Adverse Effect on the Company.
(b) The representations set forth in the Company Tax Certificate attached to
the Company Letter are true and correct.
Section 3.10 Actions and Proceedings. Except as set forth in the Company SEC
Documents or in Section 3.10 of the Company Letter, there are no outstanding
orders, judgments, injunctions, awards or decrees of any Governmental Entity
against or involving the Company or any of its Subsidiaries, or against or
involving any of the present or former directors, officers, employees,
consultants, agents or stockholders of the Company or any of its Subsidiaries,
as such, any of its or their properties, assets or business or any Company Plan
(as hereinafter defined) that, individually or in the aggregate, would have a
Material Adverse Effect on the Company. As of the date of this Agreement, there
are no actions, suits or claims or legal, administrative or arbitrative
proceedings or investigations pending or, to the Knowledge of the Company,
threatened against or involving the Company or any of its Subsidiaries or any
of its or their present or former directors, officers, employees, consultants,
agents or stockholders, as such, or any of its or their properties, assets or
business or any Company Plan that, individually or in the aggregate, would have
a Material Adverse Effect on the Company. As of the date hereof, there are no
actions, suits, labor disputes or other litigation, legal or administrative
proceedings or governmental investigations pending or, to the Knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
or any of its or their present or former officers, directors, employees,
consultants, agents or stockholders, as such, or any of its or their
properties, assets or business relating to the transactions contemplated by
this Agreement.
Section 3.11 Certain Agreements. Except as set forth in the Company SEC
Documents or in Section 3.11 of the Company Letter, as of the date of this
Agreement, neither the Company nor any of its Subsidiaries is a party to any
oral or written agreement or plan, including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by this
Agreement, other than agreements and plans as to which the value of such
increases and accelerations does not exceed, in the aggregate, $5 million. No
holder of any option to purchase shares of Company Common Stock, or shares of
Company Common Stock granted in connection with the performance of services for
the Company or its Subsidiaries, is or will be entitled to receive cash from
the Company or any Subsidiary in lieu of or in exchange for such option or
shares as a result of the transactions contemplated by this Agreement.
Section 3.12 ERISA. (a) With respect to each material Company Plan, the
Company has made, or will as soon as practicable after the date hereof make,
available to Parent a true and correct copy of (i) the most recent annual
report (Form 5500) filed with the Internal Revenue Service (the "IRS"), (ii)
such Company Plan, (iii) each trust agreement, insurance contract or
administration agreement relating to such Company Plan, (iv) the most recent
summary plan description or each Company plan for which a summary plan
description is required, (v) the most recent actuarial report or valuation
relating to a Company Plan subject to Title IV of ERISA and (vi) the most
recent determination letter, if any, issued by the IRS with respect to any
Company Plan intended to be qualified under section 401(a) of the Code. Except
as disclosed in Section 3.12 of the Company Letter or as would not have a
Material Adverse Effect on the Company, each Company Plan complies in all
material respects with ERISA, the Code and all other applicable statutes and
governmental rules and regulations, and (i) no "reportable event" (within the
meaning of Section 4043 of ERISA) has occurred with respect to any Company
Plan, (ii) neither the Company nor any of its ERISA Affiliates has withdrawn
from any Company Plan or Company Multiemployer Plan (as hereinafter defined) or
instituted, or is currently considering taking, any action to do so, and (iii)
no action has been taken, or is currently being considered, to terminate any
Company Plan subject to Title IV of ERISA. Except with respect
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to the Western Union Pension Plans or as disclosed in Section 3.12 of the
Company Letter, or as would not have a Material Adverse Effect on the Company,
no Company Plan, nor any trust created thereunder, has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA), whether
or not waived.
(b) Except as set forth in Section 3.12 of the Company Letter, with respect
to the Company Plans, no event has occurred and, to the Knowledge of the
Company, there exists no condition or set of circumstances in connection with
which the Company or any ERISA Affiliate could be subject to any liability
under the terms of such Company Plans, ERISA, the Code or any other applicable
law which would have a Material Adverse Effect on the Company. All Company
Plans that are intended to be qualified under Section 401(a) of the Code have
been determined by the Internal Revenue Service to be so qualified, or a timely
application for such determination is now pending, and the Company is not aware
of any reason why any Company Plan is not so qualified in operation. Neither
the Company nor any of its ERISA Affiliates has been notified by any Company
Multiemployer Plan that such Company Multiemployer Plan is currently in
reorganization or insolvency under and within the meaning of Section 4241 or
4245 of ERISA or that such Company Multiemployer Plan intends to terminate or
has been terminated under Section 4041A of ERISA. Except as disclosed in the
Company SEC Documents, neither the Company nor any of its ERISA Affiliates has
any liability or obligation under any welfare plan to provide benefits after
termination of employment to any employee or dependent other than as required
by ERISA or as disclosed in the Company Annual Report. As used herein, (i)
"Company Plan" means a "pension plan" (as defined in Section 3(2) of ERISA
(other than a Company Multiemployer Plan)) or a "welfare plan" (as defined in
Section 3(1) of ERISA) established or maintained by the Company or any of its
ERISA Affiliates or as to which the Company or any of its ERISA Affiliates has
contributed or otherwise may have any liability, and (ii) "Company
Multiemployer Plan" means a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) to which the Company or any of its ERISA Affiliates is or
has been obligated to contribute or otherwise may have any liability.
(c) The Company has made available to the Parent true and complete (i) copies
of all severance and employment agreements with officers of the Company and
each ERISA Affiliate who in the fiscal year ended December 31, 1994 received a
base salary in excess of $125,000, (ii) copies of all severance programs and
policies of the Company with or relating to its employees; and (iii) copies of
all plans, programs, agreements and other arrangements of the Company with or
relating to its employees who in the fiscal year ended December 31, 1994
received a base salary in excess of $125,000 which contain change of control or
similar provisions.
Section 3.13 Compliance with Certain Laws. The properties, assets and
operations of the Company and its Subsidiaries are in compliance in all
material respects with all applicable Worker Safety Laws and Environmental
Laws, except for any violations that, individually or in the aggregate, would
not have a Material Adverse Effect on the Company. With respect to such
properties, assets and operations, including any previously owned, leased or
operated properties, assets or operations, there are no past, present or
reasonably anticipated future events, conditions, circumstances, activities,
practices, incidents, actions or plans of the Company or any of its
Subsidiaries that may interfere with or prevent compliance or continued
compliance in all material respects with applicable Worker Safety Laws and
Environmental Laws, other than any such interference or prevention as would
not, individually or in the aggregate with any such other interference or
prevention, have a Material Adverse Effect on the Company.
Section 3.14 Liabilities. Except as fully reflected or reserved against in
the financial statements included in the Company Annual Report, or disclosed in
the footnotes thereto, or as contemplated or disclosed in Annex A, including
Schedule 1 thereto, the Company and its Subsidiaries had no liabilities
(including, without limitation, tax liabilities) at the date of such financial
statements, absolute or contingent, other than liabilities that, individually
or in the aggregate, would not have a Material Adverse Effect on the Company,
and had no liabilities (including, without limitation, tax liabilities) that
were not incurred in the ordinary course of business. Except as so reflected,
reserved or disclosed, the Company and its Subsidiaries have no commitments,
other than any commitments which, individually or in the aggregate, would not
have a Material Adverse Effect on the Company.
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Section 3.15 Labor Matters. Neither the Company nor any of its Subsidiaries
is a party to any collective bargaining agreement or labor contract, except for
the collective bargaining agreements between Western Union Corporation and the
Communication Workers of America. Neither the Company nor any of its
Subsidiaries has engaged in any unfair labor practice with respect to any
persons employed by or otherwise performing services primarily for the Company
or any of its Subsidiaries (the "Company Business Personnel"), and there is no
unfair labor practice complaint or grievance against the Company or any of its
Subsidiaries by the National Labor Relations Board or any comparable state
agency pending or threatened in writing with respect to the Company Business
Personnel, except where such unfair labor practice, complaint or grievance
would not have a Material Adverse Effect on the Company. There is no labor
strike, dispute, slowdown or stoppage pending or, to the Knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
which may interfere with the respective business activities of the Company or
any of its Subsidiaries, except where such dispute, strike or work stoppage
would not have a Material Adverse Effect on the Company.
Section 3.16 Intellectual Property. The Company and its Subsidiaries have all
Intellectual Property Rights as are necessary in connection with the business
of the Company and its Subsidiaries, taken as a whole, except where the failure
to have such Intellectual Property Rights would not have a Material Adverse
Effect on the Company. Neither the Company nor any of its Subsidiaries has
infringed any Intellectual Property Rights of any third party other than any
infringements that, individually or in the aggregate, would have a Material
Adverse Effect on the Company.
Section 3.17 Opinion of Financial Advisor. The Company has received the
written opinion of Morgan Stanley & Co. Incorporated, dated the date hereof, to
the effect that, as of the date hereof, the Exchange Ratio (as defined in such
opinion) is fair to the Company's stockholders from a financial point of view,
a copy of which opinion will be delivered to Parent promptly after the date of
this Agreement.
Section 3.18 State Takeover Statutes. The Board of Directors of the Company
has, to the extent such statutes are applicable, (a) taken all action necessary
to exempt Parent, its Subsidiaries and Affiliates, the Merger, this Agreement
and the transactions contemplated hereby from Sections 14-2-1131, 14-2-1132 and
14-2-1133 of the GBCC and (b) taken all action necessary to satisfy the
provisions of Section 14-2-1111 of the GBCC. To the Knowledge of the Company,
no other state takeover statutes are applicable to the Merger, this Agreement
and the transactions contemplated hereby.
Section 3.19 Required Vote of Company Stockholders. The affirmative vote of
the holders of not less than a majority of the outstanding shares of Company
Common Stock is required to approve this Agreement. No other vote of the
stockholders of the Company is required by law, the Restated Articles of
Incorporation or By-laws of the Company or otherwise in order for the Company
to consummate the Merger and the transactions contemplated hereby.
Section 3.20 Pooling of Interests; Reorganization. To the Knowledge of the
Company, neither it nor any of its Subsidiaries has (i) taken any action or
failed to take any action which action or failure would jeopardize the
treatment of the Merger as a pooling of interests for accounting purposes or
(ii) taken any action or failed to take any action which action or failure
would jeopardize the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code.
Section 3.21 Brokers. No broker, investment banker or other person, other
than Morgan Stanley & Co. Incorporated, the fees and expenses of which will be
paid by the Company (and are reflected in an agreement between Morgan Stanley &
Co. Incorporated and the Company, a copy of which has been furnished to
Parent), is entitled to any broker's, finder's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
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ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger.
(a) Actions by Parent. Except as expressly permitted by clauses (i) through
(ix) of this Section 4.1(a), during the period from the date of this Agreement
through the Effective Time, Parent shall, and shall cause each of its
Subsidiaries to, in all material respects carry on its business in the ordinary
course of its business as currently conducted and, to the extent consistent
therewith, use reasonable best efforts to preserve intact its current business
organizations, keep available the services of its current officers and
employees and preserve its relationships with customers, suppliers and others
having business dealings with it to the end that its goodwill and ongoing
business shall be unimpaired at the Effective Time. Without limiting the
generality of the foregoing, and except as otherwise expressly contemplated by
this Agreement, Parent shall not, and shall not permit any of its Subsidiaries
to, without the prior written consent of the Company:
(i) (w) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its stockholders in their
capacity as such (other than (A) regular quarterly dividends of not more
than $.03 per share on Parent Common Stock declared and paid on dates
consistent with past practice and (B) dividends and other distributions by
Subsidiaries), (x) other than in the case of any Subsidiary, split, combine
or reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock or (y) subject to the limitations of Section
4.4 and 5.9(b), purchase, redeem or otherwise acquire any shares of capital
stock of Parent or any other securities thereof or those of any Subsidiary
or any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities (other than (A) the repurchase
of shares of Parent Common Stock pursuant to any open market repurchase
program;
(ii) issue, deliver, sell, pledge, dispose of or otherwise encumber any
shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants or
options to acquire any such shares, voting securities, equity equivalent or
convertible securities, other than (A) the issuance of stock options and
shares of Parent Common Stock to employees of Parent or any of its
Subsidiaries, (B) the issuance of shares of Parent Common Stock pursuant to
the Envoy Agreement, (C) the issuance of securities in connection with the
formation of any joint venture or alliance with respect to merchant
acquiring business (a "Merchant Alliance") or in connection with any
acquisition permitted by Section 4.1(a)(iv), (D) in addition to the
foregoing, the issuance of shares of Parent Common Stock or securities
convertible into or exchangeable for shares of Parent Common Stock,
provided that the aggregate amount of such issued or issuable shares of
Parent Common Stock shall not exceed 20 million and (E) the issuance by any
wholly-owned Subsidiary of Parent of its capital stock to Parent or another
wholly-owned Subsidiary of Parent;
(iii) amend its charter or by-laws; provided, however, that Parent may
amend its Restated Certificate of Incorporation to increase its authorized
capital stock and/or to confer on the Board of Directors of Parent the
power to adopt, amend or repeal any by-laws of Parent;
(iv) other than in connection with a Merchant Alliance, acquire or agree
to acquire by merging or consolidating with, or by purchasing a substantial
portion of the assets of or equity in, or by any other manner, any business
or any corporation, partnership, association or other business organization
or division thereof or otherwise acquire or agree to acquire any assets,
unless (i) in the good faith judgment of Parent, the consummation of such
acquisition, merger, consolidation or purchase would not result in a
downgrading by Moody's Investors Service, Inc. ("Moody's") of Parent's
senior unsecured long-term debt below "Baa3", (ii) the entering into a
definitive agreement relating to or the consummation of such acquisition,
merger, consolidation or purchase would not (A) impose any material delay
in the obtaining of, or significantly increase the risk of not obtaining,
any authorizations, consents, orders, declarations or approvals of any
Governmental Entity necessary to consummate the Merger or the expiration or
termination of any applicable waiting period, (B) significantly increase
the risk of any Governmental
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Entity entering an order prohibiting the consummation of the Merger or (C)
significantly increase the risk of not being able to remove any such order
on appeal or otherwise, (iii) in the case of any individual acquisition,
merger, consolidation or purchase, the aggregate consideration does not
exceed $1.5 billion and (iv) in the case of the acquisition, merger,
consolidation or purchase of any company or business the principal
executive offices of which or a substantial portion of the assets of which
are located in the United States and the aggregate consideration exceeds
$50 million, Parent acquires directly or indirectly all of the voting stock
or equity interests or assets of such company or business;
(v) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets, other than (A) as contemplated by
the Stock Purchase Agreement, dated as of May 16, 1995, among Parent, FDC
Health Inc., First Data Health Systems Corporation, HBO & Company and HBO &
Company of Georgia, (B) transactions that are in the ordinary course of
business consistent with past practice and not material to Parent and its
Subsidiaries taken as a whole, (C) as may be required by any Governmental
Entity and (D) subject to Sections 4.4 and 5.9(b), dispositions involving
an aggregate consideration not in excess of $200 million;
(vi) incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to, or
other investments in, any other person, other than (A) (i) in the ordinary
course of business consistent with past practice, (ii) indebtedness, loans,
advances, capital contributions and investments incurred with or by any
Merchant Alliance and (iii) indebtedness, loans, advances, capital
contributions and investments between Parent and any of its wholly-owned
Subsidiaries or between any of such wholly-owned Subsidiaries and (B) the
incurrence of indebtedness or guarantees which does not result in a
downgrading by Moody's of Parent's senior unsecured long-term debt below
"Baa3", provided that, prior to any such incurrence, Parent shall have met
with representatives of Moody's to discuss the principal terms of such
indebtedness or guarantee and shall have obtained a preliminary indication
that the incurrence of the indebtedness or guarantee is not expected to
result in the downgrading of Parent's senior unsecured long-term debt below
"Baa3";
(vii) knowingly violate or knowingly fail to perform any material
obligation or duty imposed upon it or any Subsidiary by any applicable
material federal, state or local law, rule, regulation, guideline or
ordinance;
(viii) take any action, other than reasonable and usual actions in the
ordinary course of business consistent with past practice, with respect to
accounting policies or procedures (other than actions required to be taken
by generally accepted accounting principles); or
(ix) authorize, recommend or announce an intention to do any of the
foregoing, or enter into any contract, agreement, commitment or arrangement
to do any of the foregoing.
(b) Actions by the Company. Except as expressly permitted by clauses (i)
through (xiii) of this Section 4.1(b), during the period from the date of this
Agreement through the Effective Time, the Company shall, and shall cause each
of its Subsidiaries to, in all material respects carry on its business in, the
ordinary course of its business as currently conducted and, to the extent
consistent therewith, use reasonable best efforts to preserve intact its
current business organizations, keep available the services of its current
officers and employees and preserve its relationships with customers, suppliers
and others having business dealings with it to the end that its goodwill and
ongoing business shall be unimpaired at the Effective Time. Without limiting
the generality of the foregoing, and except as otherwise expressly contemplated
by this Agreement (including, without limitation, the provisions of Annex A),
the Company shall not, and shall not permit any of its Subsidiaries to, without
the prior written consent of Parent:
(i) (w) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its stockholders in their
capacity as such (other than (A) regular semi-annual dividends of not more
than $.05 per share on Company Common Stock declared and paid on dates
consistent with past practice and (B) dividends and other distributions by
Subsidiaries), (x) other than in the case of any Subsidiary, split, combine
or reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of,
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in lieu of or in substitution for shares of its capital stock or (y)
subject to the limitations set forth in Sections 4.4 and 5.9(b), purchase,
redeem or otherwise acquire any shares of capital stock of the Company or
any other securities thereof or any rights, warrants or options to acquire
any such shares or other securities;
(ii) except as disclosed in Section 4.1(b)(ii) of the Company Letter,
issue, deliver, sell, pledge, dispose of or otherwise encumber any shares
of its capital stock, any other voting securities or equity equivalent or
any securities convertible into, or any rights, warrants or options to
acquire any such shares, voting securities, equity equivalent or
convertible securities, other than (A) the issuance of shares of Company
Common Stock upon the exercise of Company Stock Options outstanding on the
date of this Agreement in accordance with their current terms, (B) the
issuance of shares of Company Common Stock upon the conversion of the 5%
Debentures, (C) the issuance of shares of Company Common Stock pursuant to
the terms of the Agreement and Plan of Merger dated as of May 12, 1995 (the
"EBP Merger Agreement") among the Company, Gemini Acquisition Corp. and
Employee Benefit Plans, Inc. ("EBP") (including such shares of Company
Common Stock issued pursuant to assumed EBP options), (D) the issuance of
shares of Company Common Stock having a value of up to $50 million which
the Company expects to issue as part of its prefunding of certain pension
plan obligations; (E) the issuance of shares of Company Common Stock
pursuant to Company Stock Options or restricted stock grants in the amounts
and to the employees set forth in Section 4.1(b)(ii) of the Company Letter,
and (F) the issuance, in the aggregate, of up to 6.4 million shares of
Company Common Stock in connection with acquisitions permitted pursuant to
clause (iv) of this paragraph (b);
(iii) amend its charter or by-laws;
(iv) except as disclosed in Section 4.1(b)(iv) of the Company Letter,
acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of or equity in, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire or
agree to acquire any assets, unless (i) in the good faith judgment of the
Company, the consummation of such acquisition, merger, consolidation or
purchase would not result in a downgrading by Moody's of the Company's
senior unsecured long-term debt below "Baa3", (ii) the entering into of a
definitive agreement relating to or the consummation of such acquisition,
merger, consolidation or purchase would not (A) impose any material delay
in the obtaining, or significantly increase the risk of not obtaining, any
authorizations, consents, orders, declarations or approvals of any
Governmental Entity necessary to consummate the Merger, or the expiration
or termination of any applicable waiting period, (B) significantly increase
the risk of any Governmental Entity entering an order prohibiting the
consummation of the Merger or (C) significantly increase the risk of not
being able to remove any such order on appeal or otherwise, (iii) in the
case of any individual acquisition, merger, consolidation or purchase, the
aggregate consideration does not exceed $1.0 billion and (iv) in the case
of the acquisition, merger, consolidation or purchase of any company or
business the principal executive offices of which or a substantial portion
of the assets of which are located in the United States and the aggregate
consideration exceeds $50 million, the Company acquires, directly or
indirectly, all of the outstanding voting stock or equity interests or
assets of such company or business;
(v) except as disclosed in Section 4.1(b)(v) of the Company Letter, sell,
lease or otherwise dispose of, or agree to sell, lease or otherwise dispose
of, any of its assets, other than (A) transactions that are in the ordinary
course of business consistent with past practice and not material to the
Company and its Subsidiaries taken as a whole, (B) as may be required by
any Governmental Entity and (C) subject to Sections 4.4 and 5.9(b),
dispositions involving an aggregate consideration not in excess of $100
million;
(vi) incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to, or
other investments in, any other person, other than (A) (i) in the ordinary
course of business consistent with past practices and (ii) indebtedness,
loans, advances, capital contributions and investments between the Company
and any of its wholly-owned Subsidiaries or between any of such wholly-
owned Subsidiaries and (B) the incurrence of indebtedness or guarantees
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which does not result in a downgrading by Moody's of the Company's senior
unsecured long term debt below "Baa3", provided that, prior to any such
incurrence, the Company shall have met with representatives of Moody's to
discuss the principal terms of such indebtedness or guarantee and shall
have obtained a preliminary indication that the incurrence of the
indebtedness or guarantee is not expected to result in the downgrading of
the Company's senior unsecured long term debt below "Baa3";
(vii) except as disclosed in Section 4.1(b)(vii) of the Company Letter,
alter (through merger, liquidation, reorganization, restructuring or in any
other fashion) the corporate structure or ownership of the Company or any
Subsidiary;
(viii) except as set forth on Section 4.1(b)(viii) of the Company Letter,
enter into or adopt, or amend any existing, severance plan, agreement or
arrangement or enter into or amend any Company Plan or employment or
consulting agreement, other than as required by law;
(ix) except as set forth in Section 4.1(b)(ix) of the Company Letter,
increase the compensation payable or to become payable to its officers or
employees, except for increases in the ordinary course of business
consistent with past practice in salaries or wages of employees of the
Company or any of its Subsidiaries who are not officers of the Company or
any of its Subsidiaries, or grant any severance or termination pay to, or
enter into any employment or severance agreement with, any director or
officer of the Company or any of its Subsidiaries (other than employment or
severance agreements with respect to any employees hired by the Company or
any of its Subsidiaries after the date of this Agreement which (A) do not
contain any provision providing benefit or severance payments based upon a
change in control of the Company or its Subsidiaries resulting from this
Agreement or the consummation of the transactions contemplated herein, (B)
do not provide for severance benefits and payments in excess of 100% of
annual base salary and (C) have a duration of no more than two years), or
establish, adopt, enter into, or, except as may be required to comply with
applicable law, amend in any material respect or take action to enhance in
any material respect or accelerate any rights or benefits under, any labor,
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any director, officer or employee;
(x) knowingly violate or knowingly fail to perform any material
obligation or duty imposed upon it or any Subsidiary by any applicable
material federal, state or local law, rule, regulation, guideline or
ordinance;
(xi) take any action, other than reasonable and usual actions in the
ordinary course of business consistent with past practice, with respect to
accounting policies or procedures (other than actions required to be taken
by generally accepted accounting principles);
(xii) except as set forth in Section 4.1(b)(xii) of the Company Letter,
make any tax election or settle or compromise any material federal, state,
local or foreign income tax liability; or
(xiii) authorize, recommend, propose or announce an intention to do any
of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
Section 4.2 No Solicitation. From and after the date hereof, the Company will
not, and will not permit any of its officers, directors, employees, attorneys,
financial advisors, agents or other representatives or those of any of its
Subsidiaries to, directly or indirectly, solicit, initiate or encourage
(including by way of furnishing information) any takeover proposal or offer
from any person, or engage in or continue discussions or negotiations relating
thereto; provided, however, that the Company may engage in discussions or
negotiations with, or furnish information concerning the Company and its
Subsidiaries, business, properties or assets to, any third party which makes a
Takeover Proposal (as hereinafter defined) if the Board of Directors of the
Company concludes in good faith on the basis of the advice of its outside
counsel (who may be its regularly engaged outside counsel) that the failure to
take such action would violate the fiduciary obligations of such Board under
applicable law. The Company will promptly (but in no case later than 24 hours)
notify Parent of any Takeover Proposal, including the material terms and
conditions thereof (provided that the Company
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need not disclose the identity of the person or group making such Takeover
Proposal). As used in this Agreement, "Takeover Proposal" shall mean any
proposal or offer, or any expression of interest by any third party relating to
the Company's willingness or ability to receive or discuss a proposal or offer,
other than a proposal or offer by Parent or any of its Subsidiaries or as set
forth in Section 4.1(b)(v) of the Company Letter or as permitted under this
Agreement, for a tender or exchange offer, a merger, consolidation or other
business combination involving the Company or any of its Subsidiaries or any
proposal to acquire in any manner a substantial equity interest in, or a
substantial portion of the assets of, the Company or any of its Subsidiaries.
Section 4.3 Third Party Standstill Agreements. During the period from the
date of this Agreement through the Effective Time, the Company shall not
terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which the Company or any of its Subsidiaries is a party
(other than any involving Parent), unless the Board of Directors of the Company
concludes in good faith on the basis of the advice of its outside counsel (who
may be its regularly engaged outside counsel), that the failure to terminate,
amend, modify or waive any such confidentiality or standstill agreement would
violate the fiduciary obligations of the Board under applicable law. Subject to
such fiduciary duties, during such period, the Company agrees to enforce, to
the fullest extent permitted under applicable law, the provisions of any such
agreements, including, but not limited to, obtaining injunctions to prevent any
breaches of such agreements and to enforce specifically the terms and
provisions thereof in any court of the United States or any state thereof
having jurisdiction.
Section 4.4 Pooling of Interests; Reorganization. During the period from the
date of this Agreement through the Effective Time, unless the other party shall
otherwise agree in writing, none of Parent, the Company or any of their
respective Subsidiaries shall (a) knowingly take or fail to take any action
which action or failure would jeopardize the treatment of the Merger as a
pooling of interests for accounting purposes or (b) knowingly take or fail to
take any action which action or failure would jeopardize the qualification of
the Merger as a reorganization within the meaning of Section 368(a) of the
Code. Between the date of this Agreement and the Effective Time, Parent and the
Company each shall take all reasonable actions necessary to cause the
characterization of the Merger as a pooling of interests for accounting
purposes if such a characterization were jeopardized by action taken by Parent
or the Company, respectively, prior to the Effective Time (it being agreed that
such actions will include, if necessary, in the case of Parent, the sale or
transfer for fair value of all shares of Parent Common Stock that currently are
treasury shares). Following the Effective Time, Parent shall not knowingly take
any action, or fail to take any action, that would jeopardize the
characterization of the Merger as a "pooling of interests" for accounting
purposes.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Meetings. The Company and Parent each shall call a
meeting of its stockholders (respectively, the "Company Stockholder Meeting"
and the "Parent Stockholder Meeting" and, collectively, the "Stockholder
Meetings") to be held as promptly as practicable for the purpose of considering
the approval of this Agreement (in the case of the Company) and the Share
Issuance (in the case of Parent). The Company and Parent will, through their
respective Boards of Directors, recommend to their respective stockholders
approval of such matters and shall not withdraw such recommendation; provided,
however, that a Board of Directors shall not be required to make, and shall be
entitled to withdraw, such recommendation if such Board concludes in good faith
on the basis of the advice of its outside counsel (who may be its regularly
engaged outside counsel) that the making of, or the failure to withdraw, such
recommendation would violate the fiduciary obligations of such Board under
applicable law. The Boards of Directors of the Company, Parent and Sub will not
rescind their respective declarations that the Merger is advisable, fair to and
in the best interest of such company and its shareholders unless, in any such
case, any such Board concludes in good faith on the basis of the advice of its
outside counsel (who may be its regularly engaged outside counsel) that
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the failure to rescind such determination would violate the fiduciary
obligations of such Board under applicable law. The Company and Parent shall
coordinate and cooperate with respect to the timing of such meetings and shall
use their reasonable best efforts to hold such meetings on the same day.
Section 5.2 Preparation of the Registration Statement and the Joint Proxy
Statement. The Company and Parent shall promptly prepare and file with the SEC
the Joint Proxy Statement and Parent shall prepare and file with the SEC the
Registration Statement, in which the Joint Proxy Statement will be included as
a prospectus. Each of Parent and the Company shall use its reasonable best
efforts to have the Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing. As promptly as
practicable after the Registration Statement shall have become effective, each
of Parent and the Company shall mail the Joint Proxy Statement to its
respective stockholders. Parent shall also take any action (other than
qualifying to do business in any jurisdiction in which it is now not so
qualified) required to be taken under any applicable state securities laws in
connection with the issuance of Parent Common Stock in the Merger and upon the
exercise of the Substitute Options (as defined in Section 5.8) and the
conversion of the 5% Debentures, and the Company shall furnish all information
concerning the Company and the holders of Company Common Stock as may be
reasonably requested in connection with any such action. No amendment or
supplement to the Joint Proxy Statement or the Registration Statement will be
made by Parent or the Company without the prior approval of the other party.
Parent and the Company each will advise the other, promptly after it receives
notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, of the issuance of any
stop order, of the suspension of the qualification of the Parent Common Stock
issuable in connection with the Merger for offering or sale in any
jurisdiction, or of any request by the SEC for amendment of the Joint Proxy
Statement or the Registration Statement or comments thereon and responses
thereto or requests by the SEC for additional information.
Section 5.3 Employee Benefits Matters. Annex A hereto sets forth certain
agreements among the parties hereto with respect to employee benefit matters
and is incorporated herein by reference.
Section 5.4 Access to Information. Subject to currently existing contractual
and legal restrictions applicable to Parent or to the Company or any of their
Subsidiaries, each of Parent and the Company shall, and shall cause each of its
Subsidiaries to, afford to the accountants, counsel, financial advisors and
other representatives of the other party hereto reasonable access to, and
permit them to make such inspections as they may reasonably require of, during
normal business hours during the period from the date of this Agreement through
the Effective Time, all their respective properties, books, contracts,
commitments and records (including, without limitation, the work papers of
independent accountants, if available and subject to the consent of such
independent accountants) and, during such period, Parent and the Company shall,
and shall cause each of its Subsidiaries to, furnish promptly to the other (i)
a copy of each report, schedule, registration statement and other document
filed by it during such period pursuant to the requirements of federal or state
securities laws and (ii) all other information concerning its business,
properties and personnel as the other may reasonably request. No investigation
pursuant to this Section 5.4 shall affect any representation or warranty in
this Agreement of any party hereto or any condition to the obligations of the
parties hereto. All information obtained by Parent or the Company pursuant to
this Section 5.4 shall be kept confidential in accordance with the
Confidentiality Agreement dated June 7, 1995 between Parent and the Company
(the "Confidentiality Agreement").
Section 5.5 Compliance with the Securities Act; Pooling Period. (a) Prior to
the Effective Time, the Company shall cause to be prepared and delivered to
Parent a list (reasonably satisfactory to counsel for Parent) identifying all
persons who, at the time of the Company Stockholder Meeting, in the Company's
reasonable judgment, may be deemed to be "affiliates" of the Company as that
term is used in paragraphs (c) and (d) of Rule 145 under the Securities Act
(the "Rule 145 Affiliates"). The Company shall use its reasonable best efforts
to cause each person who is identified as a Rule 145 Affiliate in such list to
deliver to Parent on or prior to the Effective Time a written agreement, in
substantially the form of Exhibit 5.5(a) hereto. Parent shall publish, in a
manner that satisfies the "publication" requirements under applicable SEC rules
or accounting releases, financial results (including combined sales and net
income) covering at least 30 days of
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post-Merger operations no later than 15 days following the first month-end that
is more than 30 days after the Effective Time. The period commencing 30 days
prior to the Effective Time and ending on the date of the publication of the
post-Merger financial results is referred to herein as the "Pooling Period."
(b) Prior to the Effective Time, Parent shall deliver to the Company a list
(reasonably satisfactory to counsel to the Company) identifying those persons
who may be, in Parent's reasonable judgment, at the time of the Parent
Stockholder Meeting, affiliates of Parent under applicable SEC accounting
releases with respect to pooling of interests accounting treatment. Parent
shall provide the Company such information and documents as the Company shall
reasonably request for purposes of reviewing such list. Parent shall use its
reasonable best efforts to deliver or cause to be delivered to the Company,
prior to the Effective Time, a written agreement in substantially the form of
Exhibit 5.5(b) hereto, executed by each of such persons identified in the
foregoing list.
(c) At the request of the Rule 145 Affiliates, Parent agrees to (i) at
Parent's expense, take such actions reasonably necessary to register the shares
held by such Rule 145 Affiliates for resale (including pursuant to an
underwritten offering) on the Registration Statement, and (ii) register
(including pursuant to an underwritten offering) the shares held by such Rule
145 Affiliates on a registration statement on Form S-3. Parent shall maintain
the effectiveness of the Registration Statement for a period (the
"Effectiveness Period") commencing on the date (the "Commencement Date") of the
expiration of the Pooling Period and ending on the later of (i) the date which
is 30 days after the Commencement Date and (ii) the date which is 90 days after
the Effective Time; provided, however, that, subject to the provisions of the
next sentence, if Parent determines in good faith that resales of shares of
Parent Common Stock by Rule 145 Affiliates pursuant to the Registration
Statement would materially interfere with, or require premature disclosure of,
any material financing, acquisition, reorganization or business combination
involving Parent, the Surviving Corporation or any of their respective
Subsidiaries, then, upon written notice to the Rule 145 Affiliates, Parent
shall be entitled to suspend sales of shares of Parent Common Stock by Rule 145
Affiliates pursuant to the Registration Statement for a period of up to 30
days; provided, further, that the Effectiveness Period shall be extended by the
aggregate number of days of any such suspension. Notwithstanding anything to
the contrary in this paragraph (c), Parent shall take all actions necessary to
cause sales to be permitted under the Registration Statement for at least one
15 consecutive day period commencing on or after the Commencement Date and
ending on or prior to the 90th day following the Effective Time. Parent's
obligations contained in clause (c)(i) above shall be conditioned upon the
receipt from each of the Rule 145 Affiliates registering shares in the
Registration Statement of a duly executed agreement substantially in the form
of Exhibit 5.5(a). Parent's obligations contained in clause (c)(ii) above shall
terminate on the earlier of (A) the second anniversary of the Effective Time
and (B) the completion of a sale of shares pursuant to an offering effected
under the provisions of such clause (c)(ii). Upon a request to Parent pursuant
to the first sentence of this paragraph (c)(ii), the Rule 145 Affiliates and
Parent shall promptly enter into a registration rights agreement containing the
principal terms set forth in Annex B and otherwise in form and substance
reasonably acceptable to Parent and the Rule 145 Affiliates.
Section 5.6 Stock Exchange Listings. Parent shall use its reasonable best
efforts to list on the NYSE, upon official notice of issuance, the shares of
Parent Common Stock to be issued in connection with the Merger, upon the
exercise of the Substitute Options or upon the conversion of the 5% Debentures.
Section 5.7 Fees and Expenses. (a) Except as provided in this Section 5.7 and
Section 5.11, whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby including, without limitation, the fees and disbursements of counsel,
financial advisors and accountants, shall be paid by the party incurring such
costs and expenses, provided that all printing expenses and filing fees shall
be divided equally between Parent and the Company.
(b) (i) If any event referred to in clause (i) of Section 7.1(h) occurs, this
Agreement is terminated thereafter by the Company or Parent (whether or not
pursuant to such clause) and prior to such termination the stockholders of the
Company did not approve this Agreement, then the Company shall (without
prejudice
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to any other rights of Parent against the Company except as set forth in the
provision hereto) pay to Parent a fee of $10 million in cash, such payment to
be made promptly, but in no event later than the second business day following
such termination; provided; however; that if Parent is entitled to a payment
pursuant to the immediately following paragraph of this Section 5.7(b) Parent
shall not be entitled to any payment pursuant to this paragraph.
(ii) If:
(A) this Agreement is terminated by the Company pursuant to clause (i) of
Section 7.1(d) and within twelve months after such a termination a Superior
Company Acquisition Transaction (as hereinafter defined) occurs;
(B) (x) this Agreement is terminated by the Company or Parent at a time
when Parent is entitled to terminate this Agreement pursuant to Section
7.1(e), (y) prior to the Company Stockholder Meeting but after the date of
this Agreement a Company Third Party Acquisition Event has occurred and (z)
by reason thereof or otherwise the event referred to in clause (D) of the
definition of Company Third Party Acquisition Event (the "Company Clause D
Event") occurs after the date hereof but prior to the first anniversary of
such termination;
(C) this Agreement is terminated by the Company or Parent pursuant to
Section 7.1(g); or
(D) this Agreement is terminated by Parent pursuant to clause (i) or (ii)
of Section 7.1(h) following the occurrence of a Company Third Party
Acquisition Event;
then, in each case, the Company shall (without prejudice to any other rights of
Parent against the Company, except as set forth in the proviso hereto) pay to
Parent a fee of $68 million in cash, such payment to be made promptly, but in
no event later than the second business day following, in the case of clause
(A), the Superior Company Acquisition Transaction, or, in the case of clause
(B), the later of such termination and such Company Clause D Event or, in the
case of clause (C) or (D), such termination; provided, however, that if Parent
is entitled to payment pursuant to this paragraph (b)(ii), Parent shall not be
entitled to any payment pursuant to paragraph (b)(i).
A "Company Third Party Acquisition Event" means any of the following events:
(A) any Person other than Parent or its Affiliates, acquires or becomes the
beneficial owner of 30% or more of the outstanding shares of Company Common
Stock; (B) any new group is formed which, at the time of formation,
beneficially owns 30% or more of the outstanding shares of Company Common Stock
(other than a group which includes or may reasonably be deemed to include
Parent or any of its Affiliates); (C) any Person (other than Parent or its
Affiliates) shall have commenced a tender or exchange offer for 30% or more of
the then outstanding shares of Company Common Stock or publicly proposed any
bona fide merger, consolidation or acquisition of all or substantially all the
assets of the Company, or other similar business combination involving the
Company; (D) the Company enters into, or announces that it proposes to enter
into, an agreement, including, without limitation, an agreement in principle,
providing for a merger or other business combination involving the Company or
the acquisition of a substantial interest in, or a substantial portion of the
assets, business or operations of, the Company (other than the transactions
contemplated by this Agreement); (E) any Person (other than Parent or its
Affiliates) is granted any option or right, conditional or otherwise, to
acquire or otherwise become the beneficial owner of shares of Company Common
Stock which, together with all shares of Company Common Stock beneficially
owned by such Person, results or would result in such Person being the
beneficial owner of 30% or more of the outstanding shares of Company Common
Stock; or (F) there is a public announcement with respect to a plan or
intention by the Company or any Person, other than Parent and its Affiliates,
to effect any of the foregoing transactions. For purposes of this Section 5.7,
the terms "group" and "beneficial owner" shall be defined by reference to
Section 13(d) of the Exchange Act.
A "Superior Company Acquisition Transaction" means the event referred to in
clause (D) of Company Third Party Acquisition Event provided that the financial
and other terms of the transaction referred to therein are, when considered in
the aggregate, more favorable to the Company's stockholders than the financial
and other terms of the Merger.
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(c) If the Board of Directors of Parent shall fail to recommend to Parent's
stockholders the approval of the Share Issuance or shall withdraw such
recommendation and this Agreement is terminated by Parent or the Company at a
time when the Company is entitled to terminate this Agreement pursuant to
Section 7.1(f), then Parent shall (without prejudice to any other rights of the
Company against Parent, except as set forth in the proviso hereto) pay to the
Company a fee of $10 million in cash, such payment to be made promptly, but in
no event later than the second business day following such termination;
provided, however, that if the Company is entitled to a payment pursuant to the
immediately following paragraph of this Section 5.7(c), the Company shall not
be entitled to any payment pursuant to this paragraph.
If (A) this Agreement is terminated by the Company or Parent when the Company
is entitled to terminate this Agreement pursuant to Section 7.1(f), (B) prior
to the Parent Stockholder Meeting but after the date of this Agreement a Parent
Third Party Acquisition Event (as hereinafter defined) has occurred and (C) by
reason thereof or otherwise the event referred to in clause (D) of the
definition of Parent Third Party Acquisition Event occurs after the date hereof
but prior to the first anniversary of such termination, then Parent shall
(without prejudice to any other rights of the Company against Parent, except as
set forth in the proviso hereto) pay to the Company a fee of $68 million in
cash, such payment to be made promptly, but in no event later than the second
business day following the Parent Third Party Acquisition Event; provided,
however, if the Company is entitled to payment pursuant to this paragraph, the
Company shall not be entitled to any payment pursuant to the immediately
preceding paragraph of this Section 5.7(c).
A "Parent Third Party Acquisition Event" means any of the following events:
(A) any Person acquires or becomes the beneficial owner of 30% or more of the
outstanding shares of Parent Common Stock (other than by reason of an issuance
of shares of Parent Common Stock permitted by Section 4.1(a)); (B) any new
group is formed which, at the time of formation, beneficially owns 30% or more
of the outstanding shares of Parent Common Stock (other than a group which
includes or may reasonably be deemed to include Parent or any of its
Affiliates); (C) any Person shall have commenced a tender or exchange offer for
30% or more of the then outstanding shares of Parent Common Stock or publicly
proposed any bona fide merger, consolidation or acquisition of all or
substantially all the assets of Parent, or other similar business combination
involving Parent; (D) Parent enters into, or announces that it proposes to
enter into, an agreement, including, without limitation, an agreement in
principle, providing for a merger or other business combination involving
Parent (other than this Agreement) or the acquisition of a substantial interest
in, or a substantial portion of the assets, business or operations of, Parent
or (E) there is a public announcement with respect to a plan or intention by
any Person to effect any of the foregoing transactions.
Section 5.8 Company Stock Options; Stock Purchase Plan. (a) At the Effective
Time, by virtue of the Merger and without any further action on the part of the
Company or the holder thereof, each unexpired and unexercised option to
purchase shares of Company Common Stock (a "Company Stock Option"), under the
Company Stock Option Plans, or otherwise granted by the Company outside of any
Company Stock Option Plan, will be assumed by Parent in such manner that the
Parent (i) is a corporation "assuming a stock option in a transaction to which
Section 424(a) applied" within the meaning of Section 424 of the Code or (ii)
to the extent that Section 424 of the Code does not apply to any such Company
Stock Options, would be such a corporation were Section 424 of the Code
applicable to such Company Stock Options. From and after the Effective Time,
all references to the Company in the Company Stock Option Plans, the applicable
stock option or other awards agreements issued thereunder and in any other
Company Stock Options shall be deemed to refer to Parent, which shall have
assumed the Company Stock Option Plans as of the Effective Time by virtue of
this Agreement and without any further action. At the Effective Time, by virtue
of the Merger and without any further action on the part of the Company or the
holder thereof, each Company Stock Option will be automatically converted into
an option (the "Parent Stock Option") to purchase a number of shares of Parent
Common Stock equal to the number of shares of Company Common Stock that could
have been purchased (assuming full vesting) under such Company Stock Option
multiplied by the Conversion Number (rounded to the nearest whole number of
shares of Parent Common Stock) at a price per share of Parent Common Stock
equal to the per share option exercise price specified in the Company Stock
Option divided by the Conversion Number (rounded to the nearest whole cent).
Such Parent Stock
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Option shall otherwise be subject to the same terms and conditions as such
Company Stock Option, which in accordance with the terms thereof shall vest and
become immediately exercisable as of the Effective Time. For Federal income tax
purposes, the date of grant of the substituted Parent Stock Option shall be the
date on which the corresponding Company Stock Option was granted. At the
Effective Time, (i) all references in the Company Stock Option Plans, the
applicable stock option or other awards agreements issued thereunder and in any
other Company Stock Options to the Company shall be deemed to refer to Parent;
(ii) Parent shall assume the Company Stock Option Plans and all of the
Company's obligations with respect to the Company Stock Options, as so amended;
and (iii) Parent shall issue to each holder of an outstanding Company Stock
Option a document evidencing the foregoing assumption by Parent. It is the
intention of the parties that, subject to applicable law, the Company Stock
Options assumed by Parent qualify, following the Effective Time, as incentive
stock options, as defined in Section 422 of the Code, to the extent that the
Company Stock Options qualified as incentive stock options prior to the
Effective Time.
(b) In respect of each Company Stock Option as converted into a Parent Stock
Option pursuant to Section 5.8(a) and assumed by Parent, and the shares of
Parent Common Stock underlying such option, Parent shall file and keep current
a registration statement on Form S-8 or other appropriate form for as long as
such options remain outstanding.
(c) Except as provided in Section 4.1(b)(ix), the Company agrees that it will
not grant any restricted stock, stock appreciation rights or limited stock
appreciation rights and will not permit cash payments to holders of Company
Stock Options in lieu of the substitution therefor of Parent Stock Options, as
described in this Section 5.8.
Section 5.9 Reasonable Best Efforts; Pooling of Interests. (a) Upon the terms
and subject to the conditions set forth in this Agreement, each of the parties
agrees to use reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the Merger and
the other transactions contemplated by this Agreement, including, but not
limited to: (i) the obtaining of all necessary actions or non-actions, waivers,
consents and approvals from all Governmental Entities and the making of all
necessary registrations and filings (including filings with Governmental
Entities) and the taking of all reasonable steps as may be necessary to obtain
an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity (including those in connection with the HSR Act and State
Takeover Approvals), (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby, including seeking to
have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed, and (iv) the execution and delivery of
any additional instruments necessary to consummate the transactions
contemplated by this Agreement. No party to this Agreement shall consent to any
voluntary delay of the consummation of the Merger at the behest of any
Governmental Entity without the consent of the other parties to this Agreement,
which consent shall not be unreasonably withheld.
(b) Each of Parent and the Company agrees to take, together with their
respective accountants, all actions reasonably necessary in order to obtain a
favorable determination (if required) from the SEC that the Merger may be
accounted for as a pooling of interests in accordance with generally accepted
accounting principles.
(c) Each party shall use all reasonable best efforts to not take any action,
or enter into any transaction, which would cause any of its representations or
warranties contained in this Agreement to be untrue or result in a breach of
any covenant made by it in this Agreement.
(d) Notwithstanding anything to the contrary contained in this Agreement, (i)
neither Parent nor the Company shall be obligated to use its reasonable best
efforts or to take any action pursuant to this Section 5.9 if the Board of
Directors of Parent or the Company, as the case may be, shall conclude in good
faith on
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the basis of the advice of its outside counsel (who may be its regularly
engaged outside counsel) that such action would violate the fiduciary
obligations of such Board under applicable law, and (ii) in connection with any
filing or submission required or action to be taken by either Parent or the
Company to effect the Merger and to consummate the other transactions
contemplated hereby, the Company shall not, without Parent's prior written
consent, commit to any divestiture transaction, and, except as provided in
Section 5.9 of the Parent Letter, neither Parent nor any of its Affiliates
shall be required to divest or hold separate or otherwise take or commit to
take any action that limits its freedom of action with respect to, or its
ability to retain, the Company or any of the material businesses, product lines
or assets of Parent or any of its Affiliates or that otherwise would have a
Material Adverse Effect on Parent.
Section 5.10 Public Announcements. Parent and the Company will not issue any
press release with respect to the transactions contemplated by this Agreement
or otherwise issue any written public statements with respect to such
transactions without prior consultation with the other party, except as may be
required by applicable law or by obligations pursuant to any listing agreement
with any national securities exchange.
Section 5.11 Real Estate Transfer and Gains Tax. Parent and the Company agree
that either the Company or the Surviving Corporation will pay any state or
local tax which is attributable to the transfer of the beneficial ownership of
the Company's or its Subsidiaries' real property, if any (collectively, the
"Gains Taxes"), and any penalties or interest with respect to the Gains Taxes,
payable in connection with the consummation of the Merger. The Company and
Parent agree to cooperate with the other in the filing of any returns with
respect to the Gains Taxes, including supplying in a timely manner a complete
list of all real property interests held by the Company and its Subsidiaries
and any information with respect to such property that is reasonably necessary
to complete such returns. The portion of the consideration allocable to the
real property of the Company and its Subsidiaries shall be determined by Parent
in its reasonable discretion. The stockholders of the Company shall be deemed
to have agreed to be bound by the allocation established pursuant to this
Section 5.11 in the preparation of any return with respect to the Gains Taxes.
Section 5.12 State Takeover Laws. If any "fair price," "business combination"
or "control share acquisition" statute or other similar statute or regulation
shall become applicable to the transactions contemplated hereby, Parent and the
Company and their respective Boards of Directors shall use their reasonable
best efforts to grant such approvals and take such actions as are necessary so
that the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to minimize the
effects of any such statute or regulation on the transactions contemplated
hereby.
Section 5.13 Indemnification; Directors and Officers Insurance. For six years
from and after the Effective Time, Parent agrees to, and to cause the Surviving
Corporation to, indemnify and hold harmless all past and present officers and
directors of the Company and of its Subsidiaries to the same extent such
persons are indemnified as of the date of this Agreement by the Company
pursuant to the Company's Restated Articles of Incorporation and By-Laws and
indemnification agreements in existence on the date hereof with any officers
and directors of the Company and its Subsidiaries for acts or omissions
occurring at or prior to the Effective Time. Parent shall cause the Surviving
Corporation to provide, for an aggregate period of not less than six years from
the Effective Time, the Company's current directors and officers an insurance
and indemnification policy that provides coverage for events occurring prior to
the Effective Time (the "D&O Insurance") that is no less favorable than the
Company's existing policy or, if substantially equivalent insurance coverage is
unavailable, the best available coverage; provided, however, that the Surviving
Corporation shall not be required to pay an annual premium for the D&O
Insurance in excess of 300 percent of the last annual premiums paid prior to
the date hereof (which premiums the Company represents and warrants to be
approximately $267,500), but in such case shall purchase as much coverage as
possible for such amount.
Section 5.14 Notification of Certain Matters. Parent shall use its reasonable
best efforts to give prompt notice to the Company, and the Company shall use
its reasonable best efforts to give prompt notice to Parent,
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of: (i) the occurrence, or non-occurrence, of any event the occurrence, or non-
occurrence, of which it is aware and which would be reasonably likely to cause
(x) any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect or (y) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied in all
material respects, (ii) any failure of Parent or the Company, as the case may
be, to comply in a timely manner with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder or (iii) any change
or event which would be reasonably likely to have a Material Adverse Effect on
Parent or the Company, as the case may be; provided, however, that the delivery
of any notice pursuant to this Section 5.14 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
Section 5.15 Resignation of Directors. The Company shall use its reasonable
best efforts to cause each director of the Company to resign as a director of
the Company immediately after the Effective Time.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement shall have been duly approved by the
requisite vote of stockholders of the Company in accordance with applicable law
and the Restated Articles of Incorporation and By-laws of the Company, and the
Share Issuance shall have been approved by the requisite vote of the
stockholders of Parent in accordance with applicable rules of the NYSE,
applicable law and the Restated Certificate of Incorporation and By-laws of
Parent.
(b) Stock Exchange Listings. The Parent Common Stock issuable in the Merger,
upon conversion of the 5% Debentures, and pursuant to Substitute Options, shall
have been authorized for listing on the NYSE, subject to official notice of
issuance.
(c) HSR and Other Approvals. (i) The waiting period (and any extension
thereof) applicable to the consummation of the Merger under the HSR Act shall
have expired or been terminated.
(ii) All authorizations, consents, orders, declarations or approvals of, or
filings with, or terminations or expirations of waiting periods imposed by, any
Governmental Entity, which the failure to obtain, make or occur would have the
effect of making the Merger or any of the transactions contemplated hereby
illegal or would have a Material Adverse Effect on Parent (assuming the Merger
had taken place), shall have been obtained, shall have been made or shall have
occurred.
(d) Accounting. Parent shall have received an opinion of Ernst & Young LLP,
dated as of the Effective Time, in form and substance reasonably satisfactory
to Parent and the Company, that the Merger will qualify for pooling of
interests accounting treatment under Accounting Principles Board Opinion No. 16
if closed and consummated in accordance with this Agreement.
(e) Registration Statement. The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act. No stop
order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceedings for that purpose shall have been
initiated or, to the Knowledge of Parent or the Company, threatened by the SEC.
All necessary state securities or blue sky authorizations (including State
Takeover Approvals) shall have been received.
(f) No Order. No court or other Governmental Entity having jurisdiction over
the Company or Parent, or any of their respective Subsidiaries, shall have
enacted, issued, promulgated, enforced or entered any law,
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rule, regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is then in effect and has the effect
of making the Merger or any of the transactions contemplated hereby illegal.
Section 6.2 Conditions to Obligation of the Company to Effect the Merger. The
obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. Each of
Parent and Sub shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed on or prior to
the Effective Time, each of the representations and warranties of Parent and
Sub contained in this Agreement that is qualified by materiality shall be true
and correct on and as of the Effective Time as if made on and as of such date
(other than representations and warranties which address matters only as of a
certain date which shall be true and correct as of such certain date) and each
of the representations and warranties that is not so qualified shall be true
and correct in all material respects on and as of the Effective Time as if made
on and as of such date (other than representations and warranties which address
matters only as of a certain date which shall be true and correct in all
material respects as of such certain date), in each case except as contemplated
or permitted by this Agreement, and the Company shall have received a
certificate signed on behalf of each of Parent and Sub by its Chief Executive
Officer and its Chief Financial Officer to such effect.
(b) Tax Opinion. The Company shall have received an opinion of Sutherland,
Asbill & Brennan, in form and substance reasonably satisfactory to the Company,
dated the Effective Time, substantially to the effect that on the basis of
facts, representations and assumptions set forth in such opinion which are
consistent with the state of facts existing as of the Effective Time, for
federal income tax purposes:
(i) the Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and the Company, Sub and Parent will each be a
party to that reorganization within the meaning of Section 368(b) of the
Code;
(ii) no gain or loss will be recognized by Parent or the Company as a
result of the Merger;
(iii) no gain or loss will be recognized by the stockholders of the
Company upon the conversion of their shares of Company Common Stock into
shares of Parent Common Stock pursuant to the Merger, except with respect
to cash, if any, received in lieu of fractional shares of Parent Common
Stock;
(iv) the aggregate tax basis of the shares of Parent Common Stock
received in exchange for shares of Company Common Stock pursuant to the
Merger (including fractional shares of Parent Common Stock for which cash
is received) will be the same as the aggregate tax basis of such shares of
Company Common Stock;
(v) the holding period for shares of Parent Common Stock received in
exchange for shares of Company Common Stock pursuant to the Merger will
include the holder's holding period for such shares of Company Common
Stock, provided such shares of Company Common Stock were held as capital
assets by the holder at the Effective Time; and
(vi) a stockholder of the Company who receives cash in lieu of a
fractional share of Parent Common Stock will recognize gain or loss equal
to the difference, if any, between such stockholder's basis in the
fractional share (as described in clause (iv) above) and the amount of cash
received.
In rendering such opinion, Sutherland, Asbill & Brennan may receive and rely
upon representations from Parent, the Company, and others, including
representations from Parent substantially similar to the representations in the
Parent Tax Certificate attached to the Parent Letter and representations from
the Company substantially similar to the representations in the Company Tax
Certificate attached to the Company Letter.
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Section 6.3 Conditions to Obligations of Parent and Sub to Effect the Merger.
The obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. The Company
shall have performed in all material respects each of its agreements contained
in this Agreement required to be performed on or prior to the Effective Time,
each of the representations and warranties of the Company contained in this
Agreement that is qualified by materiality shall be true and correct on and as
of the Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a certain date
which shall be true and correct as of such certain date) and each of the
representations and warranties that is not so qualified shall be true and
correct in all material respects on and as of the Effective Time as if made on
and as of such date (other than representations and warranties which address
matters only as of a certain date which shall be true and correct in all
material respects as of such certain date), in each case except as contemplated
or permitted by this Agreement, and Parent shall have received a certificate
signed on behalf of the Company by its Chief Executive Officer and its Chief
Financial Officer to such effect.
(b) Non-Solicitation Agreement. A non-solicitation agreement in the form
attached to Section 6.3(c) of the Parent Letter shall have been entered into by
Mr. Patrick H. Thomas, the Chairman of the Board, President and Chief Executive
Officer of the Company, and such agreement shall have remained in full force
and effect without breach thereof by such individual.
(c) Litigation. There shall not be instituted or pending any suit, action or
proceeding by a Governmental Entity as a result of this Agreement or any of the
transactions contemplated herein which would have a Material Adverse Effect on
Parent (assuming for purposes of this paragraph (c) that the Merger shall have
occurred).
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after any approval of the matters
presented in connection with the Merger by the stockholders of the Company or
Parent:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the other party shall have failed
to comply in any material respect with any of its covenants or agreements
contained in this Agreement required to be complied with prior to the date
of such termination, which failure to comply has not been cured within five
business days following receipt by such other party of written notice of
such failure to comply; provided, however, that if any such breach is
curable by the breaching party through the exercise of the breaching
party's best efforts and for so long as the breaching party shall be so
using its best efforts to cure such breach, the non-breaching party may not
terminate this Agreement pursuant to this paragraph;
(c) by either Parent or the Company if there has been (i) a breach by the
other party (in the case of Parent, including any material breach by Sub)
of any representation or warranty that is not qualified as to materiality
which has the effect of making such representation or warranty not true and
correct in all material respects or (ii) a breach by the other party (in
the case of Parent, including any material breach by Sub) of any
representation or warranty that is qualified as to materiality, in each
case which breach has not been cured within five business days following
receipt by the breaching party of written notice of the breach; provided,
however, that if any such breach is curable by the breaching party through
the exercise of the breaching party's best efforts and for so long as the
breaching party shall be so using its best efforts to cure such breach, the
non-breaching party may not terminate this Agreement pursuant to this
paragraph;
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(d) by Parent or the Company if: (i) the Merger has not been effected on
or prior to the close of business on December 31, 1995 (the "Termination
Date"); provided, however, that (A) the right to terminate this Agreement
pursuant to this Section 7.1(d) shall not be available to any party whose
failure to fulfill any of its obligations contained in this Agreement has
been the cause of, or resulted in, the failure of the Merger to have
occurred on or prior to the aforesaid date; (B) the Termination Date may be
extended prior to the termination hereof by written notice of either Parent
or the Company to the other to a date not later than March 31, 1996, if the
Merger shall not have been consummated as a result of the Company or Parent
having failed by December 31, 1995 to receive all required regulatory
approvals or consents (other than those relating to or arising under
applicable federal antitrust laws) with respect to the Merger necessary to
satisfy the condition set forth in Section 6.1(c); (C) the Termination Date
may be extended prior to the termination hereof by written notice of either
Parent or the Company to the other to the later of (x) the date that is 50
days following the date on which the parties fully complied with a request
by the applicable federal antitrust authority for additional information
under the HSR Act and (y) if the parties shall have agreed with the
applicable federal antitrust authority to not consummate the Merger until a
certain date, the date that is 30 days following such agreed date; (D) if
the applicable federal antitrust authority shall seek an order with respect
to the legality of the Merger under applicable federal antitrust laws, the
Termination Date may be extended prior to the termination hereof by written
notice of either Parent or the Company to the other to the date that is 30
days following the date on which a ruling with respect to such an order is
entered by a trial court or administrative body; and (E) if such order
shall have been entered which had the effect of enjoining the consummation
of the Merger and any party hereto shall have commenced an appeal thereof,
the Termination Date may be extended prior to the termination hereof by
written notice of either Parent or the Company to the other to the date
which is 30 days following the issuance of a decision by the applicable
appeals court with respect to such an appeal; provided, further, that,
notwithstanding anything to the contrary in this clause (i), in no event
shall the Termination Date be extended beyond August 31, 1996; or (ii) any
court or other Governmental Entity having jurisdiction over a party hereto
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling
or other action shall have become final and nonappealable; provided, that a
preliminary injunction preventing the consummation of the Merger that has
been entered and affirmed on appeal by a United States Court of Appeals
shall be deemed an order which is final and non-appealable for the purpose
of this clause (ii);
(e) by Parent or the Company if the stockholders of the Company do not
approve this Agreement at the Company Stockholder Meeting or any
adjournment or postponement thereof;
(f) by Parent or the Company if the stockholders of Parent do not approve
the Share Issuance at the Parent Stockholder Meeting or any adjournment or
postponement thereof;
(g) by Parent or the Company if the Board of Directors of the Company
reasonably determines that a Takeover Proposal constitutes a Superior
Proposal (as hereinafter defined); provided, however, that the Company may
not terminate this Agreement pursuant to this Section 7.1(g) unless and
until three business days have elapsed following delivery to Parent of a
written notice of such determination by the Board of Directors of the
Company (which written notice shall inform Parent of the material terms and
conditions of the Takeover Proposal but need not include the identity of
such third party);
(h) by Parent if (i) the Board of Directors of the Company shall not have
recommended, or shall have resolved not to recommend, or shall have
modified or withdrawn its recommendation of the Merger or declaration that
the Merger is advisable and fair to and in the best interest of the Company
and its stockholders, or shall have resolved to do so (ii) the Board of
Directors of the Company shall have recommended to the stockholders of the
Company any Takeover Proposal or shall have resolved to do so or (iii) a
tender offer or exchange offer for 30% or more of the outstanding shares of
capital stock of the Company is commenced, and the Board of Directors of
the Company fails to recommend against acceptance of such tender offer or
exchange offer by its stockholders (including by taking no position with
respect to the acceptance of such tender offer or exchange offer by its
stockholders).
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The right of any party hereto to terminate this Agreement pursuant to this
Section 7.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
"Superior Proposal" shall mean a bona fide proposal or offer made by a third
party to acquire the Company pursuant to a tender or exchange offer, a merger,
consolidation or other business combination or a sale of all or substantially
all of the assets of the Company and its Subsidiaries on terms which a majority
of the members of the Board of Directors of the Company determines in their
good faith reasonable judgment (based on the advice of independent financial
advisors) to be more favorable to the Company and to its stockholders than the
transactions contemplated hereby, provided that in making such determination
the Board considers the likelihood that such third party is able to consummate
such proposed transaction.
Section 7.2 Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company, as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of the Company, Parent, Sub or their respective officers or
directors (except for the last sentence of Section 5.4 and the entirety of
Section 5.7, which shall survive the termination); provided, however, that
nothing contained in this Section 7.2 shall relieve any party hereto from any
liability for any willful breach of a representation or warranty contained in
this Agreement or the breach of any covenant contained in this Agreement.
Section 7.3 Amendment. This Agreement may be amended by the parties hereto,
by or pursuant to action taken by their respective Boards of Directors, at any
time before or after approval of the matters presented in connection with the
Merger by the stockholders of Parent and the Company, but, after any such
approval, no amendment shall be made which by law requires further approval by
such stockholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
Section 7.4 Waiver. At any time prior to the Effective Time, the parties
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein which may legally be waived. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall terminate at the
Effective Time or upon the termination of this Agreement pursuant to Section
7.1, as the case may be, except that the agreements set forth in Article I and
Sections 4.4 and 5.13 and this Article VIII shall survive the Effective Time,
and those set forth in Sections 5.7 and 7.2 and this Article VIII and the
Confidentiality Agreement shall survive termination.
I-34
<PAGE>
Section 8.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered personally, one day after
being delivered to an overnight courier or when telecopied (with a confirmatory
copy sent by overnight courier) to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
First Data Corporation
401 Hackensack Avenue
Hackensack, New Jersey 07601
Attention: Henry C. Duques
Chairman and Chief
Executive Officer
Facsimile No.: (201) 342-0401
with copies to:
First Data Corporation
2121 North 117th Avenue
IMS-30
Omaha, Nebraska 68164
Attention: David P. Bailis
Senior Vice President,
Secretary and General Counsel
Facsimile No.: (402) 498-4120
and
Frederick C. Lowinger, Esq.
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Facsimile No.: (312) 853-7036
(b) if to the Company, to
First Financial Management Corporation
3 Corporate Square
Suite 700
Atlanta, Georgia 30329
Attention: Randolph L. M. Hutto
Senior Executive Vice
President and General Counsel
Facsimile No.: (404) 636-7632
with copies to:
George L. Cohen, Esq.
Sutherland, Asbill & Brennan
999 Peachtree Street, N.E.
Atlanta, Georgia 30309-3996
Facsimile No.: (404) 853-8806
and
Peter D. Lyons, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Facsimile No.: (212) 848-7179/80/81/82
I-35
<PAGE>
Section 8.3 Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation."
Section 8.4 Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
Section 8.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement,
except as provided in the last sentence of Section 5.4, constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof. This
Agreement, except for the provisions of Section 5.13 and Sections 2, 3 and 4 of
Annex A, is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
Section 8.6 Governing Law. Except to the extent that the laws of the State of
Georgia are mandatorily applicable to the Merger, this Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES ITS RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, THE
COMPANY, OR SUB IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT
THEREOF.
Section 8.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties.
Section 8.8 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
may be consummated as originally contemplated to the fullest extent possible.
Section 8.9 Enforcement of this Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, such remedy being in addition to any
other remedy to which any party is entitled at law or in equity.
I-36
<PAGE>
In Witness Whereof, Parent, Sub and the Company have caused this Agreement to
be signed by their respective officers thereunto duly authorized all as of the
date first written above.
FIRST DATA CORPORATION
/s/ Henry C. Duques
By: _________________________________
Name: Henry C. Duques
Title: Chairman and Chief
Executive Officer
Attest:
/s/ David P. Bailis
- -------------------------------------
Name: David P. Bailis
Title: Secretary
FDC MERGER CORP.
/s/ Walter M. Hoff
By: _________________________________
Name: Walter M. Hoff
Title: President
Attest:
/s/ David P. Bailis
- -------------------------------------
Name: David P. Bailis
Title: Secretary
FIRST FINANCIAL MANAGEMENT
CORPORATION
/s/ Patrick H. Thomas
By: _________________________________
Name: Patrick H. Thomas
Title: Chairman, Chief Executive
Officer
and President
Attest:
/s/ Randolph L. M. Hutto
- -------------------------------------
Name: Randolph L. M. Hutto
Title: Senior Executive Vice President
I-37
<PAGE>
ANNEX A
AGREEMENT RESPECTING THE PLANS
AND OTHER EMPLOYEE BENEFIT MATTERS
1. Continuation of Benefits. The Parent shall cause the Surviving Corporation
to maintain for a period of one year after the Effective Time the Company Plans
in effect on the date of this Agreement or to provide benefits to employees of
the Company and its subsidiaries that are no less favorable than those provided
by the Parent and its subsidiaries to their own employees. In the event that
the employees of the Company or any of its Subsidiaries are included in any
Benefits plan of Parent or any of Parent's Subsidiaries, the Parent shall, and
shall cause its Subsidiaries to, provide each such employee (i) with respect to
any welfare plans, full credit for service with the Company and each of the
Company's Subsidiaries (and their respective predecessors) (collectively,
"Prior Service") for purposes of eligibility to participate in, vesting and
payment of benefits under, and eligibility for any subsidized benefit provided
under any such welfare plan of Parent or any of Parent's Subsidiaries, and (ii)
with respect to Parent's Incentive Savings Plans, full credit for such Prior
Service for purposes of eligibility to participate in such plan and vesting in
Matching Contributions thereunder.
2. Change in Control Payments.
(a) The Company, Parent and Sub each acknowledges that consummation of the
transactions contemplated by this Agreement will constitute a change in control
of the Company under the terms of the Company's employee plans, programs,
arrangements and contracts containing provisions triggering payment, vesting or
other rights upon a change in control or similar transaction (collectively, the
"Change in Control Plans"). At the Closing, the Company shall pay all amounts
and benefits payable under the Change in Control Plans at the time of a change
in control of the Company, in accordance with the respective terms of the
Change in Control Plans as illustrated by Schedule 1 to this Annex A
(including, without limitation, severance pay, acceleration of vesting of
restricted shares and Company Stock Options, and payment of Code Section 4999
tax equalization payments with respect to all of the foregoing, in each case,
unless the relevant employee consents otherwise, subject to withholding of
taxes at no more than the minimum rate required by applicable law), and after
the Closing, Parent shall cause the Surviving Corporation to pay (x) all
amounts and benefits payable after the Closing under the Change in Control
Plans in accordance with the terms thereof (y) all amounts payable by the
Company, but not paid by the Company, prior to the Closing under the Change in
Control Plans in accordance with the terms thereof as illustrated by Schedule 1
to this Annex A. At the Closing, all shares of restricted Company Common Stock
issued pursuant to the Company Stock Option Plans shall be released from all
restrictions pursuant to such plans, and certificates for such shares shall be
delivered to the registered owners free of any legend referring to restrictions
under such plans to the extent provided in such plans.
(b) With respect to each of Messrs. Thomas, Jackson, Pittard, Kane and Hutto,
the Company, Parent and Sub each acknowledges and agrees that the employment of
such employee shall be terminated as of the Closing, and that, pursuant to his
employment or change in control agreement with the Company, at the Closing such
executive shall receive from the Company amounts calculated in a manner
consistent with the calculations set forth (and determined in accordance with
the methodologies employed) in Schedule 1 to this Annex A.
(c) With respect to each of Messrs. Marschel, Garcia, Macchia, Malone,
Marwitz, Sharp and Womack and Ms. Sherlag, the Company, Parent and Sub each
acknowledges and agrees that at the Closing each such executive, other than Mr.
Garcia, shall have "good reason" to terminate his employment pursuant to his
employment or change in control agreement with the Company, and that the
amounts payable to such executive if he elects to terminate his employment, or
his employment is terminated by the Surviving Corporation, at or following the
Closing will be calculated in a manner consistent with the calculations set
forth (and determined in accordance with the methodologies employed) in
Schedule 1 to this Annex A (it
I-A-1
<PAGE>
being understood and agreed that, for Messrs. Garcia, Malone, Marwitz, Sharp
and Womack and Ms. Sherlag, amounts payable should be calculated in the same
manner as for the listed executives).
(d) The Company, Parent and Sub acknowledge and agree that all "parachute
payments" (within the meaning of Section 280G of the Code) relating to Company
Stock Options ("Option Parachute Payments") shall be deemed to occur at the
Closing, and that, accordingly, all Code Section 4999 tax equalization payments
payable to tax authorities and any such employee in accordance with the terms
of existing employment or change in control agreements shall be paid at the
Closing; provided, however, that nothing herein shall affect the Surviving
Corporation's obligation to make additional Code Section 4999 tax equalization
payments at a later date in the event the IRS or other relevant taxing
authority determines that the Option Parachute Payments occurred after the
Effective Time.
(e) The Company, Parent and Sub acknowledge and agree that each employee of
the Company, in accordance with the terms of the relevant plans and agreements,
shall have the right at the Closing (with respect to any restricted stock
delivered at Closing or Company Stock Options exercised at the Closing) or
thereafter (with respect to the exercise of any Company Stock Options after the
Closing) (i) to have shares withheld from vested restricted stock awards and
shares issuable in connection with the exercise of Company Stock Options to pay
statutory minimum withholding for Federal, state and local tax requirements,
(ii) to surrender shares held more that six months ("Mature Shares") to satisfy
Federal, state and local tax requirements associated with the vesting of
restricted shares or exercise of Company Stock Options in excess of statutory
minimum withholding requirements for vested restricted stock awards and Company
Stock Option exercises, and (iii) to surrender Mature Shares to pay any or all
of the exercise price of Company Stock Options.
3. Incentive Compensation.
(a) Regardless of the provisions of the Company's annual incentive bonus
plans (not including any restricted stock granted to Mr. Thomas) (i) upon the
involuntary termination of the employment of any employee of the Company or any
Company Subsidiary at the Closing or of the Surviving Corporation or any
Company Subsidiary following the Closing but prior to the time incentive
bonuses for 1995 have been paid, such employee shall promptly receive (subject
to such employee executing a customary release of claims) a bonus equal to the
target incentive bonus for 1995 (assuming 100% attainment of performance
objectives), multiplied by (x) 50% if such termination occurs during the second
quarter of 1995, (y) 75% if such termination occurs during the third quarter of
1995, and (z) 100% if such termination occurs during the fourth quarter of
1995, which bonus shall be payable in the form or forms provided by such plans
pursuant to the Company's practice thereunder, determined by the Company not
later than the Effective Time; (ii) upon the voluntary resignation of any such
employee at or following the Effective Time but prior to the time incentive
bonuses are paid for 1995 in accordance with clause (iii) below, such employee
shall forfeit any incentive bonus for 1995; and (iii) any such employee whose
employment by the Company or any Company Subsidiary continues until the time
incentive bonuses for 1995 have been paid shall be paid a bonus in accordance
with the applicable plan, but in no event less than the amount payable,
assuming 100% attainment of performance, not later than January 31, 1996 in the
form or forms provided by such plans pursuant to the Company's practice
thereunder, determined by the Company not later than the Effective Time.
(b) Prior to the Effective Time, the Company shall adjust in a reasonable and
appropriate manner the performance targets employed under the Company's annual
incentive bonus plans for 1995 to reflect the effects of the Transactions
contemplated in this Agreement, including without limitation, the payment of
transactional fees, expenses and extraordinary compensation, disruptions in
operations and anticipated changes in organizational structure and business
plans and pay cash incentive bonuses for 1995 in accordance with such plans, as
adjusted.
(c) If the Effective Time occurs after December 31, 1995, the Company may,
prior to the Effective Time, adopt annual cash incentive bonus plans for 1996
in accordance with its customary past practices, containing reasonable and
appropriate provisions giving effect to the Transactions contemplated in this
Agreement.
I-A-2
<PAGE>
4. With respect to Company Stock Options held by Mr. Thomas, at the Closing,
Parent shall deliver to the Transfer Agent irrevocable instructions reasonably
satisfactory to the Company to issue to Mr. Thomas the requisite number of
shares of Parent Common Stock upon delivery, in accordance with the applicable
Company Stock Option Plan, of the exercise price specified in the applicable
option agreement. Mr. Thomas may deliver Mature Shares of Parent Common Stock
to effect payment of the exercise price or Federal, state and local tax
requirements in excess of the statutory minimum withholding requirements and
may elect to have shares of Parent Common Stock issuable upon the exercise of
his Company Stock Options withheld to pay statutory minimum withholding
requirements with respect to Federal, state and local taxes, in each case to
the full extent permitted by the applicable Company Stock Option Plan and
applicable stock option agreement.
I-A-3
<PAGE>
ANNEX B
PRINCIPAL TERMS OF REGISTRATION RIGHTS AGREEMENT
Description of Right: All Rule 145 Affiliates shall collectively have
one right to demand an underwritten
registration on a registration statement on
Form S-3 with respect to the Parent Common
Stock received in exchange for shares of
Company Common Stock in the Merger. Upon the
receipt of the demand for registration, Parent
shall have the right to delay the registration
for up to 60 days if Parent determines in good
faith that the filing of a registration
statement would materially interfere with, or
require premature disclosure of, any material
financing, acquisition, reorganization or
business combination involving Parent or any of
its Subsidiaries.
Underwriting: The Rule 145 Affiliates shall collectively have
the right to choose the lead underwriter,
subject to the reasonable approval of Parent.
Effective Period: Parent will keep the registration statement
effective for 60 days or until the Rule 145
Affiliates participating in such registration
have completed the distribution of shares
subject to the registration statement,
whichever occurs first.
Expenses: All expenses of the demand registration
(including, but not limited to, filing fees,
reasonable counsel fees of Parent and the
counsel fees of the Rule 145 Affiliates,
accountant fees and printing costs) shall be
borne by the Rule 145 Affiliates selling shares
under such registration.
Indemnification: The Rule 145 Affiliates participating in the
registration and Parent shall provide customary
cross indemnification and contribution.
Provision of Information: The Rule 145 Affiliates participating in the
registration shall provide necessary
information to Parent for inclusion in any
registration statement which includes shares
held by such Rule 145 Affiliates.
I-B-1
<PAGE>
EXHIBIT 5.5(A)
FORM OF AFFILIATE LETTER FOR AFFILIATES OF THE COMPANY
First Data Corporation
401 Hackensack Avenue
Hackensack, New Jersey 07601
Gentlemen:
I have been advised that as of the date of this letter I may be deemed to be
an "affiliate" of First Financial Management Corporation, a Georgia corporation
(the "Company"), as the term "affiliate" is (i) defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), and/or (ii) used in
and for purposes of Accounting Series Releases 130 and 135, as amended, of the
Commission. Pursuant to the terms of the Agreement and Plan of Merger dated as
of June 12, 1995 (the "Merger Agreement") among First Data Corporation, a
Delaware corporation ("Parent"), FDC Merger Corp., a Georgia corporation
("Sub"), and the Company, Sub will be merged with and into the Company (the
"Merger"). Capitalized terms used in this letter without definition shall have
the meanings assigned to them in the Merger Agreement.
As a result of the Merger, I may receive shares of common stock, par value
$.01 per share, of Parent (the "Parent Shares"). I would receive such Parent
Shares in exchange for shares (or upon exercise of options for shares) owned by
me of common stock, par value $.10 per share, of the Company (the "Company
Shares").
1. I represent, warrant and covenant to Parent that in the event I receive
any Parent Shares as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the Parent
Shares in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
Parent Shares, to the extent I felt necessary, with my counsel or counsel
for the Company.
C. I have been advised that the issuance of the Parent Shares to me
pursuant to the Merger has been registered with the Commission under the
Act on a Registration Statement on Form S-4. However, I have also been
advised that, because at the time the Merger is submitted for a vote of the
shareholders of the Company, (a) I may be deemed to be an affiliate of the
Company and (b) the distribution by me of the Parent Shares has not been
registered under the Act, I may not sell, transfer or otherwise dispose of
the Parent Shares issued to me in the Merger unless (i) such sale, transfer
or other disposition is made in conformity with the volume and other
limitations of Rule 145 promulgated by the Commission under the Act, (ii)
such sale, transfer or other disposition has been registered under the Act
or (iii) in the opinion of counsel reasonably acceptable to Parent, such
sale, transfer or other disposition is otherwise exempt from registration
under the Act.
D. I understand that except as provided for in the Merger Agreement,
Parent is under no obligation to register the sale, transfer or other
disposition of the Parent Shares by me or on my behalf under the Act or,
except as provided in paragraph 2(A) below, to take any other action
necessary in order to make compliance with an exemption from such
registration available.
E. I also understand that there will be placed on the certificates for
the Parent Shares issued to me, or any substitutions therefor, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY
I-B-2
<PAGE>
BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED
[ ] [ ], 1995 BETWEEN THE REGISTERED HOLDER HEREOF AND FIRST
DATA CORPORATION, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICES OF FIRST DATA CORPORATION."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED
BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933
AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
G. I further represent to, and covenant with, Parent that I will not,
during the 30 days prior to the Effective Time (as defined in the Merger
Agreement), sell, transfer or otherwise dispose of or reduce my risk (as
contemplated by SEC Accounting Series Release No. 135) with respect to the
Company Shares or shares of the capital stock of Parent that I may hold
and, furthermore, that I will not sell, transfer or otherwise dispose of or
reduce my risk (as contemplated by SEC Accounting Series Release No. 135)
with respect to the Parent Shares received by me in the Merger or any other
shares of the capital stock of Parent until after such time as results
covering at least 30 days of combined operations of the Company and Parent
have been published by Parent, in the form of a quarterly earnings report,
an effective registration statement filed with the Commission, a report to
the Commission on Form 10-K, 10-Q, or 8-K, or any other public filing or
announcement which includes the combined results of operations. Parent
shall notify the "affiliates" of the publication of such results.
Notwithstanding the foregoing, I understand that during the aforementioned
period, subject to providing written notice to Parent, I will not be
prohibited from selling up to 10% of the Parent Shares (the "10% Shares")
received by me or the Company Shares owned by me or making charitable
contributions or bona fide gifts of the Parent Shares received by me or the
Company Shares owned by me, subject to the same restrictions. The 10%
Shares shall be calculated in accordance with SEC Accounting Series Release
No. 135 as amended by Staff Accounting Bulletin No. 76. I covenant with
Parent that I will not sell, transfer or otherwise dispose of any 10%
Shares during the period commencing from the Effective Time and ending on
the last day of the Pooling Period except in compliance with Rule 145(d)(i)
under the Securities Act or pursuant to charitable contributions or bona
fide gifts. I further covenant that, during the period from the
Commencement Date to the later of (i) the date which is 30 days after the
Commencement Date and (ii) the date which is 90 days after the Effective
Time, I will promptly suspend sales of shares of Parent Common Stock
pursuant to the Registration Statement upon written notice from the Parent,
subject to the provisions of Section 5.5(c) which require that Parent shall
take all actions necessary to cause sales to be permitted under the
Registration Statement for at least one 15 consecutive day period
commencing on or after the Commencement Date and ending on or prior to the
90th day following the Effective Time.
H. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of the Company as described in the first
paragraph of this letter, nor as a waiver of any rights I may have to
object to any claim that I am such an affiliate on or after the date of
this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
Parent Shares pursuant to Rule 145 and, to the extent applicable, Rule 144
under the Act, Parent shall (a) use its reasonable best efforts to (i)
file, on a timely basis, all reports and data required to be filed with the
Commission by it
I-B-3
<PAGE>
pursuant to Section 13 of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and (ii) furnish to me upon request a written statement
as to whether Parent has complied with such reporting requirements during
the 12 months preceding any proposed sale of the Parent Shares by me under
Rule 145, and (b) otherwise use its reasonable best efforts to permit such
sales pursuant to Rule 145 and Rule 144. Parent has filed all reports
required to be filed with the Commission under Section 13 of the 1934 Act
during the preceding 12 months.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) two years shall have elapsed from
the date the undersigned acquired the Parent Shares received in the Merger
and the provisions of Rule 145(d)(2) are then available to the undersigned,
(ii) three years shall have elapsed from the date the undersigned acquired
the Parent Shares received in the Merger and the provisions of Rule
145(d)(3) are then applicable to the undersigned, or (iii) the Parent has
received either an opinion of counsel, which opinion and counsel shall be
reasonably satisfactory to Parent, or a "no action" letter obtained by the
undersigned from the staff of the Commission, to the effect that the
restrictions imposed by Rule 145 under the Act no longer apply to the
undersigned.
Very truly yours,
-------------------------------------
Name:
Agreed and accepted this day
of [ ], 1995, by
FIRST DATA CORPORATION
By __________________________________
Name:
Title:
I-B-4
<PAGE>
EXHIBIT 5.5(B)
FORM OF AFFILIATE LETTER FOR AFFILIATES OF PARENT
First Financial Management Corporation
3 Corporate Square
Suite 700
Atlanta, Georgia 30329
Gentlemen:
I have been advised that as of the date of this letter I may be deemed to be
an "affiliate" of First Data Corporation, a Delaware corporation ("Parent"), as
the term "affiliate" is defined for purposes of Accounting Series Releases 130
and 135, as amended, of the Securities and Exchange Commission ("Commission").
Pursuant to the terms of the Agreement and Plan of Merger dated as of June 12,
1995 (the "Merger Agreement") among Parent, FDC Merger Corp., a Georgia
corporation ("Sub"), and First Financial Management Corporation, a Georgia
corporation, Sub will be merged with and into the Company (the "Merger").
I represent to, and covenant with, the Company that I will not, during the
period beginning 30 days prior to the Effective Time (as defined in the Merger
Agreement) until after such time as results covering at least 30 days of
combined operations of the Company and Parent have been published by Parent, in
the form of a quarterly earnings report, an effective registration statement
filed with the Commission, a report to the Commission on Form 10-K, 10-Q, or 8-
K, or any other public filing or announcement which includes the combined
results of operations, sell, transfer or otherwise dispose of or reduce my risk
with respect to any shares of the capital stock of Parent ("Parent Stock") or
the Company that I may hold. I understand that Parent shall notify the
"affiliates" of the publication of such results. Notwithstanding the foregoing,
I understand that subject to providing written notice to Parent and subject to
SEC Accounting Series Release No. 135 as amended by Staff Accounting Bulletin
No. 76, during the aforementioned period I will not be prohibited from selling
up to 10% of the Parent Stock that I hold or from making charitable
contributions or bona fide gifts of the Parent Stock that I hold, subject to
the same restrictions.
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of Parent as described in the first paragraph of this
letter, nor as a waiver of any rights I may have to object to any claim that I
am such an affiliate on or after the date of this letter.
Very truly yours,
-------------------------------------
Name:
Accepted this day of
[ ], 1995, by
FIRST FINANCIAL MANAGEMENT CORPORATION
By __________________________________
Name:
Title:
I-B-5
<PAGE>
ANNEX II
Opinion of Smith Barney Inc.
<PAGE>
SMITH BARNEY OPINION
September 26, 1995
The Board of Directors
First Data Corporation
401 Hackensack Avenue
Hackensack, NJ 07601
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to First Data Corporation ("FDC") of the consideration to be paid by FDC
pursuant to the terms and subject to the conditions set forth in the Agreement
and Plan of Merger, dated June 12, 1995, as amended (the "Merger Agreement"),
by and among FDC, FDC Merger Corp., a wholly owned subsidiary of FDC ("Sub"),
and First Financial Management Corporation ("FFMC"). As more fully described in
the Merger Agreement, (i) Sub will be merged with and into FFMC (the "Merger")
and (ii) each outstanding share of the common stock, par value $0.10 per share,
of FFMC (the "FFMC Common Stock") will be converted into 1.5859 shares (the
"Conversion Number") of the common stock, par value $0.01 per share, of FDC
(the "FDC Common Stock").
In arriving at our opinion, we reviewed the Merger Agreement and the Joint
Proxy Statement/Prospectus dated the date hereof of FDC and FFMC relating to
the proposed Merger (the "Joint Proxy Statement/Prospectus"), and held
discussions with certain senior officers, directors and other representatives
and advisors of FDC and with certain senior officers and other representatives
and advisors of FFMC concerning the businesses, operations and prospects of FDC
and FFMC. We examined certain publicly available business and financial
information relating to FDC and FFMC as well as certain financial forecasts and
other data for FDC and FFMC which were provided to us by or otherwise discussed
with the respective managements of FDC and FFMC, including information relating
to certain strategic implications and operational benefits anticipated from the
Merger and analysts' estimates as to the future financial performance of FDC
and FFMC. We reviewed the financial terms of the Merger as set forth in the
Merger Agreement in relation to, among other things: current and historical
market prices and trading volumes of the FDC Common Stock and FFMC Common
Stock; historical and projected earnings and operating data of FDC and FFMC;
and the capitalization and financial condition of FDC and FFMC. We also
evaluated the potential pro forma financial impact of the Merger on FDC. We
also considered, to the extent publicly available, the financial terms of
certain other similar transactions recently effected which we considered
relevant in evaluating the Merger and analyzed certain financial, stock market
and other publicly available information relating to the businesses of other
companies whose operations we considered relevant in evaluating those of FDC
and FFMC. In addition to the foregoing, we conducted such other analyses and
examinations and considered such other financial, economic and market criteria
as we deemed appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information publicly available or furnished to or otherwise reviewed by or
discussed with us. With respect to financial forecasts and other information
and data furnished to or otherwise reviewed by or discussed with us, we have
been advised by the respective managements of FDC and FFMC that such forecasts
and other information and data were reasonably prepared on bases reflecting the
best currently available estimates and judgments of the managements of FDC and
FFMC as to the future financial performance of FDC and FFMC and the potential
strategic implications and operational benefits anticipated from the Merger. We
have assumed, with your consent, that the Merger will be treated as a pooling
of interests in accordance with generally accepted accounting principles and as
a tax-free reorganization for federal income tax purposes. Our opinion, as set
forth herein, relates to the relative values of FDC and FFMC. We are not
expressing any opinion as to what the value of the FDC Common Stock actually
will be when issued to FFMC stockholders pursuant to the Merger or the prices
at which the FDC Common Stock will trade subsequent to the Merger. We have not
made or been provided with an
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<PAGE>
SMITH BARNEY OPINION
independent evaluation or appraisal of the assets or liabilities (contingent or
otherwise) of FDC or FFMC nor have we made any physical inspection of the
properties or assets of FDC or FFMC. We were not asked to consider, and our
opinion does not address, the relative merits of the Merger as compared to any
alternative business strategies that might exist for FDC or the effect of any
other transaction in which FDC might engage. Our opinion is necessarily based
upon information available to us, and financial, stock market and other
conditions and circumstances existing and disclosed to us, as of the date
hereof.
Smith Barney has been engaged to render financial advisory services to FDC with
respect to this opinion and will receive a fee for such services, a significant
portion of which is payable upon the delivery of this opinion. In the ordinary
course of business, we and our affiliates may actively trade the securities of
FDC and FFMC for our own account or for the account of our customers and,
accordingly, may at any time hold a long or short position in such securities.
We are familiar with FDC and its business and have in the past provided, and
are currently providing, financial advisory and investment banking services to
FDC and its affiliates unrelated to the Merger, including, among other things,
financial advisory services relating to previous transactions involving FDC and
other companies engaged in the transaction and merchant credit card processing
businesses, and have received, and will receive, fees for such services. In
addition, we and our affiliates (including Travelers Group Inc. and its
affiliates) maintain business relationships with FDC and may also maintain
business relationships with FFMC.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of FDC in evaluating the proposed Merger,
and our opinion is not intended to be and does not constitute a recommendation
to any stockholder as to how such stockholder should vote on the proposed
Merger. Our opinion may not be published or otherwise used or referred to, nor
shall any public reference to Smith Barney be made, without our prior written
consent; provided, that our opinion may be included in its entirety in the
Joint Proxy Statement/Prospectus.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the Conversion Number is fair, from a
financial point of view, to FDC.
Very truly yours,
Smith Barney Inc.
II-2
<PAGE>
ANNEX III
Opinion of Morgan Stanley & Co. Incorporated
<PAGE>
LOGO
September 26, 1995
Board of Directors
First Financial Management Corporation
3 Corporate Square, Suite 700
Atlanta, Georgia 30329
Gentlemen:
We understand that First Financial Management Corporation ("FFMC" or the
"Company") and First Data Corporation ("First Data") have proposed an Agreement
and Plan of Merger, dated as of June 12, 1995 (the "Merger Agreement"), which,
subject to the terms and conditions thereof, provides, among other things, for
the merger (the "Merger") of a wholly owned subsidiary of First Data with and
into FFMC, as a result of which FFMC will become a wholly owned subsidiary of
First Data. In the Merger, each outstanding share of common stock, par value
$0.10 per share (the "Common Stock"), of FFMC (other than shares held in the
treasury of FFMC or by any wholly owned subsidiary of FFMC or any shares held
by First Data or any wholly owned subsidiary of First Data) will be converted
into 1.5859 shares (the "Exchange Ratio") of common stock, par value $0.01 per
share, of First Data ("First Data Common Stock"). The terms and conditions of
the Merger are more fully set forth in the Merger Agreement.
On June 12, 1995 we delivered a fairness opinion to the Board of Directors of
FFMC that the Exchange Ratio specified in the Merger Agreement was fair from a
financial point of view to the holders of shares of common stock of FFMC and
you have now asked us to reconfirm our earlier opinion.
For purposes of the opinion set forth herein, we have:
(i) analyzed certain publicly available financial statements and other
information of the Company and of First Data;
(ii) reviewed certain business, operating and financial information
relating to the Company, furnished to us by the Company;
(iii) discussed the past and current operations and financial condition and
the prospects of the Company with senior executives of the Company;
(iv) reviewed certain public research reports concerning the Company
prepared by certain equity research analysts and discussed these
research reports, including financial projections contained therein,
with senior executives of the Company;
(v) discussed certain business, operating and financial information
relating to First Data, with senior executives of First Data;
(vi) reviewed certain public research reports concerning First Data
prepared by certain equity research analysts and discussed these
research reports, including financial projections contained therein,
with senior executives of First Data;
(vii) discussed the past and current operations and financial condition and
the prospects of First Data with senior executives of First Data, and
analyzed the pro forma impact of the Merger on First Data's earnings
per share, consolidated capitalization and financial ratios;
(viii) reviewed the reported prices and trading activity for the Common
Stock and the First Data Common Stock;
(ix) compared the financial performance of the Company and the prices and
trading activity of the Common Stock with that of certain other
comparable publicly traded companies and their securities;
III-1
<PAGE>
LOGO
(x) compared the financial performance of First Data and the prices and
trading activity of the First Data Common Stock with that of certain
other comparable publicly traded companies and their securities;
(xi) discussed with the senior managements of the Company and First Data
their views of the strategic rationale for the Merger and the economic
benefits of the Merger to First Data;
(xii) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(xiii) participated in discussions and negotiations among representatives
of the Company and First Data and their financial and legal advisors
and reviewed the Merger Agreement; and
(xiv) performed such other analyses as we have deemed appropriate.
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. We have relied upon the assumptions of the management of FFMC and
First Data regarding cost savings and other synergies that will result from the
Merger. We have not made any independent valuation or appraisal of the assets
or liabilities of the Company, nor have we been furnished with any such
appraisals. Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof.
We have acted as financial advisor to FFMC in connection with this transaction
and will receive a fee for our services. In the past, Morgan Stanley & Co.
Incorporated and its affiliates have provided financial advisory and financing
services for FFMC and have received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of FFMC and may not be used for any other purpose without our prior
written consent, except that this opinion may be included in its entirety in
any filing made by the Company or First Data with the Securities and Exchange
Commission with respect to the Merger and the transactions related thereto.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Exchange Ratio specified in the Merger Agreement is fair from a
financial point of view to the holders of shares of common stock of FFMC.
Very truly yours,
Morgan Stanley & Co. Incorporated
/s/ Scott R. Brakebill
By: _________________________________
Scott R. Brakebill
Managing Director
III-2
<PAGE>
ANNEX IV
First Data's 1992 Long-Term Incentive Plan As Proposed To Be Amended
<PAGE>
FIRST DATA CORPORATION
1992 LONG-TERM INCENTIVE PLAN
(AS AMENDED THROUGH JULY 26, 1995)
1. PURPOSE. The purpose of the 1992 Long-Term Incentive Plan (the "Plan") is
to advance the interests of First Data Corporation, a Delaware corporation (the
"Company") and its stockholders by providing incentives to certain key
employees of the Company and its affiliates and to certain other key
individuals who perform services for these entities, including those who
contribute significantly to the strategic and long-term performance objectives
and growth of the Company and its affiliates.
2. ADMINISTRATION. The Plan shall be administered solely by the Board of
Directors (the "Board") of the Company or, if the Board shall so designate, by
the Compensation and Benefits Committee (the "Committee") of the Board, as such
Committee is from time to time constituted, or any successor committee the
Board may designate to administer the Plan; provided that if at any time Rule
16b-3, as amended (the "Exchange Act"), so permits without adversely affecting
the ability of the Plan to comply with the conditions for exemption from
Section 16 of the Exchange Act (or any successor provision) provided by Rule
16b-3, the Committee may delegate the administration of the Plan in whole or in
part, on such terms and conditions, and to such person or persons as it may
determine in its discretion, as it relates to persons not subject to Section 16
of the Exchange Act (or any successor provision). References to the Committee
hereunder shall include the Board where appropriate. The membership of the
Committee or such successor committee shall be constituted so as to comply at
all times with the applicable requirements of Rule 16b-3. No member of the
Committee shall have within one year prior to his appointment received awards
under the Plan ("Awards") or under any other plan, program, or arrangement of
the Company or any of its affiliates if such receipt would cause such member to
cease to be a "disinterested person" under Rule 16b-3; provided that if at any
time Rule 16b-3 so permits without adversely affecting the ability of the Plan
to comply with the conditions for exemption from Section 16 of the Exchange Act
(or any successor provision) provided by Rule 16b-3, one or more members of the
Committee may cease to be a "disinterested person."
The Committee has all the powers vested in it by the terms of the Plan set
forth herein, such powers to include exclusive authority (except as may be
delegated as permitted herein) to select the key employees and other key
individuals to be granted Awards under the Plan, to determine the type, size
(pursuant to Paragraph 4(b)(ii)) and terms of the Award to be made to each
individual selected, to modify the terms of any Award that has been granted,
(provided that no such modification shall be made to increase the size of any
Award or accelerate the date of exercise of any Award and/or payments
thereunder), to determine the time when Awards will be granted to establish
performance objectives, to make any adjustments necessary or desirable as a
result of the granting of Awards to eligible individuals located outside the
United States and to prescribe the form of the instruments embodying Awards
made under the Plan. The Committee is authorized to interpret the Plan and the
Awards granted under the Plan, to establish, amend and rescind any rules and
regulations relating to the Plan (provided that no such amendment, rule or
regulation shall be made to increase the amount of any Award or accelerate the
date of exercise of any Award and/or payments thereunder), and to make any
other determinations which it deems necessary or desirable for the
administration of the Plan. The Committee (or its delegate as permitted herein)
may correct any defect or supply any omission or reconcile any inconsistency in
the Plan or in any Award in the manner and to the extent the Committee deems
necessary or desirable to carry it into effect. Any decision of the Committee
(or its delegate as permitted herein) in the interpretation and administration
of the Plan, as described herein, shall lie within its sole and absolute
discretion and shall be final, conclusive and binding on all parties concerned.
The Committee may act only by a majority of its members in office, except that
the members thereof may authorize any one or more of their members or any
officer of the Company to execute and deliver documents or to take any other
ministerial action on behalf of the Committee with respect to Awards made or to
be made to Plan participants. No member of the Committee and no officer of the
Company shall be liable for anything done or omitted to be done by him, by any
other member of the Committee or by any officer of the Company in connection
with the performance of duties under the Plan, except for his own willful
IV-1
<PAGE>
misconduct or as expressly provided by statute. Determinations to be made by
the Committee under the Plan may be made by delegates.
3. PARTICIPATION. (a) Affiliates. If an Affiliate (as hereinafter defined) of
the Company wishes to participate in the Plan and its participation shall have
been approved by the Board upon the recommendation of the Committee, the board
of directors or other governing body of the Affiliate shall adopt a resolution
in form and substance satisfactory to the Committee authorizing participation
by the Affiliate in the Plan with respect to its key employees or other key
individuals performing services for it. As used herein, the term "Affiliate"
means any entity in which the Company has a substantial direct or indirect
equity interest, as determined by the Committee in its discretion.
An Affiliate participating in the Plan may cease to be a participating
company at any time by action of the Board or by action of the board of
directors or other governing body of such Affiliate, which latter action shall
be effective not earlier than the date of delivery to the Secretary of the
Company of a certified copy of a resolution of the Affiliate's board of
directors or other governing body taking such action. If the participation in
the Plan of an Affiliate shall terminate, such termination shall not relieve it
of any obligations theretofore incurred by it under the Plan, except as may be
approved by the Committee.
(b) Participants. Consistent with the purposes of the Plan, the Committee
shall have exclusive power (except as may be delegated as permitted herein) to
select the key employees and other key individuals performing services for the
Company and its Affiliates who may participate in the Plan and be granted
Awards under the Plan. Eligible individuals may be selected individually or by
groups or categories, as determined by the Committee in its discretion. No non-
employee director of the Company or any of its Affiliates shall be eligible to
receive and Award under the Plan.
4. AWARDS UNDER THE PLAN. (a) Types of Awards. Awards under the Plan may
include, but need not be limited to, one or more of the following types, either
alone or in any combination thereof: (i) "Stock Options," (ii) "Stock
Appreciation Rights," (iii) "Restricted Stock," (iv) "Performance Grants" and
(v) Awards to be made to participants who are foreign nationals or are employed
or performing services outside the United States. Stock Options, which include
"Nonqualified Stock Options" which may be awarded to participants, including
purchased stock options which may be sold to participants at a price determined
by the Committee ("Purchased Options"), in each case having an exercise price
equal to the fair market value of the Common Shares subject to such Option at
the time the Option is granted or sold, and incentive stock options as defined
in Section 422A of the Code ("Incentive Stock Options") or combinations
thereof, are rights to purchase common shares of the Company having a par value
of $.01 per share and stock of any other class into which such shares may
thereafter be changed (the "Common Shares"). Nonqualified Stock Options and
Incentive Stock Options are subject to the terms, conditions and restrictions
specified in Subparagraph 5. Stock Appreciation Rights are rights to receive
(without payment to the Company) cash, Common Shares or any combination
thereof, as determined by the Committee, based on the increase in the value of
the number of Common Shares specified in the Stock Appreciation Right. Stock
Appreciation Rights are subject to the terms, conditions and restrictions
specified in Paragraph 6. Shares of Restricted Stock are Common Shares which
are issued subject to certain restrictions pursuant to Paragraph 7. Performance
Grants are contingent awards subject to the terms, conditions and restrictions
described in Paragraph 8, pursuant to which the participant may become entitled
to receive cash, Common Shares, Other Company Securities or property, or other
forms of payment, or any combination thereof, as determined by the Committee.
(b) Maximum Aggregate Number of Shares that May be Issued.
(i) The maximum aggregate number of shares that may be issued under the
Plan (as Restricted Stock, in payment of Performance Grants, pursuant to
the exercise of Stock Options or Stock Appreciation Rights, or in payment
of or pursuant to the exercise of such other Awards as the Committee, in
its discretion, may determine) shall not exceed 23,790,000 Common Shares,
subject to adjustment as provided in Paragraph 15, provided that no more
than 4,000,000 Common Shares, subject to adjustment as provided in
Paragraph 15, may be issued in connection with Restricted Stock or
IV-2
<PAGE>
Performance Grants. Common Shares issued pursuant to the Plan may be
authorized but unissued shares, treasury shares, reacquired shares, or any
combination thereof. If any Common Shares issued as Restricted Stock or
otherwise subject to repurchase or forfeiture rights are reacquired by the
Company pursuant to such rights, or if any Award is cancelled, terminates
or expires unexercised, any Common Shares that would otherwise have been
issuable pursuant thereto will be available under new Awards. Furthermore,
any Common Shares or Options which are tendered pursuant to the exercise of
Stock Options also will be available under new Awards.
(ii) In any Fiscal year, the maximum number of shares that may be issued
to any individual in the aggregate (as Restricted Stock, in payment of
Performance Grants, as grants of Stock Options or Stock Appreciation
Rights, or in payment of such other Awards as the Committee in its
discretion, may determine) shall be one-half of one-percent of the
outstanding shares of the Company as of the preceding December 31.
(c) Rights with respect to Common Shares and Other Securities.
(i) Unless otherwise determined by the Committee in its discretion, a
participant to whom an Award of Restricted Stock has been made (and any
person succeeding to such a participant's rights pursuant to the Plan)
shall have, after issuance of a certificate for the number of Common Shares
awarded and prior to the expiration of the Restricted Period (as
hereinafter defined) or the earlier repurchase of such Common Shares as
herein provided, ownership of such Common Shares, including the right to
vote the same and to receive dividends or other distributions made or paid
with respect to such Common Shares (provided that such Common Shares, and
any new, additional or different shares, or Other Company Securities or
property, or other forms of consideration which the participant may be
entitled to receive with respect to such Common Shares as a result of a
stock split, stock dividend or any other change in the corporation or
capital structure of the Company, shall be subject to the restrictions
hereinafter described as determined by the Committee in its discretion),
subject, however, to the options, restrictions and limitations imposed
thereon pursuant to the Plan. Notwithstanding the foregoing, a participant
with whom an Award agreement is made to issue Common Shares in the future,
shall have no rights as a stockholder with respect to Common Shares related
to such agreement until issuance of a certificate to him.
(ii) Unless otherwise determined by the Committee in its discretion, a
participant to whom a grant of Stock Options, Stock Appreciation Rights,
Performance Grants or any other Award is made (and any person succeeding to
such a participant's rights pursuant to the Plan) shall have no rights as a
stockholder with respect to any Common Shares or as a holder with respect
to other securities, if any, issuable pursuant to any such Award until the
date of the issuance of a stock certificate to him for such Common Shares
or other instrument of ownership, if any. Except as provided in Paragraph
15, no adjustment shall be made for dividends, distributions or other
rights (whether ordinary or extraordinary, and whether in cash, securities,
other property or other forms of consideration, or any combination thereof)
for which the record date is prior to the date such stock certificate or
other instrument of ownership, if any, is issued.
5. STOCK OPTIONS. The Committee may grant or sell Stock Options either alone,
or in conjunction with Stock Appreciation Rights, Performance Grants or other
Awards, either at the time of grant or by amendment thereafter; provided that
an Incentive Stock Option may be granted only to an eligible employee of the
Company or its parent or any subsidiary corporation. Each Stock Option
(referred to herein as an "Option") granted or sold under the Plan shall be
evidenced by an instrument in such form as the Committee shall prescribe from
time to time in accordance with the Plan and shall comply with the following
terms and conditions, and with such other terms and conditions, including, but
not limited to, restrictions upon the Option or the Common Shares issuable upon
exercise thereof, as the Committee, in its discretion, shall establish:
(a) The option exercise price may be not less than the fair market value of
the Common Shares subject to such Option at the time the Option is granted.
Options granted as Incentive Stock Options shall comply with the then current
rules relating to Incentive Stock Options.
IV-3
<PAGE>
(b) The Committee shall determine the number of Common Shares to be subject
to each Option. The number of Common Shares subject to an outstanding Option
may be reduced on a share-for-share or other appropriate basis, as determined
by the Committee, to the extent that Common Shares under such Option are used
to calculate the cash, Common Shares, or any combination thereof, received
pursuant to exercise of a Stock Appreciation Right attached to such Option, or
to the extent that any other award granted in conjunction with such Option is
paid.
(c) The Option may not be sold, assigned, transferred, pledged, hypothecated
or otherwise disposed of, except by will or the laws of descent and
distribution, and shall be exercisable during the grantee's lifetime only by
him. Unless the Committee determines otherwise, the Option shall not be
exercisable for at least six months after the date of grant, unless the grantee
ceases employment or performance of services before the expiration of such six-
month period by reason of his disability as defined in Paragraph 12 or his
death. In the discretion of the Committee, an Option may be transferred to a
family member or a family trust, provided that any such transfer complies with
all applicable securities laws, including Rule 16b-3 under the Exchange Act,
and such transfer would not prevent the issuance of Common Shares upon the
exercise of such Option from complying with all applicable securities laws
without further action by the Company.
(d) The Option shall not be exercisable:
(i) unless payment in full is made for the shares being acquired
thereunder at the time of exercise; such payment shall be made in such form
(including, but not limited to, cash, Common Shares, or the surrender of
another outstanding Award under the Plan, or any combination thereof) as
the Committee may determine in its discretion; and
(ii) unless the person exercising the Option has been, at all times
during the period beginning with the date of the grant of the Option and
ending on the date of such exercise, employed by or otherwise performing
services for the Company or an Affiliate, or a corporation, or a parent or
subsidiary of a corporation, substituting or assuming the Option in a
transaction to which Section 424(a) of the Internal Revenue Code of 1986,
as amended, or any successor statutory provision thereto (the "Code"), is
applicable, except that
(A) in the case of any Nonqualified Stock Option, if such person
shall cease to be employed by or otherwise performing services for the
Company or an Affiliate solely by reason of a period of Related
Employment as defined in Paragraph 14, he may, during such period of
Related Employment, exercise the Nonqualified Stock Option as if he
continued such employment or performance of services; or
(B) if such person shall cease such employment or performance of
services by reason of his disability as defined in Paragraph 12 or
early, normal or deferred retirement under an approved retirement
program of the Company or an Affiliate (or such other plan or
arrangement as may be approved by the Committee, in its discretion, for
this purpose) while holding an Option which has not expired and has not
been fully exercised, such person, at any time within three years (or
such other period determined by the Committee) after the date he ceased
such employment or performance of services (but in no event after the
Option has expired), may exercise the Option with respect to any shares
as to which he could have exercised the Option on the date he ceased
such employment or performance of services, or with respect to such
greater number of shares as determined by the Committee; or
(C) if any person to whom an Option has been granted shall die
holding an Option which has not expired and has not been fully
exercised, his executors, administrators, heirs or distributees, as the
case may be, may, at any time within one year (or such other period
determined by the Committee) after the date of death (but in no event
after the Option has expired), exercise the Option with respect to any
shares as to which the decedent could have exercised the Option at the
time of his death, or with respect to such greater number of shares as
determined by the Committee.
IV-4
<PAGE>
(e) A Purchased Option may contain such additional terms not inconsistent
with this Plan, including but not limited to the circumstances under which the
purchase price of such Purchased Option may be returned to the optionee, as the
Committee may determine in its sole discretion.
6. STOCK APPRECIATION RIGHTS. The Committee may grant Stock Appreciation
Rights either alone, or in conjunction with Stock Options, Performance Grants
or other Awards, either at the time of grant or by amendment thereafter. Each
Award of Stock Appreciation Rights granted under the Plan shall be evidenced by
an instrument in such form as the Committee shall prescribe from time to time
in accordance with the Plan and shall comply with the following terms and
conditions, and with such other terms and conditions, including, but not
limited to, restrictions upon the Award of Stock Appreciation Rights or the
Common Shares issuable upon exercise thereof, as the Committee, in its
discretion, shall establish:
(a) The Committee shall determine the number of Common Shares to be subject
to each Award of Stock Appreciation Rights. The number of Common Shares subject
to an outstanding Award of Stock Appreciation Rights may be reduced on a share-
for-share or other appropriate basis, as determined by the Committee, to the
extent that Common Shares under such Award of Stock Appreciation Rights are
used to calculate the cash, Common Shares, Other Company Securities or
property, or other forms of payment, or any combination thereof, received
pursuant to exercise of an Option attached to such Award of Stock Appreciation
Rights, or to the extent that any other Award granted in conjunction with such
Award of Stock Appreciation Rights is paid.
(b) The Award of Stock Appreciation Rights may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of, except by will or
the laws of descent and distribution, and shall be exercisable during the
grantee's lifetime only by him. Unless the Committee determines otherwise, the
Award of Stock Appreciation Rights shall not be exercisable for at least six
months after the date of grant, unless the grantee ceases employment or
performance of services before the expiration of such six-month period by
reason of his disability as defined in Paragraph 12 or his death.
(c) The Award of Stock Appreciation Rights shall not be exercisable:
(i) in the case of any Award of Stock Appreciation Rights which is
attached to an Incentive Stock Option granted to a Ten Percent Employee,
after the expiration of five years from the date it is granted, and, in the
case of any other Award of Stock Appreciation Rights, after the expiration
of ten years from the date it is granted. Any Award of Stock Appreciation
Rights may be exercised during such period only at such time or times and
in such installments as the Committee may establish;
(ii) unless the Option or other Award to which the Award of Stock
Appreciation Rights is attached is at the time exercisable; and
(iii) unless the person exercising the Award of Stock Appreciation Rights
has been, at all times during the period beginning with the date of the
grant thereof and ending on the date of such exercise, employed by or
otherwise performing services for the Company or an Affiliate, except that
(A) in the case of any Award of Stock Appreciation Rights (other than
those attached to an Incentive Stock Option), if such person shall
cease to be employed by or otherwise performing services for the
Company or an Affiliate solely by reason of a period of Related
Employment as defined in Paragraph 14, he may, during such period of
Related Employment, exercise the Award of Stock Appreciation Rights as
if he continued such employment or performance of services; or
(B) if such person shall cease such employment or performance of
services by reason of his disability as defined in Paragraph 12 or
early, normal for deferred retirement under an approved retirement
program of the Company or an Affiliate (or such other plan or
arrangement as may be approved by the Committee, in its discretion, for
this purpose) while holding an Award of Stock Appreciation Rights which
has not expired and has not been fully exercised, such person may, at
any time within three years (or such other period determined by the
Committee) after the date he ceased such employment or performance of
services (but in no event after the Award of Stock
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Appreciation Rights has expired), exercise the Award of Stock
Appreciation Rights with respect to any shares as to which he could
have exercised the Award of Stock Appreciation Rights on the date he
ceased such employment or performance of services, or with respect to
such greater number or shares as determined by the Committee; or
(C) if any person to whom an Award of Stock Appreciation Rights has
been granted shall die holding an Award of Stock Appreciation Rights
which has not expired and has not been fully exercised, his executors,
administrators, heirs or distributees, as the case may be, may at any
time within one year (or such other period determined by the Committee)
after the date of death (but in no event after the Award of Stock
Appreciation Rights has expired), exercise the Award of Stock
Appreciation Rights with respect to any shares as to which the decedent
could have exercised the Award of Stock Appreciation Rights at the time
of his death, or with respect to such greater number of shares as
determined by the Committee.
(d) An Award of Stock Appreciation Rights shall entitle the holder (or any
person entitled to act under the provisions of subparagraph 6(c)(iii)(C)
hereof) to exercise such Award or to surrender unexercised the Option (or other
Award) to which the Stock Appreciation Right is attached (or any portion of
such Option or other Award) to the Company and to receive from the Company in
exchange thereof, without payment to the Company, that number of Common Shares
having an aggregate value equal to (or, in the discretion of the Committee,
less than) the excess of the fair market value of one share, at the time of
such exercise, over the exercise price (or Option Price, as the case may be),
times the number of shares subject to the Award or the Option (or other Award),
or portion thereof, which is so exercised or surrendered, as the case may be.
The Committee shall be entitled in its discretion to elect to settle the
obligation arising out of the exercise of a Stock Appreciation Right by the
payment of cash or Other Company Securities or property, or other forms of
payment, or any combination thereof, as determined by the Committee, equal to
the aggregate value of the Common Shares it would otherwise be obligated to
deliver. Any such election by the Committee shall be made as soon as
practicable after the receipt by the Committee of written notice of the
exercise of the Stock Appreciation Right. The value of a Common Share, Other
Company Securities or property, or other forms of payment determined by the
Committee for this purpose shall be the fair market value thereof on the last
business day next preceding the date of the election to exercise the Stock
Appreciation Right, unless the Committee, in its discretion, determines
otherwise.
(e) A Stock Appreciation Right may provide that it shall be deemed to have
been exercised at the close of business on the business day preceding the
expiration date of the Stock Appreciation Right or of the related Option (or
other Award), or such other date as specified by the Committee, if at such time
such Stock Appreciation Right has a positive value. Such deemed exercise shall
be settled or paid in the same manner as a regular exercise thereof as provided
in subparagraph 6(d) hereof.
(f) No fractional shares may be delivered under this paragraph 6, but in lieu
thereof a cash or other adjustment shall be made as determined by the Committee
in its discretion.
7. RESTRICTED STOCK. Each Award of Restricted Stock under the Plan shall be
evidenced by an instrument in such form as the Committee shall prescribe from
time to time in accordance with the Plan and shall comply with the following
terms and conditions, and with such other terms and conditions as the
Committee, in its discretion, shall establish:
(a) The Committee shall determine the number of Common Shares to be issued to
a participant pursuant to the Award, and the extent, if any, to which they
shall be issued in exchange for cash, other considerations, or both.
(b) Common Shares issued to a participant in accordance with the Award may
not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed
of, except by will or the laws of descent and distribution, or as otherwise
determined by the Committee, for such period as the Committee shall determine,
from the date on which the Award is granted (the "Restricted Period"). The
Company will have the option to repurchase the shares subject to the Award at
such price as the Committee shall have fixed, in its discretion,
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when the Award was made or amended thereafter, which option will be exercisable
(i) if the participant's continuous employment or performance of services for
the Company and its Affiliates shall terminate for any reason, except solely by
reason of a period of Related Employment as defined in Paragraph 14, or except
as otherwise provided in subparagraph 7(c), prior to the expiration of the
Restricted Period, (ii) if, on or prior to the expiration of the Restricted
Period or the earlier lapse of such repurchase option, the participant has not
paid to the Company an amount equal to any federal, state, local or foreign
income or other taxes which the Company determines is required to be withheld
in respect of such shares, or (iii) under such other circumstances as
determined by the Committee in its discretion. Such repurchase option shall be
exercisable on such terms, in such manner and during such period as shall be
determined by the Committee when the Award is made or as amended thereafter.
Each certificate for Common Shares issued pursuant to a Restricted Stock Award
shall bear an appropriate legend referring to the foregoing repurchase option
and other restrictions and to the fact that the shares are partly paid, shall
be deposited by the awardholder with the Company, together with a stock power
endorsed in blank, or shall be evidenced in such other manner permitted by
applicable law as determined by the Committee in its discretion. Any attempt to
dispose of any such Common Shares in contravention of the foregoing repurchase
option and other restrictions shall be null and void and without effect. If
Common Shares issued pursuant to a Restricted Stock Award shall be repurchased
pursuant to the repurchase option described above, the participant, or in the
event of his death, his personal representative, shall forthwith deliver to the
Secretary of the Company the certificates for the Common Shares awarded to the
participant, accompanied by such instrument of transfer, if any, as may
reasonably be required by the Secretary of the Company. If the repurchase
option described above is not exercised by the Company, such option and the
restrictions imposed pursuant to the first sentence of this subparagraph 7(b)
shall terminate and be of no further force and effect.
(c) If a participant who has been in continuous employment or performance of
services for the Company or an Affiliate since the date on which a Restricted
Stock Award was granted to him shall, while in such employment or performance
of service, die, or terminate such employment or performance of services by
reason of disability as defined in Paragraph 12 or by reason of early, normal
or deferred retirement under an approved retirement program of the Company or
an Affiliate (or such other plan or arrangement as may be approved by the
Committee in its discretion, for this purpose) and any of such events shall
occur after the date on which the Award was granted to him and prior to the end
of the Restricted Period of such Award, the Committee may determine to cancel
the repurchase option (and any and all other restrictions) on any or all of the
Common Shares subject to such Award; and the repurchase option shall become
exercisable at such time as to the remaining shares, if any.
(d) The minimum Restricted Period for Restricted Stock shall be one year.
(e) Awards of Restricted Stock may be made in the form of Phantom Stock. For
purposes of this Subparagraph 7(e), Phantom Stock shall mean an instrument
which provides for a cash payment which is equivalent to the fair market value
of the number of Common Shares of the Company equal to the number of shares of
Phantom Stock granted, which fair market value shall be determined as of the
date upon which restrictions on the Phantom Stock lapse and, in the discretion
of the Committee, a cash payment or payments which are equivalent to the
dividends on such number of Common Shares during the period from the date of
grant of such Phantom Stock until such lapse of restrictions.
8. PERFORMANCE GRANTS. The Award of the Performance Grant ("Performance
Grant") to a participant will entitle him to receive a specified amount
determined by the Committee (the "Actual Value"), if the terms and conditions
specified herein and in the Award are satisfied. Each Award of a Performance
Grant shall be subject to the following terms and conditions, and to such other
terms and conditions, including, but not limited to, restrictions upon any cash
or Common Shares issued in respect of the Performance Grant, as the Committee,
in its discretion, shall establish, and shall be embodied in an instrument in
such form and substance as is determined by the Committee:
(a) The Committee shall determine the value or range of values of a
Performance Grant to be awarded to each participant selected for an Award and
whether or not such a Performance Grant is granted in
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conjunction with an Award of Options, Stock Appreciation Rights, Restricted
Stock or other Award, or any combination thereof, under the Plan (which may
include, but need not be limited to, deferred Awards) concurrently or
subsequently granted to the participant (the "Associated Award"). As determined
by the Committee, the maximum value of each Performance Grant (the "Maximum
Value") shall be: (i) an amount fixed by the Committee at the time the Award is
made or amended thereafter, (ii) an amount which varies from time to time based
in whole or in part on the then current value of the Common Shares or (iii) an
amount that is determinable from criteria specified by the Committee.
Performance Grants may be issued in different classes or series having
different names, terms and conditions. In the case of a Performance Grant
awarded in conjunction with an Associated Award, the Performance Grant may be
reduced on an appropriate basis to the extent that the Associated Award has
been exercised, paid to or otherwise received by the participant, as determined
by the Committee.
(b) The award period ("Award Period") related to any Performance Grant shall
be a period determined by the Committee. At the time each Award is made, the
Committee shall establish performance objectives to be attained within the
Award Period as the means of determining the Actual Value of such a Performance
Grant. The performance objectives shall be based on such measure or measures of
performance, which may include, but need not be limited to, the performance of
the participant, the Company, one or more of its subsidiaries or one or more of
their divisions or units or any combination of the foregoing, as the Committee
shall determine, and may be applied on an absolute basis or be relative to
industry or other indices, or any combination thereof. The Actual Value of a
Performance Grant shall be equal to its Maximum Value only if the performance
objectives are attained in full, but the Committee shall specify the manner in
which the Actual Value of Performance Grants shall be determined if the
performance objectives are met in part. Such performance measures, the Actual
Value or the Maximum Value, or any combination thereof, may be adjusted in any
manner by the Committee in its discretion at any time and from time to time
during or as soon as practicable after the Award Period, if it determines that
such performance measures, the Actual Value or the Maximum Value, or any
combination thereof, are not appropriate under the circumstances.
Notwithstanding anything herein to the contrary, the Committee shall have no
discretion to increase the value of any Performance Grant.
(c) The rights of a participant in Performance Grants awarded to him shall be
provisional and may be cancelled or paid in whole or in part, all as determined
by the Committee, if the participant's continuous employment or performance of
services for the Company and its Affiliates shall terminate for any reason
prior to the end of the Award Period, except solely by reason of a period or
Related Employment as defined in Paragraph 14.
(d) The Committee shall determine whether the conditions of subparagraph 8(b)
or 8(c) hereof have been met and, if so, shall ascertain the Actual Value of
the Performance Grants. If the Performance Grants have no Actual Value, the
Award and such Performance Grants shall be deemed to have been cancelled and
the Associated Award, if any, may be cancelled or permitted to continue in
effect in accordance with its terms. If the Performance Grants have any Actual
Value and:
(i) were not awarded in conjunction with an Associated Award, the
Committee shall cause an amount equal to the Actual value of the
Performance Grants earned by the participant to be paid to him or his
beneficiary as provided below; or
(ii) were awarded in conjunction with an Associated Award, the Committee
shall determine, in accordance with criteria specified by the Committee (A)
to cancel the Performance Grants, in which event no amount in respect
thereof shall be paid to the participant or his beneficiary, and the
Associated Award may be permitted to continue in effect in accordance with
its terms, (B) to pay the Actual Value of the Performance Grants to the
participant or his beneficiary as provided below, in which event the
Associated Award may be cancelled or (C) to pay to the participant or his
beneficiary as provided below, the Actual Value of only a portion of the
Performance Grants, in which event all or a portion of the Associated Award
may be permitted to continue in effect in accordance with its terms or be
cancelled, as determined by the Committee.
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<PAGE>
Such determination by the Committee shall be made as promptly as
practicable following the end of the Award Period or upon the earlier
termination of employment or performance of services, or at such other time
or times as the Committee shall determine, and shall be made pursuant to
criteria specified by the Committee.
(e) The minimum vesting period for Performance Grants shall be one year.
Payment of any amount in respect of the Performance Grants which the
Committee determines to pay as provided above shall be made by the Company as
promptly as practicable after the end of the Award Period or at such other time
or times as the Committee shall determine, and may be made in cash, Common
Shares, Other Company Securities or property, or other forms of payment, or any
combination thereof or in such other manner, as determined by the Committee in
its discretion. Notwithstanding anything in this Paragraph 8 to the contrary,
the Committee may, in its discretion, determine and pay out the Actual Value of
the Performance Grants at any time during the Award Period.
9. DEFERRAL OF COMPENSATION. The Committee shall determine whether or not an
Award shall be made in conjunction with deferral of the participant's salary,
bonus or other compensation, or any combination thereof, and whether or not
such deferred amounts may be
(i) forfeited to the Company or to other participants or any combination
thereof, under certain circumstances (which may include, but need not be
limited to, certain types of termination of employment or performance of
services for the Company and its Affiliates),
(ii) subject to increase or decrease in value based upon the attainment
of or failure to attain, respectively, certain performance measures and/or
(iii) credited with income equivalents (which may include, but need not
be limited to, interest, dividends or other rates of return) until the date
or dates of payment of the Award, if any.
10. DEFERRED PAYMENT OF AWARDS. The Committee may specify that the payment of
all or any portion of cash, Common Shares, Other Company Securities or
property, or any other form of payment, or any combination thereof, under an
Award shall be deferred until a later date. Deferrals shall be for such periods
or until the occurrence of such events, and upon such terms, as the Committee
shall determine in its discretion. Deferred payments of Awards may be made by
undertaking to make payment in the future based upon the performance of certain
investment equivalents (which may include, but need not be limited to,
government securities, Common Shares, other securities, property or
consideration, or any combination thereof), together with such additional
amounts of income equivalents (which may be compounded and may include, but
need not be limited to, interest, dividends or other rates of return or any
combination thereof) as may accrue thereon until the date or dates of payment,
such investment equivalents and such additional amounts of income equivalents
to be determined by the Committee in its discretion.
11. AMENDMENT OR SUBSTITUTION OF AWARDS UNDER THE PLAN. The terms of any
outstanding Award under the Plan may be amended from time to time by the
Committee in its discretion in any manner that it deems appropriate (provided
that no such amendment may increase the amount of any Award or accelerate the
date of exercise of any Award and for payments thereunder). No such amendment
shall adversely affect in material manner any right of a participant under the
Award without his written consent, unless the Committee determines in its
discretion that there have occurred or are about to occur significant changes
in the participant's position, duties or responsibilities, or significant
changes in economic, legislative, regulatory, tax, accounting or cost/benefit
conditions which are determined by the Committee in its discretion to have or
to be expected to have a substantial effect on the performance of the Company,
or any subsidiary, affiliate, division or department thereof, on the Plan or on
any Award under the Plan. The Committee may, in its discretion, permit holders
of Awards under the Plan to surrender outstanding Awards in order to exercise
or realize the rights under other Awards, or in exchange for the grant of new
Awards, or require holders of Awards to surrender outstanding Awards as a
condition precedent to the grant of new Awards under the Plan.
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<PAGE>
12. DISABILITY. For the purposes of this Plan, a participant shall be deemed
to have terminated his employment or performance of services for the Company
and its Affiliates by reason of disability, if the Committee shall determine
that the physical or mental condition of the participant by reason of which
such employment of performance of services terminated was such at that time as
would entitle him to payment of monthly disability benefits under the Company's
Long-Term Disability Plan, or, if the participant is not eligible for benefits
under such plan, under any similar disability plan of the Company or an
Affiliate in which he is a participant. If the participant is not eligible for
benefits under any disability plan of the Company or an Affiliate, he shall be
deemed to have terminated such employment or performance of services by reason
of disability if the Committee shall determine that his physical or mental
condition would entitle him to benefits under the Company's Long-Term
Disability Plan if he were eligible therefor.
13. TERMINATION OF A PARTICIPANT. For all purposes under the Plan, the
Committee shall determine whether a participant has terminated employment with,
or the performance for services for, the Company and its Affiliates; provided,
however, that transfers between the Company and an Affiliate or between
Affiliates, and approved leaves of absence shall not be deemed such a
termination.
14. RELATED EMPLOYMENT. For the purposes of this Plan, Related Employment
shall mean the employment or performance of services by an individual for an
employer that is neither the Company nor an Affiliate, provided that (i) such
employment or performance of services is undertaken by the individual at the
request of the Company or an Affiliate, (ii) immediately prior to undertaking
such employment or performance of services, the individual was employed by or
performing services for the Company or an Affiliate or was engaged in Related
Employment as herein defined and (iii) such employment or performance of
services is in the best interests of the Company and is recognized by the
Committee, in its discretion, as Related Employment for purposes for this
Paragraph 14. The death or disability of an individual during a period of
Related Employment as herein defined shall be treated, for purposes of this
Plan, as if the death or onset of disability had occurred while the individual
was employed by or performing services for the Company or an Affiliate.
15. DILUTION AND OTHER ADJUSTMENTS. In the event of any change in the
outstanding Common Shares of the Company by reason of any stock split, stock
dividend, split-up, split-off, spin-off, recapitalization, merger,
consolidation, rights offering, reorganization, combination or exchange of
shares, a sale by the Company of all of its assets, any distribution to
stockholders other than a normal cash dividend, or other extraordinary or
unusual event, if the Committee shall determine, in its discretion, that such
change equitably requires an adjustment in the terms of any Award or the number
of Common Shares available for Awards, such adjustment may be made by the
Committee and shall be final, conclusive and binding for all purposes of the
Plan.
16. DESIGNATION OF BENEFICIARY BY PARTICIPANT. A participant may name a
beneficiary to receive any payment to which he may be entitled in respect of
any Award under the Plan in the event of his death, on a written form to be
provided by and filed with the Committee, and in a manner determined by the
Committee in its discretion. The Committee reserves the right to review and
approve beneficiary designations. A participant may change his beneficiary from
time to time in the same manner, unless such participant has made an
irrevocable designation. Any designation of beneficiary under the Plan (to the
extent it is valid and enforceable under applicable law) shall be controlling
over any other disposition, testamentary or otherwise, as determined by the
Committee in its discretion. If no designated beneficiary survives the
participant and is living on the date on which any amount becomes payable to
such a participant's beneficiary, such payment will be made to the legal
representatives to the participant's estate, and the term "beneficiary" as used
in the Plan shall be deemed to include such person or persons. If there is any
question as to the legal right of any beneficiary to receive a distribution
under the Plan, the Committee in its discretion may determine that the amount
in question be paid to the legal representatives of the estate of the
participant, in which event the Company, the Board and the Committee and the
members thereof, will have no further liability to anyone with respect to such
amount.
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<PAGE>
17. MISCELLANEOUS PROVISIONS.
(a) No employee or other person shall have any claim or right to be granted
an Award under the Plan. Determinations made by the Committee under the Plan
need not be uniform and may be made selectively among eligible individuals
under the plan, whether or not such eligible individuals are similarly
situated. Neither the Plan nor any action taken hereunder shall be construed as
giving any employee or other person any other person any right to continue to
be employed by or perform services for the Company or any Affiliate, and the
right to terminate the employment of or performance of services by any
participants at any time and for any reason is specifically reserved.
(b) No participant or other person shall have any right with respect to the
Plan, the Common Shares reserved for issuance under the Plan or in any Award,
contingent or otherwise, until written evidence of the Award shall have been
delivered to the recipient and all the terms, conditions and provisions of the
Plan and the Award applicable to such recipient (and each person claiming under
or through him) have been met.
(c) Except as may be approved by the Committee where such approval shall not
adversely affect compliance of the Plan with Rule 16b-3 under the Exchange Act,
a participants's rights and interest under the Plan may not be assigned or
transferred, hypothecated or encumbered in whole or in part either directly or
by operation of law or otherwise (except in the event of a participant's death)
including, but not by way of limitation, execution, levy, garnishment,
attachment, pledge, bankruptcy or in any other manner; provided, however, that
any Option or similar right (including, but not limited to, a Stock
Appreciation Right) offered pursuant to the Plan shall not be transferable
other than by will or the laws of descent and distribution and shall be
exercisable during the participant's lifetime only by him.
(d) No Common Shares, Other Company Securities or property, other securities
or property, or other forms of payment shall be issued hereunder with respect
to any Award unless counsel for the Company shall be satisfied that such
issuance will be in compliance with applicable federal, state, local and
foreign legal, securities exchange and other applicable requirements.
(e) It is the intent of the Company that the Plan comply in all respects with
Rule 16b-3 under the Exchange Act, that any ambiguities or inconsistencies in
construction of the Plan be interpreted to give effect to such intention and
that if any provision of the Plan is found not to be in compliance with Rule
16b-3, such provision shall be deemed null and void to the extent requested to
permit the Plan to comply with Rule 16b-3.
(f) The Company and its Affiliates shall have the right to deduct from any
payment made under the Plan any federal, state, local or foreign income or
other taxes required by law to be withheld with respect to such payment. It
shall be a condition to the obligation of the Company to issue Common Shares,
Other Company Securities or property, other securities or property, or other
forms of payment, or any combination thereof, upon exercise, settlement or
payment of any Award under the Plan, that the participant (or any beneficiary
or person entitled to act) pay to the Company, upon its demand, such amount as
may be required by the Company for the purpose of satisfying any liability to
withhold federal, state, local or foreign income or other taxes. If the amount
requested is not paid, the Company may refuse to issue Common Shares, Other
Company Securities or property, other securities or property, or other forms of
payment, or any combination thereof. Notwithstanding anything in the Plan to
the contrary, the Committee may, in its discretion, permit an eligible
participant (or any beneficiary or person entitled to act) to elect to pay a
portion or all of the amount requested by the Company for such taxes with
respect to such Award, at such time and in such manner as the Committee shall
deem to be appropriate (including, but not limited to, by authorizing the
Company to withhold, or agreeing to surrender to the Company on or about the
date such tax liability is determinable, Common Shares, Other Company
Securities or property, other securities or property, or other forms of
payment, or any combination thereof, owned by such person or a portion of such
forms of payment that would otherwise be distributed, or have been distributed,
as the case may be, pursuant to such Award to such person, having a fair market
value equal to the amount of such taxes).
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<PAGE>
(g) The expenses of the Plan shall be borne by the Company. However, if an
Award is made to an individual employed by or performing services for an
Affiliate,
(i) if such Award results in payment of cash to the participant, such
Affiliate shall pay to the Company an amount equal to such cash payment;
and
(ii) if the Award results in the issuance by the Company to the
participant of Common Shares, Other Company Securities or property, other
securities or property, or other forms of payment, or any combination
thereof, such Affiliate shall pay to the Company an amount equal to the
fair market value thereof, as determined by the Committee, on the date such
shares, Other Company Securities or property, other securities or property,
or other forms of payment, or any combination thereof, are issued (or, in
the case of the issuance of Restricted Stock or of Common Shares, Other
Company Securities or property, or other securities or property, or other
forms of payment subject to transfer and forfeiture conditions, equal to
the fair market value thereof on the date on which they are no longer
subject to applicable restrictions), minus the amount, if any, received by
the Company in respect of the purchase of such Common Shares, Other Company
Securities or property, other securities or property or other forms of
payment, or any combination thereof.
(h) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Award under the Plan, and rights to the
payment of Awards shall be no greater than the rights of the Company's general
creditors.
(i) By accepting any Award or other benefit under the Plan, each participant
and each person claiming under or through him shall be conclusively deemed to
have indicated his acceptance and ratification of, and consent to, any action
taken under the Plan by the Company, the Board or the Committee or its
delegates.
(j) Fair market value in relation to Common Shares as of any specific time
shall mean such value as determined by the Committee in accordance with
applicable law.
(k) The masculine pronoun includes the feminine and the singular includes the
plural wherever appropriate.
(l) The appropriate officers of the Company shall cause to be filed any
reports, returns or other information regarding Awards hereunder or any Common
Shares issued pursuant hereto as may be required by Section 13 or 15(d) of the
Exchange Act (or any successor provision) or any other applicable statute, rule
or regulation.
(m) The validity, construction, interpretation, administration and effect of
the Plan, and of its rules and regulations, and rights relating to the Plan and
to Awards granted under the Plan, shall be governed by the substantive laws,
but no the choice of law rules, of the State of Delaware.
(n) The term "For Cause" as referred to in any Awards granted under the Plan
shall mean (i) willful misconduct, (ii) dishonesty, (iii) insubordination, (iv)
conviction of a felony or its equivalent under local law, (v) gross negligence
in the performance of a Participant's employment duties, (vi) failure to abide
by instructions received from the Board of Directors of the Company or its
delegates, (vii) the material or repeated violation of policies and practices
adopted by the Company, including the First Data Corporation Code of Conduct or
(viii) use of illegal drugs or controlled substances or the illegal use of
controlled substances. Any decision of the Committee in the interpretation and
administration of the Plan shall lie within its sole and absolute discretion
and shall be final, conclusive and binding on all parties.
18. PLAN AMENDMENT OR SUSPENSION. The Plan may be amended or suspended in
whole or in part at any time from time to time by the Board, but no amendment
shall be effective unless and until the same is approved by stockholders of the
Company where the failure to obtain such approval would adversely affect the
compliance of the Plan with Rule 16b-3 under the Exchange Act and with other
applicable law. No
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amendment of the Plan shall adversely affect in a material manner any right of
any participant with respect to any Award theretofore granted without such
participant's written consent, except as permitted under Paragraph 11.
19. PLAN TERMINATION. This Plan shall terminate upon the earlier of the
following dates or events to occur:
(a) upon the adoption of a resolution of the Board terminating the Plan; or
(b) ten years from the date the Plan is initially approved and adopted by the
sole stockholder of the Company in accordance with Paragraph 21 hereof;
provided, however, that the Board may, prior to the expiration of such ten-year
period, extend the term of the Plan for an additional period of up to five
years for the grant of Awards other than Incentive Stock Options. No
termination of the Plan shall materially alter or impair any of the rights or
obligations of any person, without his consent, under any Award theretofore
granted under the Plan, except that subsequent to termination of the Plan, the
Committee may make amendments permitted under Paragraph 11.
20. STOCKHOLDER ADOPTION. The Plan shall be submitted to American Express
Company, the sole stockholder of the Company, for its approval and adoption in
accordance with applicable law and Rule 16b-3 under the Exchange Act. The Plan
shall not be effective and no award shall be made hereunder unless and until
the Plan has been so approved and adopted.
21. COMPLIANCE WITH STATE AND FEDERAL LAW IN AUSTRALIA. The obligation of the
Company to carry out the terms of this Agreement is subject to the condition
precedent that they be carried out and are able to be carried out in full
compliance with all requirements of State and Federal Law in Australia.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS OF FIRST DATA
Section 145 of the Delaware General Corporation Law (the "DGCL") empowers a
Delaware corporation to indemnify any persons who are, or are threatened to be
made, parties to any threatened, pending or completed legal action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of such corporation), by reason of the fact
that such person was an officer or director of such corporation, or is or was
serving at the request of such corporation as a director, officer, employee or
agent of another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided that such officer or director acted in good faith
and in a manner he reasonably believed to be in or not opposed to the
corporation's best interests, and, for criminal proceedings, had no reasonable
cause to believe his conduct was illegal. A Delaware corporation may indemnify
officers and directors in an action by or in the right of the corporation under
the same conditions, except that no indemnification is permitted without
judicial approval if the officer or director is adjudged to be liable to the
corporation in the performance of his duty. Where an officer or director is
successful on the merits or otherwise in the defense of any action referred to
above, the corporation must indemnify him against the expenses which such
officer or director actually and reasonably incurred.
In accordance with the DGCL, the First Data Restated Certificate of
Incorporation (the "First Data Certificate") contains a provision to limit the
personal liability of the directors of First Data for violations of their
fiduciary duty. This provision eliminates each director's liability to First
Data or its stockholders for monetary damages except to the extent provided by
the DGCL (i) for any breach of the director's duty of loyalty to First Data or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the DGCL providing for liability of directors for unlawful payment of
dividends or unlawful stock purchases or redemptions, or (iv) for any
transaction from which a director derived an improper benefit. The effect of
this provision is to eliminate the personal liability of directors for monetary
damages for actions involving a breach of their fiduciary duty of care,
including any such actions involving gross negligence.
The First Data Certificate and the First Data By-laws provide for
indemnification of First Data's officers and directors to the full extent
permitted by applicable law, except that the First Data By-laws provide that
First Data is required to indemnify an officer or director in connection with a
proceeding initiated by such person only if the proceeding was authorized by
the First Data Board of Directors. In addition, First Data maintains insurance
policies which provide coverage for its officers and directors in certain
situations where First Data cannot directly indemnify such officers or
directors.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) A list of exhibits included as part of this Registration Statement is set
forth in the Exhibit Index appearing elsewhere herein and is incorporated
herein by reference. The Registrant agrees to furnish supplementally a copy of
any omitted schedule to the Commission upon request.
(b) Not applicable.
(c) The opinion of Smith Barney, Inc. is included as Annex II to the Joint
Proxy Statement/Prospectus. The opinion of Morgan Stanley & Co. Incorporated is
included as Annex III to the Joint Proxy Statement/Prospectus.
S-1
<PAGE>
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes: (1) to file, during any
period in which offers or sales are being made, a post-effective amendment to
this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933,
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (u)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
(c) (1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(2) The Registrant undertakes that every prospectus (i) that is filed
pursuant to the paragraph immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
S-2
<PAGE>
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form S-4, within one business day of receipt
of such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
S-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
HACKENSACK, STATE OF NEW JERSEY, ON SEPTEMBER 25, 1995.
First Data Corporation
/s/ Henry C. Duques
By: _________________________________
Henry C. Duques
Chairman of the Board
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
IMMEDIATELY BELOW CONSTITUTES AND APPOINTS DAVID P. BAILIS, JOHN S. ZIESER AND
THOMAS A. ROSSI, AND EACH OR ANY OF THEM, HIS TRUE AND LAWFUL ATTORNEY-IN-FACT
AND AGENT, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN
HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY AND ALL
AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION
STATEMENT, AND TO FILE THE SAME WITH ALL EXHIBITS THERETO AND OTHER DOCUMENTS
IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING
UNTO SAID ATTORNEY-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND
AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND
NECESSARY TO BE DONE, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD
DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT
AND AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY
LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Henry C. Duques Chairman of the Board and September 25, 1995
____________________________________ Chief Executive Officer
Henry C. Duques
/s/ Lee Adrean Chief Financial Officer September 25, 1995
____________________________________ (Principal Financial
Lee Adrean Officer)
/s/ Cheryl L. King Vice President and September 25, 1995
____________________________________ Controller (Principal
Cheryl L. King Accounting Officer)
/s/ Ben Burdetsky Director September 25, 1995
____________________________________
Ben Burdetsky
</TABLE>
S-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Courtney F. Jones Director September 25, 1995
____________________________________
Courtney F. Jones
/s/ Robert J. Levenson Director September 25, 1995
____________________________________
Robert J. Levenson
/s/ James D. Robinson III Director September 25, 1995
____________________________________
James D. Robinson III
/s/ Charles T. Russell Director September 25, 1995
____________________________________
Charles T. Russell
/s/ Bernard L. Schwartz Director September 25, 1995
____________________________________
Bernard L. Schwartz
/s/ Garen K. Staglin Director September 25, 1995
____________________________________
Garen K. Staglin
</TABLE>
S-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
2.1 Agreement and Plan of Merger dated as of June 12, 1995 among First
Data Corporation, FDC Merger Corp. and First Financial Management
Corporation (incorporated by reference to First Data's Current Re-
port on Form 8-K dated June 12, 1995)
2.2 First Amendment to Agreement and Plan of Merger dated as of Septem-
ber 19, 1995 among First Data Corporation, FDC Merger Corp. and
First Financial Management Corporation
3.1 First Data Restated Certificate of Incorporation (incorporated by
reference to Exhibit 3 to First Data's Current Report on Form 8-K
dated June 30, 1995)
3.2 Form of Amendment to the First Data Restated Certificate of Incorpo-
ration to increase the number of authorized shares of First Data
Common Stock
3.3 Form of Amendment to the First Data Restated Certificate of Incorpo-
ration to confer upon the Board of Directors of First Data the power
to adopt, amend or repeal the By-laws
3.4 First Data By-laws, as amended to date (incorporated by reference to
Exhibit 28.2 of First Data's Quarterly Report on Form 10-Q for the
three months ended March 31, 1992)
4.1 The instruments defining the rights of holders of long-term debt se-
curities of First Data and its subsidiaries are omitted pursuant to
Item 601(b)(4)(iii)(A) of Regulation S-K. First Data hereby agrees
to furnish copies of these instruments to the Commission upon re-
quest
5.1 Opinion of Thomas A. Rossi, Esq., Senior Counsel to First Data, re-
garding the legality of the securities being registered
8.1 Form of opinion of Sutherland, Asbill & Brennan regarding certain
federal income tax
consequences of the Merger
10.1 Form of First Data Corporation Employee Payroll Savings Stock Pur-
chase Plan (incorporated by reference to Exhibit 10.15 to First
Data's registration statement on Form S-1 (File No. 33-45741))
10.2 Form of First Data Corporation 1992 Long-Term Incentive Plan (incor-
porated by reference to Exhibit 10.16 to First Data's registration
statement on Form S-1 (File No. 33-45741))
10.3 Form of First Data's 1992 Long-Term Incentive Plan as proposed to be
amended (included as Annex IV to the Joint Proxy
Statement/Prospectus)
10.4 1992 Long-Term Incentive Plan Performance Grant Agreement dated Jan-
uary 1, 1993 between First Data and Henry C. Duques (incorporated by
reference to Exhibit 10.16 to First Data's registration statement on
Form S-1 (File No. 33-59440))
10.5 Letter agreement dated March 4, 1993 between First Data and Edward
C. Nafus (incorporated by reference to Exhibit 10.16 to First Data's
registration statement on Form S-1 (File No. 33-59440))
10.6 Form of 1992 Long-Term Incentive Plan Performance Grant Agreement
dated January 1, 1994 between First Data and its executive vice
presidents (incorporated by reference to Exhibit 10.5 to First
Data's Annual Report on Form 10-K for the year ended December 31,
1993 dated March 16, 1994)
10.7 Form of First Data Corporation 1993 Director's Stock Option Plan
(incorporated by reference to Exhibit 10.6 to First Data's Annual
Report on Form 10-K for the year ended December 31, 1994)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
10.8 364 Day Credit Agreement, dated as of February 1, 1995, among First
Data, Chemical Bank, as administrative agent, and the Banks and
Other Financial Institutions Parties Thereto (incorporated by refer-
ence to Exhibit 10.7 to First Data's Annual Report on Form 10-K for
the year ended December 31, 1994)
10.9 5 Year Credit Agreement, dated as of February 1, 1995, among First
Data, Chemical Bank, as administrative agent, and the Banks and
Other Financial Institutions Parties Thereto (incorporated by refer-
ence to Exhibit 10.8 to First Data's Annual Report on Form 10-K for
the year ended December 31, 1994)
15.1 Letter from Ernst & Young LLP re: Unaudited interim financial infor-
mation of First Data (incorporated by reference to Exhibit 15 to
First Data's Quarterly Report on Form 10-Q for the three months
ended June 30, 1995)
21.1 Subsidiaries of First Data (incorporated by reference to Exhibit 21
to First Data's Annual Report on Form 10-K for the year ended Decem-
ber 31, 1994)
23.1 Consent of Ernst & Young LLP with respect to the First Data finan-
cial information
23.2 Acknowledgement letter of Ernst & Young LLP with respect to First
Data's unaudited financial information
23.3 Consent of Ernst & Young LLP with respect to the CESI Holdings, Inc.
financial information
23.4 Consent of Deloitte & Touche LLP with respect to the First Financial
financial information
23.5 Consent of Price Waterhouse LLP with respect to the Western Union
Financial Services, Inc. financial information
23.6 Consent of Thomas A. Rossi, Esq. (included in the opinion filed as
Exhibit 5.1 to this Registration Statement)
23.7 Consent of Sutherland, Asbill & Brennan
24.1 Powers of Attorney (set forth on the signature pages to this Regis-
tration Statement)
99.1 Form of proxy to be mailed to the stockholders of First Data
99.2 Form of proxy to be mailed to the stockholders of First Financial
</TABLE>
<PAGE>
EXHIBIT 2.2
FIRST AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
This First Amendment to Agreement and Plan of Merger, dated as of September
19, 1995 (this "First Amendment"), among First Data Corporation, a Delaware
corporation ("Parent"), FDC Merger Corp., a Georgia corporation and a wholly
owned subsidiary of Parent ("Sub"), and First Financial Management Corporation,
a Georgia corporation (the "Company").
WITNESSETH:
Whereas, Parent, Sub and the Company have entered into that certain Agreement
and Plan of Merger dated as of June 12, 1995 (the "Merger Agreement"),
providing for the merger of Sub with and into the Company upon the terms and
subject to the conditions contained therein; and
Whereas, in connection with the settlement of certain litigation commenced by
certain stockholders of the Company, the parties hereto desire to amend the
Merger Agreement in accordance with Section 7.3 thereto.
Now, Therefore, in consideration of the premises and of the mutual agreements
set forth herein, the parties hereto agree as follows:
1. Section 7.1 of the Merger Agreement is hereby amended by deleting from
subsection (d) thereto the reference to "May 31, 1996" and substituting
therefor the date "August 31, 1996."
2. Section 5.7 of the Merger Agreement is hereby amended by deleting from
subsection (b)(ii) thereto and from the second paragraph under subsection
(c) thereto the references to "$70 million" and substituting therefor the
number "$68 million."
3. The Merger Agreement, as amended by this First Amendment, shall remain
in full force and effect in accordance with its terms. This First Amendment
may be executed in one or more counterparts. No modification of this First
Amendment shall be valid unless in writing and signed by the parties
hereto. In the event of any conflict between the provisions of this First
Amendment and the provisions of the Merger Agreement, the provisions of
this First Amendment shall control.
<PAGE>
In Witness Whereof, the parties hereto have executed this First Amendment to
the Merger Agreement as of the date first written above.
First Data Corporation
/s/ David P. Bailis
By: _________________________________
David P. Bailis
Secretary
Attest:
/s/ Thomas A. Rossi
- -------------------------------------
Thomas A. Rossi
Assistant Secretary
FDC Merger Corp.
/s/ David P. Bailis
By: _________________________________
David P. Bailis
Secretary
Attest:
/s/ Thomas A. Rossi
- -------------------------------------
Thomas A. Rossi
Assistant Secretary
First Financial Management
Corporation
/s/ Randolph L. M. Hutto
By: _________________________________
Name: Randolph L. M. Hutto
Title: Senior Executive Vice
President
Attest:
/s/ Barry W. Burt
- -------------------------------------
Name: Barry W. Burt
Title: Assistant Secretary
2
<PAGE>
EXHIBIT 3.2
FORM OF STOCK AMENDMENT
The first paragraph of Article FOURTH of the First Data Restated Certificate
of Incorporation will be amended to read in its entirety as follows:
"FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 600,000,000 shares of Common Stock, each having
a par value of $.01 per share, and 10,000,000 shares of Preferred Stock,
each having a par value of $1.00 per share."
<PAGE>
EXHIBIT 3.3
FORM OF BY-LAWS AMENDMENT
The First Data Restated Certificate of Incorporation will include the
following new Article NINTH:
"NINTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, amend or
repeal the By-laws of the Corporation."
<PAGE>
EXHIBIT 5.1
September 21, 1995
Board of Directors
First Data Corporation
401 Hackensack Avenue
Hackensack, New Jersey 07601
Re: COMMON STOCK OF FIRST DATA CORPORATION
Gentlemen:
I have acted as counsel to First Data Corporation, a Delaware corporation
(the "Company"), in connection with the preparation and filing with the United
States Securities and Exchange Commission (the "Commission") under the United
States Securities Act of 1933, as amended (the "Securities Act"), of the
Company's registration statement on Form S-4 (the "Registration Statement"),
relating to the registration of shares of the Company's common stock, par value
$0.01 per share, (the "First Data Common Stock") to be issued in accordance
with the terms of the Agreement and Plan of Merger, dated as of June 12, 1995,
as amended (the "Merger Agreement"), among First Financial Management
Corporation, FDC Merger Corp. and the Company.
In arriving at the opinions expressed below, I have reviewed the Merger
Agreement and the Registration Statement and the Exhibits thereto. In addition,
I have reviewed the originals or copies certified or otherwise identified to my
satisfaction of all such corporate records of the Company and such other
instruments and other certificates of public officials, officers and
representatives of the Company and such other persons, and I have made such
investigations of law, as I have deemed appropriate as a basis for the opinions
expressed below. In rendering the opinions expressed below, I have assumed that
the signatures on all documents that I have reviewed are genuine and that the
First Data Common Stock will conform in all material respects to the
description thereof set forth in the Registration Statement.
Based on the foregoing, it is my opinion that the shares of First Data Common
Stock to be issued pursuant to the Merger Agreement have been duly authorized
by all necessary corporate action of the Company and, when issued in accordance
with such authorization and delivered and exchanged following consummation of
the Merger as contemplated in the Registration Statement, will be validly
issued, fully paid and nonassessable.
The foregoing opinions are limited to the federal law of the United States of
America and the General Corporation Law of the State of Delaware. I express no
opinion as to the application of the various state securities laws (blue sky
laws) to the offer, sale, issuance or delivery of the First Data Common Stock.
I hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to all references to me included in or made a part
of the Registration Statement. In giving such consent, I do not admit that I am
an "expert" under the Securities Act or the rules and regulations of the
Commission issued thereunder with respect to any part of the Registration
Statement, including this Exhibit.
Very truly yours,
/s/ Thomas A. Rossi
Thomas A. Rossi
Senior Counsel
First Data Corporation
<PAGE>
EXHIBIT 8.1
[FORM OF OPINION OF SUTHERLAND, ASBILL & BRENNAN]
, 1995
Board of Directors
First Financial Management Corporation
Suite 1400
5660 New Northside Drive
Atlanta, Georgia 30328
Members of the Board:
We have acted as counsel to First Financial Management Corporation ("First
Financial") in connection with the merger (the "Merger") of FDC Merger Corp.
("Sub"), a wholly owned subsidiary of First Data Corporation ("First Data"),
into First Financial. The Merger is being effected pursuant to the terms of the
Agreement and Plan of Merger, as amended (the "Merger Agreement"), among First
Data, Sub and First Financial, dated as of June 12, 1995. Section 6.2(b) of the
Merger Agreement provides that the receipt of this opinion is a condition to
the obligation of First Financial to effect the Merger. The capitalized terms
which are used in this opinion but not otherwise defined herein have the same
meaning in this opinion as in the Merger Agreement.
In issuing our opinion, we have reviewed the Merger Agreement, the Joint
Proxy Statement/Prospectus included in the registration statement (the
"Registration Statement") on Form S-4, as amended, filed by First Data with the
Securities and Exchange Commission on September , 1995, the representations
made by First Data in the Parent Tax Certificate referred to in Section 2.9(b)
of the Merger Agreement and in a letter dated September 20, 1995, the
representations made by First Financial in the Company Tax Certificate referred
to in Section 3.9(b) of the Merger Agreement, and such other documents as we
have deemed appropriate. Our opinion is based upon our understanding that the
facts and representations set forth in this letter are true and correct as of
the present time and will be true and correct as of the Effective Time of the
Merger.
First Financial is a Georgia corporation engaged in the business of providing
a variety of information services. First Financial has a single class of voting
common stock ("First Financial Common Stock") outstanding.
First Data is a Delaware corporation which provides information processing
and related services. First Data has a single class of voting common stock
("First Data Common Stock") outstanding.
Sub is a Georgia corporation formed by First Data solely for purposes of
consummating the transactions contemplated by the Merger Agreement. Sub has no
assets or business and has not carried on any activities other than incident to
its formation and in connection with the transactions contemplated by the
Merger Agreement.
The boards of directors of First Financial and First Data have determined
that the Merger is in the respective best interests of the corporations and
their shareholders.
The Merger will be effected in accordance with the Georgia Business
Corporation Code (the "GBCC"). In the Merger, Sub will be merged into First
Financial at the Effective Time, and First Financial will continue as the
Surviving Corporation and a wholly owned subsidiary of First Data. The Merger
Agreement provides that each share of First Financial Common Stock issued and
outstanding immediately prior to the Effective Time will be converted into
1.5859 shares of First Data Common Stock (except for any shares of First
Financial Common Stock held by First Data, First Financial or their respective
subsidiaries, which will be cancelled). Cash will be paid in lieu of fractional
shares of First Data Common Stock. Under the GBCC,
<PAGE>
the holders of shares of First Financial Common Stock are not entitled to
appraisal rights in connection with the Merger. Each outstanding share of
common stock of Sub will be converted into one share of common stock of the
Surviving Corporation.
Under Section 2.9(b) of the Merger Agreement and a letter dated September 20,
1995, First Data has represented that the following representations set forth
in the Parent Tax Certificate are true and correct:
1. The fair market value of the First Data Common Stock and cash received
by each First Financial stockholder will be approximately equal to the fair
market value of the First Financial Common Stock surrendered in the
exchange by each such stockholder.
2. Following the Merger, First Financial will hold at least 90 percent of
the fair market value of Sub's net assets and at least 70 percent of the
fair market value of Sub's gross assets held immediately prior to the
Effective Time. For purposes of this representation, amounts used by Sub to
pay reorganization expenses will be included as assets of Sub immediately
prior to the Merger.
3. Prior to the Merger, First Data will be in control of Sub within the
meaning of Section 368(c) of the Internal Revenue Code of 1986, as amended
(the "Code").
4. First Data has no plan or intention to cause First Financial, after
the Merger, to issue additional shares of First Financial stock that would
result in First Data losing control of First Financial within the meaning
of Section 368(c) of the Code.
5. As of the Effective Time, First Data or any corporation affiliated
with First Data (i) will not be under any obligation and will not have
entered into any agreement to redeem or repurchase any of the First Data
Common Stock issued in the Merger or to make any extraordinary
distributions in respect of the First Data Common Stock and (ii) will have
no plan or intention to reacquire any of the First Data Common Stock issued
in the Merger. Notwithstanding the foregoing, it is understood that First
Data may repurchase shares of First Data Common Stock pursuant to an open-
market repurchase program.
6. Neither First Data nor any corporation affiliated with First Data has
any plan or intention to liquidate First Financial, to merge First
Financial with and into another corporation, to sell or otherwise dispose
of any stock of First Financial except for transfers of the stock of First
Financial to corporations controlled by First Data (within the meaning of
Section 368(c) of the Code) at the time of the transfer, or to cause First
Financial to sell or otherwise dispose of any of its assets or of any of
the assets acquired from Sub, except for dispositions made in the ordinary
course of business or transfers of assets to a corporation of which First
Financial has control (within the meaning of Section 368(c) of the Code) at
the time of such transfer (it being understood that First Data has advised
us that, consistent with its prior practice, it might in the future make a
determination to transfer to one or more "alliances" in which First Data
and/or one or more of its direct or indirect subsidiaries has an interest a
portion of NaBANCO's and its subsidiaries' merchant credit card processing
contracts). In no event will First Data be deemed to have breached the
representation contained in this paragraph 6 if merchant contracts
transferred to the alliances have an aggregate value as of the Effective
Time not in excess of 20% of the equity value of First Financial as of the
Effective Time.
7. Sub will have no liabilities assumed by First Financial, and will not
transfer to First Financial any assets subject to liabilities, in the
Merger.
8. Assuming the correctness of paragraph 15 of the Company Tax
Certificate, following the Merger First Data will cause First Financial to
continue its "historic business" or use a "significant portion" of its
"historic business assets" in a business (as such terms are used in Treas.
Reg. (S) 1.368-1(d)).
9. First Data and Sub will pay their respective expenses, if any,
incurred in connection with the Merger.
10. There is no intercorporate indebtedness existing between First Data
and First Financial or between Sub and First Financial that was issued, was
acquired or will be settled at a discount.
11. The First Data Common Stock that will be exchanged for First
Financial Common Stock in the Merger is voting stock within the meaning of
Section 368(a)(2)(E) of the Code.
2
<PAGE>
12. As of the Effective Time, neither First Data nor any corporation
affiliated with First Data will own beneficially or of record, nor will it
have owned during the past five years, more than 500 shares of the stock or
securities of First Financial or options or instruments giving the holder
thereof the right to acquire stock or securities of First Financial.
13. First Data and Sub are not investment companies as defined in
Sections 368(a)(2)(F)(iii) and (iv) of the Code.
14. The payment of cash in lieu of fractional shares of First Data Common
Stock is solely for the purpose of avoiding the expense and inconvenience
to First Data of issuing fractional shares and does not represent
separately bargained-for consideration.
15. The total cash consideration that will be paid in the Merger to the
holders of First Financial Common Stock instead of issuing fractional
shares of First Data Common Stock will not exceed one percent of the total
consideration that will be issued in the Merger to the holders of First
Financial Common Stock in exchange for their First Financial Common Stock.
16. None of the compensation received by any stockholder-employees of
First Financial will be separate consideration for, or allocable to, any of
their shares of First Financial Common Stock.
17. None of the First Data Common Stock received by any stockholder-
employees of First Financial will be separate consideration for, or
allocable to, any employment agreement.
18. The compensation paid to any stockholder-employees of First Financial
with respect to periods after the Effective Time will be for services
actually rendered.
Under Section 3.9(b) of the Merger Agreement, First Financial has represented
that the following representations set forth in the Company Tax Certificate are
true and correct:
1. The fair market value of the First Data Common Stock and cash received
by each First Financial stockholder will be approximately equal to the fair
market value of the First Financial Common Stock surrendered in the
exchange by each such stockholder.
2. To the best of the knowledge of the management of First Financial,
there is no plan or intention on the part of the holders of First Financial
Common Stock to sell, exchange, or otherwise dispose of a number of shares
of First Data Common Stock received in the Merger that would reduce the
First Financial stockholders' ownership of First Data Common Stock to a
number of shares having a value, as of the Effective Time, of less than 50
percent of the value of all the formerly outstanding shares of First
Financial Common Stock as of the same date. For purposes of this
representation, shares of First Financial Common Stock exchanged for cash
in lieu of fractional shares of First Data Common Stock will be treated as
outstanding First Financial Common Stock at the Effective Time. Moreover,
shares of First Financial Common Stock otherwise sold, redeemed or disposed
of prior to the Merger in contemplation of the Merger will be considered in
making this representation. No holder of First Financial Common Stock owns
(beneficially or of record) five percent or more of the First Financial
Common Stock.
3. Following the Merger, First Financial will hold at least 90 percent of
the fair market value of its net assets and at least 70 percent of the fair
market value of its gross assets held immediately prior to the Merger. For
purposes of this representation, amounts paid by First Financial to holders
of First Financial Common Stock who receive cash or other property, amounts
used by First Financial to pay reorganization expenses and all redemptions
and distributions (excluding regular, normal dividends) made by First
Financial will be included as assets of First Financial immediately prior
to the Merger.
4. First Financial and the stockholders of First Financial will pay their
respective expenses, if any, incurred in connection with the Merger, except
as provided in Section 5.11 of the Merger Agreement.
5. There is no intercorporate indebtedness existing between Parent and
First Financial or between Sub and First Financial that was issued, was
acquired or will be settled at a discount.
3
<PAGE>
6. At the Effective Time, First Financial will not have outstanding any
warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire First Financial stock that, if
exercised or converted, would affect First Data's acquisition or retention
of control of First Financial, as defined in Section 368(c) of the Code.
7. First Financial is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
8. First Financial is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
9. At the Effective Time, the fair market value of the assets of First
Financial will exceed the sum of its liabilities, plus (without
duplication) the amount of liabilities, if any, to which the assets are
subject.
10. None of the compensation received by any stockholder-employees of
First Financial will be separate consideration for, or allocable to, any of
their shares of First Financial Common Stock.
11. None of the First Data Common Stock received by any stockholder-
employees of First Financial will be separate consideration for, or
allocable to, any employment agreement.
12. The compensation paid to any stockholder-employees of First Financial
will be for services actually rendered.
13. In the Merger, shares of First Financial stock representing control
of First Financial, as defined in Section 368(c) of the Code, will be
exchanged solely for First Data Common Stock. For purposes of this
representation, shares of First Financial stock exchanged for cash or other
property originating with First Data will be treated as outstanding First
Financial stock at the Effective Time.
14. First Financial is not a "United States real property holding
corporation" within the meaning of Section 897(c)(2) of the Code.
15. The business carried on by First Financial at the Effective Time is
its "historic business" within the meaning of Treas. Reg. (S) 1.368-1(d).
16. The total cash consideration that will be paid in the Merger to
holders of First Financial Common Stock instead of issuing fractional
shares of First Data Common Stock will not exceed one percent of the total
consideration that will be issued in the Merger to the holders of First
Financial Common Stock in exchange for their First Financial Common Stock.
The fractional share interests of each holder of First Financial Common
Stock will be aggregated, and no holder of First Financial Common Stock
will receive cash in an amount equal to or greater than the per share
closing price determined in accordance with clause (i) of Section 1.8 of
the Merger Agreement.
On the basis of the above facts and representations, it is our opinion that
the Merger will have the following Federal income tax consequences:
(i) The Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and First Financial, Sub and First Data will
each be a party to that reorganization within the meaning of Section 368(b)
of the Code;
(ii) no gain or loss will be recognized by First Data or First Financial
as a result of the Merger;
(iii) no gain or loss will be recognized by the stockholders of First
Financial upon the conversion of their shares of First Financial Common
Stock into shares of First Data Common Stock pursuant to the Merger, except
with respect to cash, if any, received in lieu of fractional shares of
First Data Common Stock;
(iv) the aggregate tax basis of the shares of First Data Common Stock
received in exchange for shares of First Financial Common Stock pursuant to
the Merger (including fractional shares of First Data Common Stock for
which cash is received) will be the same as the aggregate tax basis of such
shares of First Financial Common Stock;
4
<PAGE>
(v) the holding period for shares of First Data Common Stock received in
exchange for shares of First Financial Common Stock pursuant to the Merger
will include the holder's holding period for such shares of First Financial
Common Stock, provided such shares of First Financial Common Stock were
held as capital assets by the holder at the Effective Time; and
(vi) a stockholder of First Financial who receives cash in lieu of a
fractional share of First Data Common Stock will recognize gain or loss
equal to the difference, if any, between such stockholder's basis in the
fractional share (as described in clause (iv) above) and the amount of cash
received.
This opinion is rendered solely with respect to the federal income tax
consequences of the Merger specifically set forth above. We express no opinion
as to the treatment of the Merger under the income or other tax laws of any
foreign, state or local jurisdiction. Our opinions are based upon the present
provisions of the Code, the regulations issued thereunder, current case law and
published rulings of the Internal Revenue Service. The foregoing are subject to
change and such changes may be given retroactive effect. In the event of such
changes, our opinions may be affected.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to our firm and this opinion in
the Joint Proxy Statement/Prospectus included as part of the Registration
Statement.
Very truly yours,
Sutherland, Asbill & Brennan
5
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the incorporation by reference in the Joint Proxy Statement/Prospectus of First
Data Corporation and First Financial Management Corporation, which is made a
part of the Registration Statement on Form S-4 of First Data Corporation, of
our report dated February 3, 1995 with respect to the consolidated financial
statements of First Data Corporation included in its Annual Report on Form 10-K
for the year ended December 31, 1994, filed with the Securities and Exchange
Commission.
Ernst & Young LLP
New York, New York
September 22, 1995
<PAGE>
EXHIBIT 23.2
September 22, 1995
First Data Corporation
We are aware of the incorporation by reference in the Joint Proxy
Statement/Prospectus of First Data Corporation and First Financial Management
Corporation, which is made a part of the Registration Statement on Form S-4 of
First Data Corporation, of our reports dated May 8, 1995 and August 4, 1995
relating to the unaudited consolidated interim financial statements of First
Data Corporation included in its Quarterly Reports on Form 10-Q for the
quarters ended March 31 and June 30, 1995.
Pursuant to Rule 436(c) of the Securities Act of 1933 our reports are not a
part of the registration statement prepared or certified by accountants within
the meaning of Section 7 or 11 of the Securities Act of 1933.
Ernst & Young LLP
New York, New York
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the incorporation by reference in the Joint Proxy Statement/Prospectus of First
Data Corporation and First Financial Management Corporation, which is made a
part of the Registration Statement on Form S-4 of First Data Corporation, of
our report dated August 26, 1994 with respect to the consolidated financial
statements of CESI Holdings, Inc. included in the Current Report on Form 8-K of
First Data Corporation dated March 23, 1995, filed with the Securities and
Exchange Commission.
Ernst & Young LLP
Melville, New York
September 22, 1995
<PAGE>
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of First Data Corporation of our reports dated January 27, 1995 relating to the
consolidated financial statements and schedule of First Financial Management
Corporation as of December 31, 1993 and 1994 and for each of the three years in
the period ended December 31, 1994, appearing in the Annual Report on Form 10-K
of First Financial Management Corporation for the year ended December 31, 1994
and to the reference to us under the heading "Experts" in the Joint Proxy
Statement/Prospectus which is part of this Registration Statement.
Deloitte & Touche LLP
Atlanta, Georgia
September 20, 1995
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Joint Proxy
Statement/Prospectus constituting a part of this Registration Statement on Form
S-4 of our report dated February 22, 1994, relating to the financial statements
of Western Union Financial Services, Inc. (then a wholly owned subsidiary of
New Valley Corporation), which appears in the Current Report on Form 8-K of
First Data Corporation dated July 14, 1995. We also consent to the reference to
us under the heading "Experts" in such Joint Proxy Statement/Prospectus.
Price Waterhouse LLP
Morristown, New Jersey
September 20, 1995
<PAGE>
EXHIBIT 23.7
September 19, 1995
First Data Corporation
401 Hackensack Avenue
Hackensack, New Jersey 07601
Ladies and Gentlemen:
We hereby consent to the references to our firm in the joint proxy statement
and prospectus of First Data Corporation ("First Data") and First Financial
Management Corporation ("First Financial") included in the Registration
Statement on Form S-4 filed by First Data with respect to the proposed merger
of First Financial with a subsidiary of First Data, and expressly consent to
the summarization therein of an opinion to be given by our firm concerning
certain federal income tax consequences of such merger.
Your very truly,
Sutherland, Asbill & Brennan
/s/ George L. Cohen
By: _________________________________
George L. Cohen
<PAGE>
FIRST DATA CORPORATION
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 26, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FIRST DATA
CORPORATION.
The undersigned hereby appoints Henry C. Duques and David P. Bailis, as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of Common
Stock of First Data Corporation held of record by the undersigned at the
Special Meeting of Stockholders of First Data Corporation to be held at Suite
1400, 5660 New Northside Drive, Atlanta, Georgia on October 26, 1995, at 11:00
A.M. local time, and any adjournment or postponement thereof, as follows:
1. The approval of the issuance of Common Stock of First Data Corporation in
connection with the Agreement and Plan of Merger among First Data
Corporation, FDC Merger Corp. and First Financial Management Corporation.
[_] FOR [_] AGAINST [_] ABSTAIN
2. The approval of an amendment to the Restated Certificate of Incorporation
of First Data Corporation to increase the number of authorized shares of
Common Stock from 300,000,000 to 600,000,000.
[_] FOR [_] AGAINST [_] ABSTAIN
3. The approval of an amendment to the Restated Certificate of Incorporation
of First Data Corporation to confer upon the Board of Directors the power to
adopt, amend or repeal the By-laws of First Data Corporation.
[_] FOR [_] AGAINST [_] ABSTAIN
4. The approval of an amendment to the 1992 Long-Term Incentive Plan of First
Data Corporation to increase the number of shares of Common Stock issuable
thereunder.
[_] FOR [_] AGAINST [_] ABSTAIN
5. The approval of the right of the Board of Directors of First Data
Corporation to adjourn the Special Meeting at its discretion, including an
adjournment of the Special Meeting to obtain a quorum and/or solicit
additional stockholder votes for proposals 1, 2, 3 and 4 above.
[_] FOR [_] AGAINST [_] ABSTAIN
6. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting or at any adjournment or
postponement thereof. Management is not aware of any such matters to be
presented for action.
IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS, JUST SIGN ON THE REVERSE SIDE. YOU NEED NOT MARK ANY BOXES.
(continued, and to be signed and dated, on the other side)
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS INDICATED, THIS PROXY WILL BE
VOTED FOR APPROVAL OF PROPOSALS 1, 2, 3, 4 AND 5. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3, 4 AND 5.
The undersigned hereby revokes all proxies heretofore given to vote such
shares.
The undersigned acknowledges receipt of the Notice of Special Meeting of
Stockholders to be held on October 26, 1995 and the related Joint Proxy
Statement/Prospectus.
PLEASE SIGN, DATE AND RETURN PROMPTLY.
---------------------------------------
Signature
---------------------------------------
Signature if held jointly
Dated: _________________________, 1995
(Please sign exactly as your name or names appear to the left. When shares are
held by joint tenants, both should sign. When signing as an executor,
administrator, trustee or guardian, please give the full title of the capacity
in which you are acting, and where more than one executor, etc., is named, a
majority must sign. If a corporation, please sign full corporate name by
president or other authorized officer. If a partnership, please sign full
partnership name by an authorized person.)
<PAGE>
VOTING INSTRUCTIONS FIRST FINANCIAL MANAGEMENT CORPORATION
SAVINGS PLUS PLAN
THIS CARD REQUESTS VOTING INSTRUCTIONS FOR THE PLAN TRUSTEE. IT IS NOT A PROXY
SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS, BUT THE BOARD HAS RECOMMENDED A VOTE FOR THE MATTERS
LISTED BELOW.
The undersigned participant in the Savings Plus Plan (the "Plan") of First
Financial Management ("FFMC") hereby instructs Wachovia Bank of Georgia, N.A.
(the "Trustee") to vote all shares of FFMC Common Stock credited to the
undersigned account(s) under the Plan as of September 15, 1995 as designated
below at the special meeting of stockholders to be held on October 26, 1995,
or any adjournment thereof.
1) PROPOSAL TO APPROVE THE AGREEMENT AND PLAN OF MERGER dated as of June 12,
1995, as amended, among First Data Corporation, FDC Merger Corp. and First
Financial Management Corporation (Check applicable box.)
[_] FOR [_] AGAINST [_] ABSTAIN
2) PROPOSAL TO ADJOURN THE SPECIAL MEETING, if recommended by the management
of First Financial Management Corporation, including an adjournment to
obtain a quorum and/or solicit additional stockholder votes for the above-
referenced Agreement and Plan of Merger (Check applicable box.)
[_] FOR [_] AGAINST [_] ABSTAIN
3) In its discretion, the Trustee is authorized to vote upon such other
business as may properly come before the meeting.
When this voting instruction card is properly executed and returned, the
shares covered hereby will be voted in the manner directed herein by the
undersigned Plan participant. If this voting instruction card is signed and
returned without otherwise specifying how the Trustee should vote, the Trustee
will vote the shares held in the participant's account(s) under the Plan FOR
the matters set forth above and the Trustee may exercise its discretion to
vote on any other business that may properly come before the meeting. If no
voting instruction card is returned, the shares held in the participant's
account(s) under the Plan will be voted with respect to the above matters in
the same proportion as the shares held in the Plan for which voting
instructions are received from Plan participants.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS VOTING INSTRUCTION CARD IN THE
ENCLOSED PREPAID ENVELOPE.
(Continued and to be signed and dated on the reserve side)
- ------------------------------------------------------------------------------
(Continued from the other side)
THE TRUSTEE'S VOTE WITH RESPECT TO
THE TOTAL NUMBER OF SHARES HELD FOR
ALL PLAN PARTICIPANTS WILL BE
REPORTED TO FFMC ON AN AGGREGATE
BASIS FOR ALL SUCH SHARES. EACH
PARTICIPANT'S VOTING INSTRUCTION CARD
WILL BE TREATED AS CONFIDENTIAL AND
WILL NOT BE MADE KNOWN TO ANY
DIRECTOR, OFFICER, EMPLOYEE OR AGENT
OF FFMC.
Please sign exactly as your name
appears below. When signing as
attorney, executor, administrator,
trustee or guardian, please give full
title as such.
-----------------------------------------
Signature
-----------------------------------------
Signature if held jointly
Dated: ___________________________ , 1995
Please mark, sign, date and return this voting instruction card promptly using
the enclosed envelope which requires no postage if mailed in the United
States.
<PAGE>
PROXY
FIRST FINANCIAL MANAGEMENT CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Patrick H. Thomas and M. Tarlton Pittard, and
each of them, as Proxies, each with the power to appoint a substitute, and
hereby authorizes both or either of them to represent and to vote, as
designated below, all the shares of common stock of First Financial Management
Corporation held of record by the undersigned on September 15, 1995, at the
special meeting of stockholders to be held on October 26, 1995, or any
adjournment thereof.
1) PROPOSAL TO APPROVE THE AGREEMENT AND PLAN OF MERGER dated as of June 12,
1995, as amended, among First Data Corporation, FDC Merger Corp. and First
Financial Management Corporation (Check applicable box.)
[_] FOR [_] AGAINST [_] ABSTAIN
2) PROPOSAL TO ADJOURN THE SPECIAL MEETING, if recommended by the management
of First Financial Management Corporation, including an adjournment to
obtain a quorum and/or solicit additional stockholder votes for the above-
referenced Agreement and Plan of Merger (Check applicable box.)
[_] FOR [_] AGAINST [_] ABSTAIN
3) In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR approval of the Agreement and Plan of Merger and FOR adjournment of
the special meeting upon the recommendation of the management of First
Financial Management Corporation.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD IN THE ENCLOSED PREPAID
ENVELOPE.
(Continued and to be signed and dated on the reverse side)
- -------------------------------------------------------------------------------
(Continued from the other side)
PROXY -- SOLICITED BY THE BOARD OF DIRECTORS
Please sign exactly as your name
appears below. When shares are held
by joint tenants, both should sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in the full
corporate name by the President or
other authorized officer. If a
partnership, please sign in the
partnership name by an authorized
person.
---------------------------
Signature
---------------------------
Signature if
held jointly
Dated: _______________ , 1995
Please mark, sign, date and return this proxy card promptly using the enclosed
envelope which requires no postage if mailed in the United States.
<PAGE>
PROXY
FIRST FINANCIAL MANAGEMENT CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Patrick H. Thomas and M. Tarlton Pittard, and
each of them, as Proxies, each with the power to appoint a substitute, and
hereby authorizes both or either of them to represent and to vote, as
designated below, all the shares of common stock of First Financial Management
Corporation held of record by the undersigned on September 15, 1995, at the
special meeting of stockholders to be held on October 26, 1995, or any
adjournment thereof.
1) PROPOSAL TO APPROVE THE AGREEMENT AND PLAN OF MERGER dated as of June 12,
1995, as amended, among First Data Corporation, FDC Merger Corp. and First
Financial Management Corporation (Check applicable box.)
[_] FOR [_] AGAINST [_] ABSTAIN
2) PROPOSAL TO ADJOURN THE SPECIAL MEETING, if recommended by the management
of First Financial Management Corporation, including an adjournment to
obtain a quorum and/or solicit additional stockholder votes for the above-
referenced Agreement and Plan of Merger (Check applicable box.)
[_] FOR [_] AGAINST [_] ABSTAIN
3) In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR approval of the Agreement and Plan of Merger and FOR adjournment of
the special meeting upon the recommendation of the management of First
Financial Management Corporation.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD IN THE ENCLOSED PREPAID
ENVELOPE.
(Continued and to be signed and dated on the reverse side)
- -------------------------------------------------------------------------------
(Continued from the other side)
PROXY -- SOLICITED BY THE BOARD OF DIRECTORS
Please sign exactly as your name
appears below. When shares are held
by joint tenants, both should sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in the full
corporate name by the President or
other authorized officer. If a
partnership, please sign in the
partnership name by an authorized
person.
--------------------------
Signature
--------------------------
Signature if
held jointly
Dated: _____________ , 1995
Please mark, sign, date and return this proxy card promptly using the enclosed
envelope which requires no postage if mailed in the United States.
