<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1996
----------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission file number 1-11073
-----------
FIRST DATA CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 47-0731996
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
401 HACKENSACK AVENUE, HACKENSACK, NEW JERSEY 07601
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 525-4700
-----------------
NOT APPLICABLE
- -----------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Number of Shares Outstanding
Title of each class as of November 1,1996
- ----------------------------------- ----------------------------
Common Stock, $.01 par value 223,785,123
<PAGE>
FIRST DATA CORPORATION
INDEX
-----
PAGE
PART I. FINANCIAL INFORMATION NUMBER
------
Item 1 Consolidated Financial Statements:
Consolidated Statements of Income for the
three and nine months ended September 30, 1996 and 1995...... 3
Consolidated Balance Sheets at September 30, 1996
and December 31, 1995........................................ 4
Consolidated Statements of Cash Flows for the
nine months ended September 30, 1996 and 1995................ 5
Notes to Consolidated Financial Statements................... 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 10
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K............................ 16
2
<PAGE>
FIRST DATA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
1996 1995 1996 1995
-------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
REVENUES
Operating revenues $1,254.4 $1,047.1 $3,584.5 $2,962.1
Other income 4.0 24.1 4.0 105.0
-------------- -------------- ------------- --------------
1,258.4 1,071.2 3,588.5 3,067.1
-------------- -------------- ------------- --------------
EXPENSES
Operating 778.1 676.5 2,267.0 1,917.8
Selling, general & administrative 180.2 164.5 553.8 495.2
Merger, integration and impairment --- --- 16.3 ---
Interest expense 30.3 27.2 81.7 81.7
-------------- -------------- ------------- --------------
988.6 868.2 2,918.8 2,494.7
-------------- -------------- ------------- --------------
Income before inome taxes 269.8 203.0 669.7 572.4
Income taxes 103.2 81.1 257.5 266.9
-------------- -------------- ------------- --------------
Net income $ 166.6 $ 121.9 $ 412.2 $ 305.5
============== ============== ============= ==============
Earnings per common share:
as reported $ 0.72 $ 0.54 $ 1.78 $ 1.38
============== ============== ============= ==============
Earnings per common share:
restated for November 15, 1996
100% stock dividend $ 0.36 $ 0.27 $ 0.89 $ 0.69
============== ============== ============= ==============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
FIRST DATA CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 1996 1995
------------- ------------
<S> <C> <C>
Cash and cash equivalents $ 319.7 $ 231.0
Settlement assets 6,533.1 6,210.6
Accounts receivable, net of allowance for doubtful accounts
of $19.0 (1996) and $20.9 (1995) 905.8 835.9
Property and equipment, net 732.8 571.4
Goodwill, less accumulated amortization
of $379.2 (1996) and $298.1 (1995) 3,518.7 3,246.1
Other intangibles, less accumulated amortization
of $322.2 (1996) and $237.0 (1995) 969.4 720.0
Other assets 526.8 402.8
------------- ------------
$ 13,506.3 $ 12,217.8
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Settlement obiligations $ 6,480.5 $ 6,119.4
Accounts payable and other liabilities 1,508.9 1,378.5
Borrowings 1,565.7 1,127.7
Senior convertible debentures 447.1 447.1
------------- ------------
Total Liabilities 10,002.2 9,072.7
------------- ------------
Commitments and contingencies
Stockholders' Equity:
Common Stock, $.01 par value, authorized 600.0 shares,
issued 224.0 shares 2.2 2.2
Additional paid-in capital 2,078.9 2,021.0
------------- ------------
Paid-in capital 2,081.1 2,023.2
Retained earnings 1,432.1 1,148.8
Other (0.5) 18.7
Less treasury stock at cost, 0.1 shares (1996) and 0.7 shares (1995) (8.6) (45.6)
------------- ------------
Total Stockholder's Equity 3,504.1 3,145.1
------------- ------------
$ 13,506.3 $ 12,217.8
============= ============
See notes to consolidated financial statements.
</TABLE>
4
<PAGE>
FIRST DATA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------------
1996 1995
-------------- -------------
<S> <C> <C>
Cash and cash equivalents at beginning of period $ 231.0 $ 350.5
-------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 412.2 305.5
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization 304.9 252.2
Non-cash portion of merger, integration and
impairment charge 9.9 ---
Gains on sales of businesses, net of taxes (2.4) (23.3)
Other non-cash items 14.0 39.6
Increase (decrease) in cash, excluding the effects of acquistions,
resulting from changes in:
Accounts receivable (59.6) (61.1)
Other assets (54.2) (40.7)
Accounts payable and other liabilities (34.3) (4.5)
Income tax accounts 118.4 107.3
-------------- -------------
Net cash provided by operating activities 708.9 575.0
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Current year acquisitions, net of cash acquired (481.1) (411.3)
Payments related to the Western Union acquisition:
Payment of deferred cash purchase consideration --- (300.0)
Funding of assumed pension obligations for a suspended plan --- (199.0)
Payments related to other businesses previously acquired (40.3) (58.5)
Proceeds from dispositions, net of expenses and taxes paid 11.2 10.2
Additions to property and equipment, net (300.7) (184.2)
Payments to secure customer service contracts, including outlays for
conversion and capitalized systems development costs (171.3) (156.6)
Other investing activities 10.1 (1.0)
-------------- -------------
Net cash used in investing activities (972.1) (1,300.4)
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings, net 86.6 380.5
Net proceeds from issuance of long-term debt 348.8 197.3
Principal payments on long-term debt (16.0) (39.3)
Proceeds from issuance of common stock 130.4 71.1
Purchase of treasury shares (178.4) (54.7)
Cash dividends and other distributions (19.5) (17.7)
-------------- -------------
Net cash provided by financing activities 351.9 537.2
-------------- -------------
Change in cash and cash equivalents 88.7 (188.2)
-------------- -------------
Cash and cash equivalents at end of period $ 319.7 $ 162.3
============== =============
See notes to consolidated financial statements.
</TABLE>
5
<PAGE>
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying consolidated financial statements of First Data Corporation
("FDC" or "the Company") should be read in conjunction with the Company's
consolidated financial statements for the year ended December 31, 1995.
Significant accounting policies disclosed therein have not changed. The
Company completed its merger with First Financial Management Corporation
("FFMC") in October 1995, which was accounted for as a pooling of interests.
Accordingly, the consolidated financial statements included herein give
retroactive effect to this transaction and include the combined operations of
FDC and FFMC for all periods presented. Certain amounts have been
reclassified to conform to the current presentation.
The accompanying consolidated financial statements are unaudited; however, in
the opinion of management, they include all normal recurring adjustments
necessary for a fair presentation of the consolidated financial position of
the Company at September 30, 1996 and the consolidated results of its
operations for the three and nine months ended September 30, 1996 and 1995
and cash flows for the nine months ended September 30, 1996 and 1995. Results
of operations reported for interim periods are not necessarily indicative of
results for the entire year.
FDC operates in a single business segment, providing a variety of information
services primarily to financial institutions and commercial establishments.
The largest category of services involves information processing and funds
transfer related to payment transactions, including credit and debit cards,
checks and other types of payment instruments (such as money transfers, money
orders, and official checks). These services include the authorization,
processing and settlement of credit and debit card transactions, verification
or guarantee of check transactions, and worldwide nonbank money transfers.
Other service areas include information processing for investment companies,
health care claims processing, and data imaging and related information
management services.
FDC recognizes revenues from its information processing services as such
services are performed, recording revenues net of certain costs not
controlled by the Company (primarily interchange fees charged by credit card
associations of $547.2 million and $462.0 million for the three months ended
September 30, 1996 and 1995, respectively, and $1,499.9 million and $1,170.9
million for the nine months ended September 30, 1996 and 1995, respectively).
2. In the fourth quarter of 1995, the Company recorded a $645.7 million merger,
integration and impairment charge and disclosed that plans for the
integration of operations would continue to be implemented during 1996. The
1996 first quarter results include a $16.3 million merger, integration and
impairment charge, which reduced net income by $10.0 million ($.04 per
share), related primarily to integration processes in certain of the
Company's businesses. The charge included $12.0 million of restructuring and
integration costs consisting principally of accruals for personnel severance
(involving approximately 800 employees) with additional charges for lease
termination costs and incurred employee relocations. The remaining $4.3
million of the first quarter charge is impairment costs, principally related
to exiting certain locations and business activities. For the fourth quarter
of 1995 and the first quarter of 1996 restructuring and integration accrued
liabilities totaled $133.2 million, against which $77.7 million of cash
expenditures have been charged through September 30, 1996.
6
<PAGE>
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
3. FDC has guaranteed the $447.1 million of 5% senior convertible debentures
issued by FFMC in December 1994.
FFMC is not required to file periodic reports with the Securities and
Exchange Commission with respect to the outstanding senior convertible
debentures so long as such reports for FDC contain summarized financial
information concerning FFMC. Subsequent to the merger, certain FDC businesses
were merged into certain FFMC subsidiaries, therefore, the current year
results are not comparable with the prior year. The summarized financial
information for FFMC and its subsidiaries is as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------ ------------------
For the periods ended September 30, 1996 1995 1996 1995
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------
(In millions)
Revenues $744.4 $ 537.3 $2,060.3 $1,497.3
Income before income taxes 192.5 87.8 502.1 216.0
Net income 118.9 51.8 309.0 127.3
September 30, December 31,
1996 1995
- ---------------------------------------------------------------------------------------
(In millions)
Goodwill $2,685.0 $1,794.8
Total assets 5,952.1 3,330.2
Borrowings 6.0 24.0
Senior convertible debentures 447.1 447.1
Total liabilities 2,837.3 1,816.6
</TABLE>
4. In January 1996, FDC paid $162.0 million to purchase the remaining interest
in a joint venture relating to Western Union's money transfer services
between the U.S. and Mexico. The purchase price has been classified as
goodwill and, consistent with the Company's accounting for its 1994
acquisition of Western Union, is being amortized over forty years.
In September 1996, FDC completed the acquisition of Donnelley Marketing,
Inc., one of the nation's largest direct marketing firms, for $188.9 million
in cash (net of cash acquired). Based on preliminary allocations of purchase
price, this transaction resulted in approximately $190 million attributable
to goodwill, acquired database and software which will be amortized over
periods ranging from 7 to 30 years.
The Company also acquired three businesses during 1996 expanding FDC's
markets and service offerings in its payment instruments and its information
management services businesses for a total of $69.8 million in cash (net of
7
<PAGE>
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
cash acquired) and the issuance of $22.1 million in notes payable. In
addition, the Company has made payments relating to a number of its alliance
programs with bank clients involving merchant business. All current year
acquisitions have been accounted for as purchases and their results are
included with the Company's results from the effective date of each
acquisition. No pro forma financial information with respect to the above
acquisitions is presented as the aggregate impact is not material.
5. In 1996, the Company issued $350 million in Medium-Term Notes with maturities
ranging from two to five years. The Company also obtained new uncommitted
credit lines of $250 million, under which $75 million is outstanding at
September 30, 1996. The Company used the proceeds to reduce its commercial
paper borrowings. The Company's commercial paper borrowings at September 30,
1996 were $701.0 million under its $1 billion commercial paper program which
was initiated in 1995.
6. Earnings per common share amounts are computed by dividing net income amounts
by weighted average common and common equivalent shares (when dilutive)
outstanding during the period. Amounts utilized in per share computations are
as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------ -----------------
For the periods ended September 30, 1996 1995 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(In millions)
Weighted average shares outstanding:
Simple weighted average shares 223.8 220.1 223.8 215.2
Common stock equivalents 14.0 13.1 14.0 13.3
------ ------ ------ ------
237.8 233.2 237.8 228.5
------ ------ ------ ------
Earnings add back related to senior
convertible debentures $ 3.5 $ 3.5 $ 10.5 $ 10.5
</TABLE>
Common stock equivalents consist of shares issuable under FDC's stock option
plans, shares issuable in connection with previously outstanding FFMC common
stock warrants, and an assumed conversion into common stock of FFMC's senior
convertible debentures. The after tax interest expense and issue cost
amortization on these debentures is added back to net income when common
stock equivalents are included in computing earnings per common share.
7. During the 1995 second quarter, the Company completed the sale of its health
systems business to HBO & Company (HBOC) in exchange for 4 million shares of
HBOC common stock, resulting in a pretax gain of $68.9 million. This pretax
gain was substantially offset by income taxes of $67.7 million relating
thereto. In the 1995 third quarter, the Company sold its investment in HBOC
common stock for $231 million producing pretax and after tax gains of $24.1
million and $15.1 million, respectively. These pretax gains have been
included in "Other Income" on the Company's Consolidated Statements of
Income.
8
<PAGE>
FIRST DATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
8. In September 1996, the Company's Board of Directors declared a two-for-one
stock split, effected in the form of a stock dividend to be distributed on
November 15, 1996 to shareholders of record on November 1, 1996. Pro forma
earnings per common share giving effect to such split for the September 30,
1996 and 1995 periods reported are included on the face of the accompanying
Consolidated Statements of Income. The issued shares and treasury stock,
giving effect to such split, will be restated to 448.0 million and 0.3
million shares, respectively.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
First Data Corporation ("FDC" or "the Company") completed its merger with First
Financial Management Corporation ("FFMC") in October 1995. This business
combination was accounted for as a pooling of interests and, accordingly, the
results of FFMC are included in the Company's results for all periods presented
in the accompanying consolidated financial statements and in the following
discussions.
Results of Operations
Operating revenues for the quarter ended September 30, 1996 were up 20% to $1.25
billion, compared with $1.05 billion in 1995's third quarter. The Company's
internal growth rate in revenues over the prior year quarter (excluding the
effect of acquisitions and divested businesses) was approximately 16%. Operating
revenues for the nine months ended September 30, 1996 were up 21% to $3.58
billion, compared with $2.96 billion in the prior year period. The Company's
internal growth rate in revenue for the nine month period over the prior year
(excluding the effect of acquisitions and divested businesses) was approximately
18%.
Growth in existing businesses, principally due to the addition of new clients
along with volume increases from existing clients and enhanced services to such
clients, accounted for a substantial majority of the revenue increase. The
Company's performance reflects, in particular, continuing strong growth in the
payment instruments, merchant processing, and domestic card issuance business
areas. Though still growing strongly, there continues to be moderation in the
growth rate of international money transfer business due to the stabilization of
the economy and currency exchange rates in Mexico, which has lessened the
urgency to use rapid money transfer services. The internal growth rate includes
the negative impact of a revenue decrease in FDC's health care administrative
services area due principally to the Company's deemphasis of certain aspects of
this business.
The Company derives revenues in its primary service areas based principally on a
unit price per transaction, on a percentage of dollar volume processed, or on a
combination thereof. Lesser amounts of revenue are generated from foreign
currency exchange on money transfer transactions and from sharing in interest
earned on fiduciary funds. The overall 1996 third quarter growth of FDC is
demonstrated by the following key indicators (along with the percentage growth
compared to third quarter 1995): 137 million card accounts on file at September
30, 1996 (+18%), 1.5 billion merchant transactions (+29%) and 115 million
payment instrument transactions, excluding MoneyGram money transfers (+16%).
These growth indicators are a continuation of the second quarter trend,
producing the following 1996 nine month growth in key indicators (along with the
percentage growth compared to the 1995 period): 4.2 billion merchant
transactions (+35%, including the impact of the March 1995 acquisition of CES)
and 340 million payment instrument transactions, excluding MoneyGram money
transfers (+14%).
During the 1995 second quarter, the Company completed the sale of its health
systems business to HBO & Company (HBOC) in exchange for 4 million shares of
HBOC common stock, resulting in a pretax gain of $68.9 million. This pretax
gain was substantially offset by income taxes of $67.7 million relating thereto.
In the 1995 third quarter, the Company sold its investment in HBOC common stock
for $231 million producing pretax and after tax gains of $24.1 million and $15.1
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS (Continued)
million, respectively. These pretax gains have been included in "Other Income"
on the Company's Consolidated Statements of Income. The Company also recorded
third quarter 1995 charges of $17.3 million ($11 million after tax) relating
principally to the writedown of certain intangible assets, excess facility and
severance costs.
Operating expenses for the 1996 third quarter increased 15% to $778.1 million
compared with $676.5 million in 1995 and increased 18% for the nine months ended
September 30, 1996 to $2.3 billion compared with $1.9 billion in the same 1995
period. The growth rates in operating expenses, after excluding the $17.3
million 1995 third quarter charges, as discussed in the preceding paragraph
were 18% and 19%, respectively. These percentage increases continue to be less
than the operating revenue increases for the same periods, reversing a 1995
trend when operating expenses for the year rose at a rate of four percentage
points higher than operating revenue growth. The reversal occurred as a result
of several factors. High growth in certain business units which have a lower
ratio of operating expenses to revenue than the overall Company average, and the
benefits of integration activities which have slowed the rate of growth in
operating expenses, improved the comparison. These positive impacts were
somewhat offset by the continued impact of signing certain new business and
renewing larger customers at lower rates and the impact of FFMC's health care
acquisition in October 1995, which has relatively higher operating expenses
compared with its revenues.
Selling, general and administrative expenses for the quarter ended September 30,
1996 increased to $180.2 million, up 10% from $164.5 million in 1995. The
increase is principally associated with the Company's efforts to attract
customers and increase business levels by devoting resources and expenditures to
marketing and advertising programs for the Company businesses, including its
alliance programs with banks for its merchant processing services. General and
administrative expense increases for the quarter were largely offset by synergy
savings from the merger with FFMC.
Selling, general and administrative expenses for the nine months ended September
30, 1996 increased to $553.8 million, up 12% from $495.2 million in 1995. This
year-to-date increase is higher than the quarter increase primarily due to the
inclusion of the March 1995 CES acquisition, which created unusually high growth
in expenses when comparing first quarter 1996 and 1995.
Interest expense for the 1996 third quarter increased 11% to $30.3 million
compared with $27.2 million in 1995 primarily due to increased borrowings for
acquisitions. Year-to-date interest expense is comparable with 1995 despite
increased borrowing levels, principally due to reduced costs related to assumed
pension obligations in connection with the Western Union acquisition (which has
been classified as interest expense since it is a suspended plan for which
service credits are no longer being earned). In addition, the Company is
currently experiencing lower rates due to the short-term rate environment and
use of the commercial paper program.
In the fourth quarter of 1995, the Company recorded a $645.7 million merger,
integration and impairment charge and disclosed that plans for the integration
of operations would continue to be implemented during 1996. The 1996 results
include a first quarter $16.3 million merger, integration and impairment charge,
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS (Continued)
which reduced net income by $10.0 million ($.04 per share), related primarily to
integration processes in certain of the Company's businesses.
FDC's effective income tax rate of 38.2% and 38.4% in 1996 third quarter and
nine months, respectively, was down from 40.0% and 39.6% (excluding the second
quarter impact of the divestiture discussed above) in the 1995 third quarter and
nine months, respectively. This decline results from the shift in the Company's
revenues in certain of its payment instrument business from taxable processing
income to nontaxable investment income from settlement assets, a trend which is
expected to continue into 1997.
Net income rose 37% to $166.6 million in the quarter ended September 30, 1996
compared with $121.9 million in the prior year quarter and net income margins
increased to 13.2% from 11.4%. This margin increase is due to strong growth in
the merchant services business (which experience higher margins than the overall
FDC margin) and realization of merger synergies from the consolidation of
corporate functions and certain business units, partially offset by the impact
of pricing for larger customers as previously discussed. The impact of these
items is also evident in the results for the 1996 nine months where net income,
(excluding the 1996 merger, integration and impairment charge) rose 38% to
$422.2 million compared with $305.5 million in the prior year period and net
income margins increased to 11.8% from 10.0%, respectively.
Earnings per common share for the quarter were up 33% to $0.72 from $0.54 in
1995. Earnings per common share for the nine months ended September 30, 1996
were up 29% to $1.78 from $1.38. Excluding the 1996 merger, integration and
impairment charge, earnings per share for the nine months ended September 30,
1996 were $1.82, up 32% from the same period in 1995.
On September 18, 1996, the Company's Board of Directors declared a two-for-one
stock split, effected in the form of a stock dividend to be distributed on
November 15, 1996 to shareholders of record on November 1, 1996. Pro forma
earnings per common share giving effect to the stock split, would have been
$0.36 and $0.89 in the 1996 third quarter and nine months, respectively.
Excluding the 1996 merger, integration and impairment charge, earnings per share
for the nine months ended September 30, 1996 would have been $0.91. Earnings per
share for the 1995 third quarter and nine months would have been $0.27 and
$0.69, respectively.
Capital Resources and Liquidity
FDC generated $133.9 million more cash from operating activities during the nine
months of 1996 than the amount generated in the comparable 1995 period, due
principally to higher net income and depreciation and amortization, slightly
offset by a net cash outflow attributable to net working capital items
(principally accounts receivable, accounts payable, and income taxes) in 1996.
FDC reinvests cash in its existing businesses principally to expand its
processing capabilities through property and equipment additions and systems
development, and to establish customer processing relationships through contract
payments and costs for conversion. These cash outlays totaled $472.0 million in
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS (Continued)
the nine months of 1996 compared with $340.8 million in the same 1995 period.
Cash outlays of $481.1 million for acquisitions in the nine months of 1996
consist principally of two acquisitions. A $162 million payment was made in the
first quarter to purchase the remaining interest in a joint venture relating to
Western Union's money transfer services between the U.S. and Mexico. In the
third quarter, a $188.9 million payment was made to purchase Donnelley
Marketing, Inc., a large direct marketing firm. The remainder consists of
payments relating to the Company's alliance programs with bank clients involving
merchant business, and two acquisitions which expanded the Company's markets and
service offerings in its payment instruments business. FDC continues its pattern
of paying quarterly cash dividends, resulting in total cash outlays of $19.5
million for the 1996 nine months.
During the nine months ended September 30, 1996, the Company repurchased 2.4
million shares of common stock in the open market for $178.4 million, pursuant
to a formal plan approved by FDC's Board of Directors. These shares were
substantially all reissued as a result of the exercise of employee stock options
as the Company had only 0.1 million shares in treasury at September 30, 1996.
The Company chose to fund its investing activities through cash from operating
activities and increased borrowings. During 1996, the Company issued $350
million in Medium-Term Notes (with maturities ranging from two to five years)
rather than significantly increase its dependence on short-term borrowings. The
Company obtained $250 million in uncommitted bank lines during 1996 under which
$75 million is outstanding at September 30, 1996 and increased its commercial
paper borrowings slightly during 1996.
The Company has $299 million of available short-term borrowing capacity at
September 30, 1996 under its $1 billion commercial paper program which was
initiated in 1995. Also, the Company has an outstanding shelf registration
statement providing for the future issuance of debt and equity securities up to
$250 million in the aggregate.
Included in cash equivalents on the consolidated balance sheet at September 30,
1996 is $70.0 million related to required investments of cash in connection with
the Company's merchant card settlement operation. FDC's remaining cash and cash
equivalents of $249.7 million is available for general corporate purposes.
The Company believes that its current level of cash and financing capability
along with future cash flows from operations are sufficient to meet the needs of
its existing businesses. However, the Company may from time to time seek
longer-term financing to support additional cash needs or reduce its short-term
borrowings.
FDC is actively pursuing the divestiture of its MoneyGram operation in 1996 to
comply with the Company's agreement with the Federal Trade Commission (FTC) as a
part of the merger with FFMC. On November 4, 1996 the Company received approval
from the FTC to divest the MoneyGram operation through an initial public
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS (Continued)
offering of common stock. On November 7, 1996 an amended registration with
respect to such offering was filed with the Securities and Exchange Commission.
The Company expects to utilize the proceeds from the MoneyGram divestiture to
reduce borrowings under its commercial paper program and for other general
corporate purposes.
14
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Stockholders and Board of Directors
First Data Corporation
We have reviewed the accompanying consolidated balance sheet of First Data
Corporation as of September 30, 1996, and the related consolidated statements of
income for the three-month and nine-months periods ended September 30, 1996 and
1995, and the consolidated statements of cash flows for the nine-month periods
ended September 30, 1996 and 1995. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of First Data Corporation as of
December 31, 1995, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the year then ended (not presented
herein) and in our report dated February 5, 1996, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated balance sheet as of
December 31, 1995, is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
Ernst & Young LLP
New York, New York
November 8, 1996
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
--------
10.1(1)(2) Form of First Data Corporation 1992 Long-Term Incentive
Plan, as amended
10.2(1)(2) Form of First Data Corporation 1993 Director's Stock Option
Plan, as amended
12 Computation of Ratio of Earnings to Fixed Charges
15 Letter from Ernst & Young LLP Regarding Unaudited Interim
Financial Information
27.1 Financial Data Schedule (for SEC use only)
99 Private Securities Litigation Reform Act of 1995 Safe
Harbor Compliance Statement for Forward-Looking Statements
(b) Reports on Form 8-K
-------------------
None.
(1) Filed herewith.
(2) Constitutes a management contract or compensatory plan, contract or
arrangement described under 601(b)(10)(iii)(A) of Regulation S-K.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST DATA CORPORATION
----------------------------------
(Registrant)
Date: November 13, 1996 By /s/ Lee Adrean
------------------------------- -----------------------------------
Lee Adrean
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: November 13, 1996 By /s/ Richard Macchia
------------------------------- -----------------------------------
Richard Macchia
Senior Vice President - Finance
(Principal Accounting Officer)
17
<PAGE>
Exhibit 10.1
FIRST DATA CORPORATION
1992 LONG-TERM INCENTIVE PLAN
(AS AMENDED THROUGH SEPTEMBER 17, 1996)
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, its Subsidiaries 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. 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. References
to the Committee hereunder shall include the Board or the delegate of the
Committee where appropriate.
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.
3. PARTICIPATION. (a) Affiliates. If an Affiliate (as hereinafter
defined) of the Company wishes to participate in the Plan and its participation
<PAGE>
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 (other than a Subsidiary) 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, its Subsidiaries 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 an 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," and (iv) 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.
<PAGE>
(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, 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 14, provided that no more than 4,000,000 Common Shares, subject
to adjustment as provided in Paragraph 14, may be issued as Restricted
Stock. 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 canceled, 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, 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
<PAGE>
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
14, 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, 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.
(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) 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.
(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 cash,
Common Shares or such other form (including, but not limited to the
surrender of another outstanding Award under the Plan) as the Committee may
determine in its discretion; and
<PAGE>
(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;
(C) if such person shall cease such employment for performance of
services by reason of his involuntary termination other than for cause
as defined in Section 16 while holding an Option which has not
expired and has not been fully exercised, such person, at any time
within 90 days 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
(D) 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
<PAGE>
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.
(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;
<PAGE>
(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
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;
(C) if such person shall cease such employment for performance of
services by reason of his involuntary termination other than for cause
as defined in Section 16 while holding an Award of Stock Appreciation
Right which has not expired and has not been fully exercised, such
person, at any time within 90 days after the date he ceased such
employment or performance of services (but in no event after the Award
of Stock Appreciation Right has expired), may exercise the Award of
Stock Appreciation Right with respect to any shares as to which he
could have exercised the Award of Stock Appreciation Right 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
(D) 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
<PAGE>
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
<PAGE>
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, 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
<PAGE>
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. 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.
9. 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.
10. 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
<PAGE>
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.
11. 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.
12. 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.
13. 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 or his or her involuntary
termination of employment 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.
<PAGE>
14. 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.
15. 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.
16. 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.
<PAGE>
(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 participant'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) 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).
(f) 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
<PAGE>
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.
(g) 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.
(h) 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.
(i) 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.
(j) The masculine pronoun includes the feminine and the singular includes
the plural wherever appropriate.
(k) 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 not the choice of law rules, of the State of Delaware.
(l) 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.
<PAGE>
(m) The term "Subsidiary" means any corporation (or partnership, alliance,
joint venture, or other enterprise) of which the Company owns or controls,
directly or indirectly, 50% or more of the outstanding shares of stock normally
entitled to vote for the election of directors (or comparable equity
participation and voting power).
17. 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. No 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 10.
18. 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.
19. 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.
<PAGE>
EXHIBIT 10.2
FIRST DATA CORPORATION
1993 DIRECTOR'S STOCK OPTION PLAN
1. PURPOSE. The purpose of the First Data Corporation 1993 Director's Stock
Option Plan (the "Plan") is to advance the interests of First Data Corporation
(the "Company") and its stockholders by encouraging increased stock ownership by
members of the Board of Directors of the Company (the "Board") who are not
employees of the Company or any of its subsidiaries, in order to promote long-
term stockholder value through continuing ownership of the Company's common
stock.
2. ADMINISTRATION. The Plan shall be administered by the Compensation and
Benefits Committee of the Board (the "Committee"). The Committee shall have all
the powers vested in it by the terms of the Plan, such powers to include
authority (within the limitations described herein) to prescribe the form of the
agreement embodying awards of nonqualified stock options ("NQOs") and purchased
stock options ("PSOs"). The Committee shall, subject to the provisions of the
Plan, grant NQOs and PSOs under the Plan and shall have the power to construe
the Plan, to determine all questions arising thereunder and to adopt and amend
such rules and regulations for the administration of the Plan as it may deem
desirable. Any decisions of the Committee in the administration of the Plan, as
described herein, shall be final and conclusive. 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 number or the Secretary or any other officer of the
Company to execute and deliver documents on behalf of the Committee. No member
of the Committee shall be liable for anything done or omitted to be done by him
or by any other member of the Committee in connection with the Plan, except for
his own willful misconduct or as expressly provided by statute.
3. PARTICIPATION. Each member of the Board who is not an employee of the
Company, any of its subsidiaries or any of its affiliates ("Non-Employee
Director") shall be eligible to receive NQOs and PSOs in accordance with
Paragraphs 5 and 6 below. As used herein, the term "subsidiary" means any
corporation or other trade or business at least 50% of whose outstanding voting
stock is owned, directly or indirectly, by the Company. As used herein, the
term "affiliate" means any person who owns, directly or indirectly, at least 10%
of the outstanding voting stock of the Company.
4. AWARDS UNDER THE PLAN. (a) Type of Awards. Awards under the Plan shall
include only NQOs and PSOs, which are, in both instances, rights to purchase
shares of common stock of the Company having a par value of $.01 per share (the
"common stock") which are awarded or sold, respectively, to participants. All
NQOs and PSOs are subject to terms, conditions and restrictions specified in
Paragraphs 5 and 6 below.
(b) Maximum Number of Shares That May Be Issued. There may be issued under
the Plan pursuant to the exercise of NQOs or PSOs an aggregate of not more than
750,000 shares of common stock, subject to adjustment as provided in Paragraph 7
below. If an NQO or PSO is cancelled, terminates or expires unexercised, in
whole or in
<PAGE>
part, any common stock that would otherwise have been issuable pursuant thereto
will be available for issuance under new NQOs or PSOs granted pursuant to the
Plan.
(c) Rights with Respect to Shares. A Non-Employee Director to whom an NQO
or PSO is granted (and any person succeeding to such a Non-Employee Director's
rights pursuant to the Plan) shall have no rights as a stockholder with respect
to any shares of common stock issuable pursuant to any such NQO or PSO until the
date of exercise of such NQO or PSO. Except as provided in Paragraph 7 below,
no adjustment shall be made for dividends, distributions or other rights
(whether ordinary or extraordinary, and whether in cash, securities or other
property) for which the record date is prior to the date of such exercise.
5. NONQUALIFIED STOCK OPTIONS. Each NQO granted under the Plan shall be
evidenced by an agreement 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:
(a) The NQO exercise price shall be the fair market value of the common
stock subject to such NQO on the date the NQO is granted, which shall be the
average of the closing prices of a share of common stock on each trading day
within the 30 calendar day period ending on the date of grant as reported on the
New York Stock Exchange Composite Transactions Tape.
(b) Each person who is a Non-Employee Director on the relevant date shall
be granted on that date and each person who becomes a Non-Employee Director
thereafter shall be granted as soon as practicable following the date that such
person commences services as a Non-Employee Director, NQOs for 10,000 shares of
common stock ("Initial Grant"). Following the Initial Grant, as of the date of
each annual meeting of the stockholders of the Company ("Stockholders'
Meeting"), each person who is a Non-Employee Director shall as soon as
practicable following the date of such meeting be granted NQOs for 4,000 shares
of common stock, except that, as soon as practicable following the date of the
fourth and eighth Stockholders' Meetings following the Initial Grant, each Non-
Employee Director shall be granted NQOs for 14,000 shares of common stock. The
grants of NQOs for 14,000 shares of common stock shall be in lieu of the grants
of for 4,000 shares which would otherwise be made at the same time.
(c) The NQO shall not be transferable by the optionee otherwise than by
will or the laws of descent and distribution, and shall be exercisable during
his lifetime only by him; and
(d) The NQO shall not be exercisable:
(i) after the expiration of ten years from the date it is granted, and
may be exercised during such period as follows: one-fourth (25%) of the total
number of shares of common stock covered by the NQOs shall become exercisable
each year beginning with the first anniversary of the date it is granted;
(ii) unless payment in full is made for the shares of common stock
<PAGE>
being acquired thereunder at the time of exercise, which payment shall be made
(A) in United States dollars by cash or check, or
(B) in lieu thereof, by tendering to the company shares of common
stock owned by the person exercising the NQO and having a fair market value
equal to the cash exercise price applicable to such NQO, such fair market value
to be the average of the closing prices of a share of common stock on each
trading day in the 30 calendar day period ending on the date of exercise as
reported on the New York Stock Exchange Composite Transactions Tape; or
(C) by a combination of United States dollars and shares of
common stock as aforesaid; and
(iii) unless the person exercising the NQO has been at all times
during the period beginning with the date of grant of the NQO and ending on the
date of such exercise, a Non-Employee Director of the Company, except that
(A) if such person shall cease to be such a Non-Employee Director
for reasons other than death or disability while holding an NQO that has not
expired and has not been fully exercised, unless determined otherwise by the
Committee, such person may, at any time within 120 days of the date he ceased to
be such a Non-Employee Director (but in no event after the NQO has expired under
the provisions of Subparagraph 5(d)(i) above), exercise the NQO with respect to
any shares of common stock as to which he could have exercised the NQO on the
date he ceased to be such a Non-Employee Director or with respect to such
greater number of shares as determined by the Committee; or
(B) if a Non-Employee Director to whom an NQO has been granted
shall die holding an NQO that has not expired and has not been fully exercised,
his executors, administrators, heirs or distributes, as the case may be, may, at
any time within one year after the date of such death (but in no event after the
NQO has expired under the provisions of Subparagraph 5(d)(i) above), exercise
the NQO with respect to any shares of common stock as to which the decedent
could have exercised the NQO at the time of his death or which become
exercisable within one year after his death; or
(C) if a Non-Employee Director to whom an NQO has been granted
shall become disabled (as determined by the Committee) while holding an NQO that
has not expired and has not been fully exercised, he may at any time within
three years after the date of onset of such disability (but in no event after
the NQO has expired under the provisions of Subparagraph 5(d)(i) above),
exercise the NQO with respect to any shares of common stock as to which he could
have exercised the NQO at the time of the onset of disability or which become
exercisable within the three year period after the onset of disability.
6. PURCHASED STOCK OPTIONS. Each PSO purchased under the Plan shall be
evidenced by an agreement in such form as the Committee shall prescribe from
time to time in accordance with the Plan. Except as set forth below, PSOs shall
<PAGE>
be governed by the terms and conditions governing NQOs:
(a) The PSO exercise price shall be an amount equal to the fair market
value of the shares of common stock subject to such PSO on the date such PSO is
purchased as described in Subparagraph 6(d) below, which shall be the average of
the closing prices of a share of common stock on each trading day in the 30
calendar day period ending on the date of such purchase as reported on the New
York Stock Exchange Composite Transactions Tape;
(b) The PSO purchase price shall be an amount equal to ten (10%) percent of
the PSO exercise price;
(c) Each calendar year, each person who is a Non-Employee Director shall be
entitled to purchase PSOs entitling such Non-Employee Director to purchase a
maximum number of shares of common stock equal to the nearest whole number
determined by a fraction, the numerator of which is equal to the dollar value of
the annual retainer to which such Non-Employee Director would be entitled during
such year and the denominator of which is equal to the PSO purchase price.
(d) Each Non-Employee Director who desires to purchase PSOs shall make an
election prior to a date set by the Committee which shall be prior to the
beginning of a year to forgo part or all of his annual retainer for such year in
exchange for PSOs. If no election is made, the election in place for the
preceding year shall be deemed to continue in effect. The Board of Directors or
the Committee or the delegate of either shall approve the PSO purchase and the
date of purchase shall be the date of such approval.
(e) The PSO shall not be exercisable after the expiration of five years
from the date it first becomes exercisable and may be exercised during such
period as follows: one-third (33 1/3%) of the total number of shares of common
stock covered by the PSOs shall become exercisable each year beginning with the
first anniversary of the purchase of such PSOs, as described in Subparagraph
6(c);
(f) The PSO shall not be exercisable unless the person exercising the PSO
has been at all times during the period beginning with the date of purchase of
the PSO and ending on the date of such exercise a Non-Employee Director of the
Company, except that
(i) if such person shall cease to be such a Non-Employee Director for
reasons other than death or disability, while holding a PSO that has not expired
and has not been fully exercised, unless determined otherwise by the Committee,
such person may, at any time within 120 days of the date he ceased to be such a
Non-Employee Director (but in no event after the PSO has expired under the
provisions of Subparagraph 6(e) above), exercise the PSO with respect to any
shares of common stock as to which he could have exercised the PSO on the date
he ceased to be such a Non-Employee Director or with respect to such greater
number of shares as determined by the Committee; and
<PAGE>
(A) in the event that the PSO exercise price is less than the
fair market value of the shares of common stock at the time the Non-Employee
Director ceases to be a director, he shall be entitled to receive the PSO
purchase price plus simple interest credited at the 10 year U.S. Government
Treasury Bond Rate from the PSO purchase date to the date such person ceases to
be a director for all shares of common stock for which the PSOs are not then
exercisable, and
(B) in the event that the PSO exercise price is greater than the
fair market value of the shares of common stock at the time the Non-Employee
Director ceases to be a director, the PSO that is not then exercisable shall
lapse and he shall not be entitled to a return of the PSO purchase price with
respect to the PSOs that are not then exercisable; and
(ii) if a Non-Employee Director to whom a PSO has been granted shall
die holding a PSO that 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 after the date of such death (but in no event after the
PSOs has expired under the provisions of Subparagraph 6(e) above), exercise the
PSOs with respect to any shares of common stock as to which the decedent could
have exercised the PSOs at the time of his death or with respect to which the
PSOs becomes exercisable within one year after his death; and
(A) in the event that the PSO exercise price is less that the
fair market value of the shares of common stock one year after the death of the
Non-Employee Director, his executors, administrators, heirs or distributees, as
the case may be, shall be entitled to receive the PSO purchase price plus simple
interest credited at the 10 year U.S. Government Treasury Bond Rate from the PSO
purchase date to the date that is one year after the death of such Non-Employee
Director for all shares of common stock for which the PSOs are not then
exercisable, and
(B) in the event that the PSO exercise price is greater than the
fair market value of the shares of common stock one year after the death of the
Non-Employee Director, the PSOs that are not then exercisable shall lapse and
his executors, administrators, heirs or distributees, as the case may be, shall
not be entitled to a return of the PSO purchase price with respect to the PSOs
that are not then exercisable; and
(iii) if a Non-Employee Director to whom a PSO has been granted shall
become disabled (as determined by the Committee) while holding PSOs that have
not expired and have not been fully exercised, he may, at any time within three
years after the date of onset of such disability (but in no event after the PSO
has expired under the provisions of Subparagraph 6(e) above), exercise the PSOs
with respect to any shares of common stock as to which he could have exercised
the PSOs at the time of the onset of disability or with respect to which the
PSOs become exercisable within the three year period after the onset of
disability.
7. DILUTION AND OTHER ADJUSTMENTS. In the event of any stock split, stock
dividend, split-up, spin-off, recapitalization, merger, consolidation,
reorganization, combination or exchange of shares, a sale by the Company of all
or part of its assets, any distribution to stockholders, other than a cash
<PAGE>
dividend, or other similar change in capitalization or change in the common
stock, the number or kind of shares or other securities that may be issued under
the Plan pursuant to Subparagraph 4(b) above, and the number or kind of shares
or other securities subject to and the exercise price per share under, all
outstanding NQOs or PSOs shall be appropriately adjusted by the Committee; such
adjustment in outstanding NQOs and PSOs shall be made without change in the
total NQO and PSO exercise price applicable to the unexercised portion of such
NQOs and PSOs and with an adjustment in the NQO and PSO exercise price per
share, and such adjustment shall be conclusive and binding for all purposes of
the Plan.
8. MISCELLANEOUS PROVISIONS.
(a) Except as expressly provided for in the Plan, no Non-Employee Director
or other person shall have any claim or right to be granted an NQO or PSO under
the Plan. Neither the Plan nor any action taken hereunder shall be construed as
giving any Non-Employee Director any right to be retained in the service of the
Company.
(b) A participant'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, by will or the laws of descent or distribution), including, but not by
way of limitation, execution, levy, garnishment, attachment, pledge, bankruptcy
or in any other manner, and no such right or interest of any participant in the
Plan shall be subject to any obligation or liability of such participant.
(c) No shares of common stock shall be issued hereunder unless counsel for
the Company shall be satisfied that such issuance will be in compliance with
applicable federal, state, local and foreign securities, securities exchange and
other applicable laws and requirements.
(d) It shall be a condition to the obligation of the Company to issue
shares of common stock upon exercise of an NQO or PSO, that the participant (or
other beneficiary or person entitled to act under Subparagraph 5(d)(iii)(B) or
6(f) above) pay to the Company, upon its demand, such amount as may be requested
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 such shares.
(e) The expense of the Plan shall be borne by the Company.
(f) 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 issuance of shares upon exercise of NQOs or PSOs under the
Plan, and rights to the issuance of shares upon exercise of NQOs or PSOs shall
be subordinate to the claims of the Company's general creditors.
(g) By accepting any NQO or PSO 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 or the Board.
<PAGE>
(h) The masculine pronoun means the feminine and the singular means the
plural in the Plan, wherever appropriate.
(i) The appropriate officers of the Company shall cause to be filed any
reports, returns or other information regarding NQOs or PSOs hereunder or any
shares of common stock issued pursuant hereto as may be required by Section 13
or 15(d) of the securities Exchange Act of 1934, as amended, or any other
applicable statute, rule or regulation.
9. AMENDMENT OR DISCONTINUANCE. The Plan may be amended at any time and from
time to time by the Board as the Board shall deem advisable. No amendment of
the Plan shall materially and adversely affect any right of any participant with
respect to any NQO or PSO theretofore granted without such participant's written
consent.
10. TERMINATION. The 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
shareholders of the Company in accordance with Paragraph 11 below.
No termination of the Plan shall materially and adversely affect any of the
rights and obligations of any person, without his consent, under any NQO or PSO
theretofore granted under the Plan.
11. STOCKHOLDER APPROVAL AND ADOPTION. The Plan shall be submitted to the
stockholders of the Company for their approval and adoption on or before the
1994 Stockholder's Meeting. The effective date set forth herein and any awards
granted hereunder shall be subject to such stockholder approval. The
stockholders shall be deemed to have approved and adopted the Plan only if it is
approved and adopted at a meeting of the stockholders duly held on or before
that date (or any adjournment of said meeting occurring subsequent to such date)
by vote taken in the manner required by the laws of the State of Delaware. In
the event that the Plan is not approved by the stockholders of the Company, the
Plan and any awards hereunder shall be void and of no force or effect.
<PAGE>
EXHIBIT 12
FIRST DATA CORPORATION
COMPUTATION OF
RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ---------------------
1996 1995 1996 1995
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
EARNINGS:
Income before income taxes $ 269.8 $ 203.0 $ 669.7 $ 572.4
Interest expense 30.3 27.2 81.7 81.7
Other adjustments 13.7 14.7 39.7 41.9
---------- ---------- --------- ----------
Total earnings (a) $ 313.8 $ 244.9 $ 791.1 $ 696.0
========== ========== ========= ==========
FIXED CHARGES:
Interest expense $ 30.3 $ 27.2 $ 81.7 $ 81.7
Other adjustments 13.7 14.7 39.7 41.9
---------- ---------- --------- ----------
Total fixed charges (b) $ 44.0 $ 41.9 $ 121.4 $ 123.6
========== ========== ========= ==========
RATIO OF EARNINGS TO
FIXED CHARGES (a/b) 7.13 5.84 6.52 5.63
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, fixed charges
consist of interest on debt, amortization of deferred financing costs and a
portion of rentals determined to be representative of interest. Earnings
consist of income before income taxes plus fixed charges.
<PAGE>
EXHIBIT 15
November 11, 1996
The Stockholders and Board of Directors
First Data Corporation
We are aware of the incorporation by reference in the Registration Statements
(Forms S-8 No. 33-47234, No. 33-48578, No. 33-82826, No. 33-87338, No. 33-90992,
No. 33-62921, No. 33-98724, No. 33-99882, No. 333-9017 and No. 333-9031 and Form
S-3 No. 333-4012) of First Data Corporation of our reports dated May 10, 1996,
August 9, 1996 and November 8, 1996 relating to the unaudited consolidated
interim financial statements of First Data Corporation which are included in its
Forms 10-Q for the quarters ended March 31, 1996, June 30, 1996 and September
30, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933 our reports are not a part
of the registration statements prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
Ernst & Young LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 1996 3RD
QTR 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 320
<SECURITIES> 0
<RECEIVABLES> 925
<ALLOWANCES> 19
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 733
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,506
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 447
0
0
<COMMON> 2
<OTHER-SE> 3,502
<TOTAL-LIABILITY-AND-EQUITY> 13,506
<SALES> 0
<TOTAL-REVENUES> 3,589
<CGS> 0
<TOTAL-COSTS> 2,267
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 82
<INCOME-PRETAX> 676
<INCOME-TAX> 258
<INCOME-CONTINUING> 412
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 412
<EPS-PRIMARY> 1.78
<EPS-DILUTED> 1.78
<FN>
<F1>Unclassified Balance Sheet
</FN>
</TABLE>
<PAGE>
EXHIBIT 99
Private Securities Litigation Reform Act of 1995
Safe Harbor Compliance Statement for Forward-Looking Statements
- ---------------------------------------------------------------
In passing the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"), Congress encouraged public companies to make "forward-looking
statements"* by creating a safe-harbor to protect companies from securities law
liability in connection with forward-looking statements. First Data Corporation
("FDC") intends to qualify both its written and oral forward-looking statements
for protection under the Reform Act.
To qualify oral forward-looking statements for protection under the Reform
Act, a readily available written document must identify important factors that
could cause actual results to differ materially from those in the forward-
looking statements. FDC provides the following information in connection with
its continuing effort to qualify forward-looking statements for the safe harbor
protection of the Reform Act.
Important factors currently known to management that could cause actual
results to differ materially from those in forward-looking statements include
the following: (i) successful implementation of the merchant bank alliance
program and the U$A Value Exchange program; (ii) timely completion and market
acceptance of the ACT3 health care claims administration processing system;
(iii) accurate estimation of market assumptions integral to the forward-looking
statements including assumptions as to growth rates for card-based payment
transactions, consumer money transfer transactions and other product markets as
well as continued moderate growth in the overall economy; (iv) consolidation
among financial institutions or other client groups which has a significant
impact on FDC client relationships; (v) changes in pricing which may be
necessary to grow business with large sophisticated customers and in competitive
markets; (vi) maintaining a role for FDC's credit card processing, merchant
processing and money transfer businesses in connection with new payment
technologies being developed; (vii) successfully managing the potential both for
patent protection and patent liability in the context of rapidly developing
legal framework for expansive software patent protection; (viii) the successful
disposition of the MoneyGram business for fair value in satisfaction of the
August 28, 1995 consent decree with the Federal Trade Commission, and (ix)
unanticipated changes in laws, regulations, credit card association rules or
other industry standards affecting FDC's businesses which require significant
product redevelopment efforts or render products obsolete.
Forward-looking statements express expectations of future events. All
forward-looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Due to these
inherent uncertainties the investment community is urged not to place undue
reliance on forward-looking statements. In addition, FDC undertakes no
obligation to update or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events, or changes to projections
over time.
* "Forward-looking statements" can be identified by use of words such as
--------------------------
"expect," "estimate," "project," "forecast," "anticipate," "plan" and similar
expressions.
