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As filed with the Securities and Exchange Commission on January 27, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CHECKFREE CORPORATION
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
Delaware 7374 31-1013521
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
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4411 East Jones Bridge Road
Norcross, Georgia 30092
(770) 441-3387
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
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Peter J. Kight
Chairman, President and Chief Executive Officer
Checkfree Corporation
4411 East Jones Bridge Road
Norcross, Georgia 30092
(770) 441-3387
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies of Correspondence to:
Curtis A. Loveland, Esq.
Porter, Wright, Morris & Arthur
41 South High Street
Columbus, Ohio 43215
(614) 227-2004
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Approximate date of commencement of proposed sale of the securities to the
public:
From time to time after the Effective Date of this Registration Statement, as
determined by market conditions.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any securities being registered on this Form are to be offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price Aggregate Offering Registration
Securities to be Registered Registered Per Share* Price* Fee*
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Common stock, $.01 par value. . . . . . . .15,129,183 $15.3125 $231,665,615 $70,202
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<FN>
* Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), based on the average high and low prices of the
Common Stock as reported on the Nasdaq National Market on January 22, 1997.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION - JANUARY 27, 1997
PROSPECTUS
15,129,183 SHARES
CHECKFREE CORPORATION
COMMON STOCK
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All of the 15,129,183 shares of common stock, $.01 par value (the
"Common Stock"), of Checkfree Corporation (the "Company") offered hereby (the
"Shares") may be offered for sale from time to time by and for the account of
certain stockholders of the Company (collectively, the "Selling Stockholders")
as more fully described herein. The Company will not receive any proceeds from
the sale of Shares offered hereby by the Selling Stockholders. See "Use of
Proceeds," "Selling Stockholders," and "Plan of Distribution."
The Common Stock is listed on the Nasdaq National Market under the
symbol "CKFR." On January 24, 1997, the closing price per share of the Common
Stock on the Nasdaq National Market was $14.75.
This Prospectus relates to the (i) 2,529,183 shares of Common Stock
which were originally issued by the Company to the former stockholders of
Security APL, Inc. on May 9, 1996 in connection with the consummation of the
Company's acquisition of Security APL, Inc.; and (ii) 12,600,000 shares of
Common Stock which were originally issued by the Company to Intuit Inc. on
January 27, 1997 in connection with the consummation of the Company's
acquisition of Intuit Services Corporation. The Selling Stockholders, directly,
through agents designated from time to time, or through broker-dealers or
underwriters also to be designated, may sell the Shares, jointly or severally,
from time to time on terms to be determined at the time of sale. To the extent
required, the specific Shares to be sold, public offering price, the names of
any such agent, broker-dealer, or underwriter and any applicable commission or
discount will be set forth in an accompanying supplement to this Prospectus (a
"Prospectus Supplement"). See "Selling Stockholders" and "Plan of Distribution."
The Selling Stockholders, jointly and severally, reserve the sole right to
accept or reject, in whole or in part, any proposed purchase of the Shares to be
made in the manner set forth above.
The distribution of the Shares by the Selling Stockholders may be
effected from time to time in one or more transactions in the over-the-counter
market, in the Nasdaq National Market, or in privately negotiated transactions
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices, or at negotiated prices. The Selling Stockholders and
any underwriters, broker-dealers, or agents that participate in the distribution
of the Shares may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act of 1933, as amended (the "Securities Act"), and any
profit on the sale of the Shares by them and any commissions, discounts, or
concessions received by any such underwriters, broker-dealers, or agents might
be deemed to be underwriting discounts and commissions under the Securities Act.
See "Plan of Distribution" for indemnification arrangements between the Company
and the Selling Stockholders.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" AT PAGE 6.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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__________ __, 1997
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "Exchange Act"), and in accordance therewith files reports,
proxy statements, and other information with the Securities and Exchange
Commission (the "Commission"). Copies of such reports, proxy statements, and
other information filed by the Company can be inspected and copied at the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 or at the public reference facilities of the regional offices of the
Commission at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511;
and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material also can be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of
the fees prescribed by the rules and regulations of the Commission. Such
materials may also be accessed electronically by means of the Commission's home
page on the Internet at http://www.sec.gov.
The Common Stock is listed on the Nasdaq National Market, and
accordingly such reports and other information concerning the Company also
should be available for inspection and copying at the offices of the Nasdaq
Stock Market, 1735 K. Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission under the Securities Act, and
the rules and regulations thereunder, a Registration Statement on Form S-3, as
it may be amended (the "Registration Statement"), with respect to the Shares
offered hereby. This Prospectus does not contain all of the information
contained in the Registration Statement, certain portions of which have been
omitted pursuant to the rules and regulations of the Commission and to which
reference is hereby made. Any statements contained herein or in any document
incorporated by reference herein concerning the provisions of any contract or
other document are not necessarily complete, and in each instance reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement or other document, each such statement being qualified in
its entirety by such reference. The Registration Statement (and exhibits
thereto) should be available for inspection at the offices of the Commission at
450 Fifth Street, N.W., Washington D.C. 20549, and copies thereof may be
obtained from the Commission at prescribed rates. Such materials may also be
accessed electronically by means of the Commission's home page on the Internet
at http://www.sec.gov.
INFORMATION INCORPORATED BY REFERENCE
The following documents previously filed with the Commission by the
Company pursuant to Sections 13(a), 14 or 15(d) of the Exchange Act are hereby
incorporated herein by reference:
1. Transition Report on Form 10-K (filed September 27, 1996) and
Form 10-K/A No. 1 (filed December 9, 1996) for the six months
ended June 30, 1996;
2. Quarterly Report on Form 10-Q (filed November 12, 1996) and
Form 10-Q/A No. 1 (filed December 9, 1996) for the quarter
ended September 30, 1996;
3. Current Reports on Form 8-K, dated May 9, 1996 (filed May 20,
1996), September 15, 1996 (filed September 26, 1996), October
1, 1996, (filed October 9, 1996), November 22, 1996 (filed
December 6, 1996), December 16, 1996 (filed December 18,
1996), and January 27, 1997 (filed January 27, 1997); Current
Report on Form 8-K/A No. 1, dated May 9, 1996 (filed July 22,
1996); and Current Report on Form 8-K/A No. 2, dated May 9,
1996 (filed October 11, 1996); and
4. Proxy Statement for the Special Meeting of Stockholders held
on January 27, 1997 (filed on December 23, 1996).
In addition, the description of the Common Stock which is contained in
the Company's Form 8-A (Registration No. 0-26802) filed with the Commission
pursuant to Section 12 of the Exchange Act, as the same may be updated in any
amendment or report filed for the purpose of updating such description, is
hereby incorporated by reference.
All documents filed by the Company, pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering of the Shares hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company shall promptly furnish, without charge, a copy of any and
all of the information that has been incorporated by reference in the Prospectus
upon the written or oral request of any potential investor to: Brenda Jones,
4411 East Jones Bridge Road, Norcross, Georgia 30092, (770) 734-3430.
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SUMMARY
The following is a brief summary of certain information contained
elsewhere in this Prospectus. This summary is not intended to be complete and is
qualified in its entirety by reference to, and should be read in conjunction
with, the detailed information and financial statements contained or
incorporated by reference herein and in the exhibits hereto. As used in this
Prospectus, "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 Prospectus 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
"Risk Factors."
THE COMPANY
The Company is a leading provider of electronic commerce services,
financial application software and related products for financial institutions
and businesses and their customers. To maximize the efficiency and effectiveness
of its product development and distribution strategies, the Company has
established several strategic alliances with companies such as Automatic Data
Processing, Inc. ("ADP"), Block Financial Corporation ("Block Financial"),
CyberCash, Inc. ("CyberCash"), Electronic Data Systems Corporation ("EDS"),
Fiserv, Inc. ("Fiserv"), FiTech, Inc. ("FiTech"), Premiere Communications, Inc.
("Premiere"), Spyglass, Inc. ("Spyglass"), and SPRY, Inc. ("Spry"), an affiliate
of CompuServe Corporation ("CompuServe").
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
application software and services to financial institutions substantially
enhances the Company's presence in the financial institutions market of the
electronic commerce industry. 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 industry. ISC's
experience as a provider of on-line electronic banking and bill payment
processing services to consumers and financial institutions enhances the
Company's presence in the consumer and financial institutions market of the
electronic commerce industry. 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
service, and ISC's on-line electronic banking and bill payment processing
services 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.
Prior to the Servantis Acquisition, Checkfree operated its business in
one business segment, the electronic commerce segment. With the Servantis
Acquisition, the Company added financial application software as a second
business segment. The electronic commerce segment includes electronic home
banking, electronic bill payment, automatic accounts receivable collection,
electronic accounts payable processing, investment portfolio management services
and investment trading and reporting services. These services are primarily
directed to financial institutions and businesses and their customers. The
financial application software segment includes end-to-end software products for
Automated Clearing House ("ACH") processing, account reconciliation, wire
transfer, mortgage loan origination and servicing, lease accounting and debt
recovery. These products and services are primarily directed to financial
institutions and large corporations.
The Company was incorporated in Ohio in 1981 and reincorporated in
Delaware in 1986. The Company has ten direct and indirect wholly owned
subsidiaries: Servantis Systems Holdings, Inc., a Delaware corporation;
Servantis Systems, Inc., a Georgia corporation; Servantis Services, Inc., a
Georgia corporation; Checkfree Software Solutions, Inc., a Delaware corporation;
Security APL, Inc., an Illinois corporation; Bow Tie Systems, Inc., an Illinois
corporation; Checkfree Services Corporation, a Delaware corporation;
Interactive Solutions Corporation, an Oregon corporation; Checkfree Investment
Corporation, a Delaware corporation; and RCM Systems, Inc., a Wisconsin
corporation. The Company's principal executive offices are located at 4411 East
Jones Bridge Road, Norcross, Georgia 30092 and its telephone number is (770)
441-3387. The Company's Internet address is http://www.checkfree.com.
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THE SERVANTIS ACQUISITION AND SERVANTIS
On February 21, 1996, Checkfree acquired Servantis for approximately
$165.1 million, consisting of the issuance of 5.7 million shares of the Common
Stock valued at $20.00 per share and $42.5 million in cash to repay Servantis'
long-term debt, in addition to the assumption of $38.3 million of liabilities.
Founded in 1971, Servantis is a leading provider of electronic commerce and
financial application software and services for businesses and financial
institutions (including the 500 largest banks and over 350 mortgage institutions
in the United States). Servantis designs, markets, licenses and supports
software products for electronic corporate banking, home banking, financial
lending, regulatory compliance and document imaging. In addition, Servantis
offers software consulting and remote processing services. The Company accounted
for the Servantis Acquisition using the purchase method of accounting.
THE SECURITY APL ACQUISITION AND SECURITY APL
On May 9, 1996, Checkfree acquired Security APL for approximately $53.3
million, consisting of the issuance of 2.8 million shares of the Common Stock
valued at $18.50 per share, and the assumption of $5.5 million of liabilities.
Security APL is a leading vendor of portfolio management and software services
for institutional investment managers. Security APL has been developing and
providing advanced investment analysis systems since it was founded in 1978.
Security APL believes that it is the only full-service provider of
fully-integrated portfolio management, performance measurement, trading and
reporting systems for the investment manager. Security APL's clients include
money management firms, bank trust departments, insurance companies and
brokerage houses. Security APL added an additional investment information
service by establishing its Portfolio Accounting World Wide ("PAWWS") division
in August 1994. The PAWWS world-wide web site offers individuals some of the
same tools professional money managers have to gather the information they need
to make their investment decisions to enter trades and to monitor the status of
their investments. Some of the services available through PAWWS include
portfolio accounting and allocation, research information provided by various
data suppliers, free stock quotes, stock host lists and brokerage services.
The Company accounted for the Security APL Acquisition using the purchase
method of accounting.
THE ISC ACQUISITION AND ISC
On January 27, 1997, the Company acquired ISC in a transaction for an
estimated total transaction consideration of $198.9 million, consisting of the
issuance of 12.6 million shares of the Common Stock and the assumption of $1.7
million of ISC liabilities in the merger and the payment of $20.0 million cash
to Intuit Inc. ("Intuit") for a connectivity license under a separate services
and license agreement under which the Company, ISC and Intuit will cooperate and
provide each other mutual services and connectivity rights. Of the $20.0 million
payable under the services and license agreement, $10.0 million has been paid
and an additional $10.0 million is payable on or about October 1, 1997. The
actual cost of the ISC Acquisition will be based upon final determination of an
illiquidity discount for the Common Stock issued to Intuit (currently estimated
at 25%) and the final value of the liabilities assumed. ISC was incorporated in
Delaware on December 22, 1989, under the name "National Payment Clearinghouse,
Inc." ISC was acquired by Intuit in July 1994 and later renamed Intuit Services
Corporation. ISC was an operations processing facility for Intuit and the
on-line products of other companies. ISC's principal business is to provide
on-line electronic banking and bill payment processing services (including
Intuit's on-line banking and online bill payment services) to approximately 40
financial institutions (including six of the ten largest domestic banks and
American Express), their customers, and a variety of merchants. ISC also
supports BankNow, an Intuit home banking service that is available on America
Online, and banking, bill payment and stock quote services accessible through
Microsoft Money. ISC's current operations include data processing and storage,
maintenance and development of multiple on-line connections to other entities
(including companies other than Intuit), and telephone support for both customer
service and technical support. However, to date ISC's services have been
marketed to and designed primarily for users of Intuit's Quicken personal
finance software program. The Company accounted for the ISC Acquisition using
the purchase method of accounting.
OTHER INFORMATION
The Common Stock is actively traded in the over-the-counter market
under the Nasdaq symbol "CKFR." Since information regarding the Company is
readily available to investors, the Commission permits this document to be
abbreviated by incorporating information regarding the Company by reference to
certain reports and other documents filed with the Commission. See "INFORMATION
INCORPORATED BY REFERENCE." Other than as described herein, there have been no
material changes in the affairs of the Company since the filing of its Quarterly
Report on Form 10-Q/A No. 1 for the quarter ended September 30, 1996, that have
not been described in a subsequent report filed with the Commission pursuant to
the Exchange Act.
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RISK FACTORS
The Common Stock being offered hereby involves certain risks,
including, but not limited to the following: (i) emerging electronic commerce
market; security and privacy concerns; (ii) integration of Servantis, Security
APL and ISC; (iii) acquisition-related risks; (iv) ISC's financial performance;
(v) intense competition; (vi) management of growth; (vii) dependence on
strategic alliances; (viii) potential fluctuations in quarterly results;
seasonality; (ix) product defects; (x) rapid technological change; delays; (xi)
loss from returned transactions, merchant fraud or erroneous transmissions;
(xii) system failure; (xiii) limited protection of proprietary technology; third
party infringement claims; (xiv) dependence on key personnel; lack of employment
agreements; (xv) ACH access; termination of MasterCard and Visa registration;
(xvi) customer attrition; (xvii) limited prior market; volatility of stock
price; (xviii) control by principal stockholders; (xix) shares eligible for
future sale; possible adverse effect on market price; (xx) anti-takeover
provisions; certain provisions of Delaware law; certificate of incorporation and
by-laws; (xxi) government regulation; and (xxii) future capital needs;
uncertainty of additional financing.
For a fuller discussion of these and other risks affecting the Company
and its business, see "RISK FACTORS."
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RISK FACTORS
The Company desires to take advantage of the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Many
of the following important factors discussed below have been discussed in the
Company's prior filings with the Securities and Exchange Commission. In addition
to the other information in this Prospectus, the following factors should be
carefully considered in evaluating the Company and its business before
purchasing shares of the Common Stock offered hereby. The following important
factors, among others, in some cases have affected, and in the future could
affect, the Company's actual results and could cause the Company's actual
consolidated results of operations to differ materially from those expressed in
any forward-looking statements made by, or on behalf of, the Company.
Emerging Electronic Commerce Market; Security and Privacy Concerns. The
electronic commerce market is a relatively new and growing service industry. If
the electronic commerce market fails to grow or grows more slowly than
anticipated, or if the Company, despite an investment of significant resources,
is unable to adapt to meet changing customer requirements or technological
changes in this emerging market or if the Company's services and related
products do not maintain a proportionate degree of acceptance in this growing
market, the Company's business, operating results and financial condition could
be materially adversely affected. Additionally, the security and privacy
concerns of existing and potential customers may inhibit the growth of the
electronic commerce market in general and the Company's customer base and
revenues in particular. Similar to the emergence of the credit card and
automated teller machine ("ATM") industries, the Company and other organizations
serving the electronic commerce market need to educate users that electronic
transactions use encryption technology and other electronic security measures
that make electronic transactions more secure than paper-based transactions.
While the Company believes that it is utilizing proven applications designed for
premium data security and integrity to process electronic transactions, there
can be no assurance that the Company's use of such applications will be
sufficient to address the changing market conditions or the security and privacy
concerns of existing and potential customers.
Additionally, the Company's growth and acceptance in the electronic
commerce market is dependent on its continued growth in its target markets.
Although demand for the Company's services and related products continues to
grow, there can be no assurance that the Company will be successful in each of
its target markets. Accordingly, the Company's inability to grow in any one of
these markets could have a material adverse effect on the Company's business,
operating results and financial condition.
Integration of Servantis, Security APL, and ISC. On February 21, 1996,
the Company acquired Servantis for approximately $165.1 million, consisting of
the issuance of 5.7 million shares of the Common Stock valued at $20.00 per
share (approximately 16% of the Company's total shares outstanding following the
Servantis Acquisition) and $42.5 million in cash to repay Servantis' long-term
debt, in addition to the assumption of $38.3 million in liabilities. In
addition, on May 9, 1996, the Company acquired Security APL for approximately
$53.3 million, consisting of the issuance of 2.8 million shares of the Common
Stock valued at $18.50 per share (approximately 7% of the Company's total shares
outstanding following the Security APL Acquisition), and the assumption of $5.5
million of liabilities. Additionally, on January 27, 1997 the Company acquired
ISC in a transaction for an estimated total transaction consideration of $198.9
million, consisting of the issuance of 12.6 million shares of the Common Stock
(representing approximately 23.2% of the Company's total shares outstanding
immediately following the ISC acquisition) and the assumption of $1.7 million of
ISC liabilities in the merger and payment of $20.0 million cash to Intuit for a
connectivity license under a separate services and license agreement under which
the Company, ISC and Intuit will cooperate and provide each other mutual
services and connectivity rights. Of the $20.0 million payable under the
services and license agreement, $10.0 million has been paid and an additional
$10.0 million is payable on or about October 1, 1997. The successful and timely
integration of Checkfree, Servantis, Security APL, and ISC is critical to the
future financial performance of the Company. The Company currently estimates
that the complete integration of the four companies could take several quarters
to accomplish. The combination of the four companies will require, among other
things, integration of the companies' respective service and product offerings
and coordination of their sales and marketing and research and development
efforts. While Checkfree, Servantis, Security APL, and ISC have focused on
markets which utilize financial transaction processing, record-keeping and
information delivery, Checkfree and ISC have to date acted principally as
providers of services, whereas Servantis and Security APL have focused on the
development and support of software systems and services used by financial
institutions. In addition, Servantis had greater revenues than Checkfree for the
twelve months ended December 31, 1995, and the absorption of a larger company
may present a more substantial integration challenge than the acquisition of a
smaller company. There can be no assurance that present and potential customers
of the Company will continue their recent buying patterns without regard to the
Acquisitions, and any significant delay or reduction in orders could have an
adverse effect on the Company's near-term business and results of operations.
The diversion of the attention of management created by, and any difficulties
encountered in, the integration process could have an adverse impact on the
revenues and operating results of the Company. In addition, the process of
combining the four organizations could have an adverse effect on any or all of
the companies' businesses. The difficulty of combining the four companies may be
increased by the need to integrate the personnel of and the geographic distance
between the four companies. Changes brought about by the
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Acquisitions may result in the loss of key employees of any or all companies.
There can be no assurance that the Company will retain the employees it wants to
retain or that the Company will realize any of the other anticipated benefits of
the Acquisitions. See "RISK FACTORS -- Acquisition Related Risks."
For transition fiscal 1996, the Company wrote-off $119.4 million of the
purchase price for Servantis and Security APL as in-process research and
development. In addition, as part of the allocation of the Servantis purchase
price, the Company reduced the deferred revenues on the balance sheets of
Servantis at the date of the Servantis Acquisition due to the fact that the
anticipated profits included in deferred revenues are reflected in the purchase
price of the Servantis Acquisition. As a result, the Company did not recognize
revenues or profits of approximately $12.7 million with respect to such
reduction in deferred revenues in transition fiscal 1996. The write-off of
in-process research and development costs, and the nonrecognition of revenues or
profits on certain deferred revenues had a material adverse impact on the
Company's financial results in 1996. In addition, with the acquisition of ISC
the Company expects a substantial in-process research and development write-off
in fiscal 1997, which is currently estimated at $120 million.
Acquisition-Related Risks. In January 1997, the Company consummated the
ISC Acquisition which was accounted for as a purchase. While the appraisal for
ISC is not yet complete, the Company expects a substantial in-process research
and development write-off at the acquisition date, currently estimated at $120
million. In addition, ISC had been incurring operating losses and operating
losses are anticipated in 1997. The Company expects it will take 12 to 18 months
to integrate ISC's bill payment and home banking operations into the Company's
operations. The integration of ISC's operations into the Company's operations
will be included in the project to integrate some of the product and service
offerings and sales and marketing efforts of Servantis and Security APL into the
Company. While the Company believes the integration of ISC, Servantis, Security
APL and Checkfree will eventually result in greater operating efficiencies, a
significant amount of effort and resources will be needed for the integration
effort. The Company does not currently have a detailed estimate of the cost of
the integration plan, but the cost could range from $5 to $10 million. There can
be no assurance the Company's integration plan will be completed in the expected
time frame or that the Company will realize the operational efficiencies
projected as a result of the acquisition.
In the future, the Company may pursue additional acquisitions of
complementary service or product lines, technologies or businesses. Future
acquisitions by the Company could result in potentially dilutive issuances of
equity securities, the incurrence of debt and contingent liabilities and
amortization expenses related to goodwill and other intangible assets, any of
which could materially adversely affect the Company's business, operating
results and financial condition. In addition, acquisitions involve numerous
risks, including difficulties in the assimilation of the operations,
technologies, services and products of the acquired companies, the diversion of
management's attention from other business concerns, risks of entering markets
in which the Company has no or limited direct prior experience, and the
potential loss of key employees of the acquired company. There can be no
assurance that some or all of these risks will not arise from the Acquisitions.
From time to time, the Company evaluates potential acquisitions of businesses,
services, products or technologies. However, the Company has no present
commitments or agreements with respect to any material acquisition of other
businesses, services, products or technologies. In the event that such an
acquisition were to occur, however, there can be no assurance that the Company's
business, operating results and financial condition would not be materially
adversely affected.
ISC's Financial Performance. For the past two fiscal years, ISC has
been an operations facility for Intuit and the on-line products of other
companies. The operations conducted by ISC include electronic banking and bill
payment processing services and storage, maintenance and development of multiple
on-line connections to other entities (including companies other than Intuit),
and telephone support for both customer service and technical support. ISC has
experienced significant losses and fluctuations in its operating results and the
Company anticipates that losses and fluctuations attributable to ISC's business
will continue. ISC has incurred an accumulated deficit of $24.3 million through
October 31, 1996. In the years ended July 31, 1995 and 1996 and the three months
ended October 31, 1996, ISC incurred net loss of $5.3 million, $13.5 million,
and $4.1 million, respectively.
Since its acquisition by Intuit in July 1994, ISC has funded its
business with capital contributions from Intuit and cash generated from
operations, and ISC has been heavily dependent upon Intuit for cash funds
necessary to offset ISC's operating losses. The Company, along with the cash
generated from ISC's operations, will be the source of financing for ISC to
continue to fund its operations at its present level and fund anticipated cash
needs for working capital, capital expenditures and business expansion for the
foreseeable future. While the Company anticipates that its available cash
resources and funds from operations will be sufficient to meet these needs for
both the short-term and through June 30, 1998, the continued funding of ISC's
operations will have a negative effect on the Company's cash and cash
equivalents. Moreover, there can be no assurance that ISC's operations will
become profitable.
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Intense Competition. Portions of the electronic commerce market are
becoming increasingly competitive. The Company faces significant competition in
all of its customer markets. In the financial institutions market, the
Company's competitors include Visa Interactive and Integrion Financial Network
Inc. A number of banks have developed, and others in the future may develop,
home banking services in-house. Additionally, Intuit and Microsoft have each
individually announced their own alliances with financial institutions to offer
on-line home banking and financial services to consumers. Recently, the
Company, Intuit, and Microsoft announced that they will work together to
provide a unified technical standard called Open Financial Exchange which would
make it easier for people using competing systems to more easily exchange
financial information over the Internet. There can be no assurance that such
unified technical standard will be successful or accepted in the electronic
commerce market. In the business market, the Company competes with other credit
card and ACH processors. The Federal Reserve's ACH is the national payment
clearance system through which any bank can effect debit or credit transactions
to any authorized consumer checking account. There are numerous competitors in
the business market for credit card processing, including First USA, Inc.,
NaBanco and Card Establishment Services (divisions of First Data Corporation),
and National Processing Company (a division of National City Bank). The Company
also faces competition in ACH processing from numerous banks. The financial
application software segment also faces significant competition. Portfolio
accounting software providers include Advent software, PORTIA, a division of
Thomson Financial, and Shaw Data, a Sun Guard Company. The primary portfolio
competition is Shaw Data. In products offered to the mortgage services
industry, the Company competes with Fiserv, FiTech, EDS, Alltel Financial
Information Services, Inc., Computer Power, Inc., Associated Software
Consultants, Inc. and Gallagher Financial Systems, Inc. The Company's
Imaging/COLD product lines compete with the products of several companies,
including International Business Machines Corporation, Optika, Image
Integration Corporation and Computron Software, Inc.
The Company expects competition to increase from both established and
emerging companies and that such increased competition will result in price
reductions and may result in a reduction of the Company's market share, either
or both of which could materially adversely affect the Company's business,
operating results and financial condition. The Company announced a new series of
services and pricing options in September 1995 in an attempt to appeal to
various segments of the Company's markets. One such option is to offer a bill
payment service at a lower cost in order to target new users and users who are
only interested in the electronic bill payment aspect of the Company's services.
Moreover, the Company's current and potential competitors, many of whom have
significantly greater financial, technical, marketing and other resources than
the Company, may respond more quickly than the Company to new or emerging
technologies or could expand to compete directly against the Company in any or
all of its target markets. Accordingly, it is possible that current or potential
competitors could rapidly acquire significant market share. Acquisitions and
consolidations are taking place in the transaction processing industry, such as
the merger between First Data Corp. and First Financial Management Corp. and the
acquisition of Litle and Company by First USA, Inc. While the Company believes
competition will increase as a result of these mergers and acquisitions, the
Company also believes it is well positioned to meet such competition. There can
be no assurance, however, that the Company will be able to compete against
current or future competitors successfully or that competitive pressures faced
by the Company will not have a material adverse effect on its business,
operating results and financial condition.
Today, the Company is the leading provider of electronic payment
services to users of personal finance software. The Company believes that as
consumer-based on-line interactive and telecommunications services continue to
grow, retail-marketed personal financial software will become a less important
channel for the Company in acquiring new customers. The Company's strategy is to
focus increasingly on its own distribution alliances and direct marketing,
including key strategic alliances in the on-line interactive and
telecommunications industries. There can be no assurance that the Company's
strategy will be successful.
Management of Growth. The Company is currently experiencing a period of
rapid growth which has placed, and could continue to place, a significant strain
on its resources. This strain is increased by the Acquisitions. Some of the
Company's key employees have not had experience in managing companies larger
than the Company. The Company's ability to manage growth successfully will
require the Company to continue to improve its operational, management and
financial systems and controls as well as expand its work force. A significant
increase in the Company's customer base resulting from the Acquisitions will
necessitate the hiring of a significant number of additional customer care and
technical support personnel as well as computer software developers and
technicians, qualified candidates for which, at the present time, are in short
supply. In addition, the expansion and adaptation of the Company's computer
infrastructure will require substantial operational, management and financial
resources. Although the Company believes that its current computer
infrastructure is adequate to meet the needs of its customers in the foreseeable
future, there can be no assurance that the Company will be able to expand and
adapt its computer
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infrastructure to meet additional demand on a timely basis, at a commercially
reasonable cost, or at all. If the Company's management is unable to manage
growth effectively, hire needed personnel, expand and adapt its computer
infrastructure or improve its operational, management and financial systems and
controls, the Company's business, operating results and financial condition
could be materially adversely affected.
Dependence on Strategic Alliances. A principal element of the Company's
strategy is the creation and maintenance of strategic alliances that maximize
access to potential customers for the Company's electronic commerce services and
related products. The Company believes that these alliances enable the Company
to offer its services, software and related products to a larger customer base
than could be reached through stand-alone marketing efforts. As of the date of
this report, the Company has entered into strategic alliances with several
companies, including ADP, Block Financial, CyberCash, EDS, Fiserv, FiTech,
Premiere, Spyglass and Spry. While the Company believes it has established
strong strategic alliances with these partners, the Company's success depends
both on the ultimate success of these partners, as well as on the ability of its
partners to successfully market the Company's services and related products.
Failure of one or more of the Company's key strategic partners to successfully
develop and sustain a market for the Company's services and related products
could have a material adverse effect on the Company's overall performance.
Additionally, failure of the Company's strategic partners to generate new
customers would likely lead to increased and more costly direct marketing
expenditures by the Company as well as a need to develop new strategic alliances
with other parties. Moreover, the Company has traditionally relied on its
strategic partners as the cornerstone of its marketing efforts to consumers and
financial institutions and, consequently, the Company has only limited
experience in the direct marketing of its services to its target markets.
Although the Company views its alliances as a key factor in its overall
business strategy and in the development and commercialization of its services,
software and related products, there can be no assurance that its strategic
partners view their alliances with the Company as significant for their own
businesses or that they will not reassess their commitment to the Company at any
time in the future. The Company's strategic alliance agreements generally do not
establish minimum performance requirements for the strategic partners but
instead rely on the voluntary efforts of the partners in pursuing joint goals.
The ability of the Company's strategic partners to incorporate the Company's
services, software and related products into successful commercial ventures will
depend, in part, on the Company's ability to continue to successfully enhance
its existing services, software and products and develop new services and
products. The Company's inability to meet such requirements would delay the
ongoing development of services, software and products and could result in its
strategic partners seeking alternative providers of financial transaction
services, software and related products, which would have a material adverse
impact on the Company.
Potential Fluctuations in Quarterly Results; Seasonality. The Company's
quarterly results of operations may fluctuate significantly as a result of a
number of factors, including costs related to the integration of historical and
future business acquisitions, changes in the Company's pricing policies or those
of its competitors, relative rates of acquisition of new customers, delays in
the introduction of new or enhanced services, software, and related products by
the Company or by its competitors or market acceptance of such services,
software and related products, other changes in operating expenses, personnel
changes and general economic conditions. Moreover, the Company's intention to
aggressively promote the acceptance of its electronic commerce services and
rapidly expand its customer base may adversely impact the Company's short-term
profitability. In addition, the Company's growth in new consumer customers is
impacted by certain seasonal factors such as holiday-based personal computer
sales. These seasonal factors may impact operating results by concentrating
customer acquisition and set-up costs, which may not be immediately offset by
revenue increases primarily due to introductory service price discounts.
Additionally, online interactive service customers generally tend to be more
active users during the non-summer seasons, potentially causing revenue
fluctuations during the summer months. Servantis' quarterly operating results
have historically been highly seasonal, with sales and earnings generally
stronger in the quarters ended December 31 and June 30 of each year and
generally weaker in the quarters ended September 30 and March 31 of each year.
The seasonality is due, in part, to calendar year-end buying patterns of
Servantis' financial institution customers and Servantis' sales compensation
structure, which is based on fiscal year (June 30) sales performance. Servantis
has historically operated with little or no backlog and has no long-term
contracts, and approximately half of its revenues in each quarter result from
software licenses issued in that quarter. These seasonal factors will impact the
Company's operating results. Fluctuations in operating results could result in
volatility in the price of the Common Stock.
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Risk of Product Defects. The software products offered by the Company
could contain errors or "bugs" that could adversely affect the performance of
the Company's software or services or damage a user's data. In addition, as the
Company increases its share of the electronic commerce services market, software
reliability and security demands will increase. The Company attempts to limit
its potential liability for warranty claims through disclaimers in its software
documentation and limitation-of-liability provisions in its license and customer
agreements. There can be no assurance that the measures taken by the Company
will prove effective in limiting the Company's exposure to warranty claims.
Additionally, despite the existence of various security precautions, the
Company's computer infrastructure may be also vulnerable to viruses or similar
disruptive problems caused by its customers or third parties gaining access to
the Company's processing system.
Rapid Technological Change; Risk of Delays. The Company's success is
highly dependent on its ability to develop new and enhanced software, services
and related products that meet changing customer requirements. The market for
the Company's software, services and related products is characterized by
rapidly changing technology, evolving industry standards, emerging competition
and frequent new and enhanced software, service and related product
introductions. In addition, the software market is subject to rapid and
substantial technological change. The Company, to remain successful, must be
responsive to new developments in hardware and semiconductor technology,
operating systems, programming technology and computer capabilities. In many
instances, the new and enhanced services, products and technologies are in the
emerging stages of development and marketing, and are subject to the risks
inherent in the development and marketing of new software, services and
products. There can be no assurance that the Company can successfully identify
new service opportunities and develop and bring new and enhanced software,
services and related products to market in a timely manner, that such software,
services, products or technologies will develop or will be commercially
successful, that the Company will benefit from such developments or that
services, products or technologies developed by others will not render the
Company's software, services and related products noncompetitive or obsolete. If
the Company is unable, for technological or other reasons, to develop and
introduce new services and products in a timely manner in response to changing
market conditions or customer requirements, or if new or enhanced software,
services and related products do not achieve a significant degree of market
acceptance, the Company's business, operating results and financial condition
would be materially adversely affected.
Risk of Loss From Returned Transactions, Merchant Fraud or Erroneous
Transmissions. The Company utilizes all three principal financial payment
clearance systems: the Federal Reserve's ACH for electronic fund transfers; the
national credit card systems (e.g., American Express, Discover, MasterCard and
Visa) for electronic credit card settlements; and conventional paper check and
draft clearing systems for settlement of payments by check or drafts. In its use
of these established payment clearance systems, the Company generally bears the
same credit risks normally assumed by other users of these systems arising from
returned transactions caused by insufficient funds, stop payment orders, closed
accounts, frozen accounts, unauthorized use, disputes, theft or fraud. In
addition, the Company also assumes the risk of merchant fraud and transmission
errors when it is unable to have erroneously transmitted funds returned by an
unintended recipient. Merchant fraud includes such actions as inputting false
sales transactions or false credits. The Company manages all of these risks
through its risk management systems, internal controls and system security. The
Company also maintains a reserve for such credit risks and has not historically
incurred losses in excess of its reserve nor greater than 0.76% of its revenues
in any of the past five years. Past reserving experience cannot predict the
adequacy of reserves in the future. The Company believes that its risk
management and reserving practices are adequate. However, there can be no
assurance that the Company's risk management practices or reserves will be
sufficient to protect the Company from returned transactions, merchant fraud or
erroneous transmissions which could have a material adverse effect on the
Company's business, operating results and financial condition.
Risk of System Failure. The Company's operations are dependent on its
ability to protect its computer equipment against damage from fire, earthquake,
power loss, telecommunications failure or similar event. All of the Company's
computer equipment, including its processing operations, is located at its
facilities in Columbus, Ohio, Norcross, Georgia, Chicago, Illinois, Downers
Grove, Illinois, Aurora, Illinois, and Austin, Texas. Although the Company is
considering moving some of its computer processing equipment to other sites,
those measures will not eliminate the significant risk to the Company's
operations from a natural disaster or system failure at any one of the sites.
Any damage or failure that causes interruptions in the Company's operations
could have a material adverse effect on the Company's business, operating
results and financial condition. The Company's property and business
interruption
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insurance may not be adequate to compensate the Company for all losses that may
occur.
Limited Protection of Proprietary Technology; Risk of Third Party
Infringement Claims. The Company regards its financial transaction services and
related products such as its software as proprietary and relies primarily on a
combination of patent, copyright, trademark and trade secret laws, employee and
third party nondisclosure agreements, and other intellectual property protection
methods to protect its services and related products.
The Company has been granted a patent for certain features of its
electronic bill payment processing system. While the Company believes that the
ownership of the patent is a significant factor in its business, its success
does not depend only on the ownership of the patent or future patents, but also
on the innovative skills, technical competence, quality of service and marketing
abilities of its personnel. The Company believes its patent provides a measure
of security against competition, and the Company intends to enforce its patent
against infringement by third parties. If the Company's patent is found to be
invalid, to the extent it has or would in the future serve as a barrier to entry
in this marketplace, there may be increased competition in the market. See "RISK
FACTORS -- Intense Competition."
Existing intellectual property laws afford only limited protection, and
it may be possible for unauthorized third parties to copy the Company's services
and related products or to reverse engineer or obtain and use information that
the Company regards as proprietary. There can be no assurance that the Company's
competitors will not independently develop services and related products that
are substantially equivalent or superior to those of the Company.
Dependence on Key Personnel; Lack of Employment Agreements. The
Company's success depends to a significant degree upon the continued
contributions of its key management, marketing, service and related product
development and operational personnel, including its Chairman, President, and
Chief Executive Officer, Peter J. Kight, and its President of Business Services,
Mark A. Johnson. The Company's operations could be affected adversely if, for
any reason, either Mr. Kight or Mr. Johnson ceased to be active in the Company's
management. The Company maintains proprietary nondisclosure and noncompete
agreements with all of its key employees. The Company does not have employment
agreements with several of its executive officers, including Mr. Kight and Mr.
Johnson. The Company maintains key person life insurance policies on Mr. Kight.
The success of the Company depends to a large extent upon its ability to retain
and continue to attract highly skilled personnel. Competition for employees in
the electronic commerce industry is intense, and there can be no assurance that
the Company will be able to attract and retain enough qualified employees. If
the business of the Company grows, it may become increasingly difficult to hire,
train and assimilate the new employees needed. The Company's inability to retain
and attract key employees could have a material adverse effect on the Company's
business, operating results and financial condition.
ACH Access; Termination of MasterCard and Visa Registration. The
Federal Reserve rules provide that the Company can only access the Federal
Reserve's ACH through a bank. If the Federal Reserve rules were to change to
further restrict access to the ACH or limit the Company's ability to provide ACH
transaction processing services, the Company's business could be materially
adversely affected. To process credit card transactions for merchants and
businesses, the Company must register with MasterCard and Visa as an independent
service organization through processing banks. MasterCard and Visa permit the
Company, as a registered service provider, to provide MasterCard and Visa
transaction processing services through processing banks that are members of
MasterCard or Visa. The Company's registrations with MasterCard and Visa are
renewed annually. There can be no assurance that the Company's registrations
with MasterCard and Visa will be renewed or that the current rules of MasterCard
and Visa permitting independent service providers to market transaction
processing services will remain in effect or that the terms thereof will not be
modified in the future. The non-renewal of either registration or any changes in
MasterCard or Visa rules that would prevent the registration of the Company or
limit its ability to provide MasterCard and Visa transaction processing services
would have a material adverse effect on the Company's business, operating
results and financial condition.
Customer Attrition. In the consumer market, the Company had an average
annual customer attrition rate of 21% for the twelve months ended December 31,
1996. Such attrition rate is approximately 30% higher than the Company's
historical customer attrition experiences. The higher attrition rate has been
due primarily to the competition from ISC for bill payment processing for
Quicken. Most of the customer attrition occurs within the first few months of a
new customer's commencement of use of the services while longer-term customers
have significantly lower attrition rates. Nonetheless, there can be no assurance
that the Company will not experience higher customer attrition rates in the
future. Increased levels of attrition could have a material adverse effect on
the Company's business, operating results
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and financial condition.
Limited Prior Market; Volatility of Stock Price. Prior to September 28,
1995, there was no public market for the Common Stock. Although the Company is
listed on the Nasdaq National Market, there can be no assurance that an active
or liquid trading market in the Common Stock will continue. The market price of
the Common Stock is subject to significant fluctuations in response to
variations in quarterly operating results, the failure of the Company to achieve
operating results consistent with securities analysts' projections of the
Company's performance, and other factors. The stock market has experienced
extreme price and volume fluctuations and volatility that has particularly
affected the market prices of many technology, emerging growth and developmental
stage companies. Such fluctuations and volatility have often been unrelated or
disproportionate to the operating performance of such companies. Factors such as
announcements of the introduction of new or enhanced services or related
products by the Company or its competitors, announcements of joint development
efforts or corporate partnerships in the electronic commerce market, market
conditions in the technology, banking, telecommunications and other emerging
growth sectors, and rumors relating to the Company or its competitors may have a
significant impact on the market price of the Common Stock.
Control by Principal Stockholders. As of January 27, 1997, the
directors, executive officers and principal stockholders of the Company
(including Intuit) and their affiliates collectively owned approximately 53.5%
of the outstanding the Common Stock. The Selling Stockholders collectively owned
approximately 27.9% of the issued and outstanding the Common Stock. As a result,
these stockholders will be able to exercise influence over matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions. Such concentration of ownership may have the
effect of delaying, preventing, or expediting a change in control of the
Company.
Shares Eligible for Future Sale; Possible Adverse Effect on Market
Price. As of January 27, 1997, there were 54.2 million shares of the Common
Stock outstanding. Of these shares, 14.0 million shares are held by
nonaffiliates of the Company and are freely tradeable without restriction or
further registration under the Securities Act. The holders of the remaining 40.2
million shares are or will be entitled to resell them only pursuant to a
registration statement under the Securities Act (including the Registration
Statement for the offering described in this Prospectus) or an applicable
exemption from registration thereunder, such as an exemption provided by Rule
144, Rule 145, or Rule 701 under the Securities Act. Additionally, as of
December 31, 1996, the Company had outstanding options to purchase approximately
3.5 million shares of the Common Stock at a weighted average exercise price of
$6.78, of which options for approximately 1.5 million shares of the Common Stock
were exercisable as of December 31, 1996 at a weighted average exercise price of
$1.20 per share.
The 5.7 million shares of the Common Stock issued by the Company to the
stockholders of Servantis on February 21, 1996 in connection with the Servantis
Acquisition are available for resale, subject in certain cases to the quarterly
volume limitations of Rules 144 and 145 under the Securities Act.
Additionally, the approximately 2.5 million shares of the Common Stock
issued by the Company to the stockholders of Security APL on May 9, 1996 in
connection with the Security APL Acquisition have been included in the
Registration Statement for the offering described in this Prospectus and are
available for resale pursuant to a registration rights agreement between
the Company and Security APL's stockholders (the "Security APL Registration
Rights Agreement"), which grants Security APL's stockholders certain demand
registration rights, "piggy-back" registration rights, and shelf registration
rights.
Under the Security APL Registration Rights Agreement, the Company is
obligated to, and has filed, a registration statement on Form S-3 for a
continuous offering under Rule 415 of the Securities Act (the "Shelf
Registration") covering the registration of all shares of the Common Stock
issued in the Security APL Acquisition (the "Security APL Shares"). The Company
shall effect, as soon as practicable, the effectiveness of the registration of
the Security APL Shares and shall continually maintain such effectiveness until
February 9, 1998. Each Security APL stockholder's right to offer and sell his or
her Security APL Shares under the Shelf Registration is subject to the following
limitations: (a) for as long as such Security APL stockholder is entitled to
registration rights pursuant to the Security APL Registration Rights Agreement,
the amount of the Security APL Shares that may be sold by such Security APL
stockholder in each sale of the Security APL Shares, together with all sales of
other shares of the Common Stock for the account of such Security APL
stockholder within the preceding three months (excluding any sales of the Common
Stock by such Security APL stockholder pursuant to the stockholder's demand and
piggy-back registration rights), shall not exceed the greater of (i) one percent
(1%) of the shares of the 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 the Common
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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 the delivery of a notice required below; (b) the
stockholders of Security APL holding at least 50% of the initial Security APL
Shares shall give the Company written notice of a bona fide intention to sell
Security APL Shares at least seven 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 Security APL Shares; (c) each request to sell the
Security APL Shares shall be for such number of shares of the Common Stock
having an aggregate sale price of at least $250,000; and (d) each Security APL
stockholder shall bear all of his or her respective discounts, commissions or
other amounts payable to underwriters or broker-dealers and fees and
disbursements of counsel for the Security APL stockholder in connection with
sales of the Security APL Shares. If for any reason the shelf registration
statement ceases to be effective at any time prior to February 9, 1998, then
the Company shall use its best efforts to cause the shelf registration
statement (or a new conforming shelf registration statement) to be declared
effective by the Commission and remain effective until February 9, 1998.
In addition, the Security APL Registration Rights Agreement provides
that stockholders of Security APL will receive three demand registration rights,
the first being exercisable after September 1, 1996. The subsequent demand
registration rights will be available no earlier than 180 days after the
effectiveness of a previous registration period. The shares of the Common Stock
received in the Security APL Acquisition will no longer be registrable after
February 9, 1998. During each registration period, the Security APL stockholders
who hold in the aggregate more than 50% of the then registrable shares will be
able to demand registration of up to 25% of the original number of shares
received in the Security APL Acquisition as long as the aggregate price to the
public, net any underwriting discounts and commissions, of the registered shares
will exceed $5,000,000. In addition to demand registration rights, if at any
time or from time to time on or before February 9, 1998, the Company shall
determine to register any of its shares, Security APL stockholders will have the
opportunity to include their shares in such registration and in any underwriting
involved with the registration. These "piggy-back" registration rights are
subject to certain limitations, including the right of the Company to exclude
shares from an underwritten offering if the managing underwriter determines that
market conditions require such limitation. Pursuant to the terms of the Security
APL Registration Rights Agreement, all of the shares issued by the Company to
the stockholders of Security APL on May 9, 1996 in connection with the Security
APL Acquisition are being registered hereunder.
Further, the 12,600,000 shares of the Common Stock issued by the
Company to Intuit in connection with the ISC Acquisition have been included in
the Registration Statement for the offering described in this Prospectus and are
available for resale pursuant to a registration rights agreement between the
Company and Intuit (the "ISC Registration Rights Agreement"), which grants
Intuit certain demand registration rights, "piggy-back" registration rights, and
shelf registration rights.
Under the ISC Registration Rights Agreement, the Company is obligated
to, and has filed, a registration statement on Form S-3 for a continuous
offering under Rule 415 of the Securities Act (the "Shelf Registration")
covering the registration of all shares of the Common Stock issued in the ISC
Acquisition (the "ISC Shares"). The Company shall effect, as soon as
practicable, the effectiveness of the registration of the ISC Shares and shall
continually maintain such effectiveness until January 27, 1999. Intuit's right
to offer and sell the ISC Shares under the Shelf Registration is subject to the
following limitations: (a) for as long as Intuit may be an affiliate of the
Company as defined in the Securities Act, the amount of the ISC Shares that may
be sold by Intuit in each sale of the ISC Shares, together with all sales of
other shares of the Common Stock for the account of Intuit within the preceding
three months (excluding any sales of the Common Stock by Intuit pursuant to the
demand and piggy-back registration rights), shall not exceed the greater of (i)
one percent (1%) of the shares of the 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 the 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 the delivery of
notice required below; (b) Intuit shall give the Company written notice of its
bona fide intention to sell the ISC Shares at least seven 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 ISC Shares; (c) each
request to sell the ISC Shares shall be for such number of shares of the Common
Stock having an aggregate sale price of at least $250,000; and (d) Intuit shall
bear all discounts, commissions or other amounts payable to underwriters or
broker-dealers and fees and disbursements of counsel for Intuit in connection
with sales of the ISC Shares. All other expenses incurred in connection with a
sale of the ISC Shares, including, without limitation all federal and "blue sky"
registration and qualification fees, printers' and accounting fees, and fees and
disbursements of counsel for the Company shall be borne by the Company. If for
any reason the shelf registration statement ceases to be effective at any time
prior to January 27, 1999, then the Company shall use its best efforts to cause
the shelf registration statement (or a new conforming shelf registration
statement) to be declared effective by the Commission and remain effective until
January 27, 1999.
-13-
<PAGE> 15
In addition, under the ISC Registration Rights Agreement, Intuit may
make one such demand for registration per calendar year commencing in 1997. The
minimum number of shares of the Common Stock requested by Intuit to be
registered in each such demand registration is 20% of the shares issued to
Intuit in the ISC Acquisition; provided, however, that the first such request
may be for a lesser number of shares as would reduce Intuit's ownership of the
Common Stock to less than 20% of the total Common Stock outstanding. If Intuit
utilizes the demand registration rights, Intuit shall bear the expense of all
discounts, commissions or other amounts payable to underwriters or brokers, if
any, with respect to sales by Intuit in connection with such offering, as well
as Intuit's pro-rata share of one-half of all other expenses incurred in
connection with the registration, including without limitation all federal and
"blue sky" registration and qualification fees, printers' and accounting fees,
fees and disbursements of counsel for the Company and for Intuit. The Company
is not obligated to act on a demand under the ISC Registration Rights
Agreement: (i) 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; (ii) if
within ten (10) days of the receipt of a registration request, the Company
gives written notice to Intuit of the Company's intention to file a
registration statement for the sale of securities by the Company (other than
for a Rule 145 transaction or an employee benefit plan) within 30 days of such
request, in which event, (x) Intuit may exercise its piggyback registration
rights (as described below), (y) the Company shall employ all reasonable
efforts to cause its registration statement to become effective, and (z) if the
Company abandons its registration statement, the Company shall renew its best
efforts to register the securities that were the subject of Intuit's demand;
(iii) during the period starting with the filing of and ending ninety (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 415 transaction or with respect to an employee benefit
plan); (iv) the Company furnishes Intuit a certificate stating that in the good
faith judgment of the Company's Board of Directors it would be seriously
detrimental to the Company or its stockholders for a registration statement to
be filed in the near future, in which case the Company's obligation to register
Intuit's shares of the Common Stock shall be deferred for up to one hundred and
twenty (120) days from the date of receipt of the written request from Intuit
(only applicable after March 1, 1997); or (v) less than one hundred and eighty
(180) days shall have expired from the effectiveness of a previous registration
under the ISC Registration Rights Agreement pursuant to a demand registration
or pursuant to a piggyback registration where Intuit had the opportunity to
include at least the lesser of (a) five percent of the ISC Shares issued to
Intuit in the ISC Acquisition, or (b) all shares of Common Stock then owned by
Intuit.
Additionally, under the ISC Registration Rights Agreement, the Company
is required to notify Intuit at least twenty (20) days prior to filing a
registration statement under the Securities Act for purposes of effecting a
public offering of the Company's securities and Intuit may register its shares
of the Common Stock issued in the ISC Acquisition under such registration
statement in certain instances. If Intuit is given the opportunity to include
the lesser of 5% of the shares issued to it in the ISC Acquisition or all its
shares issued in the ISC Acquisition then owned by Intuit in such a registration
statement, then Intuit may not make a demand for registration for one hundred
and eighty (180) days after the earlier of the termination of such offering or
the effectiveness of such registration statement. If Intuit exercises its
piggyback registration rights, Intuit shall bear the cost of all discounts,
commissions or other amounts payable to underwriters or broker-dealers and fees
and disbursements of counsel for Intuit with respect to sales by Intuit in
connection with such offering. All other expenses incurred in connection with a
piggyback registration, including without limitation all federal and "blue sky"
registration and qualification fees, printers' and accounting fees, and fees and
disbursements of counsel for the Company, shall be borne by the Company.
The Company's obligations to register the Common Stock issued to
Intuit in the ISC Acquisition will expire (i) when all such shares have been
registered and sold by Intuit or (ii) after the fifth anniversary of the
Effective Time of the ISC Acquisition; provided, that if the Company exercises
its right to defer a demand registration requested by Intuit, then the date for
expiration of the ISC Registration Rights Agreement will be extended by one
year for each time the Company exercises the deferral right. It is Intuit's
stated intention, as soon as reasonably practicable following effectiveness of
the ISC Acquisition, to reduce its beneficial ownership interest in the Common
Stock to less than twenty percent (20%) of the outstanding Common Stock through
sales of the shares of the Common Stock issued in the ISC Acquisition. Such
sales may be made through open market sales in accordance with Rule 144 under
the Securities Act, by the exercise of registration rights granted to Intuit in
connection with the ISC Acquisition, pursuant to the offerings contemplated by
this Prospectus and the associated Registration Statement, through private
sales or otherwise.
Sales of substantial amounts of the Common Stock in the public market
or the prospect of such sales could adversely affect the market price of the
Common Stock.
Anti-Takeover Provisions; Certain Provisions of Delaware Law;
Certificate of Incorporation and By-Laws. Certain provisions of Delaware law and
the Company's Certificate of Incorporation and By-Laws could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire,
-14-
<PAGE> 16
control of the Company. The Company's Certificate of Incorporation provides for
the Board of Directors to be divided into three classes of directors serving
staggered three-year terms. Such classification of the Board of Directors
expands the time required to change the composition of a majority of directors
and may tend to discourage a proxy contest or other takeover bid for the
Company. Certain provisions of Delaware law and the Company's Certificate of
Incorporation allow the Company to issue preferred stock with rights senior to
those of the Common Stock without any further vote or action by the
stockholders. The issuance of shares of preferred stock, $.01 par value, of the
Company could decrease the amount of earnings and assets available for
distribution to the holders of the Common Stock or could adversely affect the
rights and powers, including voting rights, of the holders of the Common Stock.
In certain circumstances, such issuance could have the effect of decreasing the
market price of the Common Stock.
Government Regulation. Management believes that the Company is not
required to be licensed by the Office of the Comptroller of the Currency, the
Federal Reserve Board, or other federal or state agencies that regulate or
monitor banks or other types of providers of electronic commerce services. There
can be no assurance that a federal or state agency will not attempt to regulate
providers of electronic commerce services such as the Company which could impede
the Company's ability to do business in the regulator's jurisdiction. In
addition, through its processing agreements, the Company agrees to comply with
the data, recordkeeping, processing and other requirements of applicable federal
and state laws and regulations, Federal Reserve Bank operating letters and the
National Automated Clearing House Association Operating Rules imposed on the
Company's processing banks. In conducting various aspects of its business, the
Company is subject to various laws and regulations relating to commercial
transactions generally, such as the Uniform Commercial Code, and is also subject
to the electronic funds transfer rules embodied in Regulation E, promulgated by
the Federal Reserve Board. Given the expansion of the electronic commerce
market, it is possible that the Federal Reserve might revise Regulation E or
adopt new rules for electronic funds transfer affecting users other than
consumers. Because of growth in the electronic commerce market, Congress has
held hearings on whether to regulate providers of services and transactions in
the electronic commerce market, and it is possible that Congress or individual
states could enact laws regulating the electronic commerce market. If enacted,
such laws, rules and regulations could be imposed on the Company's business and
industry and could have a material adverse effect on the Company's business,
operating results and financial condition.
Future Capital Needs; Uncertainty of Additional Financing. The Company
currently anticipates that its available cash resources and funds from
operations will be sufficient to meet its presently anticipated and its
projected working capital and capital expenditure requirements both for the
short-term and through at least June 30, 1998. However, unforeseen capital
expenditures required by ISC or substantial operating losses incurred by ISC
could require the Company to raise additional funds sooner. The Company may need
to raise additional funds through public or private debt or equity financings in
order to take advantage of unanticipated opportunities, including more rapid
expansion or acquisitions of complementary businesses or technologies, or to
develop new or enhanced services and related products or otherwise respond to
unanticipated competitive pressures. If additional funds are raised through the
issuance of equity securities, the percentage ownership of the then current
stockholders of the Company will be reduced and such equity securities may have
rights, preferences or privileges senior to those of the holders of the Common
Stock. There can be no assurance that additional financing will be available on
terms favorable to the Company, or at all. If adequate funds are not available
or are not available on acceptable terms, the Company may not be able to take
advantage of unanticipated opportunities, develop new or enhanced services and
related products, fund then existing operations, or otherwise respond to
unanticipated competitive pressures and the Company's business, operating
results and financial condition could be materially adversely affected. See
"RISK FACTORS -- ISC's Financial Performance."
USE OF PROCEEDS
The proceeds from the sale of the Shares offered hereby are solely for
the account of the Selling Stockholders. Accordingly, the Company will not
receive any of the proceeds from the sale of Shares by the Selling Stockholders.
SELLING STOCKHOLDERS
The Selling Stockholders have advised the Company that each of them is
the beneficial owner (within the meaning of such term in Rule 13d-3 promulgated
under the Exchange Act) of their respective Shares being offered hereby.
-15-
<PAGE> 17
As of the date of this Prospectus, Intuit beneficially owns 12,600,000
shares of Common Stock (approximately 23.2% of the Common Stock outstanding on
January 27, 1997). Assuming Intuit sells all 12,600,000 shares of Common Stock
offered hereby, Intuit will no longer beneficially own any shares of Common
Stock. Pursuant to the terms of the ISC Acquisition, 11,340,000 shares of Common
Stock were issued to Intuit on January 27, 1997 and 1,260,000 shares of Common
Stock (the "Escrow Shares") are held in escrow pursuant to an Escrow Agreement
between the Company, Intuit and a third-party escrow agent (the "Escrow
Agreement"). The Escrow Shares will be released from escrow and delivered to
Intuit on January 27, 1998, subject to the terms of the Escrow Agreement.
As of the date of this Prospectus, the former stockholders of Security
APL, Inc. beneficially own collectively 2,529,183 shares of Common Stock
(approximately 4.7% of the Common Stock outstanding on January 27, 1997).
Assuming the former stockholders of Security APL, Inc. collectively sell all
2,529,183 shares of Common Stock offered hereby, the former stockholders of
Security APL, Inc. will no longer own beneficially any shares of Common Stock.
Pursuant to the terms of the ISC Registration Rights Agreement and the
Security APL Registration Rights Agreement, the Company agreed to file and use
its best efforts to cause to be declared effective the Registration Statement
of which this Prospectus is a part. The Company also agreed to use its best
efforts to keep the Registration Statement effective until January 27, 1999
under the ISC Registration Rights Agreement and until February 9, 1998 under
the Security APL Registration Rights Agreement. If for any reason the Shelf
Registration ceases to be effective at any time prior to January 27, 1999, then
the Company shall use its best efforts to cause the Shelf Registration (or a
new conforming shelf registration statement) to be declared effective by the
Commission and remain effective until January 27, 1999.
Under the ISC Registration Rights Agreement, Intuit's right to offer
and sell the ISC Shares under the Shelf Registration is subject to the following
limitations: (a) for as long as Intuit may be an affiliate of the Company as
defined in the Securities Act, the amount of the ISC Shares that may be sold by
Intuit in each sale of the ISC Shares, together with all sales of other shares
of the Common Stock for the account of Intuit within the preceding three months
(excluding any sales of the Common Stock by Intuit pursuant to the demand and
piggy-back registration rights), shall not exceed the greater of (i) one percent
(1%) of the shares of the 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 such securities on all national securities
exchanges and/or reported through the automated quotation system of a registered
securities association during the four calendar weeks preceding the delivery of
notice required below; (b) Intuit shall give the Company written notice of its
bona fide intention to sell the ISC Shares at least seven 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 ISC Shares; and (c) each
request to sell the ISC Shares shall be for such number of shares of the Common
Stock having an aggregate sale price of at least $250,000.
Under the Security APL Registration Rights Agreement, each Security APL
stockholder's right to offer and sell his or her Security APL Shares under the
Shelf Registration is subject to the following limitations: (a) for as long as
such Security APL stockholder is entitled to registration rights pursuant to the
Security APL Registration Rights Agreement, the amount of the Security APL
Shares that may be sold by such Security APL stockholder in each sale of the
Security APL Shares, together with all sales of other shares of the Common Stock
for the account of such Security APL stockholder within the preceding three
months (excluding any sales of the Common Stock by such Security APL stockholder
pursuant to the demand and piggy-back registration rights), shall not exceed the
greater of (i) one percent (1%) of the shares of the 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 the 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 the delivery of notice required below; (b) the stockholders of
Security APL holding at least 50% of the initial Security APL Shares shall give
the Company written notice of its bona fide intention to sell their Security APL
Shares at least seven 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 Security APL Shares; (c) each request to sell the Security APL Shares shall
be for such number of shares of the Common Stock having an aggregate sale price
of at least $250,000.
The Company has agreed to pay its expenses of registering the Shares
under the Securities Act, including registration and filing fees, printing
expenses, administrative expenses, and certain legal and accounting fees. Each
of the Selling Stockholders will bear their pro rata share of all discounts,
commissions, or other amounts payable to underwriters, broker-dealers, or agents
as well as fees and disbursements for legal counsel retained by any such Selling
Stockholders.
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<PAGE> 18
PLAN OF DISTRIBUTION
The Shares covered hereby may be offered and sold from time to time by
the Selling Stockholders or by pledgees, donees, transferees, and other
successors in interest. The Selling Stockholders will act independently, subject
to the limitations set forth in the Security APL Registration Rights Agreement
and the ISC Registration Rights Agreement, of the Company in making decisions
with respect to the timing, manner, and size of each sale. To the Company's
knowledge, no Selling Stockholder has entered into any agreement, arrangement,
or understanding with any particular brokers or market makers that will
participate in the offering.
The Selling Stockholders may sell Shares in any of the following
transactions: (i) through broker-dealers; (ii) through agents; or (iii) directly
to one or more purchasers. The distribution of the Shares by the Selling
Stockholders may be effected from time to time in one or more transactions in
the over-the-counter market, in the Nasdaq National Market, or in privately
negotiated transactions at market prices prevailing at the time of sale, at
prices related to such prevailing market prices, or at negotiated prices. In
addition, any Shares covered by this Prospectus which qualify for sale pursuant
to Rule 144 of the Securities Act may be sold under Rule 144 rather than
pursuant to this Prospectus.
In connection with the distribution of the Shares or otherwise, the
Selling Stockholders may enter into hedging transactions with broker-dealers. In
connection with such transactions, broker-dealers may engage in short sales of
the Shares registered hereunder in the course of hedging the positions they
assume with the Selling Stockholders. The Selling Stockholders may also sell
shares short and redeliver the Shares to close out such short positions. The
Selling Stockholders may also enter into option or other transactions with
broker-dealers which require the delivery to the broker-dealer of the Shares
registered hereunder, which the broker-dealer may resell or otherwise transfer
pursuant to this Prospectus. The Selling Stockholders may also loan or pledge
the Shares registered hereunder to a broker-dealer and the broker-dealer may
sell the Shares so loaned or upon a default the broker-dealer may effect sales
of the pledged Shares pursuant to this Prospectus.
Underwriters, broker-dealers, or agents may receive compensation in the
form of commissions, discounts, or concessions from the Selling Stockholders in
amounts to be negotiated in connection with each sale of the Shares. Such
underwriters, broker-dealers, or agents that participate in the distribution of
the Shares may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act, and any profit on the sale of the Shares by them
and any commissions, discounts, or concessions received by any such
underwriters, broker-dealers, or agents might be deemed to be underwriting
discounts and commissions under the Securities Act.
At the time a particular offer is made, to the extent required, a
Prospectus Supplement will be distributed which will set forth the aggregate
number of Shares being offered and the terms of the offering, including the name
or names of any underwriters, broker-dealers, or agents, any commissions,
discounts, or concessions and other items constituting compensation from the
Selling Stockholders and any commissions, discounts, or concessions allowed or
repaid to broker-dealers.
Certain of the underwriters, broker-dealers, agents, or Selling
Stockholders may have other business relationships with the Company and its
affiliates in the ordinary course of business.
The Company and Intuit, as well as the Company and the Security APL
stockholders, have agreed, respectively, to indemnify each other and certain
other related parties for certain liabilities in connection with the
registration of the Shares offered hereby.
EXPERTS
The consolidated financial statements of the Company as of June 30,
1996 and December 31, 1995 and 1994, and for the six months ended June 30, 1996
and each of the three years in the period ended December 31, 1995 and the
related financial statement schedule incorporated in this Prospectus from the
Company's Transition Report on Form 10-K/A No. 1 for the six months ended June
30, 1996, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports, which are incorporated herein by reference, and have
been so incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The financial statements of ISC at July 31, 1996 and 1995 and for
each of the two years in the period ended July 31, 1996 included in (a) the
Company's Proxy Statement for the Special Meeting of Stockholders held on
January 27, 1997, and (b) the Company's Current Report on Form 8-K dated
January 27, 1997, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their reports thereon included therein and incorporated herein
by reference. Such financial statements are incorporated herein by reference in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
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<PAGE> 19
LEGAL OPINION
The validity of the shares of Common Stock offered hereby has been
passed upon for the Company by Porter, Wright, Morris & Arthur, Columbus, Ohio.
Partners of Porter, Wright, Morris & Arthur who participated in the preparation
of this Prospectus beneficially own an aggregate of 35,814 shares of Common
Stock consisting of a combination of stock and options exercisable within 60
days after the date of this Prospectus.
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<PAGE> 20
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY UNDERWRITER, DEALER, OR AGENT.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
---------------------------
TABLE OF CONTENTS
PAGE
----
Available Information..................... 2
Information Incorporated By Reference..... 2
Summary................................... 3
Risk Factors.............................. 6
Use of Proceeds........................... 15
Selling Stockholders...................... 15
Plan of Distribution...................... 17
Experts ................................. 17
Legal Matters............................. 18
- --------------------------------------------------------------------------------
15,129,183 SHARES
CHECKFREE CORPORATION
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
__________ __, 1997
- -------------------------------------------------------------------------------
<PAGE> 21
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with
the sale and distribution of the securities being registered hereby, other than
underwriting discounts and commissions, if any. All amounts shown are estimates,
except the SEC registration fee:
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee......................................... $ 70,202
Printing and engraving fee................................... 20,000
Legal fees and expenses...................................... 25,000
Accounting fees and expenses................................. 5,000
Blue Sky fees and expenses................................... 1,000
Transfer agent and registrar fees and expenses............... 1,000
Miscellaneous fees and expenses.............................. 2,798
---------
Total............................................... $ 125,000
=========
</TABLE>
All the costs identified above will be paid by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) Article IX of the Registrant's By-Laws (the "By-Laws") provides
that the Registrant shall, to the fullest extent permitted by applicable law as
then in effect, indemnify any person who is or was involved or threatened to be
made so involved in any action by reason of the fact that he is or was a
director or officer of the Registrant, or is or was serving at the request of
the Registrant as a director or officer of another entity. The right to
indemnification includes the right to receive payment of expenses in advance of
the final disposition of the proceeding. All indemnification rights in Article
IX are contract rights. The Registrant also may provide indemnification for
employees, agents, attorneys and representatives of the Registrant by action of
its board of directors. Article IX expressly states that no amendment to the
By-Laws or the Certificate of Incorporation shall adversely affect any right to
indemnification for acts occurring prior to such amendment. The right of
indemnification is not exclusive of any other rights of indemnification that may
be available.
In determining the right to indemnification, the Registrant
has the burden of proof that the indemnitee has not met the applicable standard
of conduct. If successful in whole or in part in such a proceeding, the
indemnitee is entitled to be indemnified for expenses incurred in connection
with such proceeding. All reasonable expenses incurred by an indemnitee in
connection with any proceeding shall be advanced by the Registrant after receipt
of a statement from the indemnitee requesting such advance.
Article IX provides that the Registrant may purchase and
maintain insurance in connection with any expenses, liability or loss relating
to any proceeding, whether or not the Registrant would have the power to
indemnify the officer, director, employee, agent, attorney, trustee or
representative. The Registrant also may enter into indemnification contracts
with any of the foregoing persons, which contracts are deemed specifically
approved and authorized by the stockholders.
Article IX provides that if any provision of Article IX is
held invalid, illegal or unenforceable, the remaining provisions of Article IX
shall not be affected. An indemnitee also may elect, as an alternative to the
Article IX procedures, to follow procedures authorized by applicable corporate
law or statute. Article IX sets forth specific procedures for the advancement of
expenses and for the determination of entitlement to indemnification.
Entitlement to indemnification shall be determined by a majority vote of
disinterested directors, by a written opinion
II-1
<PAGE> 22
of independent counsel under certain circumstances or by the Registrant's
stockholders if a majority of the disinterested directors determines the issue
should be submitted to the stockholders. If the foregoing persons have not been
appointed within 60 days after the receipt of a request for indemnification, the
indemnitee is deemed to be entitled to indemnification unless the indemnitee
misrepresented or omitted a material fact in making or supporting his request
for indemnification or the indemnification is prohibited by law. The termination
of an action by judgment, order, settlement or conviction or upon a plea of nolo
contendere does not adversely affect the right of an indemnitee to
indemnification or create any presumption with respect to any standard of
conduct. An indemnitee is entitled to indemnification for expenses if he is
successful on the merits, if the action is terminated without a determination of
liability on the part of the indemnitee or if the indemnitee was not a party to
the action. An indemnitee who is determined not to be entitled to
indemnification may appeal such determination either through the courts or by
arbitration.
(b) Under Section 145 of the Delaware GCL, indemnification of any
person who is or was a party or threatened to be made so in any action by reason
of the fact that he is or was a director, officer, employee or agent of the
corporation or was serving in such capacity for another corporation or other
enterprise at the request of the corporation is permitted against expenses,
fines and amounts paid in settlement actually and reasonably incurred by him in
such proceeding where the indemnified person acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and in criminal actions, where he had no reasonable cause to
believe his conduct was unlawful. Indemnification is also permitted in lawsuits
brought by or on behalf of the corporation if the standards of conduct described
above are met, except that no indemnification is permitted in respect to any
matter in which the person is adjudged to be liable to the corporation unless a
court shall determine that indemnification is fair and reasonable in view of all
the circumstances of the case. Indemnification against expenses (including
attorneys' fees) actually and reasonably incurred by directors, officers,
employees and agents is required under Section 145 of the Delaware GCL in those
cases where the person to be indemnified has been successful on the merits or
otherwise in defense of a proceeding of the type described above. In cases where
indemnification is permissive, a determination as to whether the person met the
applicable standard of conduct must be made (unless ordered by a court) by
majority vote of the disinterested directors, by independent legal counsel, or
by the stockholders. Such indemnification rights are specifically not deemed to
be exclusive of other rights of indemnification by agreement or otherwise and
the corporation is authorized to advance expenses incurred prior to the final
disposition of a matter upon receipt of an undertaking to repay such amounts on
a determination that indemnification was not permitted in the circumstances of
the case.
(c) Under Section 145 of the Delaware GCL and Article IX of the
By-Laws, the Registrant may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent of the Registrant,
or who serves as a director, officer, employee or agent of another corporation
or other enterprise, against liability asserted against or incurred by such
person in any such capacity whether or not the Registrant would have the power
to provide indemnity under Section 145 or the By-Laws. The Registrant has
obtained insurance which, subject to certain exceptions, insures the directors
and officers of the Registrant and its subsidiaries.
(d) The Registrant has entered into indemnification contracts with its
directors and certain officers which provides that such directors and officers
will be indemnified to the fullest extent provided by Section 145 of the
Delaware GCL (or such other future statutory provision authorizing or permitting
indemnification) against all expenses (including attorneys' fees), judgments,
fines and settlement amounts, actually and reasonably paid or incurred by them
in any action or proceeding, including any action by or in the right of the
Registrant, by reason of the fact that they were a director, officer, employee
or agent of the Registrant, or were serving at the request of the Registrant as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise.
No indemnity will be provided under such indemnification
contracts (i) except to the extent that the aggregate losses to be indemnified
pursuant thereto exceed the amount for which the indemnitee is indemnified
pursuant to any directors and officers liability insurance purchased and
maintained by the Registrant; (ii) in respect to remuneration paid to an
indemnitee if it shall be determined by a final judgment that such remuneration
was in violation of law; (iii) on account of any suit in which judgment is
rendered against an indemnitee for an accounting of profits made from the
purchase or sale by indemnitee of securities of the Registrant pursuant to the
provisions of Section 16(b) of the Securities Exchange Act of 1934 and
amendments thereto or similar provisions of any federal, state or local
statutory law; (iv) on account of the indemnitee's act or omission being finally
adjudged to have been not in good faith
II-2
<PAGE> 23
or involving intentional misconduct or a knowing violation of law; or (v) if a
final decision by a court having jurisdiction in the matter shall determine that
such indemnification is not lawful.
(e) Article EIGHTH of the Registrant's Restated Certificate of
Incorporation provides that a director of the Registrant shall not be personally
liable to the Registrant or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Registrant or its stockholders; (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) for any unlawful payment of a dividend or
unlawful stock purchase or redemption; or (iv) for any transaction from which
the director derived any improper personal benefit.
(f) Certain registration rights agreements provide for the
indemnification of the Registrant's directors and officers by the Selling
Stockholders. The indemnification provided for by the Selling Stockholders is
limited to matters arising in connection with this Registration Statement.
The above discussion of the Registrant's By-Laws, Restated Certificate
of Incorporation, indemnification agreements, and of Section 145 of the Delaware
GCL is not intended to be exhaustive and is respectively qualified in its
entirety by such By-Laws, Restated Certificate of Incorporation and statutes.
ITEM 16. EXHIBITS.
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
------ -----------
2(a) Agreement and Plan of Merger, dated as of January 15,
1996, among the Company, Checkfree Acquisition
Corporation, and Servantis Systems Holdings, Inc.
(Reference is made to Exhibit 2 to the Current Report
on Form 8-K, dated January 15, 1996, filed with the
Securities and Exchange Commission on January 16,
1996, and incorporated herein by reference.)
2(b) Agreement and Plan of Merger, dated as of March 21,
1996, among the Company, ISC Acquisition Corporation,
and Security APL, Inc. (Reference is made to Exhibit
2 to the Current Report on Form 8-K, dated March 21,
1996, as amended, filed with the Securities and
Exchange Commission, and incorporated herein by
reference.)
2(c) Amendment to Agreement and Plan of Merger, dated as
of April 30, 1996, among the Company, ISC Acquisition
Corporation, and Security APL, Inc. (Reference is
made to Exhibit 2(c) to the Form 10-Q for the quarter
ended March 31, 1996, filed with the Securities and
Exchange Commission, and incorporated herein by
reference.)
2(d) 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
Current Report on Form 8-K, dated September 15, 1996,
filed with the Securities and Exchange Commission on
September 26, 1996, and incorporated herein by
reference.)
2(e) 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.)
II-3
<PAGE> 24
4 Articles FOURTH, FIFTH, SEVENTH, EIGHTH, TENTH AND
ELEVENTH of the Registrant's Restated Certificate of
Incorporation (contained in the Registrant's Restated
Certificate of Incorporation filed as Exhibit 3(a) to
Registration Statement on Form S-1, as amended
(Registration No. 33-95738), filed with the
Securities and Exchange Commission on August 14,
1995, and incorporated herein by reference) and
Articles II, III, IV, VI and VIII of the Registrant's
Amended and Restated By-Laws (contained in the
Registrant's Amended and Restated By-Laws filed as
Exhibit 3(b) to Registration Statement on Form S-1,
as amended (Registration No. 33-95738), filed with
the Securities and Exchange Commission on August 14,
1995, and incorporated herein by reference).
5 * Opinion of Porter, Wright, Morris & Arthur regarding
legality.
23(a) Consent of Porter, Wright, Morris & Arthur (included
in Exhibit 5 ).
23(b) * Consent of Deloitte & Touche LLP.
23(c) * Consent of Ernst & Young LLP.
24 * Powers of Attorney.
27 * Financial Data Schedule.
- ------------
* Filed with this report.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes: (1) to file during any
period in which offers or sales are being made, a post effective amendment to
this registration statement: (i) to include any prospectus required by section
10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any
facts or events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume or securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; (2) that for
the purpose of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof; (3)
to remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public
II-4
<PAGE> 25
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
II-5
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Norcross, State of Georgia, on January 27, 1997.
CHECKFREE CORPORATION
By: /s/ Peter J. Kight
---------------------------
Peter J. Kight, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Peter J. Kight President, Chief Executive Officer, January 27, 1997
- -------------------------------------------- and Chairman of the Board
Peter J. Kight (Principal Executive Officer)
*Mark A. Johnson President Business Services January 27, 1997
- -------------------------------------------- and Director
Mark A. Johnson
*James S. Douglass Executive Vice President-Finance and January 27, 1997
- -------------------------------------------- Chief Financial Officer
James S. Douglass (Principal Financial Officer)
*John M. Stanton Vice President and Treasurer January 27, 1997
- -------------------------------------------- (Principal Accounting Officer)
John M. Stanton
*William P. Boardman Director January 27, 1997
- -------------------------------------------
William P. Boardman
*George R. Manser Director January 27, 1997
- -------------------------------------------
George R. Manser
*Eugene F. Quinn Director January 27, 1997
- -------------------------------------------
Eugene F. Quinn
*Jeffrey M. Wilkins Director January 27, 1997
- -------------------------------------------
Jeffrey M. Wilkins
*By: /s/ Peter J. Kight
------------------------------------
Peter J. Kight, attorney-in-fact
for each of the persons indicated
</TABLE>
II-6
<PAGE> 1
EXHIBIT 5
Porter, Wright, Morris & Arthur
41 South High Street
Columbus, Ohio 43215-6194
Telephone: 614-227-2000
Facsimile: 614-227-2100
Nationwide: 800-533-2794
January 27, 1997
Checkfree Corporation
4411 East Jones Bridge Road
Norcross, Georgia 30092
Gentlemen:
With respect to the Registration Statement on Form S-3 (the
"Registration Statement") being filed by Checkfree Corporation (the "Company")
under the Securities Act of 1933, as amended, relating to the registration of
15,129,183 common shares of the Company, $.01 par value (the "Shares"), all of
which Shares are currently outstanding and are to be sold by certain
stockholders of the Company (the "Selling Stockholders"), we advise you as
follows:
We are counsel for the Company and have participated in the preparation
of the Registration Statement. We have reviewed the Company's Restated
Certificate of Incorporation, as amended to date, the corporate action taken to
date in connection with the Registration Statement and the sale of the Shares,
and such other documents and authorities as we deem relevant for the purpose of
this opinion. We understand that the Shares will be sold by the Selling
Stockholders, directly, through agents designated from time to time, or through
dealers or underwriters also to be designated from time to time on such terms to
be determined at the time of sale.
Based upon the foregoing, we are of the opinion that the Shares have
been legally issued and are fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Opinions" in the prospectus included in the Registration Statement.
Very truly yours,
PORTER, WRIGHT, MORRIS & ARTHUR
<PAGE> 1
Exhibit 23(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Checkfree Corporation on form S-3 or our reports dated August 22, 1996, except
for Note 17 as to which the date is September 15, 1996, appearing in the
Transition Report on Form 10-K/A No. 1 of Checkfree Corporation for the six
months ended June 30, 1996 and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
Columbus, Ohio
January 24, 1997
<PAGE> 1
EXHIBIT 23(c)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement, (Form S-3), and related Prospectus of Checkfree
Corporation for the registration of 15,129,183 shares of Checkfree's common
stock and to the incorporation by reference therein of our reports with respect
to the financial statements of Intuit Services Corporation (a) dated October 22,
1996,included in the Proxy Statement of Checkfree Corporation, and (b) dated
January 21, 1997, included in the Current Report on Form 8-K dated January 27,
1997, both filed with the Securities and Exchange Commission.
Ernst & Young LLP
Palo Alto, California
January 27, 1997
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
-----------------
Each of the undersigned officers and/or directors of Checkfree
Corporation, a Delaware corporation (the "Company"), hereby appoints Peter J.
Kight, James S. Douglass, and Curtis A. Loveland, as his true and lawful
attorneys-in-fact, or any of them, with power to act without the others, as his
true and lawful attorney-in-fact, in his name and on his behalf, and in any and
all capacities stated below, to sign and to cause to be filed with the
Securities and Exchange Commission the Company's Registration Statement on Form
S-3 (the "Registration Statement") to register under the Securities Act of 1933,
as amended, a maximum of 15,129,183 shares of Common Stock, $.01 par value, of
the Company to be sold and distributed by certain stockholders of the Company
pursuant to the Registration Statement, and any and all amendments, including
post-effective amendments, to the Registration Statement, hereby granting unto
such attorneys-in-fact, and to each of them, full power and authority to do and
perform in the name and on behalf of the undersigned, in any and all such
capacities, every act and thing whatsoever necessary to be done in and about the
premises as fully as the undersigned could or might do in person, hereby
granting to each such attorney-in-fact full power of substitution and
revocation, and hereby ratifying all that any such attorney-in-fact or his
substitute may do by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 27th day of
January, 1997.
Signature: Title:
/s/ Peter J. Kight Chairman of the Board of Directors,
- -------------------------------- President and Chief Executive Officer
Peter J. Kight (Principal Executive Officer)
/s/ Mark A. Johnson Director and President - Business Services
- --------------------------------
Mark A. Johnson
/s/ James S. Douglass Executive Vice President - Finance and
- -------------------------------- Chief Financial Officer
James S. Douglass (Principal Financial Officer)
/s/ John M. Stanton Vice President and Treasurer
- -------------------------------- (Principal Accounting Officer)
John M. Stanton
/s/ William P. Boardman Director
- --------------------------------
William P. Boardman
/s/ George R. Manser Director
- --------------------------------
George R. Manser
/s/ Eugene F. Quinn Director
- --------------------------------
Eugene F. Quinn
/s/ Jeffrey M. Wilkins Director
- --------------------------------
Jeffrey M. Wilkins
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 19,014,015
<SECURITIES> 8,988,345
<RECEIVABLES> 32,221,072
<ALLOWANCES> 2,680,988
<INVENTORY> 0
<CURRENT-ASSETS> 79,106,001
<PP&E> 49,609,099
<DEPRECIATION> 12,505,920
<TOTAL-ASSETS> 181,257,304
<CURRENT-LIABILITIES> 42,396,034
<BONDS> 6,707,315
0
0
<COMMON> 424,714
<OTHER-SE> 129,723,999
<TOTAL-LIABILITY-AND-EQUITY> 181,257,304
<SALES> 0
<TOTAL-REVENUES> 32,661,865
<CGS> 0
<TOTAL-COSTS> 44,924,653
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 147,890
<INCOME-PRETAX> (11,891,713)
<INCOME-TAX> (4,162,100)
<INCOME-CONTINUING> (7,729,613)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,729,613)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE TRANSITION PERIOD FROM JUNE 1, 1996 TO JUNE 30, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 20,987,355
<SECURITIES> 18,089,029
<RECEIVABLES> 31,796,270
<ALLOWANCES> 2,279,722
<INVENTORY> 0
<CURRENT-ASSETS> 90,798,732
<PP&E> 46,388,560
<DEPRECIATION> 9,821,419
<TOTAL-ASSETS> 196,229,544
<CURRENT-LIABILITIES> 45,303,019
<BONDS> 8,274,317
0
0
<COMMON> 422,748
<OTHER-SE> 137,251,967
<TOTAL-LIABILITY-AND-EQUITY> 196,229,544
<SALES> 0
<TOTAL-REVENUES> 51,039,862
<CGS> 0
<TOTAL-COSTS> 50,528,948
<OTHER-EXPENSES> 122,357,586
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 324,726
<INCOME-PRETAX> (146,831,450)
<INCOME-TAX> (8,628,615)
<INCOME-CONTINUING> (138,202,835)
<DISCONTINUED> 0
<EXTRAORDINARY> (364,374)
<CHANGES> 0
<NET-INCOME> (138,567,209)
<EPS-PRIMARY> (3.70)
<EPS-DILUTED> (3.70)
</TABLE>
