1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number: 0-26802
CHECKFREE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-1013521
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4411 EAST JONES BRIDGE ROAD, NORCROSS, GEORGIA 30092
(Address of principal executive offices, including zip code)
(770) 441-3387
(Registrant's telephone number, including area code)
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 the
filing requirements for at least 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: 54,283,237 shares
of Common Stock, $.01 par value, were outstanding at January 28, 1997.
2
FORM 10-Q
CHECKFREE CORPORATION
TABLE OF CONTENTS
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets 3
June 30, 1996 and December 31, 1996
Condensed Consolidated Statements of 4
Operations For the Three Months and Six
Months Ended December 31, 1995 and 1996
Condensed Consolidated Statements of 5
Cash Flows For the Three Months and Six
Months Ended December 31, 1995 and 1996
Notes to Interim Condensed Consolidated Unaudited 6
Financial Statements For the Three Months
and Six Months Ended December 31, 1995 and 1996
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 7-11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. N/A
Item 2. Changes in Securities. N/A
Item 3. Defaults Upon Senior Securities. N/A
Item 4. Submission of Matters to a Vote of Security Holders. N/A
Item 5. Other Information. 12
Item 6. Exhibits and Reports on Form 8-K. 13-15
Signatures 16
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHECKFREE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1996 1996
-------------------- -------------------
ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents $ 20,987,355 $ 29,466,280
Investments 18,089,029 10,873,193
Accounts receivable, net 29,591,417 27,183,287
Assets held for sale 20,000,000 --
Prepaid expenses and other 2,205,026 3,561,715
-------------------- -------------------
Total Current Assets 90,872,827 71,084,475
Property and equipment, net 36,567,141 35,675,608
Capitalized software, net 37,107,680 35,742,573
Intangible assets, net 27,507,677 26,124,459
Investments and other assets 4,174,219 3,870,995
-------------------- -------------------
Total $ 196,229,544 $172,498,110
==================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable 5,139,607 4,182,431
Accrued liabilities 16,038,095 15,062,109
Current portion of long-term obligations 1,112,184 1,008,218
Deferred revenues 15,388,797 18,863,165
Deferred income taxes 7,819,505 5,525,460
-------------------- -------------------
Total Current Liabilities 45,498,188 44,641,383
Deferred income taxes 4,732,324 --
Long-term obligations - less current portion 8,324,317 8,222,606
-------------------- -------------------
Total Liabilities 58,554,829 52,863,989
-------------------- -------------------
Stockholders' Equity:
Preferred stock - 15,000,000 authorized shares, $.01 par value;
no shares issued or outstanding -- --
Common stock - 150,000,000 authorized shares, $.01 par value;
42,274,800 and 42,542,913 shares issued 422,748 425,429
Additional paid in capital 276,823,109 277,082,991
Treasury stock - at cost, 757,536 and 1,034,005 shares (629,481) (5,882,392)
Accumulated deficit (138,941,661) (151,991,907)
-------------------- -------------------
Total Stockholders' Equity 137,674,715 119,634,121
-------------------- -------------------
Total $196,229,544 $172,498,110
==================== ==================
See Notes to Interim Condensed Consolidated Unaudited Financial Statements
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CHECKFREE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended December 31, Six months ended December 31,
----------------------------------- ------------------------------------
1995 1996 1995 1996
-------------- --------------- --------------- ---------------
Revenues:
Processing and servicing $10,818,012 $17,795,490 $20,645,280 $35,731,896
Merchant discount 2,608,108 3,382,568 5,103,394 6,633,023
License -- 8,602,294 -- 13,494,148
Maintenance -- 4,766,173 -- 8,353,019
Other -- 3,958,501 -- 6,954,805
-------------- --------------- --------------- ---------------
Total revenues 13,426,120 38,505,026 25,748,674 71,166,891
-------------- --------------- --------------- ---------------
Expenses:
Cost of processing, servicing and support 8,355,792 23,021,538 15,797,461 44,824,375
Research and development 1,962,730 7,013,834 3,856,956 13,968,225
Sales and marketing 2,442,838 6,849,083 4,182,083 12,409,935
General and administrative 1,203,120 4,559,814 2,218,764 9,605,532
Depreciation and amortization 655,566 5,755,731 1,291,050 11,316,541
-------------- --------------- --------------- ---------------
Total expenses 14,620,046 47,200,000 27,346,314 92,124,608
-------------- --------------- --------------- ---------------
Loss from operations (1,193,926) (8,694,974) (1,597,640) (20,957,717)
Interest, net 1,186,992 511,344 1,285,576 882,375
-------------- --------------- --------------- ---------------
Loss before income taxes (6,934) (8,183,630) (312,064) (20,075,342)
Income tax expense (benefit) 115,716 (2,862,996) (21,592) (7,025,096)
-------------- --------------- --------------- ---------------
Net loss $ (122,650) $ (5,320,634) $ (290,472) $ (13,050,246)
============== =============== =============== ===============
Net loss per common share $ (0.00) $ (0.13) $ (0.01) $ (0.31)
============= ============== ============== ==============
Weighted average common shares outstanding 31,888,510 41,533,981 29,535,719 41,582,074
============= ============== ============== ==============
See Notes to Interim Condensed Consolidated Unaudited Financial Statements
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CHECKFREE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended December 31,
--------------------------------------------
1995 1996
------------------- --------------------
Cash flows from operating activities:
Net loss $ (290,472) $ (13,050,246)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,291,050 11,316,541
Deferred income taxes 78,628 (7,026,369)
Gain on sale of business -- (213,132)
Loss on disposal of property and equipment 11,650 262,811
Change in certain assets and liabilities:
Accounts receivable, net (1,105,803) 2,408,130
Prepaid expenses and other (623,262) (1,249,860)
Accounts payable 535,240 (957,176)
Accrued liabilities 730,729 (975,986)
Deferred revenues (1,733) 3,474,368
------------------- --------------------
Net cash provided by (used in) operating activities 626,027 (6,010,919)
------------------- --------------------
Cash flows from investing activities:
Purchase of property and software (5,205,172) (7,893,171)
Proceeds from the sale of property and equipment 100 352,999
Proceeds from sale of business -- 19,000,000
Proceeds from maturities and sales of investments 37,725,000 13,231,688
Purchase of investments (55,409,194) (4,517,345)
------------------- --------------------
Net cash provided by (used in) investing activities (22,889,266) 20,174,171
------------------- --------------------
Cash flows from financing activities:
Proceeds from sales of common stock, net of expenses 82,698,642 --
Repayment of notes payable and other debt extinguishment (37,500) (31,250)
Repayment of stockholders' notes -- (50,000)
Principal payments under capital lease obligations (524,847) (612,729)
Proceeds from stock options exercised including related income tax benefits 232,371 262,563
Cash payments in lieu of fractional shares (398) --
Purchase of treasury stock -- (5,252,911)
Payments received on stockholder notes receivable 192,139 --
------------------- --------------------
Net cash provided by (used in) financing activities 82,560,407 (5,684,327)
------------------- --------------------
Net increase in cash and cash equivalents 60,297,168 8,478,925
Cash and cash equivalents at beginning of period 3,542,686 20,987,355
------------------- --------------------
Cash and cash equivalents at end of period $ 63,839,854 $ 29,466,280
=================== ====================
Supplemental disclosure of cash flow information:
Interest paid $ 315,101 $ 323,524
=================== ====================
Supplemental disclosure of non-cash investing and financing activities:
Capital lease additions $ 135,769 $ 488,302
=================== ====================
See Notes to Interim Condensed Consolidated Unaudited Financial Statements
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CHECKFREE CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 1995 AND 1996
1. The accompanying condensed consolidated financial statements and
notes thereto have been prepared in accordance with the rules and regulations
of the Securities and Exchange Commission for Form 10-Q and include all of the
information and disclosures required by generally accepted accounting
principles for interim financial reporting for Checkfree Corporation and
subsidiaries (the "Company"). The results of operations for the three months
and six months ended December 31, 1995 and 1996 are not necessarily indicative
of the results for the full year.
These financial statements should be read in conjunction with the
financial statements, accounting policies and financial notes thereto included
in the Company's Transition Report filed with the Securities and Exchange
Commission on Form 10-K/A No. 1. In the opinion of management, the accompanying
condensed consolidated unaudited financial statements reflect all adjustments
(consisting only of normal recurring adjustments) which are necessary for a
fair presentation of financial results for the interim periods presented.
2. In August 1996, the Company signed a definitive agreement to sell
certain software for $20 million. The sale closed on October 1, 1996 with $19.0
million received at the closing and $1.0 million to be received in 18 months.
The gain on the sale of $213,000 was recognized in the fiscal quarter ended
December 31, 1996.
On September 15, 1996, the Company entered into a definitive
agreement to purchase Intuit Services Corporation ("ISC"), a wholly owned
subsidiary of Intuit Inc., in exchange for approximately 12.6 million shares of
the Company's common stock. The agreement contains certain provisions that
limit the purchase of additional shares of common stock and the disposition of
shares of common stock to be obtained by Intuit Inc. The acquisition of ISC
closed on January 27, 1997 and will be accounted for under the purchase method
of accounting and is expected to include a charge for in-process research and
development, currently estimated at $120 million. ISC provides transaction
processing and electronic funds transfer services.
The Company also entered into a Service and License Agreement with
Intuit Inc., whereby the Company will obtain a license to connect to and use
certain software technology of Intuit Inc. for a payment of $10 million on the
closing of the ISC acquisition and $10 million on October 1, 1997.
3. In the quarter ended December 31, 1996, the Company accrued $1.3
million in personnel benefits related to a realignment of certain customer care
and programming operations. The charge was included in general and
administrative expenses and will affect approximately 60 associates. To date,
no associates have been terminated and no benefits have been paid against the
liability.
4. Certain amounts in the June 30, 1996 balance sheet have been
reclassified to conform with the December 31, 1996 presentation. In addition,
certain amounts in the condensed consolidated statements of operations for the
three and six months ended December 31, 1995 have been reclassified to conform
with the December 31, 1996 presentation.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
As used in this report, "Checkfree" is generally used to indicate Checkfree
Corporation prior to its acquisition of Servantis Systems Holdings, Inc. on
February 21, 1996 (the "Servantis Acquisition"), prior to its acquisition of
Security APL, Inc. on May 9, 1996 (the "Security APL Acquisition"), and prior
to its acquisition of Intuit Services Corporation on January 27, 1997 (the "ISC
Acquisition") (the Servantis Acquisition, the Security APL Acquisition, and the
ISC Acquisition are collectively referred to as the "Acquisitions").
"Servantis" is generally used to indicate Servantis Systems Holdings, Inc.
prior to its acquisition by Checkfree, "Security APL" is generally used to
indicate Security APL, Inc. prior to its acquisition by Checkfree, "ISC" is
generally used to indicate Intuit Services Corporation prior to its acquisition
by Checkfree, and the term the "Company" is used to indicate the combined
company following the Acquisitions. This report contains forward-looking
statements which involve risks and uncertainties. The Company's actual results
may differ materially from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed in "Business -- Business Risks" in the Company's
Transition Report on Form 10-K/A No. 1.
The Acquisitions further Checkfree's strategy of providing an
expanding range of convenient, secure and cost-effective electronic commerce
services and related products to financial institutions and businesses and
their customers. Servantis' experience as a provider of electronic commerce
and financial applications software and services to financial institutions
substantially enhances the Company's presence in the financial institutions
market of the electronic commerce segment. Security APL's experience as a
vendor of portfolio management and software services to institutional
investment managers and investment services to consumers enhances the Company's
presence in the consumer and financial institutions market of the electronic
commerce segment. ISC's base of financial institution customers furthers the
Company's home banking and bill payment offering. The integration of
Checkfree's electronic transaction processing and remote delivery technology
with Servantis' software products and market presence, Security APL's portfolio
management and software services, and ISC's financial institution market share
has created a single vendor of electronic commerce services and related
products to an expanded customer base of financial institutions and businesses
and their customers.
The Company expects to incur operating losses for the next several
quarters. The acquisition of ISC is expected to increase the operating loss for
the quarter ending March 31, 1997. However, with the Company's continued
increase in sales and marketing efforts to promote the Company's new electronic
commerce offerings, and with the continued acceptance in the marketplace of
electronic commerce services, and resulting growth in subscribers, the Company
expects revenues to continue to increase with operating results beginning to
improve in the quarter ending June 30, 1997. The Company intends to increase
research and development costs for new products and services, including the
integration of the products and services of Checkfree, Servantis, Security APL,
and ISC.
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The Company expects that these initiatives will allow it to maintain
and enhance its leading position in the rapidly growing electronic commerce
market. There can be no assurance, however, that the Company will be able to
successfully compete against current or future competitors or that the
competitive pressures faced by the Company will not have a material adverse
effect on its business, operating results, and financial condition.
RESULTS OF OPERATIONS
The following table sets forth as percentages of total operating
revenues certain consolidated statements of operations' data:
Three months ended December 31, Six months ended December 31,
----------------------------------- ------------------------------------
1995 1996 1995 1996
-------------- --------------- --------------- ---------------
Total revenues 100.0% 100.0% 100.0% 100.0%
-------------- --------------- --------------- ---------------
Expenses:
Cost of processing, servicing and support 62.2% 59.8% 61.4% 63.0%
Research and development 14.6% 18.2% 15.0% 19.6%
Sales and marketing 18.2% 17.8% 16.2% 17.4%
General and administrative 9.0% 11.9% 8.6% 13.5%
Depreciation and amortization 4.9% 14.9% 5.0% 15.9%
-------------- --------------- --------------- ---------------
Total expenses 108.9% 122.6% 106.2% 129.4%
-------------- --------------- --------------- ---------------
Loss from operations (8.9)% (22.6)% (6.2)% (29.4)%
Interest, net 8.8% 1.3% 5.0% 1.2%
-------------- --------------- --------------- ---------------
Loss before income taxes (0.1)% (21.3)% (1.2)% (28.2)%
Income tax expense (benefit) 1.0% (7.5)% (0.1)% (9.9)%
-------------- --------------- --------------- ---------------
Net loss (0.9)% (13.8)% (1.1)% (18.3)%
============== =============== =============== ===============
Revenues are reduced by purchased profits of $1.7 million and $7.6
million for the three months and the six months ended December 31, 1996,
respectively. Purchased profits are the estimated profits in deferred revenues
at the Servantis Acquisition date, which were eliminated as a purchase
accounting adjustment. Excluding the purchased profits adjustment, revenues
increased 199% to $40.2 million and 206% to $78.8 million for the three months
and the six months ended December 31, 1996, respectively. The increases were
primarily due to the acquisitions of Servantis and Security APL, and to a lesser
extent to the internal growth of the Company.
Costs of processing, servicing and support as a percentage of servicing
revenue (all revenue except licensing fees) and excluding the purchased profits
adjustment were 62.2% and 72.8% for the three months ended December 31, 1995 and
1996, respectively, and 61.4% and 68.7% for the six months ended December 31,
1995 and 1996, respectively. Processing, servicing and support costs increased
as a percentage of servicing revenue for the quarter and year-to-date, due
primarily to an approximate 15% decrease in the average revenue per customer
for the Company's home banking and bill payment services. The decrease in the
average revenue per customer is a result of the Company's change in marketing
strategy in mid-1996 to distribute its bill payment services on a wholesale
basis through financial institutions.
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Additionally, the Company has increased its implementation staff to service the
increasing number of financial institutions which have contracted for the
Company's home banking and bill payment offerings. During the implementation
period, the margin on the implementation revenue is lower than the margin on the
processing revenue.
Research and development expenses as a percentage of revenues excluding
the purchased profits adjustment were 14.6% and 17.4% for the three months ended
December 31, 1995 and 1996, respectively, and 15.0% and 17.7% for the six months
ended December 31, 1995 and 1996, respectively. The increases as a percentage of
revenue were due to increased product and business development for new and
existing services and related products, including electronic bill presentment
and expanded business and home banking and bill payment offerings, such as
Web-based bill payment.
Sales and marketing expenses as a percentage of revenues excluding the
purchased profits adjustment were 18.2% and 17.0% for the three months ended
December 31, 1995 and 1996, respectively, and 16.2% and 15.8% for the six months
ended December 31, 1995 and 1996, respectively. The decreases as a percentage of
revenue were primarily due to the increase in revenues and efficiencies gained
from combining the entities.
General and administrative expenses as a percentage of revenues
excluding the purchased profits adjustment were 9.0% and 11.3% for the three
months ended December 31, 1995 and 1996, respectively, and 8.6% and 12.2% for
the six months ended December 31, 1995 and 1996, respectively. The increases as
a percentage of revenue were due to higher general and administrative cost from
the acquired companies, charges for certain disputed accounts receivable, and
costs of personnel benefits associated with the realignment of certain
customer care and programming operations in the three months ended December 31,
1996.
Depreciation and amortization expenses as a percentage of revenues
excluding the purchased profits adjustment were 4.9% and 14.3% for the three
months ended December 31, 1995 and 1996, respectively, and 5.0% and 14.4% for
the six months ended December 31, 1995 and 1996, respectively. The increases as
a percentage of revenue were primarily due to depreciation and amortization from
the acquired companies for the three and six months ended December 31, 1995 and
1996. Included in depreciation and amortization expense is purchased software
amortization of $2.0 million and $4.0 million for the three month and six month
periods ended December 31, 1996, respectively, which relates solely to license
fee revenue.
Net interest income decreased by $676,000 and $403,000 for the three
months and the six months ended December 31, 1996, respectively, compared to
the same periods in 1995, due to lower cash, cash equivalent and investment
balances in 1996 compared to 1995. Such cash was used for acquisitions and to
fund operating activities.
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For the three months and six months ended December 31, 1995, the
Company recognized a $116,000 income tax expense, on a pre-tax loss of $7,000
and a (6.9%) benefit, respectively. For the three months and six
months ended December 31, 1996, the effective income tax rate (benefit) was
(35.0%). The three month and six month period effective tax rates vary from the
statutory tax rate due to non-deductible items such as meals and entertainment
and amortization.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended December 31, 1996, the Company's operating
activities used cash of $6.0 million. During the six month period, the Company
invested $7.9 million in property and software additions, primarily for
computer related equipment and software and facilities and paid $5.2 million to
purchase treasury stock in conjunction with a put option granted to certain
stockholders in an acquisition. The Company used cash on hand, the net proceeds
from the sale of investments of $8.7 million, as well as the $19.0 million
proceeds from the sale of certain software to finance these operating and
investing activities.
At December 31, 1996, the Company's cash and cash equivalents and
investments were $41.7 million, a decrease of $200,000 from June 30, 1996. As
of December 31, 1996 the Company's current ratio was 1.6 to 1, compared to a
current ratio of 2.0 to 1 as of June 30, 1996. In addition, working capital was
$26.4 million and $45.4 million at December 31, 1996 and June 30, 1996,
respectively.
The Company entered into a Service and License Agreement with Intuit
Inc., which required a $10 million payment upon the closing of the ISC
acquisition and $10 million on October 1, 1997. The Company funded the initial
$10 million payment pursuant to the Services and License Agreement with
available cash and investments. The Company expects to fund the $10 million
payment due on October 1, 1997 pursuant to the Services and License Agreement
with available cash and investments.
With the acquisition of ISC, the Company expects to incur operating
losses into fiscal 1998. The Company believes the existing cash and cash
equivalents and investments will be sufficient to meet the Company's presently
anticipated operating, working capital and capital expenditure requirements for
the foreseeable future. To the extent that the Company needs additional capital
resources, the Company believes that it will have access to both bank financing
and capital leasing for additional facilities and equipment.
INFLATION
The Company believes the effects of inflation have not had a
significant impact on the Company's results of operations.
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SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
Except for the historical information contained herein, the matters
discussed in this Form 10-Q include forward-looking statements that involve
risks and uncertainties. These forward-looking statements involve risks and
uncertainties, including without limitation, quarterly fluctuations in
results, the management of growth, the timely implementation of existing bank
processing agreements, the ability of the Company to sell its processing
services to additional banks, the acceptance of the Company's electronic
banking and bill payment services by financial institutions, businesses and
their customers, the acceptance of the Company's applications software,
services and related products by financial institutions, the impact of
competitive services and products, the Company's ability to efficiently
integrate recent acquisitions, including ISC, Servantis, and Security APL, the
effect of any future acquisitions or divestitures, and the timely development
and acceptance of new electronic commerce services and products, as well as the
various risks inherent in the Company's business and other risks and
uncertainties detailed from time to time in the Company's periodic reports
filed with the Securities and Exchange Commission, including the Transition
Report on Form 10-K/A No. 1 for the six months ended June 30, 1996, and the
Company's Proxy Statement for the Special Meeting of Stockholders held on
January 27, 1997. One or more of these factors have affected, and could in the
future affect, the Company's business and financial results in future periods
and could cause actual results to differ materially from plans and projections.
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PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
Beginning with the quarter ended December 31, 1996, the Company has
enhanced the presentation of operating expenses on the Statements of Operations
to separately disclose depreciation and amortization. The Company is presenting
the operating expenses in the enhanced format for the periods presented below
for comparison purposes (all information is unaudited):
Twelve months ended Quarter ended Quarter ended
June 30, September 30, December 31,
1995 1995 1995
-------------------- -------------------- -----------------
Expenses:
Cost of processing, servicing and support $26,752,106 $ 7,441,669 $ 8,355,792
Research and development 5,270,336 1,894,226 1,962,730
Sales and marketing 5,453,691 1,739,245 2,442,838
General and administrative 3,215,911 1,015,644 1,244,865
Depreciation and amortization 2,374,001 635,484 613,821
In process research and development -- -- --
-------------------- -------------------- -----------------
Total expenses $43,066,045 $12,726,268 $14,620,046
==================== ==================== =================
Quarter ended Quarter ended Quarter ended
March 31, June 30, September 30,
1996 1996 1996
-------------------- -------------------- -----------------
Expenses:
Cost of processing, servicing and support $ 12,351,769 $23,086,735 $21,802,533
Research and development 4,719,572 5,187,740 6,954,934
Sales and marketing 6,894,229 10,272,928 5,560,792
General and administrative 3,351,170 3,986,505 5,045,584
Depreciation and amortization 1,918,958 5,078,143 5,560,810
In process research and development 93,757,586 28,600,000 --
-------------------- -------------------- -----------------
Total expenses $122,993,284 $76,212,051 $44,924,653
==================== ==================== =================
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
EXHIBIT NUMBER EXHIBIT DESCRIPTION
2(a) Agreement and Plan of Merger, dated as
of September 15, 1996, among the
Registrant, Checkfree Acquisition
Corporation II, Intuit Inc., and Intuit
Services Corporation. (Reference is made
to Exhibit 2 to the Current Report on
Form 8-K, dated September 15, 1996,
filed with the Securities and Exchange
Commission, and incorporated herein by
reference.)
2(b) Amendment No. 1 to Agreement and Plan of
Merger, dated as of September 15, 1996,
among the Registrant, Checkfree
Acquisition Corporation II, Intuit Inc.,
and Intuit Services Corporation
(Reference is made to Appendix A to the
Proxy Statement for the Special Meeting
of Stockholders held on January 27,
1997, filed with the Securities and
Exchange Commission on December 23,
1996, and incorporated herein by
reference.)
10(a) Checkfree Corporation Amended and
Restated 1995 Stock Option Plan.
(Reference is made to Exhibit 10(jjj) to
the Registration Statement on Form S-4
filed with the Securities and Exchange
Commission on October 31, 1996
(Registration No. 333-15247) and
incorporated herein by reference.)
10(b) Checkfree Corporation Associate Stock
Purchase Plan. (Reference is made to
Exhibit 10(kkk) to the Registration
Statement on Form S-4 filed with the
Securities and Exchange Commission on
October 31, 1996 (Registration No.
333-15247) and incorporated herein by
reference.)
10(c) Stockholder Agreement between Intuit
Inc. and Peter J. Kight, as a
shareholder of the Company. (Reference
is made to Exhibit 10(lll) to the
Registration Statement on Form S-4 filed
with the Securities and Exchange
Commission on October 31, 1996
(Registration No. 333-15247) and
incorporated herein by reference.)
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10(d) Stockholder Agreement between Intuit
Inc. and Mark A. Johnson, as a
shareholder of the Company. (Reference
is made to Exhibit 10(mmm) to the
Registration Statement on Form S-4 filed
with the Securities and Exchange
Commission on October 31, 1996
(Registration No. 333-15247) and
incorporated herein by reference.)
10(e) Stock Restriction Agreement between the
Company and Intuit Inc. (Reference is
made to Exhibit 10(nnn) to the
Registration Statement on Form S-4 filed
with the Securities and Exchange
Commission on October 31, 1996
(Registration No. 333-15247) and
incorporated herein by reference.)
10(f) Form of Escrow Agreement among the
Company, Intuit Inc. and a to be named
Escrow Agent. (Reference is made to
Exhibit 10(ooo) to the Registration
Statement on Form S-4 filed with the
Securities and Exchange Commission on
October 31, 1996 (Registration No.
333-15247) and incorporated herein by
reference.)
10(g) Form of Registration Rights Agreement
between the Company and Intuit Inc.
(Reference is made to Exhibit 10(ppp) to
the Registration Statement on Form S-4
filed with the Securities and Exchange
Commission on October 31, 1996
(Registration No. 333-15247) and
incorporated herein by reference.)
10(h) Services and License Agreement, dated as
of September 15, 1996, between Checkfree
Corporation and Intuit Inc. (Reference
is made to Exhibit 10(a) to the Current
Report on Form 8-K, dated November 22,
1996, filed with the Securities and
Exchange Commission, and incorporated
herein by reference.)**
10(i) Amended and Restated Registration Rights
Agreement, dated as of September 15,
1996, between Checkfree Corporation and
Intuit Inc. (Reference is made to
Exhibit 10(a) to the Current Report on
Form 8-K, dated December 16, 1996, filed
with the Securities and Exchange
Commission, and incorporated herein by
reference.)
10(j) Amended and Restated stock Restriction
Agreement, dated as of September 15,
1996, between Checkfree Corporation and
Intuit Inc. (Reference is made to
Exhibit 10(b) to the Current Report on
Form 8-K, dated December 16, 1996, filed
with the Securities and Exchange
Commission, and incorporated herein by
reference.)
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15
10(k) * Form of Amended Registration Rights
Agreement, dated as of January 27,
1997, between Checkfree and the former
stockholders of Security APL, Inc.
27 * Financial Data Schedule.
-------------
* Filed with this Report.
** The Registrant has requested that portions of this Exhibit be
given confidential treatment.
(b) REPORTS ON FORM 8-K.
The Registrant filed the following Current Reports on Form 8-K with
the Securities and Exchange Commission:
(i) A Current Report on Form 8-K, dated as of October 1,
1996, was filed with the Securities and Exchange
Commission on October 9, 1996 (Items 2 and 7).
(ii) A Current Report on Form 8-K/A No. 2, dated as of
May 9, 1996, was filed with the Securities and
Exchange Commission on October 11, 1996
(Items 2 and 7).
(iii) A Current Report on Form 8-K, dated as of November
22, 1996, was filed with the Securities and Exchange
Commission on December 6, 1996 (Items 5 and 7).
(iv) A Current Report on Form 8-K, dated as of December
16, 1996, was filed with the Securities and Exchange
Commission on December 18, 1996 (Items 5 and 7).
(v) A Current Report on Form 8-K, dated as of January
27, 1997, was filed with the Securities and Exchange
Commission on January 27, 1997 (Items 2 and 7).
(vi) A Current Report on Form 8-K, dated as of January
31, 1997, was filed with the Securities and Exchange
Commission on February 3, 1997 (Items 5 and 7).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this amended report to be signed on its behalf
by the undersigned thereunto duly authorized.
CHECKFREE CORPORATION
Date: February 11, 1997 By: /s/ JAMES S. DOUGLASS
-----------------------------------------
James S. Douglass, Executive Vice
President, Finance and Chief Financial
Officer*
(Principal Financial Officer)
Date: February 11, 1997 By: /s/ JOHN M. STANTON
----------------------------------------
John M. Stanton, Vice President,
Treasurer, and Assistant Secretary
(Principal Accounting Officer)
* In his capacity as Executive Vice President, Finance and Chief
Financial Officer, Mr. Douglass is duly authorized to sign this amended
report on behalf of the Registrant.
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CHECKFREE CORPORATION
FORM 10-Q FOR THE QUARTER ENDED
DECEMBER 31, 1996
EXHIBIT INDEX
18
EXHIBIT EXHIBIT EXHIBIT INDEX
NUMBER DESCRIPTION PAGE NUMBER
2(a) Agreement and Plan of Merger, dated as of September
15, 1996, among the Registrant, Checkfree Acquisition
Corporation II, Intuit Inc., and Intuit Services
Corporation (Reference is made to Exhibit 2 to the
Current Report on Form 8-K, dated September 15, 1996,
filed with the Securities and Exchange Commission,
and incorporated herein by reference.)
2(b) Amendment No. 1 to Agreement and Plan of Merger,
dated as of September 15, 1996, among the Registrant,
Checkfree Acquisition Corporation II, Intuit Inc.,
and Intuit Services Corporation (Reference is made to
Appendix A to the Proxy Statement for the Special
Meeting of Stockholders held on January 27, 1997,
filed with the Securities and Exchange Commission on
December 23, 1996, and incorporated herein by
reference.)
10(a) Checkfree Corporation Amended and Restated 1995 Stock
Option Plan. (Reference is made to Exhibit 10(jjj) to
the Registration Statement on Form S-4 filed with the
Securities and Exchange Commission on October 31,
1996 (Registration No. 333-15247) and incorporated
herein by reference.)
10(b) Checkfree Corporation Associate Stock Purchase Plan.
(Reference is made to Exhibit 10(kkk) to the
Registration Statement on Form S-4 filed with the
Securities and Exchange Commission on October 31,
1996 (Registration No. 333- 15247) and incorporated
herein by reference.)
10(c) Stockholder Agreement between Intuit Inc. and Peter
J. Kight, as a shareholder of the Company. (Reference
is made to Exhibit 10(lll) to the Registration
Statement on Form S-4 filed with the Securities and
Exchange Commission on October 31, 1996 (Registration
No. 333-15247) and incorporated herein by reference.)
19
10(d) Stockholder Agreement between Intuit Inc. and Mark A.
Johnson, as a shareholder of the Company. (Reference
is made to Exhibit 10(mmm) to the Registration
Statement on Form S-4 filed with the Securities and
Exchange Commission on October 31, 1996 (Registration
No. 333-15247) and incorporated herein by reference.)
10(e) Stock Restriction Agreement between the Company and
Intuit Inc. (Reference is made to Exhibit 10(nnn) to
the Registration Statement on Form S-4 filed with the
Securities and Exchange Commission on October 31,
1996 (Registration No. 333-15247) and incorporated
herein by reference.)
10(f) Form of Escrow Agreement among the Company, Intuit
Inc. and a to be named Escrow Agent. (Reference is
made to Exhibit 10(ooo) to the Registration Statement
on Form S-4 filed with the Securities and Exchange
Commission on October 31, 1996 (Registration No.
333-15247) and incorporated herein by reference.)
10(g) Form of Registration Rights Agreement between the
Company and Intuit Inc. (Reference is made to Exhibit
10(ppp) to the Registration Statement on Form S-4
filed with the Securities and Exchange Commission on
October 31, 1996 (Registration No. 333-15247) and
incorporated herein by reference.)
10(h) Services and License Agreement, dated as of September
15, 1996, between Checkfree Corporation and Intuit
Inc. (Reference is made to Exhibit 10(a) to the
Current Report on Form 8-K, dated November 22, 1996,
filed with the Securities and Exchange Commission,
and incorporated herein by reference.)**
10(i) Amended and Restated Registration Rights Agreement,
dated as of September 15, 1996, between Checkfree
Corporation and Intuit Inc. (Reference is made to
Exhibit 10(a) to the Current Report on Form 8-K,
dated December 16, 1996, filed with the Securities
and Exchange Commission, and incorporated herein by
reference.)
20
10(j) Amended and Restated stock Restriction Agreement,
dated as of September 15, 1996, between Checkfree
Corporation and Intuit Inc. (Reference is made to
Exhibit 10(b) to the Current Report on Form 8-K,
dated December 16, 1996, filed with the Securities
and Exchange Commission, and incorporated herein by
reference.)
10(k) * Form of Amended Registration Rights Agreement,
dated as of January 27, 1997, between Checkfree and
the former stockholders of Security APL, Inc.
27 * Financial Data Schedule.
- ------------------
* Filed with this Report.
** The Registrant has requested that portions of this Exhibit be given
confidential treatment.
1
Exhibit 10(k)
CHECKFREE CORPORATION
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This Amended and Restated Registration Rights Agreement (this "Agreement")
is made and entered into as of January 24, 1997, by and between Checkfree
Corporation, a Delaware corporation (the "Company"), and the individual holder
of the Company's common stock, $.01 par value, ("Stockholder").
RECITALS
A. The Company, ISC Acquisition Corporation, an Ohio corporation and a
wholly owned subsidiary of the Company ("Acquisition"), and Security APL, Inc.,
an Illinois corporation ("Security "), entered into an Agreement and Plan of
Merger, dated March 21, 1996 (the "Merger Agreement"), pursuant to which
Acquisition was merged with and into Security on May 9, 1996 (the "Merger") and
all outstanding shares of the capital stock of Security were converted into the
right to receive shares of common stock, $.01 par value, of the Company (the
"Shares").
B. Each Stockholder was given certain registration rights with respect to
the Shares acquired in the Merger (the "Merger Shares") in accordance with the
terms of a certain Registration Rights Agreement, dated as of May 6, 1996 (the
"Prior Registration Rights Agreement").
C. This Agreement amends, restates, and supersedes the Prior Registration
Rights Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions contained herein, the parties
hereto hereby agree as follows:
Section 1. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Holder" shall mean each person holding Registrable Securities.
"Initiating Holders" shall mean any Holders who in the aggregate are
Holders of more than fifty percent (50%) of the then Registrable Securities.
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"Merger Effective Date" shall mean May 9, 1996.
"Registrable Securities" shall mean the Merger Shares; provided, however,
that the Merger Shares shall no longer be treated as Registrable Securities (A)
when the time specified as the holding period for such shares under Commission
Rule 144(d) under the Securities Act, or any similar rule or regulation of the
Commission as the same shall be in effect at the time, in the opinion of counsel
to the Company, shall have expired from the Merger Effective Date or will so
expire within 90 days; (B) after such shares have been sold to or through a
broker or dealer or underwriter in a public distribution or a public securities
transaction; (C) after such shares have been transferred and the registration
rights granted by this Agreement have not been transferred in accordance with
Section 13 hereof; or (D) after two years have expired from the Merger Effective
Date.
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing with the Commission a registration
statement in compliance with the Securities Act, and the declaration or ordering
of the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, except Selling Expenses
as defined below, incurred by the Company in complying with a registration under
Sections 5, 6, or 7 hereof, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel and accountants for the Company, blue sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration.
"Restricted Securities" shall mean the securities of the Company required
to bear the legend set forth in Section 3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and all fees and disbursements of counsel for any Holder.
Section 2. Restrictions on Transferability. During the term of this
Agreement, the Merger Shares held by Stockholder shall not be sold, assigned,
transferred or pledged except upon satisfaction of the conditions specified in
Sections 3 and 4 of this Agreement, which conditions are intended to ensure
compliance with the provisions of the Securities Act. Stockholder will cause any
proposed purchaser, assignee, transferee, or pledgee of the Merger Shares to
agree to take and hold such securities subject to the provisions and conditions
of this Agreement.
Section 3. Restrictive Legend. Each certificate representing (i) the
Merger Shares and (ii) any other securities issued in respect of the Merger
Shares upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event, shall (unless otherwise permitted by the
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3
provisions of Section 4 below) be stamped or otherwise imprinted with a legend
in substantially the following form (in addition to any legend required under
applicable state securities laws):
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF
ANY STATE, AND HAVE BEEN ISSUED PURSUANT TO EXEMPTIONS FROM REGISTRATION
THAT DEPEND IN PART ON THE INTENT OF THE PURCHASER TO ACQUIRE FOR
INVESTMENT AND WITHOUT A VIEW TOWARDS DISTRIBUTION. THEREFORE, SUCH SHARES
MAY NOT BE SOLD OR TRANSFERRED EXCEPT UPON REGISTRATION OR UPON DELIVERY
TO THE COMPANY OF COMMUNICATIONS FROM THE SECURITIES AND EXCHANGE
COMMISSION AND ANY STATE REGULATORY AUTHORITIES CONCERNED, OR AN OPINION
OF COUNSEL SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT REGISTRATION IS
NOT REQUIRED FOR SUCH SALE OR TRANSFER.
Stockholder consents to the Company making a notation on its records and
giving instructions to any transfer agent of the Merger Shares in order to
implement the restrictions on transfer established in this Agreement.
Section 4. Notice of Proposed Transfers. Stockholder, by acceptance of
each certificate representing Restricted Securities, agrees to comply in all
respects with the provisions of this Section 4 during the term of this
Agreement. Prior to any proposed sale, assignment, transfer or pledge of any
Restricted Securities (other than transfers not involving a change in beneficial
ownership), unless there is in effect a registration statement under the
Securities Act covering the proposed transfer, Stockholder shall give written
notice to the Company of its intention to effect such transfer, sale, assignment
or pledge. Each such notice shall describe the manner and circumstances of the
proposed transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied, at Stockholder's expense by either (i) an unqualified written
opinion of legal counsel who shall be, and whose legal opinion shall be,
reasonably satisfactory to the Company addressed to the Company, to the effect
that the proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a "no action" letter from the
Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon Stockholder shall be
entitled to transfer such Restricted Securities in accordance with the terms of
the notice delivered by Stockholder to the Company. Each certificate evidencing
the Restricted Securities transferred as above provided shall bear, except if
such transfer is made pursuant to Rule 144, the appropriate restrictive legend
set forth in Section 3 above, except that such certificate shall not bear such
restrictive legend if in the opinion of counsel for Stockholder and the Company
such legend is not required in order to establish compliance with any provision
of the Securities Act.
-3-
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Section 5. Demand Registration Rights.
(a) Notice for Registration. After September 1, 1996, if the Company
shall receive from Initiating Holders a written request that the Company effect
a registration under the Securities Act on Form S-3 (or any successor form to
Form S-3) for a public offering of Registrable Securities, the reasonably
anticipated aggregate price to the public of which, net of underwriting
discounts and commissions, would reasonably exceed $5,000,000, and the Company
is then entitled, or will be entitled within 30 days after the receipt of such
written request, to use Form S-3 under applicable Commission rules to register
the Registrable Securities for such an offering, the Company will:
(i) promptly give written notice of the proposed registration
to all other Holders; and
(ii) as soon as practicable, use its best efforts to effect
such registration (including, without limitation, appropriate qualification
under applicable blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Securities Act and any
other governmental requirements or regulations) as may be so requested and as
would permit or facilitate the sale and distribution of all or such portion of
such Registrable Securities as are specified in such request, together with all
or such portion of the Registrable Securities of any Holder or Holders joining
in such request as are specified in a written request received by the Company
within 10 days after receipt of such written notice from the Company;
Provided, however, that the Company shall not be obligated to take any
action to effect any such registration pursuant to this Section 5 as follows:
(A) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act;
(B) If the Company, within 10 days of the receipt of a
registration request of the Initiating Holders received after November 30, 1996,
gives written notice to the Initiating Holders of the Company's bona fide
intention to effect the filing, within 60 days of receipt of such request, of a
registration statement with the Commission for the sale of securities by the
Company (other than with respect to a registration statement relating to a Rule
145 transaction, an offering solely to employees or any other registration which
is not appropriate for the registration of Registrable Securities), in which
event, (i) the Stockholders shall be entitled to exercise any rights available
under Section 6 hereof, (ii) the Company shall be required in good faith to
employ all reasonable efforts to cause its registration statement to become
effective and to give prompt written notice to the Initiating Stockholders if
the Company abandons its effort to file or cause its registration statement to
become effective, and (iii) in the event the Company gives notice that it has
abandoned its registration statement efforts, the Company shall promptly renew
its best efforts to
-4-
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register the Registrable Securities that were the subject of the demand
registration notice if so requested in writing by the Initiating Holders within
10 days after their receipt of notice that the Company has abandoned its
registration efforts;
(C) If a demand registration hereunder is received after
November 30, 1996, then during the period starting with the filing of and ending
on the date 90 days immediately following the effective date of any registration
statement pertaining to securities of the Company (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan), provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective;
(D) If a demand registration hereunder is received after
November 30, 1996, if the Company shall furnish to the Initiating Holders a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company it would be seriously
detrimental, for the specific reasons stated in such certificate, to the Company
or its stockholders for a registration statement to be filed in the near future,
then the Company's obligation to use its best efforts to register under this
Section 5 shall be deferred for a period not to exceed 60 days from the date of
receipt of the written request from the Initiating Holders;
(E) If the Company has effected three registrations of
Registrable Securities pursuant to this Section 5, and such registrations have
been declared or ordered effective;
(F) Unless at least 180 days shall have expired from the
effectiveness of a previous registration of Registrable Securities pursuant to
this Section 5;
(G) To the extent that the request for registration
includes more than 25% of the original number of Merger Shares, as adjusted for
stock dividends and stock splits;
(H) If the Company gives written notice, within 15 days
after receipt of a notice for registration under this Section 5, that it offers
to purchase for cash all of the Registrable Securities as are requested by
Holders to be included and as are properly includible in such registration, at a
purchase price equal to the higher of (i) the average of the per share closing
prices on the Nasdaq National Market ("Nasdaq NM") of the Company's Shares for
the three consecutive trading days ended on the day prior to the date of receipt
by the Company of a demand for registration hereunder, or (ii) the average of
the per share closing prices on the Nasdaq NM of the Shares for the three
consecutive trading days prior to the date the Company gives notice of the
exercise of its right to purchase hereunder, payment to be made within 30 days
after the Company's receipt of the Shares to be purchased; or
(I) If the Company shall be advised by its independent
public accountants or its legal counsel that the sale of the Registrable
Securities by affiliates would jeopardize the pooling of interests accounting
for the Merger under Accounting Principles Bulletin
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No. 16 or Commission Accounting Series Release Nos. 130 (October 5, 1972) or 135
(January 18, 1973), such sale shall be delayed for such period of time as to not
jeopardize such accounting.
Subject to the foregoing clauses (A) through (I), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders.
(b) Underwriting. In the event that a registration requested by the
Initiating Holders pursuant to this Section 5 is for a registered public
offering involving an underwriting, the Company shall so advise the Holders as
part of the notice given pursuant to Section 5(a)(i). In such event, the right
of any Holder to registration pursuant to this Section 5 shall be conditioned
upon such Holder's participation in the underwriting arrangements required by
this Section 5, and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent requested shall be limited as provided herein.
The Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with managing underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of this Section
5, if the managing underwriter or underwriters advise the Initiating Holders in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the Company shall so advise all Holders participating and
the number of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all Holders thereof in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing the registration
statement. No Registrable Securities excluded from the underwriting by reason of
the underwriters' marketing limitation shall be included in such registration.
To facilitate the allocation of shares in accordance with the above provisions,
the Company or the underwriters may round the number of shares allocated to any
Holder to the nearest 100 shares.
If any Holder disapproves of the terms of the underwriting, such person
may elect to withdraw therefrom by written notice to the Company. The
Registrable Securities so withdrawn shall also be withdrawn from registration,
and such Registrable Securities shall not be transferred in a public
distribution prior to ninety (90) days after the effective date of such
registration, or such other shorter period of time as the underwriters may
require.
Section 6. Piggyback Registration Rights.
(a) Notice of Registration. If at any time or from time to time on
or before the expiration of 21 months from the Merger Effective Date, the
Company shall determine to register any of its Shares, either for its own
account or the account of a security holder or holders, other than a
registration relating solely to employee benefit plans or a registration
relating solely to a Commission Rule 145 transaction, the Company will:
-6-
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(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within 10 days after receipt of such written notice from the
Company, by any Holder; provided, however, that the Company shall not be
required to include in the registration at the effective date thereof any
Registrable Securities if the Company shall be advised by its independent public
accountants or legal counsel that the sale of such Registrable Securities by
affiliates would jeopardize the pooling of interests accounting for the Merger
under Accounting Principles Bulletin No. 16 or Commission Accounting Series
Release Nos. 130 (October 5, 1972) or 135 (January 18, 1973).
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 6(a)(i). In such event the right of any Holder to
registration pursuant to this Section 6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and any other stockholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriters selected by the Company.
Notwithstanding any other provision of this Section 6, if the managing
underwriters determine that marketing factors require a limitation of the number
of shares to be underwritten, the managing underwriters may limit the
Registrable Securities to be included in such registration. The Company shall so
advise all Holders and the number of shares of Registrable Securities that may
be included in the registration and underwriting shall be allocated among all
Holders in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such Holders at the time of filing the
registration statement. To facilitate the allocation of shares in accordance
with the above provisions, the Company may round the number of shares allocated
to any Holder or other stockholder to the nearest 100 shares. If any Holder or
other stockholder disapproves of the terms of any such underwriting, he may
elect to withdraw therefrom by written notice to the Company and the managing
underwriter. Any securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration, and shall not be transferred in a public
distribution prior to ninety (90) days after the effective date of the
registration statement relating thereto, or such other shorter period of time as
the underwriters may require. The Company may include Shares held by
stockholders other than Holders in a registration statement pursuant to this
Section 6, to the extent that the amount of Registrable Securities otherwise
includible in such registration statement would not thereby be diminished.
(c) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 6 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
Section 7. Shelf Registration Rights. If at any time or from time to time
on or before the expiration of 21 months from the Merger Effective Date, the
Company shall determine to register
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any of its Shares, for the account of a security holder or holders, pursuant to
a registration statement on Form S-3 for a continuous registered shelf offering
under Rule 415 of the Securities Act (the "Shelf Registration Statement")
covering the registration of all Registrable Securities (the "Shelf Registered
Securities"), the Company will promptly give to each Holder written notice
thereof and include in such registration all the Registrable Securities. The
Company shall use its best efforts to cause the Shelf Registration Statement and
the registration of the Shelf Registered Securities thereunder to be declared
effective by the SEC as soon as practicable following the Effective Time, and
shall continuously maintain the effectiveness of the Shelf Registration
Statement at all times until the expiration of 21 months from the Merger
Effective Date. Stockholder's right to offer and sell Shelf Registered
Securities pursuant to the Shelf Registration Statement shall be subject to the
following limitations:
(a) Limitation on Amount of Securities Sold. For as long as
Stockholder is entitled to registration rights pursuant to this Agreement, the
amount of Shelf Registered Securities that may be sold by Stockholder in each
sale of Shelf Registered Securities in reliance on the Shelf Registration
Statement under this Section 7, together with all sales of other shares of the
Company's Common Stock for the account of Stockholder within the preceding three
months (excluding any sales of the Company's Common Stock by Stockholder
pursuant to registrations filed pursuant to Section 5 or 6 of this Agreement),
shall not exceed the greater of (i) one percent (1%) of the shares of the
Company's Common Stock outstanding as shown by the most recent report or
statement published by the Company, or (ii) the average weekly reported volume
of trading in shares of the Company's Common Stock on all national securities
exchanges and/or reported through the automated quotation system of a registered
securities association during the four calendar weeks preceding Stockholder's
delivery to the Company of the notice required by Section 7(b).
(b) Notice of Proposed Sale. Initiating Holders shall give the
Company written notice of their bona fide intention to sell Shelf Registered
Securities pursuant to the Shelf Registration Statement at least seven (7)
business days in advance of the proposed date of sale, and the Company shall act
as soon as practicable to make any necessary filings with the Commission and
regulatory bodies as may be necessary to permit the sale of the Shelf Registered
Securities in accordance with Section 7(a).
(c) Minimum Amount of Securities Sold. Each request to sell Shelf
Registered Securities under this Section 7 shall be for such number of shares of
the Company's Common Stock having an aggregate sale price of at least $250,000.
(d) Curative Measures. If for any reason the Shelf Registration
Statement ceases to be effective at any time prior to the expiration of 21
months after the Merger Effective Date, then the Company shall use its best
efforts to cause the Shelf Registration Statement (or a new shelf registration
statement conforming to the provisions of this Section 7) to be declared
effective by the Commission and remain effective until the expiration of 21
months after the Merger Effective Date.
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Section 8. Limitations on Subsequent Registration Rights. Until the
expiration of 21 months from the Merger Effective Date, the Company shall not
enter into any agreement granting any holder or prospective holder of any
securities of the Company registration rights with respect to such securities
unless such new agreement specifies that the rights of the Holders hereunder
shall have preference to the holders of such new registration rights.
Section 9. Expenses of Registration. All Registration Expenses incurred in
connection with all registrations pursuant to Sections 5, 6, or 7 shall be borne
by the Company. All Selling Expenses relating to securities registered on behalf
of the Holders shall be borne by the Holders of such securities pro rata on the
basis of the number of shares so registered and sold.
Section 10. Registration Procedures. In the case of each registration
effected by the Company pursuant to this Agreement, each Holder participating
therein shall make the Holder with the largest number of Registrable Shares to
be included in the registration, or such other person or entity as the largest
participating Holder shall select, such Holder's attorney-in-fact
("Attorney-in-Fact") with respect to the registration, and the Company will keep
the Attorney-in-Fact, and each Holder if it so chooses, advised in writing as to
the initiation of each registration and as to the completion thereof. At its
expense the Company will:
(a) Prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least thirty (30)
days, and prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration statement effective for at least
thirty (30) days, provided that no such registration shall constitute a shelf
registration under Rule 415 promulgated by the Commission under the Securities
Act;
(b) Enter into a written underwriting agreement in customary form
and substance reasonably satisfactory to the Company and the managing
underwriters of the public offering of such securities, if the offering is to be
underwritten in whole or in part;
(c) Furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such Holders or the underwriters may reasonably
request in order to facilitate the public offering of such securities;
(d) Use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or blue sky
laws of such jurisdictions as such participating Holders or the underwriters may
reasonably request within ten (10) days prior to the original filing of such
registration statement, except that the Company shall not for any purpose be
required to execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction where it is not so
qualified;
-9-
10
(e) Notify the Holders or their Attorney-in-Fact promptly after it
shall receive notice thereof, of the time when such registration statement has
become effective or a supplement to any prospectus forming a part of such
registration statement has been filed;
(f) Notify the Holders or their Attorney-in-Fact promptly of any
request by the Commission to amend or supplement such registration statement or
prospectus or for additional information;
(g) Prepare and file with the Commission promptly upon the request
of any such Holders, any amendments or supplements to such registration
statement or prospectus which, in the reasonable opinion of counsel for such
Holders, is required under the Securities Act or the rules and regulations
thereunder in connection with the distribution of the Registrable Securities by
such Holders;
(h) Prepare and promptly file with the Commission, and promptly
notify such Holders or their Attorney-in-Fact of the filing of, such amendment
or supplement to such registration statement or prospectus as may be necessary
to correct any statements or omissions if, at the time when a prospectus
relating to such securities is required to be delivered under the Securities
Act, any event has occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances in which they
were made;
(i) In case any of such Holders or any underwriter for any of such
Holders is required to deliver a prospectus at a time when the prospectus then
in effect may no longer be used under the Securities Act, prepare promptly upon
request such amendment or amendments to such registration statement and such
prospectuses as may be necessary to permit compliance with the requirements of
the Securities Act;
(j) Advise such Holders or their Attorney-in-Fact, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for that purpose
and promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued; and
(k) At the request of any such Holder, furnish on the effective date
of the registration statement and, if such registration includes an underwritten
public offering, at the closing provided for in the underwriting agreement, (i)
an opinion, dated each such date, of the counsel representing the Company for
the purposes of such registration, addressed to the underwriters, if any, and to
the Holder or Holders making such request, covering such matters with respect to
the registration statement, the prospectus and each amendment or supplement
thereto, proceedings under state and federal securities laws, other matters
relating to the Company, the securities being registered and the offer and sale
of such securities as are customarily the subject of opinions of
-10-
11
issuer's counsel provided to underwriters in underwritten public offerings, and
(ii) to the extent the Company's accounting firm is willing to do so, a letter
dated each such date, from the independent public accountants of the Company,
addressed to the underwriters, if any, and to the Holder or Holders making such
request, stating that they are independent public accountants within the meaning
of the Securities Act and that in the opinion of such accountants the financial
statements and other financial data of the Company included in the registration
statement or the prospectus or any amendment or supplement thereto comply in all
material respects with the applicable accounting requirements of the Securities
Act, and additionally covering such other financial matters, including
information as to the period ending not more than five (5) business days prior
to the date of such letter with respect to the registration statement and
prospectus, as the underwriters or such requesting Holder or Holders may
reasonably request.
Section 11. Information by Holders. The Holders of Registrable Securities
included in any registration shall furnish the Company such information
regarding such Holders, the Registrable Securities held by them and the
distribution proposed by such Holders as the Company may request in writing and
as shall be required in connection with any registration referred to in this
Agreement.
Section 12. Indemnification.
(a) The Company will indemnify each Holder, each of its officers,
directors and partners, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
loses, damages or liabilities (or actions in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto, incident to
any such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, or any violation by the Company of the
Securities Act or any rule or regulation promulgated under the Securities Act
applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse each such Holder,
each of its officers and directors, and each person controlling such Holder,
each such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder,
controlling person or underwriter and stated to be specifically for use therein.
-11-
12
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers, each underwriter, if any, of the Company's securities covered by such
a registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, and each
other such Holder, each of its officers and directors and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
against all claims, losses, damages and liabilities (or actions in respect
thereof), arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder and
stated to be specifically for use therein. Notwithstanding the foregoing, the
liability of each Holder under this subsection (b) shall be limited to an amount
equal to the initial public offering price of the shares sold by such Holder,
unless such liability arises out of or is based on willful conduct by such
Holder.
(c) Each party entitled to indemnification under this Section 12
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or separate and
different defenses. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
Section 13. Non-assignability of Registration Rights. The registration
rights granted by this Agreement to Stockholders may not be transferred except
by will or the laws of descent or distribution, except that Jay N. Whipple, III.
may transfer such rights to one or more trusts that he may establish for estate
planning purposes.
-12-
13
Section 14. Standoff Agreement. Each Holder agrees, so long as such Holder
holds at least one percent (1%) of the Company's outstanding voting equity
securities, that, upon request of the Company or the underwriters managing an
underwritten offering of the Company's securities, such Holder will not sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Registrable Securities (other than those included in the
registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 90
days) from the effective date of such registration as may be requested by the
underwriters; provided, that if any officer or director of the Company who owns
at least one percent (1%) of the outstanding voting equity securities of the
Company does not agree to such restrictions, then the Holders shall not be
required to do so either.
Section 15. Execution in Counterparts. For the convenience of the parties,
this Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
Section 16. Notices. All notices that are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if given in writing and delivered by hand or national
overnight courier service, transmitted by telecopy or mailed by registered or
certified mail, postage prepaid, and shall be deemed given upon receipt, as
follows:
If to the Company to:
CHECKFREE CORPORATION
4411 East Jones Bridge Road
Norcross, Georgia 30092
(770) 441-3387:
Attention: Peter J. Kight, President and Chief Executive Officer
If to the Stockholder or Holder to:
The address appearing on the books and records of
the Company or its transfer agent as the address of
the Stockholder or Holder
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto.
Section 17. Applicable Law. This Agreement shall be governed by and
construed in accordance with he laws of the State of Ohio, without regard to its
conflict of laws principles.
Section 18. Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes any and all prior agreements and understandings, oral and written,
with respect to the subject matter hereof.
-13-
14
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the day and year first above written.
CHECKFREE CORPORATION STOCKHOLDER
By: _________________________ _____________________________
Its: _________________________ _____________________________
Print Name
-14-
5
1
6-MOS
JUN-30-1996
JUL-01-1996
DEC-31-1996
29,466,280
10,873,193
30,091,655
2,908,368
0
71,084,475
50,988,289
15,312,681
172,498,110
44,641,383
8,222,606
0
0
425,429
119,208,692
172,498,110
0
71,166,891
0
92,124,608
0
0
0
(20,075,342)
(7,025,096)
(13,050,246)
0
0
0
(13,050,246)
(.31)
(.31)
