CHECKFREE HOLDINGS CORP \GA\, S-3, 1999-06-01

CHECKFREE HOLDINGS CORP \GA\
S-3, 1999-06-01
BUSINESS SERVICES, NEC

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 1, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

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 HOLDINGS CORPORATION
(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 7374 58-2360335
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>

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4411 EAST JONES BRIDGE ROAD
NORCROSS, GEORGIA 30092
(678) 375-3387
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)

----------------------

PETER J. KIGHT
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
CHECKFREE HOLDINGS CORPORATION
4411 EAST JONES BRIDGE ROAD
NORCROSS, GEORGIA 30092
(678) 375-3387
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

----------------------

COPIES OF CORRESPONDENCE TO:

<TABLE>
<S> <C>
CURTIS A. LOVELAND, ESQ. DAVID C. CHAPIN, ESQ.
PORTER, WRIGHT, MORRIS & ARTHUR LLP ROPES & GRAY
41 SOUTH HIGH STREET ONE INTERNATIONAL PLACE
COLUMBUS, OHIO 43215 BOSTON, MASSACHUSETTS
(614) 227-2004 (617) 951-7371
</TABLE>

----------------------

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

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. [ ]
-----

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

<TABLE>
<CAPTION>
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- ----------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED PER SHARE* PRICE* REGISTRATION FEE*
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<S> <C> <C> <C> <C>
Common stock, $.01 par
value.................. 4,025,000 $44.04 $177,261,000 $49,279
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>

* 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 May 27, 1999.
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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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

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
PRELIMINARY PROSPECTUS DATED JUNE 1, 1999
PROSPECTUS

3,500,000 SHARES
(CHECKFREE HOLDINGS LOGO)

COMMON STOCK

----------------------

We are offering and selling 2,350,000 shares of common stock with this
prospectus. Certain of our stockholders are offering and selling a total of
1,150,000 shares of common stock with this prospectus. We will not receive any
of the proceeds from the sale of shares by the selling stockholders. Our shares
are traded on the Nasdaq National Market under the symbol "CKFR." On May 28,
1999, the last reported sale price of our common stock on the Nasdaq National
Market was $47.07 per share.

INVESTING IN THE COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 7 OF THIS PROSPECTUS.

----------------------

<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public offering price................................... $ $
Underwriting discount................................... $ $
Proceeds, before expenses, to CheckFree................. $ $
Proceeds to the selling stockholders.................... $ $
</TABLE>

The underwriters may also purchase up to an additional 525,000 shares from
us at the public offering price, less the underwriting discount, within 30 days
from the date of this prospectus to cover over-allotments.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

The shares of common stock will be ready for delivery in New York, New York
on or about , 1999.

----------------------

MERRILL LYNCH & CO.
BT ALEX. BROWN
HAMBRECHT & QUIST
U.S. BANCORP PIPER JAFFRAY

----------------------

The date of this prospectus is , 1999.
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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Summary.......................................... 3
Risk Factors................................................ 7
Use of Proceeds............................................. 17
Dividend Policy............................................. 17
Price Range of Common Stock................................. 18
Capitalization.............................................. 19
Selected Consolidated Financial Data........................ 20
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 22
Business.................................................... 29
Management.................................................. 42
Selling Stockholders........................................ 45
Underwriting................................................ 48
Legal Matters............................................... 50
Experts..................................................... 50
Forward-Looking Statements.................................. 50
Where You Can Find More Information......................... 51
Incorporation of Documents by Reference..................... 52
Index to Consolidated Financial Statements.................. F-1
</TABLE>

----------------------

You should rely only on the information contained in this prospectus. We
have not, the selling stockholders have not and the underwriters have not
authorized any other person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. We are not, the selling stockholders are not and the underwriters are not
making an offer to sell these securities in any jurisdiction where the offer or
sale is not permitted. You should assume that the information appearing in this
prospectus is accurate only as of the date on the front cover of this
prospectus. Our business, financial condition, results of operations and
prospects may have changed since that date.

----------------------

CheckFree(R), CheckFree and the logo design together(R), CheckFree in
stylized letters(R), M-Watch(R), M-Search(R) and PEP+(R) are registered United
States Trademarks of CheckFree Holdings Corporation. This prospectus also
includes trademarks of companies other than CheckFree. We have filed
applications for the following trademarks: CheckFree ARP/SMS(TM), CheckFree
RECON(TM), APL(TM), M-Vest(TM) and CheckFree RECON-PLUS(TM). We have also filed
an application for the service mark CheckFree E-Bill(SM).
1
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2
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PROSPECTUS SUMMARY

The information in this prospectus summary may not contain all of the
information that may be important to you. You should read the entire prospectus,
including the financial statements and related notes and the information
incorporated by reference in this prospectus, before making an investment
decision. All references to "we," "us," "our," "CheckFree" or the "Company" in
this prospectus mean CheckFree Holdings Corporation and all entities owned or
controlled by CheckFree Holdings Corporation, except where it is made clear that
the term only means the parent company.

OUR COMPANY

We are the leading provider of electronic billing and payment services. Our
Electronic Commerce business provides services that allow consumers to:

- Receive electronic bills through the Internet;

- Pay any bill -- electronic or paper -- to anyone; and

- Perform customary banking transactions, including balance inquiries,
transfers between accounts and on-line statement reconciliations.

We currently provide services for nearly 3 million consumers through over
350 financial institutions, Internet financial sites like Quicken.com, and
personal financial management software like Quicken, Microsoft Money and
Managing Your Money. As part of our strategy to broaden availability of our
electronic billing and payment services on the Internet, we recently entered
into a distribution contract with a leading Internet portal. We have developed
relationships with over 1,100 merchants nationwide that enable us to remit more
than 50% of all of our bill payments electronically. During the three-month
period ended March 31, 1999, we processed an average of more than 11 million
transactions per month.

In March 1997, we introduced electronic billing -- "E-Bill" -- that enables
merchants to deliver billing as well as marketing materials interactively to
their customers over the Internet. To date, we have signed contracts for E-Bill
services with 49 of the country's largest billers, who together deliver more
than 500 million bills each month. During the month of March 1999, we presented
and paid more than 10,000 electronic bills through 20 financial institutions and
Internet portals, double the number of bills presented and paid through E-Bill
services the previous month.

We also are a leading provider of portfolio management and information
services and financial application software. Our Investment Services business
offers portfolio management and information services for fee-based money
managers and financial planners within investment advisory firms, brokerage
firms, banks and insurance companies. Our fee-based money manager clients are
typically sponsors or managers of wrap money management products or traditional
money managers, managing investments of institutions and high net worth
individuals. Our Software business provides electronic commerce and financial
applications software and services for businesses and financial institutions. We
design, market, license and support software products for automated
clearinghouse, or ACH, processing, reconciliation and regulatory compliance.

During the nine months ended March 31, 1999, Electronic Commerce accounted
for 69% of our revenues, Software accounted for 16% of our revenues and
Investment Services accounted for 15% of our revenues.

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<PAGE> 7

OUR BUSINESS STRATEGY

Our business strategy is to provide an expanding range of convenient,
secure and cost-effective electronic commerce services to financial
institutions, businesses and their customers. The key elements of our business
strategy are to:

- Drive increased adoption of electronic commerce services by consumers;

- Continue to distribute electronic commerce services through multiple
channels;

- Focus on customer care and technical support;

- Continue to improve operational efficiency and effectiveness; and

- Drive new forms of electronic commerce services.

RECENT DEVELOPMENTS

On April 27, 1999, we announced revenues of $62.9 million for our fiscal
third quarter ended March 31, 1999, and revenues of $179.4 million for the nine
months ended March 31, 1999. This was a 20% increase over the comparative
quarter for the prior fiscal year and a 22% increase over the comparative
nine-month period, in both cases adjusted for the effects of the divestitures of
some of our software businesses. We had income from operations of $0.3 million
and net loss of $0.3 million for our quarter ended March 31, 1999, and loss from
operations of $4.5 million and net income of $9.6 million for the nine months
ended March 31, 1999. The total number of subscribers to our electronic billing
and payment services grew from the prior quarter by approximately 200,000, or
6%, in the fiscal third quarter to more than 2.8 million subscribers. During
this three-month period, we processed an average of more than 11 million
transactions per month. While our services through traditional personal
financial management, or PFM, software continued to grow, our financial
institution customers experienced, on average, quarter-to-quarter growth in
their Internet-based subscribers of more than 20%.

On January 26, 1999, we announced that, as part of our strategy to broaden
availability of electronic billing and payment on the Internet, we had entered
into a distribution contract with a leading Internet portal. We estimate
incurring expenses of less than $10 million in support of this agreement for
marketing, promotion, site development and customer care. While we expect this
agreement will significantly increase the number of subscribers using our
services, we do not expect any material revenues from the agreement in the near
term.

On May 4, 1999, we announced an agreement with Cox Communications, Inc.,
one of the nation's leading broadband communications companies, to provide
nearly 3.8 million Cox customers access to on-line electronic billing and
payment. Under the agreement with Cox, customers will be able to receive and pay
their monthly cable and local and long-distance telephone bills electronically.
With the signing of the Cox agreement, we now have contracts with 49 of the
nation's top 100 billers, including major utilities, financial institutions,
insurance companies and telecommunications service providers.

OUR ADDRESS

Our principal executive offices are located at 4411 East Jones Bridge Road,
Norcross, Georgia 30092 and our telephone number is (678) 375-3387. We maintain
a World Wide Web site at www.checkfree.com. This reference to our World Wide Web
site address does not constitute incorporation by reference of the information
contained on our web site.

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<PAGE> 8

THE OFFERING

Except as otherwise noted, all share and per share information in this
prospectus assumes no exercise of the underwriters' over-allotment option.

Common stock offered by CheckFree....... 2,350,000 shares

Common stock offered by the selling
stockholders.......................... 1,150,000 shares

Total offering.......................... 3,500,000 shares

Common stock to be outstanding
after the offering.................... 54,481,767 shares(1)

Risk factors............................ Investing in our common stock
involves a high degree of risk. See
"Risk Factors."

Use of proceeds......................... We expect to use the net proceeds
from this offering for working
capital and general corporate
purposes, including expansion of
our services to a broader market
and potential acquisitions. See
"Use of Proceeds."

We will not receive any of the
proceeds from the shares sold by
the selling stockholders. See
"Selling Stockholders."

Nasdaq National Market
symbol................................ CKFR
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(1) As of the date of this prospectus, this does not include: 7,905,850 shares
of our common stock reserved for issuance upon exercise of stock options
under our Stock Option Plans, 792,764 shares of our common stock reserved
for issuance under our Associate Stock Purchase Plan, 846,762 shares
reserved for our 401(k) Plan, and 10,550,000 shares of our common stock
reserved for issuance upon the exercise of warrants. Options to purchase
4,049,339 shares of our common stock are outstanding, of which options to
purchase 1,168,450 shares are exercisable at a weighted average exercise
price of approximately $7.63 per share. Warrants to purchase 10,550,000
shares of our common stock are outstanding, of which warrants to purchase
2,875,000 shares are exercisable at a weighted average exercise price of
approximately $20.87 per share.

5
<PAGE> 9

SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND OTHER DATA)

Our summary consolidated financial data for the fiscal years ended June 30,
1997 and 1998 have been derived from our financial statements, included
elsewhere in this prospectus, which have been audited by Deloitte & Touche LLP,
independent auditors, whose report thereon is also included elsewhere in this
prospectus. The summary consolidated financial data for the twelve months ended
June 30, 1996, for the nine months ended March 31, 1998 and as of and for the
nine months ended March 31, 1999, are derived from our unaudited consolidated
financial statements which, in the opinion of management, reflect all
adjustments necessary for a fair presentation of the results for the respective
annual and interim periods. The summary consolidated financial data set forth
below should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in our Annual Report on
Form 10-K for the fiscal year ended June 30, 1998 and our Quarterly Report on
Form 10-Q for the quarter ended March 31, 1999, which are incorporated by
reference herein, and our Consolidated Financial Statements and Notes thereto
contained elsewhere in this prospectus.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
--------------------------------------- -------------------------
1996(1) 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Electronic commerce................................ $ 55,532 $ 85,926 $137,972 $ 99,046 $122,915
Investment services................................ 2,986 22,406 29,749 21,570 26,966
Software........................................... 18,271 68,113 66,143 49,737 29,498
--------- --------- -------- -------- --------
Total revenue................................ 76,789 176,445 233,864 170,353 179,379
(Loss) from operations............................... (149,763) (175,149) (7,176) (14,908) (4,521)
Net income (loss).................................... (138,857) (161,813) (3,703) (9,461) 9,599
Net income (loss) per common share:
Basic.............................................. $ (4.15) $ (3.44) $ (0.07) $ (0.17) $ 0.18
Diluted............................................ $ (4.15) $ (3.44) $ (0.07) $ (0.17) $ 0.17
Weighted-average common shares outstanding:
Basic.............................................. 33,435 46,988 55,087 54,989 52,696
Diluted............................................ 33,435 46,988 55,087 54,989 56,117
</TABLE>

<TABLE>
<CAPTION>
AS OF MARCH 31,
-------------------------
AS
1999 ADJUSTED(2)
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 44,473 $149,620
Total assets................................................ 250,690 355,837
Long-term obligations, less current portion................. 6,616 6,616
Total stockholders' equity.................................. 185,217 290,364
</TABLE>

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(1) On April 19, 1996, we elected to change our fiscal year end from December 31
to June 30. To assist in the analysis of the summary consolidated financial
information, unaudited results for the twelve months ended June 30, 1996 are
provided.
(2) Adjusted to give effect to the sale of 2,350,000 shares of our common stock
and the application of the estimated net proceeds of the sale. See
"Capitalization" and "Use of Proceeds."
(3) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization. EBITDA is not intended to represent cash flow from operations
as defined by generally accepted accounting principles and should not be
considered as an alternative to net income as an indicator of operating
performance or to cash flow as a measure of liquidity. We have included
information concerning EBITDA as we understand that this measure is used by
certain investors to measure operating performance in the industry. EBITDA,
as presented, may not be comparable to similarly titled measures reported by
other companies and, therefore, is not necessarily an accurate means of
comparison between companies.
(4) Subscribers refers to the approximate number of financial institution and
Internet portal end-users using our electronic billing and payment services
as of the end of the period indicated.
(5) Transactions refers to the approximate number of electronic and traditional
paper-based transactions that we processed during the period indicated.

6
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RISK FACTORS

An investment in the shares offered by this prospectus involves a high
degree of risk. You should carefully consider the following factors as well as
the other information contained and incorporated by reference in this prospectus
before deciding to invest in our common stock. You should also consider these
risk factors when you read "forward-looking" statements elsewhere in this
prospectus.

THE MARKET FOR OUR ELECTRONIC COMMERCE SERVICES IS EVOLVING AND MAY NOT CONTINUE
TO DEVELOP OR GROW RAPIDLY ENOUGH FOR US TO REMAIN PROFITABLE.

The electronic commerce market is still evolving and currently growing at a
rapid rate. We believe future growth in the electronic commerce market will be
driven by the cost, ease-of-use and quality of products and services offered to
consumers and businesses. In order to maintain and increase our profitability,
consumers and businesses must continue to adopt our services. If the number of
electronic commerce transactions does not continue to grow or if consumers or
businesses do not continue to adopt our services, it could have a material
adverse effect on our business, financial condition and results of operations.

SECURITY AND PRIVACY BREACHES IN OUR ELECTRONIC TRANSACTIONS MAY DAMAGE CUSTOMER
RELATIONS AND INHIBIT OUR GROWTH.

If we are unable to protect the security and privacy of our electronic
transactions, our growth and the growth of the electronic commerce market in
general could be materially adversely affected. A security or privacy breach
may:

- Cause our customers to lose confidence in our services;

- Deter consumers from using our services;

- Harm our reputation;

- Expose us to liability;

- Increase our expenses from potential remediation costs; and

- Decrease market acceptance of electronic commerce transactions.

While we believe that we utilize proven applications designed for premium
data security and integrity to process electronic transactions, there can be no
assurance that our use of these applications will be sufficient to address
changing market conditions or the security and privacy concerns of existing and
potential subscribers. Any failures in our security and privacy measures could
have a material adverse effect on our business, financial condition and results
of operations.

WE RELY ON THIRD PARTIES TO DISTRIBUTE OUR ELECTRONIC COMMERCE SERVICES, WHICH
MAY NOT RESULT IN WIDESPREAD ADOPTION.

We rely on our relationships with financial institutions, businesses,
billers, Internet portals and other third parties like Intuit Inc. to provide
branding for our electronic commerce services and to market our services to
their customers. These relationships are an important source of the growth in
demand for our electronic commerce services. If any of these parties abandons,
curtails or insufficiently increases its marketing efforts, it could have a
material adverse effect on our business, financial condition and results of
operations.

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<PAGE> 11

CONSOLIDATION IN THE BANKING INDUSTRY MAY ADVERSELY AFFECT OUR ABILITY TO SELL
OUR ELECTRONIC COMMERCE SERVICES, INVESTMENT SERVICES AND SOFTWARE.

Mergers, acquisitions and personnel changes at key financial institutions
have the potential to adversely affect our business, financial condition and
results of operations. Currently, the banking industry is undergoing large-scale
consolidation, causing the number of financial institutions to decline. This
consolidation could cause us to lose:

- Current and potential customers;

- Market share if the combined financial institution determines that it is
more efficient to develop in-house home banking services similar to ours
or offer our competitors' products or services; and

- Revenue if the combined financial institution is able to negotiate a
greater volume discount for, or discontinues the use of, our products and
services.

WE ARE DEPENDENT UPON A SMALL NUMBER OF FINANCIAL INSTITUTION CUSTOMERS FOR A
SIGNIFICANT PERCENTAGE OF OUR SUBSCRIBERS.

We rely on our relationships with three key financial institutions for a
substantial portion of our subscriber base and the volume of electronic
transactions that we process. As of March 31, 1999, these three financial
institutions accounted for approximately 1.4 million subscribers, or
approximately 50% of our total subscriber base. The loss of the relationship
with any of these key financial institutions or a significant decline in the
number of transactions processed through them could have a material adverse
effect on our business, financial condition and results of operations. See
"Business -- Products and Services."

IF WE DO NOT SUCCESSFULLY RENEW OR RENEGOTIATE OUR AGREEMENTS WITH OUR
CUSTOMERS, OUR BUSINESS MAY SUFFER.

Our agreements for electronic commerce services with financial institutions
generally provide for terms of three to five years. These agreements are
renegotiated from time to time when financial institutions migrate from our
PC-based platform to our web-based platform. If we are not able to renew or
renegotiate these agreements on favorable terms, it could have a material
adverse effect on our business, financial condition and results of operations.

The profitability of our Software business depends, to a substantial
degree, upon our software customers electing to periodically renew their
maintenance agreements. In the event that a substantial number of our software
customers declined to renew these agreements, our revenues and profits in this
business segment would be materially adversely affected.

COMPETITIVE PRESSURES WE FACE MAY HAVE A MATERIAL ADVERSE EFFECT ON US.

The electronic commerce market is new and evolving rapidly, resulting in a
dynamic competitive environment. We face significant competition in all of our
customer markets. Increased competition or other competitive pressures may
result in price reductions, reduced margins or loss of market share, any of
which could have a material adverse effect on our business, financial condition
and results of operations. Further, we expect competition to persist, intensify
and increase in the future. A number of financial institutions have developed,
and others in the future may develop, in-house home banking services similar to
ours. Additionally, TransPoint LLC, a joint venture among Microsoft Corporation,
First Data Corporation and Citibank N.A., has announced its own agreements with
financial institutions to offer on-line home banking and electronic billing and
payment services to consumers. We cannot assure you that we will be able to
compete effectively against TransPoint or other current and future electronic
commerce competitors.

The markets for our investment services and software products are also
highly competitive. In Investment Services, our competition comes from service
bureaus and providers of portfolio accounting

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<PAGE> 12

software. In Software, our competition comes from several different market
segments, including large diversified computer software and service companies
and independent suppliers of software products. Because there are relatively low
barriers to entry, we expect competition in the software market to increase
significantly in the future. We cannot assure you that we will be able to
compete effectively against current and future competitors in these markets.

Across all of our market segments, many of our current and potential
competitors have longer operating histories, significantly greater financial,
technical, marketing, customer service and other resources, greater name
recognition and a larger installed base of customers than we do. As a result,
these competitors may be able to respond to new or emerging technologies and
changes in customer requirements faster and more effectively than we can, or to
devote greater resources to the development, promotion and sale of products than
we can. If these competitors were to acquire significant market share, it could
have a material adverse effect on our business, financial condition and results
of operations. See "Business -- Competition."

OUR CONTINUED FUTURE PROFITABILITY IS DEPENDENT UPON AN INCREASE IN THE
PROPORTION OF TRANSACTIONS WE PROCESS ELECTRONICALLY.

Our continued future profitability will depend, in part, on our ability to
increase the percentage of transactions we process electronically. Compared with
conventional paper-based transactions, electronic transactions:

- Cost much less to complete;

- Give rise to far fewer errors, which are costly to resolve; and

- Generate far fewer subscriber inquiries and, therefore, consume far fewer
customer care resources.

Accordingly, if we are unable to increase the percentage of transactions
that we process electronically, our margins could decrease, which could have a
material adverse effect on our business, financial condition and results of
operations.

THE TRANSACTIONS WE PROCESS EXPOSE US TO CREDIT RISKS.

The electronic and conventional paper-based transactions we process expose
us to credit risks. These credits risks include risks arising from returned
transactions caused by:

- Insufficient funds;

- Stop payment orders;

- Closed accounts;

- Frozen accounts;

- Unauthorized use;

- Payment disputes;

- Theft; and

- Fraud.

We are also exposed to credit risk from merchant fraud and erroneous
transmissions. We attempt to manage all of these risks through our sophisticated
risk management systems, which include our patented billing and payment
processing system and agreements with some customers to guarantee our losses or
to grant us reversal rights. There can be no assurance, however, that these
efforts will be successful. Any losses resulting from returned transactions,
merchant fraud or erroneous transmissions could result in liability to financial
institutions, merchants or subscribers, which could have a material adverse
effect on our business, financial condition and results of operations. See
"Business -- Remittances."

WE MAY EXPERIENCE BREAKDOWNS IN OUR PAYMENT PROCESSING SYSTEM THAT COULD DAMAGE
CUSTOMER RELATIONS AND EXPOSE US TO LIABILITY.

A system outage or data loss could have a material adverse effect on our
business, financial condition and results of operations. To successfully operate
our business, we must be able to protect our payment

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processing and other systems from interruption by events that are beyond our
control. Events that could cause system interruptions include:

- Fire;

- Natural disaster;

- Power loss;

- Telecommunications failure;

- Unauthorized entry; and

- Computer viruses.

We are currently migrating subscribers from our pre-existing data
processing platforms to a new system which we call the Genesis Platform. Our
main processing facility is located in Norcross, Georgia, and we have other
processing facilities located in Ohio, Illinois and Texas. During the transition
from the pre-existing platforms to the Genesis Platform, we may be exposed to
loss of data or unavailability of systems due to inadequate back-ups, reduced or
eliminated redundancy, or both. Although we regularly back-up data from our
operations and take other measures to protect against data loss and system
failures, there is still some risk that we may lose critical data or experience
system failures. As a precautionary measure, we have entered into disaster
recovery agreements for the processing systems at all our sites, and we conduct
business resumption tests on a scheduled basis. Our property and business
interruption insurance may not be adequate to compensate us for all losses or
failures that may occur. See "Business -- Technology."

WE MAY EXPERIENCE SOFTWARE DEFECTS AND DEVELOPMENT DELAYS, DAMAGING CUSTOMER
RELATIONS, DECREASING OUR POTENTIAL PROFITABILITY AND EXPOSING US TO LIABILITY.

Our electronic commerce services and our software products are based on
sophisticated software and computing systems which often encounter development
delays, and the underlying software may contain undetected errors or defects.
Defects in our software products and errors or delays in our processing of
electronic transactions could result in:

- Additional development costs;

- Diversion of technical and other resources from our other development
efforts;

- Loss of credibility with current or potential customers;

- Harm to our reputation; or

- Exposure to liability claims.

In addition, we rely on technologies supplied to us by third parties that may
also contain undetected errors or defects which could have a material adverse
effect on our business, financial condition and results of operations. Although
we attempt to limit our potential liability for warranty claims through
disclaimers in our software documentation and limitation-of-liability provisions
in our license and customer agreements, there can be no assurance that these
measures will be successful in limiting our liability. See "Business --
Technology."

OUR QUARTERLY OPERATING RESULTS FLUCTUATE AND MAY NOT ACCURATELY PREDICT OUR
FUTURE PERFORMANCE.

Our quarterly results of operations have varied significantly and probably
will continue to do so in the future as a result of a variety of factors, many
of which are outside our control. These factors include:

- Changes in our pricing policies or those of our competitors;

- Relative rates of acquisition of new customers;

- Seasonal patterns;

- Delays in the introduction of new or enhanced services, software and
related products by us or our competitors or market acceptance of these
products and services; and

- Other changes in operating expenses, personnel and general economic
conditions.

10
<PAGE> 14

As a result, we believe that period-to-period comparisons of our operating
results are not necessarily meaningful, and you should not rely on them as an
indication of our future performance. In addition, our operating results in a
future quarter or quarters may fall below expectations of securities analysts or
investors and, as a result, the price of our common stock may fluctuate.

WE EXPERIENCE SEASONAL FLUCTUATIONS IN OUR NET SALES CAUSING OUR OPERATING
RESULTS TO FLUCTUATE.

We have historically experienced and expect to continue to experience
seasonal fluctuations in our net sales. If our net sales are below the
expectations of securities analysts and investors due to seasonal fluctuations,
our stock price could decrease unexpectedly. Our growth in new electronic
commerce subscribers is affected by seasonal factors such as holiday-based
personal computer sales. These seasonal factors may impact our operating results
by concentrating subscriber acquisition and set-up costs, which may not be
immediately offset by revenue increases primarily due to introductory service
price discounts. Additionally, on-line interactive service subscribers generally
tend to be less active users during the summer months, resulting in lower
revenue during this period.

Our software sales also have historically displayed seasonal variability,
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 in software sales is due, in part, to
calendar year-end buying patterns of financial institution customers and our
software sales compensation structure, which measures sales performance at our
June 30 fiscal year end.

THE YEAR 2000 ISSUE MAY ADVERSELY AFFECT OUR INFORMATION TECHNOLOGY SYSTEMS OR
CAUSE OUR CURRENT OR POTENTIAL CUSTOMERS TO DELAY IMPLEMENTING OUR PRODUCTS AND
SERVICES.

If our efforts, or the efforts of our customers and suppliers, fail to
adequately address the Year 2000 issue, we would likely incur a substantial loss
of revenue and suffer irreparable harm to our reputation. We use computer
software, operating systems and embedded micro-processors containing
date-related programs in the development and delivery of our products and
services and in our own internal information technology systems. In order to
accurately process transactions, we also rely on technologies provided by our
customers and suppliers. Transaction processing relies on transmissions of data
from PCs, through financial institutions and business web servers and the
Internet, over third-party data and voice communication lines and through the
Federal Funds System. The software we use in our products and in the delivery of
our services contains, in addition to code written by our programmers, some
software that we license from third parties.

We are in the process of testing our internal management information and
other critical business systems to identify any Year 2000 issues. We also have
inquired of our resellers, vendors and key suppliers about their Year 2000
readiness. To date, we are not aware of any significant resellers, vendors or
key suppliers with Year 2000 issues that would materially adversely affect us.
We cannot guarantee, however, that our information technology systems or those
of other companies on which we rely will successfully address the Year 2000
issue. Any failure by us or other third parties on which we rely to address the
Year 2000 issue could have a material adverse effect on our business, financial
condition and results of operations.

We believe that the adoption of our products and services by existing and
potential customers and subscribers may be adversely affected by the Year 2000
issue. As companies expend significant resources to correct or upgrade their
current software systems for Year 2000 compliance, they may delay or cancel
decisions to adopt our products and services. If this occurs, it could have a
material adverse effect on our business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Year 2000 Compliance."

OUR INABILITY TO MANAGE GROWTH COULD ADVERSELY AFFECT OUR BUSINESS.

We have experienced rapid growth in our revenues, from $76.8 million in the
twelve months ended June 30, 1996 to $233.9 million in the fiscal year ended
June 30, 1998, and we intend to continue to grow
11
<PAGE> 15

our business significantly. To support our growth plans, we will have to
significantly expand our existing management, operational, financial and human
resources and management information systems and controls. If we are not able to
manage our growth successfully, we will not grow as planned which could have a
material adverse effect on our business, financial condition and results of
operations.

IF WE ARE UNABLE TO RECRUIT AND RETAIN ADDITIONAL SKILLED PERSONNEL, OUR
BUSINESS COULD BE ADVERSELY AFFECTED.

Our future success depends upon our ability to attract, train, assimilate
and retain additional skilled personnel. Competition for qualified employees in
all of our business segments is intense. A significant increase in our customer
base would necessitate the hiring of a significant number of additional customer
care and technical support personnel, as well as software developers and
technicians, qualified candidates for which are currently in short supply. We
cannot assure you that we will be able to retain our key employees or that we
can attract, train, assimilate or retain other skilled personnel in the future.

IF WE DO NOT RESPOND TO RAPID TECHNOLOGICAL CHANGE OR CHANGES IN INDUSTRY
STANDARDS, OUR SERVICES COULD BECOME OBSOLETE AND WE COULD LOSE OUR CUSTOMERS.

The electronic commerce industry is changing rapidly. To remain
competitive, we must continue to enhance and improve the functionality and
features of our products, services and technologies. For example, we are
currently migrating our products and services from a PC-based platform to a
web-based platform. If competitors introduce new products and services embodying
new technologies, or if new industry standards and practices emerge, our
existing product and service offerings, proprietary technology and systems may
become obsolete. Further, if we fail to adopt or develop new technologies or to
adapt our products and services to emerging industry standards, we may lose
current and future customers, which could have a material adverse effect on our
business, financial condition and results of operations.

WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY, PERMITTING COMPETITORS
TO DUPLICATE OUR PRODUCTS AND SERVICES.

Our success and ability to compete in our markets are dependent, in part,
upon our proprietary technology. We rely primarily on patent, copyright, trade
secret and trademark laws to protect our technology. In addition, we have been
granted a patent for some features of our electronic billing and payment
processing system, which we believe provides some measure of security for our
technologies. If challenged, we cannot assure you that our patent will prove to
be valid or provide the protection that we need. Further, the source code for
our proprietary software is protected both as a trade secret and as a
copyrighted work. We generally enter into confidentiality and assignment
agreements with our employees, consultants and vendors, and generally control
access to and distribution of our software, documentation and other proprietary
information.

Because our means of protecting our proprietary rights may not be adequate,
it may be possible for a third party to copy or otherwise obtain and use our
technology without authorization. In addition, the laws of some countries in
which we sell our products do not protect software and intellectual property
rights to the same extent as the laws of the U.S. Unauthorized copying, use or
reverse engineering of our products could have a material adverse effect on our
business, financial condition and results of operations.

A third party could also claim that our technology infringes its
proprietary rights. As the number of software products in our target markets
increases and the functionality of these products overlap, we believe that
software developers may increasingly face infringement claims. These claims,
even if without merit, can be time-consuming and expensive to defend. A third
party asserting infringement claims against us in the future may require us to
enter into costly royalty arrangements or litigation.

12
<PAGE> 16

OUR COMMON STOCK PRICE IS VOLATILE.

The market price of our common stock has been volatile in the past and may
change rapidly in the future. The following factors, among others, may cause
significant volatility in our stock price:

- Actual or anticipated fluctuations in our operating results;

- Announcements by us, our competitors or our customers;

- Announcements of the introduction of new or enhanced products and
services by us or our competitors;

- Announcements of joint development efforts or corporate partnerships in
the electronic commerce market;

- Market conditions in the banking, telecommunications, technology and
other emerging growth sectors;

- Rumors relating to our competitors or us; and

- General market or economic conditions.

In addition, the stock market has experienced significant price and volume
fluctuations, which have particularly affected the trading prices of equity
securities of many technology companies. These price and volume fluctuations
often have been unrelated to the operating performance of the affected
companies. In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted against that company. This type of litigation, regardless of the
outcome, could result in substantial costs and a diversion of management's
attention and resources, which could have a material adverse effect on our
business, financial condition and results of operations.

WE MAY BE UNABLE TO BECOME CONSISTENTLY PROFITABLE.

We have not consistently operated profitably to date. We incurred a loss
from operations of $7.2 million and a net loss of $3.7 million in the fiscal
year ended June 30, 1998 and had a loss from operations of $4.5 million and net
income of $9.6 million for the nine months ended March 31, 1999. We intend to
continue to make significant investments in our research and development, sales
and marketing and customer care operations. As a result, we may continue to
experience net losses from operations in future quarters and may not be able to
sustain or increase our profitability. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

AVAILABILITY OF SIGNIFICANT AMOUNTS OF COMMON STOCK FOR SALE IN THE FUTURE COULD
ADVERSELY AFFECT OUR STOCK PRICE.

The availability for future sale of a substantial number of shares of our
common stock in the public market, or issuance of common stock upon the exercise
of stock options, warrants or otherwise could adversely affect the market price
for our common stock. Upon completion of this offering, we will have outstanding
54,481,767 shares of common stock, assuming the underwriters do not exercise
their over-allotment option. All the shares sold in this offering will be freely
tradable, unless they are purchased by our affiliates, as defined in Rule 144
under the Securities Act of 1933. As of May 10, 1999, 33,744,090 shares of our
issued and outstanding common stock were held by nonaffiliates and the holders
of the remaining 17,983,523 shares were entitled to resell them only pursuant to
a registration statement under the Securities Act of 1933 or an applicable
exemption from registration thereunder such as an exemption provided by Rule
144, Rule 145 or Rule 701 under the Securities Act of 1933. As of May 10, 1999,
we had outstanding options to purchase 4,303,493 shares of our common stock, of
which options for 1,422,604 shares were fully vested and exercisable at an
average weighted exercise price of approximately $8.89 per share. As of May 10,
1999, we had issued warrants to purchase 10,700,000 shares of our common stock,
of which warrants for 3,025,000 shares were fully vested and exercisable at a
weighted exercise price of approximately $20.87 per share. In addition, our
employees are entitled to purchase up to 792,764 shares

13
<PAGE> 17

under our Associate Stock Purchase Plan and receive up to 846,762 shares under
our 401(k) Plan. Any shares purchased thereunder will be eligible for future
sale following the expiration of applicable holding periods.

Intuit Inc., which holds 10,175,000 shares of our common stock, and
Integrion Financial Network, L.L.C., which holds warrants to purchase up to
10,000,000 shares of our common stock (9,850,000 shares after completion of this
offering), of which warrants for 3,000,000 shares are fully vested and
exercisable (2,850,000 shares upon completion of this offering), are entitled to
"piggy-back" and demand registration rights subject to specified conditions and
restrictions. If Intuit or Integrion, by exercising their registration rights,
cause a large number of shares to be registered and sold in the public market,
such sales may have an adverse effect on the market price of our common stock.

Some of our directors, executive officers and selling stockholders have
agreed not to sell or otherwise dispose of any shares of our common stock for a
period of at least 90 days after the date of this prospectus without the prior
written approval of the underwriters. The underwriters may, in their discretion
and at any time without notice, release all or any portion of these shares for
sale in the public market, which could adversely affect the market price of our
common stock. See "Underwriting."

THE LOSS OF KEY EXECUTIVES COULD ADVERSELY AFFECT OUR BUSINESS.

Our success depends to a significant degree upon the continued
contributions of our key management, including:

- Peter J. Kight, our founder, Chairman and Chief Executive Officer;

- Mark A. Johnson, our Vice Chairman, Corporate Development;

- Peter F. Sinisgalli, our President; and

- Ravi Ganesan, our Executive Vice President and Chief Technology Officer.

If for any reason any of these officers ceased to be active in our management,
it could have a material adverse effect on our business, financial condition and
results of operations.

WE MAY NOT BE SUCCESSFUL IN MAKING ACQUISITIONS AND, EVEN IF WE ARE, RISKS
ARISING FROM THOSE ACQUISITIONS COULD HAVE A MATERIAL ADVERSE EFFECT ON US.

We have expanded, and plan to continue to expand, our operations through
the acquisition of additional businesses that complement our core skills and
have the potential to increase our overall value. We may not be able to identify
and acquire compatible businesses. Acquisitions involve many risks, which could
have a material adverse effect on our business, financial condition and results
of operations, including:

- Acquired businesses may not achieve anticipated revenues, earnings or
cash flow;

- Integration of acquired businesses and technologies may not be successful
and we may not realize anticipated economic, operational and other
benefits in a timely manner, particularly if we acquire a business in a
market in which we have limited or no current expertise or with a
corporate culture different from our own;

- Financing of future acquisitions may require issuing common stock or debt
for some or all of the purchase price, which could result in dilution of
the ownership interests of our stockholders or recognizing amortization
expense related to goodwill and other intangible assets;

- Competing with other companies, many of which have greater financial and
other resources, to acquire attractive companies makes it more difficult
to acquire suitable companies on acceptable terms; and

- Disruption of our existing business, distraction of management and other
resources and difficulty in maintaining our current business standards,
controls and procedures.
14
<PAGE> 18

WE ARE SUBJECT TO SIGNIFICANT INFLUENCE BY SOME STOCKHOLDERS THAT MAY HAVE THE
EFFECT OF DELAYING OR PREVENTING A CHANGE IN CONTROL.

At May 10, 1999, our directors, executive officers and principal
stockholders and their affiliates collectively owned approximately 35% of the
outstanding shares of our common stock and will own approximately 31% after this
offering. As a result, these stockholders are able to exercise significant
influence over matters requiring stockholder approval, including the election of
directors and approval of significant corporate transactions. This concentration
of ownership may have the effect of delaying or preventing a change in control.

ANTI-TAKEOVER PROVISIONS IN OUR ORGANIZATIONAL DOCUMENTS AND DELAWARE LAW MAKE
ANY CHANGE IN CONTROL OF US MORE DIFFICULT.

Our certificate of incorporation and by-laws contain provisions that may
have the effect of delaying or preventing a change in control, may discourage
bids at a premium over the market price of our common stock and may adversely
affect the market price of our common stock and the voting and other rights of
the holders of our common stock. These provisions include:

- Division of our board of directors into three classes serving staggered
three-year terms;

- Removal of our directors by the stockholders only for cause upon 80%
stockholder approval;

- Prohibiting our stockholders from calling a special meeting of
stockholders;

- Ability to issue additional shares of our common stock or preferred stock
without stockholder approval;

- Prohibiting our stockholders from unilaterally amending our certificate
of incorporation or by-laws except with 80% stockholder approval; and

- Advance notice requirements for raising business or making nominations at
stockholders' meetings.

We have also adopted a stockholder rights plan that allows us to issue
preferred stock with rights senior to those of our common stock without any
further vote or action by our stockholders. The issuance of our preferred stock
under the stockholder rights plan could decrease the amount of earnings and
assets available for distribution to the holders of our common stock or could
adversely affect the rights and powers, including voting rights, of the holders
of our common stock. In some circumstances, the issuance of preferred stock
could have the effect of decreasing the market price of our common stock.

We are also subject to provisions of the Delaware corporation law that, in
general, prohibit any business combination with a beneficial owner of 15% or
more of our common stock for five years unless the holder's acquisition of our
stock was approved in advance by our board of directors.

OUR BUSINESS COULD BECOME SUBJECT TO INCREASED GOVERNMENT REGULATION, WHICH
COULD MAKE OUR BUSINESS MORE EXPENSIVE TO OPERATE.

We believe that we are not required to be licensed by the Office of the
Comptroller of the Currency, or OCC, the Federal Reserve Board or other federal
agencies that regulate or monitor banks or other types of providers of
electronic commerce services. A number of states have legislation regulating or
licensing check sellers, money transmitters or service providers to banks, and
we have registered under this legislation in specific instances. Because
electronic commerce in general, and most of our products and services in
particular, are so new, the application of many of these laws and regulations is
uncertain and difficult to interpret. The entities responsible for interpreting
and enforcing these laws and regulations could amend those laws or regulations
or issue new interpretations of existing laws or regulations. Any of these
changes could lead to increased operating costs and reduce the convenience and
functionality of our products or services, possibly resulting in reduced market
acceptance. It is also possible that new laws and regulations may be enacted
with respect to the Internet. The adoption of any of these laws or regulations
may decrease the growth of the Internet, which could in turn decrease the demand
for our products or

15
<PAGE> 19

services, increase our cost of doing business or could otherwise have a material
adverse effect on our business, financial condition and results of operations.

The Federal Reserve rules provide that we can only access the Federal
Reserve's ACH through a bank. If the Federal Reserve rules were to change to
further restrict our access to the ACH or limit our ability to provide ACH
transaction processing services, it could have a material adverse effect on our
business, financial condition and results of operations. See
"Business -- Government Regulation" and "-- Remittances."

WE MAY NOT BE ABLE TO OBTAIN ADEQUATE FINANCING TO IMPLEMENT OUR GROWTH
STRATEGY.

Successful implementation of our growth strategy will likely require
continued access to capital. If we do not generate sufficient cash from
operations, our growth could be limited unless we are able to obtain capital
through additional debt or equity financings. We cannot assure you that debt or
equity financings will be available as required for acquisitions or other needs.
If additional funds are raised through the issuance of equity securities, the
percentage ownership of our then current stockholders may be reduced. In
addition, we may issue equity securities that have rights, preferences or
privileges senior to those of the holders of our common stock. Even if financing
is available, it may not be on terms that are favorable to us or sufficient for
our needs. If we are unable to obtain sufficient financing, we may be unable to
fully implement our growth strategy.

WE MAY BE UNABLE TO EFFECTIVELY MANAGE THE SIGNIFICANT UNALLOCATED NET PROCEEDS
FROM THIS OFFERING.

We will have a significant amount of net proceeds from this offering that
we have not allocated to a specific use. Our failure to apply these proceeds
effectively could have a material adverse effect on our business, financial
condition and results of operations and, therefore, the market price of our
common stock. We will have broad discretion in how we use the net proceeds of
this offering, which may include general corporate purposes, such as increased
expenses associated with expansion of our products and services to a broader
market, additional customer care needed for the expected growth from the
Internet portals, new sales and marketing initiatives, and potential
acquisitions. See "Use of Proceeds."

16
<PAGE> 20

USE OF PROCEEDS

We expect to receive approximately $105,147,150 (approximately $128,623,313
if the underwriters exercise their over-allotment option in full) from the sale
of the 2,350,000 shares of common stock offered by us at an assumed public
offering price of $47.07 per share, and after deducting the underwriting
discount and estimated offering expenses payable by us. We expect to use the net
proceeds from this offering for working capital and general corporate purposes,
including expansion of our services to a broader market and potential
acquisitions.

Accordingly, we have broad discretion in the allocation of the net proceeds
from this offering. Pending such uses, we expect to invest the net proceeds from
this offering in short-term income producing investments. While we engage in
discussions relating to potential acquisitions from time to time, no such
transaction is contemplated as of the date of this prospectus.

We will not receive any proceeds from the sale of common stock by the
selling stockholders. See "Selling Stockholders."

DIVIDEND POLICY

We currently anticipate that all of our future earnings will be retained
for the development of our business and do not anticipate paying cash dividends
on our common stock for the foreseeable future. In addition, our line of credit
restricts the payment of dividends on our common stock. Our board of directors
will determine future dividend policy based on our results of operations,
financial condition, capital requirements and other circumstances. During the
last ten years, we have not paid cash dividends.

17
<PAGE> 21

PRICE RANGE OF COMMON STOCK

Our common stock is traded on the Nasdaq National Market under the symbol
"CKFR." The following table sets forth the high and low sales prices of our
common stock for the periods indicated as reported by the Nasdaq National
Market.

<TABLE>
<CAPTION>
COMMON STOCK
PRICE
---------------
FISCAL PERIOD HIGH LOW
------------- ------ ------
<S> <C> <C>
FISCAL 1997
First Quarter............................................... $22.13 $10.75
Second Quarter.............................................. $25.00 $14.13
Third Quarter............................................... $17.38 $11.13
Fourth Quarter.............................................. $19.63 $ 9.50
FISCAL 1998
First Quarter............................................... $23.13 $16.50
Second Quarter.............................................. $31.44 $20.25
Third Quarter............................................... $28.50 $20.00
Fourth Quarter.............................................. $30.63 $20.44
FISCAL 1999
First Quarter............................................... $31.50 $ 8.25
Second Quarter.............................................. $23.44 $ 5.75
Third Quarter............................................... $46.00 $20.63
Fourth Quarter (through May 28, 1999)....................... $69.13 $40.00
</TABLE>

On May 28, 1999, the last reported sale price for our common stock on The
Nasdaq National Market was $47.07 per share. As of May 27, 1999, there were
approximately 579 holders of record of our common stock.

18
<PAGE> 22

CAPITALIZATION

The following table sets forth our capitalization at March 31, 1999 and as
adjusted on that date to give effect to the sale of common stock offered by us
at an assumed public offering price of $47.07 per share, after deducting the
underwriting discount and estimated offering expenses payable by us, and
assuming that the underwriters' over-allotment option is not exercised. This
table contains unaudited information and should be read in conjunction with the
consolidated financial statements appearing elsewhere in this prospectus.

<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
---------------------------------
ACTUAL AS ADJUSTED
------------- --------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C>
Total debt................................................ $ -- $ --
---------- ----------
Stockholders' equity:
Preferred stock -- 15,000,000 authorized shares, $.01
par value; no amounts issued or outstanding.......... -- --
Common stock -- 150,000,000 authorized shares, $.01 par
value; 57,219,744 actual shares issued, 59,973,898
shares issued, as adjusted; 51,670,363 actual shares
outstanding, 54,424,517 shares outstanding, as
adjusted(1).......................................... 517 544
Additional paid-in capital.............................. 479,558 584,678
Accumulated deficit..................................... (294,858) (294,858)
---------- ----------
Total stockholders' equity........................... 185,217 290,364
---------- ----------
Total capitalization............................ $ 185,217 $ 290,364
========== ==========
</TABLE>

- ---------------

19
<PAGE> 23

SELECTED CONSOLIDATED FINANCIAL DATA

Our selected consolidated financial data for the fiscal year ended December
31, 1995, for the six-months ended June 30, 1996 and as of and for the fiscal
years ended June 30, 1997 and 1998, have been derived from our consolidated
financial statements, included elsewhere in this prospectus, which have been
audited by Deloitte & Touche LLP, independent auditors, whose report thereon is
also included elsewhere in this prospectus. Our selected consolidated financial
data as of and for the fiscal years ended December 31, 1993 and 1994, as of
December 31, 1995, and as of June 30, 1996, have been derived from our audited
consolidated financial statements which are not included in this prospectus. The
selected consolidated financial data for the twelve months ended June 30, 1996
and as of and for each of the nine month periods ended March 31, 1998 and 1999,
are derived from unaudited consolidated financial statements which, in the
opinion of management, reflect all adjustments necessary for a fair presentation
of the results for the respective annual and interim periods. The selected
consolidated financial data set forth below should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in our Annual Report on Form 10-K for the fiscal year ended
June 30, 1998 and our Quarterly Report on Form 10-Q for the quarter ended March
31, 1999, which are incorporated by reference herein, and our Consolidated
Financial Statements and Notes thereto contained elsewhere in this prospectus.

<TABLE>
<CAPTION>
SIX
MONTHS NINE MONTHS
ENDED ENDED
YEAR ENDED DECEMBER 31, JUNE 30, YEAR ENDED JUNE 30, MARCH 31,
--------------------------- --------- -------------------------------- -------------------
1993 1994 1995 1996 1996(1) 1997 1998 1998 1999
------- ------- ------- --------- --------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Revenues:
Processing, servicing and
merchant discount........... $28,986 $38,282 $49,330 $ 33,305 $ 59,053 $ 104,522 $159,255 $115,093 $145,468
License fees.................. -- -- -- 10,970 10,970 33,088 28,952 21,411 10,005
Maintenance fees.............. -- -- -- 1,978 1,978 22,567 25,848 19,904 13,314
Other......................... 1,906 984 -- 4,787 4,788 16,268 19,809 13,945 10,592
------- ------- ------- --------- --------- --------- -------- -------- --------
Total revenues.......... 30,892 39,266 49,330 51,040 76,789 176,445 233,864 170,353 179,379
Expenses:
Cost of processing, servicing
and support................. 18,387 24,212 30,258 35,438 51,236 102,721 129,924 94,332 107,572
Research and development...... 3,605 4,724 6,876 9,907 13,765 32,869 36,265 26,157 16,539
Sales and marketing........... 3,640 4,427 7,242 17,167 21,349 32,670 28,839 22,002 21,945
General and administrative.... 2,381 2,598 4,134 7,338 9,598 18,707 20,677 15,748 21,556
Depreciation and
amortization................ 1,377 1,922 2,485 6,997 8,246 24,919 24,999 19,380 18,001
In-process research and
development(2).............. -- -- -- 122,358 122,358 140,000 719 719 2,201
Charge for stock
warrants(3)................. -- -- -- -- -- -- 32,827 32,409 --
Exclusivity amortization(4)... -- -- -- -- -- 5,958 2,963 2,963 --
------- ------- ------- --------- --------- --------- -------- -------- --------
Total expenses.......... 29,390 37,883 50,995 199,205 226,552 357,844 277,213 213,710 187,814
Net gain on dispositions of
assets(5)..................... -- -- -- -- -- 6,250 36,173 28,449 3,914
------- ------- ------- --------- --------- --------- -------- -------- --------
Income (loss) from
operations.................... 1,502 1,383 (1,665) (148,165) (149,763) (175,149) (7,176) (14,908) (4,521)
Interest:
Income........................ 165 298 2,135 1,659 3,104 2,153 3,464 2,413 2,205
Expense....................... (279) (795) (645) (325) (484) (834) (632) (547) (507)
------- ------- ------- --------- --------- --------- -------- -------- --------
Income (loss) before income
taxes....................... 1,388 886 (175) (146,831) (147,143) (173,830) (4,344) (13,042) (2,823)
Income tax expense
(benefit)(6)................ 368 400 40 (8,628) (8,650) (12,017) (641) (3,581) (12,422)
------- ------- ------- --------- --------- --------- -------- -------- --------
Income (loss) before
extraordinary item.......... 1,020 486 (215) (138,203) (138,493) (161,813) (3,703) (9,461) 9,599
Extraordinary item............ -- -- -- (364) (364) -- -- -- --
------- ------- ------- --------- --------- --------- -------- -------- --------
Net income (loss)....... $ 1,020 $ 486 $ (215) $(138,567) $(138,857) $(161,813) $ (3,703) $ (9,461) $ 9,599
======= ======= ======= ========= ========= ========= ======== ======== ========
Diluted income (loss) per
common share before
extraordinary item(7)......... $ 0.04 $ 0.02 $ (0.01) $ (3.69) $ (4.14) $ (3.44) $ (0.07) $ (0.17) $ 0.17
Diluted income (loss) per
common share(7)............... $ 0.04 $ 0.02 $ (0.01) $ (3.70) $ (4.15) $ (3.44) $ (0.07) $ (0.17) $ 0.17
Diluted equivalent number of
shares outstanding(7)......... 26,886 27,103 28,219 37,420 33,435 46,988 55,087 54,989 56,117
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF JUNE 30, AS OF MARCH 31,
------------------------------ ------------------------------ -------------------
1993 1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................ $ 623 $ 11,399 $ 81,792 $ 45,496 $ 20,002 $ 78,238 $ 76,502 $ 44,473
Total assets............................... 17,669 30,512 115,642 196,230 223,836 250,112 237,878 250,690
Long-term obligations, less current
portion................................... 8,968 8,213 7,282 8,324 8,401 6,467 6,748 6,616
Total stockholders' equity................. 2,985 16,372 99,325 137,675 148,644 183,854 177,304 185,217
</TABLE>

20
<PAGE> 24

- ---------------

(1) On April 19, 1996, we elected to change our fiscal year end from December 31
to June 30. To assist in the analysis of the selected consolidated financial
data, unaudited results for the twelve months ended June 30, 1996 are
provided.
(2) In connection with the acquisitions of Intuit Services Corporation in
January 1997, Advanced Mortgage Technologies, Inc. in October 1997 and
Mobius Group, Inc. in March 1999, we recorded charges to expense of $140.0
million, $0.7 million, and $2.2 million, respectively, for acquired
in-process research and development that were determined to have no future
value. See Note 2 to the audited consolidated financial statements and Note
11 to the interim unaudited consolidated financial statements included
elsewhere in this prospectus.
(3) The $32.4 million and $0.4 million charges for stock warrants in the fiscal
year ended June 30, 1998 resulted from the vesting of warrants related to a
ten year processing agreement with Integrion and to a consulting agreement
with a third party, respectively. See Note 15 to the audited consolidated
financial statements included elsewhere in this prospectus.
(4) In connection with an exclusivity arrangement entered into upon our
acquisition of Intuit Services Corporation in January 1997, we recorded
amortization expense of $6.0 million and $3.0 million for the fiscal years
ended June 30, 1997 and 1998, respectively.
(5) The $6.3 million net gain on dispositions of assets in the year ended June
30, 1997 resulted from the March 1997 sale of our credit card business. The
$36.2 million net gain in the year ended June 30, 1998 resulted from the
sales of our recovery management business in August 1997, our item
processing business in March 1998 and our electronic banking and wire
businesses in April 1998. The resulting gains from such sales were $28.2
million, $3.2 million, and $14.7 million, respectively. The gains were
offset by losses on the sale of the leasing business, discontinuation of the
web investor business and write-offs of certain equipment. The resulting
losses were $4.7 million, $1.0 million and $4.2 million, respectively. The
$28.4 million net gain in the nine months ended March 31, 1998 resulted from
the $28.2 million gain on the August 1997 sale of our recovery management
business, the $3.2 million gain on the March 1998 sale of our item
processing business, and the $3.0 million write-off of certain equipment and
capitalized costs.
(6) In connection with the creation of a special purpose subsidiary to
administer our employee medical benefits program, we recorded a one-time tax
benefit of approximately $12.2 million during the quarter ended December 31,
1998. See Note 10 to the unaudited consolidated financial statements
included elsewhere in this prospectus.
(7) The earnings per share amounts prior to the fiscal year ended June 30, 1998
have been restated to comply with Statement of Financial Accounting
Standards No. 128 "Earnings per Share" as required. For further discussion
of earnings per share and the impact of Statement 128, see Note 1 to the
consolidated financial statements included elsewhere in this prospectus.

21
<PAGE> 25

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion sets forth our operating revenue and operating
income (loss) by business segment. For a complete discussion of our financial
condition and results of operations, please refer to our Annual Report on Form
10-K for the fiscal year ended June 30, 1998 and our Quarterly Report on Form
10-Q for the quarter ended March 31, 1999 which are incorporated by reference
into this prospectus. See "Where You Can Find More Information" and
"Incorporation of Documents by Reference."

OVERVIEW

We are the leading provider of electronic billing and payment services. Our
Electronic Commerce business provides services that allow consumers to:

- Receive electronic bills through the Internet;

- Pay any bill -- electronic or paper -- to anyone; and

- Perform customary banking transactions, including balance inquiries,
transfers between accounts and on-line statement reconciliations.

We also are a leading provider of portfolio management and information
services and financial applications software. During the nine months ended March
31, 1999, Electronic Commerce accounted for 69% of our revenues, Software
accounted for 16% of our revenues and Investment Services accounted for 15% of
our revenues.

Our current business was developed through expansion of our core electronic
commerce business and the acquisition of companies operating similar or
complementary businesses. Our major acquisitions include the acquisition of
Servantis Systems Holdings, Inc. in February 1996, Security APL, Inc. in May
1996, Intuit Services Corporation in January 1997 and Mobius Group, Inc. in
March 1999.

During fiscal 1998, we made the decision to sell some of our software
businesses that did not directly promote our strategic direction. These
divestitures included the sale of our recovery management business in August
1997, our item processing business in March 1998, our wire and electronic
banking businesses in April 1998, our leasing business in July 1998, our
mortgage business in September 1998 and our imaging business in October 1998.

22
<PAGE> 26

SEGMENT INFORMATION

The following summary of segment information is derived from our
consolidated financial statements included elsewhere in this prospectus and
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in our Annual Report on
Form 10-K for the fiscal year ended June 30, 1998 and our Quarterly Report on
Form 10-Q for the quarter ended March 31, 1999, which are incorporated by
reference herein, and the Consolidated Financial Statements and Notes thereto
contained elsewhere in this prospectus.

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED JUNE 30, MARCH 31,
-------------------- -------------------
1997 1998 1998 1999
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating revenue:
Electronic Commerce................................ $ 85,926 $137,972 $ 99,046 $122,915
Software........................................... 68,113 66,143 49,737 29,498
Investment Services................................ 22,406 29,749 21,570 26,966
--------- -------- -------- --------
Total operating revenue.................... $ 176,445 $233,864 $170,353 $179,379
========= ======== ======== ========
Operating income (loss):
Operating income (loss) excluding specific items:
Electronic Commerce............................. $ (20,487) $ (1,342) $ (515) $ (3,904)
Software........................................ 4,324 8,393 4,497 8,713
Investment Services............................. 2,171 6,225 4,147 5,142
Corporate....................................... (21,449) (20,116) (15,395) (16,185)
Specific items:
Exclusivity amortization........................ (5,958) (2,963) (2,963) --
In-process research and development............. (140,000) (719) (719) (2,201)
Charge for stock warrants....................... -- (32,827) (32,409) --
Net gain on dispositions of assets.............. 6,250 36,173 28,449 3,914
--------- -------- -------- --------
Total operating loss....................... $(175,149) $ (7,176) $(14,908) $ (4,521)
========= ======== ======== ========
</TABLE>

Nine Months Ended March 31, 1998 and 1999

Our revenue in the Electronic Commerce segment increased by 24%, or $23.9
million, from $99.0 million for the nine months ended March 31, 1998, to $122.9
million for the nine months ended March 31, 1999. This increase in revenue is
due primarily to an increase in subscribers from approximately 2.4 million at
March 31, 1998 to approximately 2.8 million at March 31, 1999.

Our operating loss in the Electronic Commerce segment increased from a loss
of $0.5 million for the nine months ended March 31, 1998 to a loss of $3.9
million for the nine months ended March 31, 1999. This increase in our operating
loss was due to the temporary slowing of revenue growth caused by financial
institutions converting their PC-based systems to our new web-based platform. At
the same time, we have continued to invest in our payment processing
infrastructure to enhance our future quality and efficiency in anticipation of
the revenue growth expected when financial institutions complete their
technology conversions and refocus their marketing efforts on new subscriber
growth. These investments include additional customer care resources geared
toward improved quality and significant E-Bill implementation costs, which were
not offset by additional revenue in the period.

To date, we have activated 21 billers for our E-Bill product offering, have
an additional 19 billers actively engaged in the implementation process and have
another 9 billers awaiting implementation. We believe that as we continue to
activate additional billers for our electronic billing and payment product
offering, the number of users will continue to increase, which should drive
significant revenue and operating income growth in the future.

23
<PAGE> 27

In January 1999, we announced a distribution agreement with a leading
Internet portal designed to promote on-line billing and payment and electronic
banking to Internet users. Our planned investments related to this agreement
will place near-term downward pressure on margins, however, these costs will
prepare us for up to 1 million additional subscribers for our services. These
investments will allow us to grow our professional services and customer care
staff to support anticipated greater deployment of electronic billing and
payment services by billers, as well as expand our sales and marketing and
related training activities.

Revenues in our Software segment declined by $20.2 million, or 41%, from
$49.7 million for the nine months ended March 31, 1998, to $29.5 million for the
nine months ended March 31, 1999. This decline reflects the impact of the
divestiture of several of our software businesses. Excluding the effects of the
divestitures, revenue in our Software segment rose by $3.4 million, or 13%, from
$26.1 million for the nine months ended March 31, 1998, to $29.5 million for the
nine months ended March 31, 1999. Despite this increase, license sales revenue
in our Software segment were lower than anticipated due primarily to purchasing
moratoriums imposed by some potential customers who deferred new software
purchases as a result of addressing their internal Year 2000 issues. This
slowdown in software license sales was somewhat offset by greater consulting
revenues related to implementations of prior sales of software licenses.

Operating income in our Software segment increased from $4.5 million for
the nine months ended March 31, 1998, to $8.7 million for the nine months ended
March 31, 1999. Excluding the effects of the divestitures, operating income
increased from $6.6 million for the nine months ended March 31, 1998, to $8.7
million for the nine months ended March 31, 1999. The increase in operating
income was due to overhead allocation in the prior year.

Revenues in our Investment Services segment increased by $5.4 million, or
25%, from $21.6 million for the nine months ended March 31, 1998, to $27.0
million for the nine months ended March 31, 1999. This increase was due
primarily to an increase in the number of institutional portfolios managed from
approximately 447,000 at March 31, 1998, to approximately 630,000 at March 31,
1999, offset somewhat by an increase in the number of retail brokerage accounts
managed which carry a somewhat lower price. Operating income in our Investment
Services segment increased from $4.1 million for the nine months ended March 31,
1998, to $5.1 million for the nine months ended March 31, 1999. This increase
was due to the greater number of portfolios managed, offset somewhat by costs of
approximately $0.9 million related to the moving of this segment's main office
in the period.

On March 8, 1999, we acquired Mobius Group to augment the product line of
the Investment Services segment. Investment consultants and asset managers may
now use Mobius Group's M-Vest service to determine the ideal asset allocation
for their clients; use M-Search to determine the ideal investment manager
candidates; use CheckFree APL and APL Wrap products to provide investment
management platform and trading tools; and use either M-Watch or CheckFree APL
for their investment oversight and reporting to the end client. The acquisition
had minimal impact on operations in the nine months ended March 31, 1999.

Expenses in our Corporate segment represent charges for human resources,
legal, accounting and various other unallocated overhead charges. Corporate
segment costs were $15.4 million for the nine months ended March 31, 1998 versus
$16.2 million for the nine months ended March 31, 1999, including a
non-recurring one-time charge of $0.6 million incurred in December 1998 for the
formation of a special-purpose subsidiary created to administer our employee
medical benefits program. Our Corporate segment expenses were relatively stable
due to successful efforts to leverage these resources despite the growth of our
other operating segments during the most recent nine-month period.

Exclusivity amortization of $2.9 million in the nine months ended March 31,
1998 represented the final amortization expense related to an exclusivity
arrangement we entered into with Intuit in conjunction with the purchase of
Intuit Services in January 1997.

In-process research and development charges of $2.2 million in the nine
months ended March 31, 1999 resulted from our acquisition of Mobius Group on
March 8, 1999. Please refer to Note 11 to the

24
<PAGE> 28

interim unaudited consolidated condensed financial statements included elsewhere
in this prospectus. The $0.7 million charge for in-process research and
development in the nine months ended March 31, 1998 resulted from the
acquisition of Advanced Mortgage Technologies, Inc. in October 1997.

The $32.4 million charge for stock warrants in the nine months ended March
31, 1998 resulted from the vesting of 3,000,000 warrants in March 1998 related
to a ten-year processing agreement with Integrion which we announced in October
1997.

The net gain on disposition of assets is the result of various transactions
in the nine months ended March 31, 1998 and 1999. The net gain on dispositions
of assets of $3.9 million in the nine months ended March 31, 1999 is the result
of a gain of $6.4 million on the sale of the mortgage business and the loss on
the sale of the imaging business of approximately $2.5 million. The net gain on
dispositions of assets of $28.4 million in the nine months ended March 31, 1998
is the result of a $28.2 million gain on the sale of the credit management
business in August 1997, the gain on the sale of the item processing business of
$3.2 million in March 1998 and the write-off of approximately $3.0 million on
September 30, 1997 of certain equipment and capitalized costs for which we
determined that the book value exceeded their net realizable value.

Year Ended June 30, 1997 and 1998

Our revenue in the Electronic Commerce segment increased by 61%, or $52.0
million, from $85.9 million for the fiscal year ended June 30, 1997, to $137.9
million for the fiscal year ended June 30, 1998. This increase in revenue is due
primarily to an increase in subscribers from approximately 1.7 million at June
30, 1997 to approximately 2.4 million at June 30, 1998.

Our operating loss in the Electronic Commerce segment decreased from a loss
of $20.5 million for the fiscal year ended June 30, 1997 to a loss of $1.3
million for the fiscal year ended June 30, 1998. This decrease in operating loss
was due primarily to the previously mentioned revenue growth as well as
improvements in the efficiency of remittances and customer care, reduction in
costs from the integration of Intuit Services and the significant economies of
scale and leverage inherent in the segment's business model.

Revenues in our Software segment declined from $68.1 million for the fiscal
year ended June 30, 1997, to $66.1 million for the fiscal year ended June 30,
1998. This decline reflects the impact of the divestiture of several of our
Software businesses. Excluding the effects of purchased profits and the effects
of a divestiture of the credit management business, revenue in our Software
segment rose by 6% for the fiscal year ended June 30, 1997, to $66.1 million for
the fiscal year ended June 30, 1998. This increase is due to increased license
sales, which were driven by growth in our reconciliation and compliance
products, and related maintenance and services revenue.

Operating income in our Software segment increased from $4.3 million for
the fiscal year ended June 30, 1997, to $8.4 million for the fiscal year ended
June 30, 1998. Excluding the effects of the divestitures, operating income
increased from $5.3 million for the fiscal year ended June 30, 1997, to $8.3
million for the fiscal year ended June 30, 1998. The increase in operating
income was principally due to a decrease in intangible amortization expense of
approximately $3.7 million. Gains on the sales of divested businesses allowed us
to release a deferred tax benefit valuation allowance, which in turn reduced
goodwill and other intangible assets related to the Servantis acquisition.

Revenues in our Investment Services segment increased by $7.3 million, or
33%, from $22.4 million for the fiscal year ended June 30, 1997, to $29.7
million for the fiscal year ended June 30, 1998. This increase was due primarily
to an increase in the number of institutional portfolios managed from
approximately 350,000 at June 30, 1997 to approximately 500,000 at June 30,
1998. Operating income increased from $2.2 million for the year ended June 30,
1997, to $6.2 million for the fiscal year ended June 30, 1998. This increase was
due to the greater number of portfolios managed.

Expenses for our Corporate segment represent charges for human resources,
legal, accounting and various other of our unallocated overhead charges.
Corporate segment costs decreased from $21.4 million
25
<PAGE> 29

for the fiscal year ended June 30, 1997 to $20.1 million for the fiscal year
ended June 30, 1998. This decrease was due to successful efforts to leverage
these resources despite the growth of our other operating segments during the
most recent fiscal year.

In-process research and development charges of $140.0 million in the fiscal
year ended June 30, 1997 resulted from our acquisition of Intuit Services in
January 1997. In-process research and development charges of $0.7 million in the
fiscal year ended June 30, 1998 resulted from our acquisition of Advanced
Mortgage in October 1997.

YEAR 2000 COMPLIANCE

The following statements are "Year 2000-Readiness Disclosures" in
conformance with the Year 2000 Information and Readiness Disclosure Act (15
U.S.C. 1) enacted on October 19, 1998.

Our goal is to ensure that all systems and products will be ready for any
date-based processing related to the millennium. The following readiness
disclosure is presented for each of our business segments: Electronic Commerce,
Investment Services, and Software.

State of Readiness. We are moving all of our Electronic Commerce segment
processing to Year 2000-ready environments and are making satisfactory progress
to ensure that all of our systems will be ready for any date-based functions
related to the millennium. Previous implementation phases included building a
Year 2000-ready data center and the physical move of the processing systems to
that center. The final implementation phase will include the planned migration
of customers from our Chicago and Columbus systems to our Year 2000-ready
Genesis Platform followed by applicable testing on that system to be completed
by the middle of 1999. In anticipation of limited customer migration from the
Austin system to Genesis before January 1, 2000, the Austin system has been made
Year 2000 ready and testing with financial institutions is substantially
complete. The Electronic Commerce processing systems are subject to regulation
by the OCC and are required to meet OCC's Year 2000-readiness requirements by
June 30, 1999. All our Software segment products have been made Year 2000 ready
and only minor efforts necessary to remediate internal support systems remain.
Prior to the acquisition of Mobius Group, all Investment Services
customer-related processing systems had been made Year 2000 ready and only
customer testing and final remediation of internal systems at Mobius Group
remain. Final corporate initiatives require resources to complete installation
of date related "patches" to related infrastructure hardware and software
applications. All remaining remediation efforts are scheduled to be completed
during the quarter ended September 30, 1999.

An inventory of all our information technology and non-information
technology systems is maintained and periodically updated. We have solicited
most of our third-party vendors to determine the status of their Year 2000
readiness and those functions that are likely to have a material effect on our
business have been identified and assessed. We have received responses from all
of our critical vendors and over half of our other vendors. Validation is based
on third party representations and/or internal testing. To date, in excess of
75% of our mission critical applications are deemed to be Year 2000 ready. Based
on a review of third party representations, we are not currently aware of any
third-party issue applicable to the Year 2000 that is likely to have a material
impact on the conduct of our business, the results of our operations or our
financial condition. We have not performed our own tests on many of these
third-party systems and no assurance can be given at this time that these
systems are Year 2000 ready.

Costs to Address Our Year 2000 Issues. Although the development of our
Genesis Platform has taken into account relevant Year 2000 issues, the planned
conversion was not accelerated due to Year 2000 issues and Year 2000 costs are
not included in development for our Genesis Platform. The following chart
reflects our Year 2000 specific costs. The fiscal year 1998 costs were
attributed to remediation of our legacy systems and applications. The cost to
complete includes remediation, testing and verification, but is

26
<PAGE> 30

primarily budgeted to remedy any Year 2000 related situations that management
has not yet anticipated. We believe that associated costs are adequately
budgeted for in our fiscal 1999 business plans.

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
FISCAL FISCAL MARCH 31, COST TO
BUSINESS SEGMENT 1997 1998 1999 COMPLETE TOTAL
- ---------------- ------ ------ ----------- -------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Electronic Commerce............................... $ -- $ 100 $ 959 $ 441 $1,500
Software.......................................... -- 500 500 100 1,100
Investment Services............................... -- 375 878 359 1,612
Corporate......................................... -- -- 208 177 385
------ ------ ------ ------ ------
Total................................... $ -- $ 975 $2,545 $1,077 $4,597
====== ====== ====== ====== ======
</TABLE>

Risks of Our Year 2000 Issues. In order to accurately process
transactions, we must rely on technology supported by our customers and
suppliers. Transaction processing relies on transmissions of data from consumer
personal computers, through financial institution and business web servers and
the Internet, over third party data and voice communication lines, and through
the Federal Funds System. Failure by us, our customers or suppliers to
adequately address the Year 2000 issues in a timely manner could impede our
ability to process transactions and could have a direct impact on our ability to
generate revenue per our agreements with financial institutions, portfolio
management companies, merchant and direct customers. This in turn could have a
material impact on our business, results of operations and financial condition.
Accordingly, we plan to address all Year 2000 issues before problems
materialize. Should our efforts, or the efforts of our customers and suppliers
fail to adequately address their relevant Year 2000 issues, the most likely
worst case scenario would be a total loss of our revenue.

Our Contingency Plans. We are internally reviewing and testing all mission
critical systems and major components for Year 2000 readiness. Our contingency
plans are in place to address mission critical customer related processes such
as back-up communication plans for incoming customer payment and portfolio
transactions, paper based payment transaction processing in the event of
electronic payment failure and alternative power supply in the event of
prolonged power outages. Additional Year 2000 considerations have been and will
continue to be incorporated into our business contingency plans. We cannot
guarantee that our efforts will prevent all consequences and there may be
undetermined future costs due to business disruption that may be caused by our
customers, suppliers or unforeseen circumstances.

LIQUIDITY AND CAPITAL RESOURCES

During the quarters ended September 30, 1998 and December 31, 1998, we
expended approximately $31.2 million to repurchase shares of our own stock. In
spite of this expenditure, we retained in excess of $25 million in cash, cash
equivalents and short-term investments as of March 31, 1999. Our March 31, 1999
balance sheet reflects a strong current ratio of 1.76. Over the remainder of the
fiscal year ending June 30, 1999, we expect to generate positive cash flow from
our operations. Additionally, in conjunction with the purchase of our new
building in Dublin, Ohio, we expect to increase cash in the next several months
by $10 to $15 million through available financing alternatives. We believe that
existing cash, cash equivalents, investments and the proceeds from this
offering, combined with projected positive operating cash flow and the financing
of our Dublin, Ohio building will be more than sufficient to meet our presently
anticipated requirements for the foreseeable future. To the extent that
additional capital resources may be needed, we have access to an untapped line
of credit totaling $20 million.

27
<PAGE> 31

The following table sets forth a summary of cash flow activity and should
be read in conjunction with statements regarding our liquidity and capital
resources:

<TABLE>
<CAPTION>
SUMMARY OF CASH FLOWS
--------------------------------------------
YEAR ENDED NINE MONTHS ENDED
JUNE 30, MARCH 31,
----------------------- ------------------
1997 1998 1998 1999
---------- ---------- ------- --------
<S> <C> <C> <C> <C>
Cash flow provided by (used in) operating
activities...................................... $(7,831) $(11,673) $ 8,901 $ 24,709
Cash flow provided by (used in) investing
activities...................................... 24,912 12,767 22,381 (14,390)
Cash flow provided by (used in) financing
activities...................................... (5,982) 3,355 605 (30,655)
------- -------- ------- --------
Net increase (decrease) in cash and cash
equivalents............................ $11,099 $ 4,449 $31,887 $(20,336)
======= ======== ======= ========
</TABLE>

While we historically funded our business primarily through cash flows
generated from operations, the sale of equity securities and capital lease
financing, we have had several acquisitions and divestitures that significantly
impacted our cash flow from the six months ended June 30, 1996 through the
fiscal year ended June 30, 1998.

For the fiscal year ended June 30, 1998, we used $11.7 million of cash flow
in our operating activities. During the fiscal year ended June 30, 1998, $24.5
million in net investments in trading securities were reflected as cash used in
operations. In previous periods, all our investments were classified as
available for sale and, therefore, related investment activities did not impact
operating cash flow. The change to trading securities is an effort to maximize
yields within our conservative investment guidelines and not to significantly
impact the risk profile of our portfolio. From an investing perspective, we
generated $54.7 million of cash from the sale of our various software
businesses, $23.8 million from sales and maturities of available for sale
investments, $8.9 million from receipt of a purchase price adjustment related to
the Intuit Services acquisition, and $0.3 million from the sales of other
assets. Investing receipts were offset by $27.9 million of investment in
property additions, primarily for computer and operational equipment and
facilities related to completion of the Genesis Platform; $20.3 million in the
purchase of investments ($19.3 million of available for sale and $1.0 million of
trading); $14.9 of investment in a note receivable in conjunction with the
proposed purchase of our Dublin, Ohio building; $10.0 million as final payment
of the purchase price of Intuit Services; payment of $1.0 million for the
purchase of Advance Mortgage; and $0.7 million in capitalization of software
costs. From a financing perspective, $5.4 million of cash was provided by stock
option exercises under our Stock Option Plans, stock purchases under our
Associate Stock Purchase Plan and our matching contributions under our 401(k)
Plan which was offset by payments of $1.1 million in satisfaction of an
outstanding note payable and $0.9 million in capital lease obligations. In
total, cash and cash equivalents increased by $4.4 million for fiscal 1998. As a
result, our current ratio has improved from 1.3 at June 30, 1997 to 2.3 at June
30 1998 and related working capital has increased from $20.0 million to $78.2
million for the same periods. In the fiscal year ending June 30, 1999, we expect
to earn a profit and believe that existing cash and cash equivalents and
expected cash from remaining software divestitures early in the fiscal year
ending June 30, 1999 will be sufficient to meet our presently anticipated
operating, working capital and capital expenditure requirements for the
foreseeable future. To the extent that additional capital resources are
required, we have access to an unused $20 million line of credit.

For the fiscal year ended June 30, 1997, we used $7.8 million for operating
activities. The sale of businesses generated proceeds of $28.9 million while
$0.6 million was received from stock options exercised during the year. We
invested $11.4 million, net of cash acquired, for the Intuit Services
acquisition. Some stockholders from the Security APL acquisition exercised
options to sell back to us 276,469 of common shares at a price of $19.00 per
share. We received proceeds of $16.5 million on net maturities and sales of
available for sale investments, $9.8 million was invested in property and
software additions, while $0.6 million was received on the sale of property and
equipment. Principal payments on capital leases totaled $1.1 million, $50,000
was applied to the repayment of stockholder notes payable and an additional
$68,750 was expended on repayment of outstanding notes payable balances. Cash
and cash equivalents increased by $11.1 million for the fiscal year ended June
30, 1997.

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BUSINESS

OVERVIEW

We are the leading provider of electronic billing and payment services. Our
Electronic Commerce business provides services that allow consumers to:

- Receive electronic bills through the Internet;

- Pay any bill -- electronic or paper -- to anyone; and

- Perform customary banking transactions, including balance inquiries,
transfers between accounts and on-line statement reconciliations.

We currently provide services for nearly 3 million consumers through over
350 financial institutions, Internet financial sites like Quicken.com and
personal financial management software like Quicken, Microsoft Money and
Managing Your Money. As part of our strategy to broaden availability of our
electronic billing and payment services on the Internet, we recently entered
into a distribution contract with a leading Internet portal. We have developed
relationships with over 1,100 merchants nationwide that enable us to remit more
than 50% of all of our bill payments electronically. During the three-month
period ended March 31, 1999, we processed an average of more than 11 million
transactions per month.

In March 1997, we introduced electronic billing -- "E-Bill" -- which
enables merchants to deliver billing as well as marketing materials
interactively to their customers over the Internet. To date, we have signed
contracts for E-Bill services with 49 of the country's largest billers, who
together deliver more than 500 million bills each month. During the month of
March 1999, we presented and paid more than 10,000 electronic bills through 20
financial institutions and Internet portals, double the number of bills
presented and paid through E-Bill services the previous month.

We also are a leading provider of institutional portfolio management and
information services and financial application software. Our Investment Services
business offers portfolio management and information services for fee-based
money managers and financial planners within investment advisory firms,
brokerage firms, banks and insurance companies. Our fee-based money manager
clients are typically sponsors or managers of wrap money management products or
traditional money managers, managing investments of institutions and high net
worth individuals. Our Software businesses provides electronic commerce and
financial applications software and services for business and financial
institutions. We design, market, license and support software products for
automated clearinghouse, or ACH, processing, reconciliation and regulatory
compliance.

ELECTRONIC COMMERCE INDUSTRY BACKGROUND

The vast majority of today's financial transactions are completed using
traditional paper-based methods. Many traditional financial transactions,
however, can now be completed electronically due to the emergence of new
communications, computing and security technologies. Many financial institutions
and businesses have invested in these technologies and are creating the
infrastructure for recording, reporting and executing electronic transactions.
We believe the broad impact of the Internet will increase the use of electronic
methods to execute financial transactions.

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Persistence of Traditional Financial Transaction Processes

Many traditional methods of completing financial transactions still
persist, including:

- Paper Checks. It is estimated that 67 billion checks were written in the
U.S. in 1997. The use of checks imposes significant costs on financial
institutions, businesses and their customers. These costs include the
writing, mailing, recording and manual processing of checks.

- Paper Billing. It is estimated that over 18 billion paper bills are
produced each year, with the cost of submitting a paper bill, including
printing, postage and billing inserts, as high as $3.00 per bill.

- Conventional Banking. Many financial transactions are conducted in
person at banks. Banks incur substantial expenses in providing personnel
and physical locations, while bank customers incur transportation costs
and personal inconvenience when traveling to a bank facility. Over 90% of
the 80 million banking households in the U.S. are still conducting most
of their financial transactions using conventional banking methods.

- Business to Business Payments. While consumers bear costs and
inconvenience receiving and paying paper bills, businesses experience an
even higher level of cost and inefficiency when receiving and paying
paper bills. For businesses, issues like discounts for prompt payment,
returns, allowances, disputed charges and other adjustments, as well as
reconciliation to the business' own records, increase the costs of
payment.

The Internet's Role in Driving Electronic Commerce

We believe the broad impact of the Internet is driving financial
institutions, businesses and consumers to adopt practices of electronic billing
and payment, banking and business to business payments. We expect that the
growth in these electronic commerce activities will increase the need for
services that support secure, reliable and cost-effective financial transactions
between and among these market participants. We believe the combination of the
following trends is driving adoption of electronic commerce:

- Expanding PC Ownership. Declining prices for PCs and rapid growth in the
number of computer-literate consumers are driving increased penetration
of PCs in U.S. homes. The Yankee Group estimates that by 1998 the
percentage of U.S. consumer households owning a PC grew to 44% and
expects this number to increase to 54% by the year 2001.

- Increasing Internet Accessibility. Reduced communications costs,
improved web browsers and faster connection speeds have made the Internet
increasingly accessible to consumers and to businesses offering products
and services on-line. International Data Corporation, or IDC, estimates
that there were 52 million Internet users in the U.S. at the end of 1998
and that this figure will grow to 136 million by the end of 2002.

- Increasing Acceptance of Electronic Commerce. Consumers have grown
increasingly comfortable with the security of electronic commerce and are
willing to conduct large transactions on-line. IDC estimates that the
total value of goods and services purchased over the Internet in the U.S.
will increase from approximately $26 billion in 1998 to over $269 billion
in 2002.

- Emergence of New Industry Participants. New businesses have emerged
which use the broad adoption of the Internet to compete with traditional
businesses. Traditional financial institutions now compete with
Internet-based banks, brokerages and other financial services companies.
These companies do not offer consumers the possibility of traditional,
manual financial transactions and are driving further adoption of
electronic commerce.

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THE ELECTRONIC SOLUTION

We believe that consumers will move their financial transactions from
traditional paper-based to electronic transactions if they have an
easy-to-access, easy-to-use, compelling, secure and cost-effective solution for
receiving and paying their bills electronically. We believe that these solutions
should allow consumers at their access point of choice to:

- Receive electronic bills through the Internet;

- Pay any bill -- electronic or paper -- to anyone; and

- Perform customary banking transactions, including balance inquiries,
transfers between accounts and on-line statement reconciliations.

We also believe that these functionalities must be delivered on a platform
that:

- Is fully supported by end-to-end customer care;

- Is available 24 hours a day, 7 days a week; and

- Provides the highest level of security, availability and privacy.

Over the past fifteen years, we have developed market leading expertise and
technological capability to provide electronic commerce solutions with these
functionalities.

THE CHECKFREE ADVANTAGE

Our experience as a leading provider of electronic billing and payment and
banking services has facilitated the building of a state of the art
infrastructure. We have leveraged this infrastructure by developing a full suite
of electronic commerce services, all of which we offer in an integrated fashion
through multiple distribution channels.

Infrastructure

Our infrastructure allows consumers to receive and pay both conventional
and electronically presented bills and handle traditional banking transactions
electronically. The key components of our infrastructure are:

- Connectivity with Merchants. We have established electronic connectivity
to over 1,100 merchants which allows us to remit over 50% of all of our
bill payments electronically. Electronic remittance may be accomplished
at a lower cost than remittances using the traditional paper-based
method. In addition, electronic remittance significantly reduces payment
exceptions and related costs associated with customer care.

- Scalable Genesis Platform. Our Genesis Platform, completed in 1998, is a
fully integrated data processing system that was designed by our in-house
engineers. The Genesis Platform was designed to be scaled to handle more
than 30 million consumers. We have made significant investments in
processes and technologies around our Genesis Platform to ensure that
transactions are executed with the highest level of security, reliability
and efficiency.

- Connectivity to Billers. We believe that our ability to provide
consumers with access to electronic bills will substantially spur
adoption of the electronic solution. By targeting the largest billers in
key industries and in selected population centers, we believe we can
quickly provide a significant number of bills to most consumers at their
access point of choice. We have contracts with 49 billers, which
represent the opportunity to deliver over 500 million bills per month,
representing over 70% of the telecom bills, 21% of the utility bills, 22%
of the mortgage bills and 22% of the credit card bills in the U.S.

- Experienced Customer Care Staff. We have nearly 600 trained, experienced
customer care and merchant services staff who offer seamless end-to-end
customer care. We believe that customer

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care that provides answers to all the questions that consumers may have about
their transactions is a critical component of providing a compelling,
easy-to-use solution that consumers will ultimately adopt.

Distribution

We believe that consumers are most attracted to an electronic solution that
enables them to receive and pay all of their bills at a single site. For many
consumers, the site they choose will be their financial institution's web site,
while others will prefer Internet portals or sites operated by individual
merchants. Through relationships with over 350 banks, brokerage houses, credit
unions, Internet portals and financial services sites, we are able to distribute
our services to whichever access and aggregation site the consumer prefers.
Significant among these relationships are our agreements with:

- 23 of the 25 largest U.S. banks;

- 8 of the top 10 U.S. brokerage firms;

- Quicken.com; and

- A recently announced leading Internet portal.

OUR BUSINESS STRATEGY

Our business strategy is to provide an expanding range of convenient,
secure and cost-effective electronic commerce services and related products to
financial institutions, businesses and their customers. We have designed our
services and products to take advantage of opportunities we perceive in light of
current trends and our fundamental strategy. The key elements of our business
strategy are to:

- Drive increased adoption of electronic commerce services by
consumers. We believe that consumers will move their financial
transactions from traditional paper-based methods to electronic
transactions if they have an easy-to-access, easy-to-use, secure,
compelling and cost-effective method for receiving and paying their bills
electronically. We intend to use the broad adoption of the Internet by
consumers to encourage the use of our web-based electronic commerce
services by our financial institution customers. To further drive demand,
we are also providing our services through Internet portals. This
strategy should provide consumers with ready access to easy-to-use,
cost-effective applications for receiving and paying their bills
electronically. As consumers continue to adopt electronic commerce
services, financial institutions and billers will see greater
efficiencies from providing electronic billing and payment services to
their customers. Additionally, we believe that financial institutions and
Internet portals that offer electronic banking will experience increased
customer retention, have a superior marketing channel, and be able to
offer enhanced customer service.

- Continue to distribute electronic commerce services through multiple
channels. We maintain alliances with market-leading companies to achieve
deeper market penetration and have begun an initiative to offer our
electronic commerce services through Internet portals. To better reach
smaller financial institutions, we have entered into distribution
agreements with some independent firms that we believe can more
efficiently address the needs of this industry segment. Additionally, by
making services available to users of PFM software, like Quicken,
Microsoft Money and Managing Your Money and of business management
software, like QuickBooks, we expand public access to, and awareness of,
our services.

- Focus on customer care and technical support. We believe that providing
superior quality and accessible and reliable customer care is essential
to establishing and maintaining successful relationships with our
customers. We support and service customers through numerous activities,
including technical and non-technical support, through help desk, e-mail
and facsimile, as well as through service implementation and training. We
are enhancing our support of our services through advanced Internet-based
communications technologies that enable us to efficiently respond to
billing

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and payment inquiries made by financial institutions, billers and their
customers. In anticipation of greater adoption of our electronic commerce
services, we are increasing the number of our customer care personnel and
focusing on our efficiency in handling customer care inquiries.

- Continue to improve operational efficiency and effectiveness. We believe
that as our business grows and the number of transactions we process
increases, we will be able to take advantage of operating efficiencies
associated with increased volumes, thereby reducing our costs.
Additionally, we expect to derive further operational efficiency and
effectiveness by increasing our electronic links with billers, enabling a
larger percentage of our consumer transactions to be processed
electronically.

- Drive new forms of electronic commerce services. Our electronic commerce
services are currently applied to banking, billing and payment and
brokerage transactions. We believe that new applications will be
developed as a result of the growth in electronic commerce generally, and
Internet-based commerce specifically. We intend to leverage our
infrastructure and distribution to address the requirements of consumers
and businesses in these new applications.

PRODUCTS AND SERVICES

Electronic Commerce

Our electronic commerce services are primarily targeted to consumers
through financial institutions and Internet portals. We believe that our
services offer significant benefits to financial institutions and Internet
portals, including an enhanced electronic relationship with their consumers
under which they can market other products and services and, for financial
institutions, a lower cost of providing traditional banking and bill payment
services. We are continually developing new electronic commerce services and
enhancing our existing services for each of our target markets.

We have arrangements with more than 350 financial institutions through
which electronic payment services are provided to their customers. Some of the
financial institutions we serve include:

<TABLE>
<S> <C> <C> <C>
- - Bank of America - KeyCorp
- - Bank One - Merrill Lynch & Co.
- - Charles Schwab & Co. - NationsBank
- - Chase Manhattan Bank - Wells Fargo
- - First Union - U.S. Bancorp
</TABLE>

Bill Payment and Banking. Our bill payment services enable financial
institution customers and direct consumer subscribers to pay bills
electronically using a variety of devices such as PCs and touch-tone telephones.
Bills paid by consumers using our bill payment services typically include credit
card, monthly mortgage and utility bills, but a cornerstone of our services is
that we can facilitate electronic payment by consumers to anyone, regardless of
whether payment is ultimately made through an electronic or traditional paper
method. Consumers can use our services to electronically make any payment from
any checking account at any financial institution in the U.S. Recurring bills
such as mortgages can be paid automatically and scheduled in advance, as
specified by the consumer. As of March 31, 1999, we had nearly 3 million
consumers using our bill payment and home banking services.

We support home electronic banking services for financial institutions and
their customers. Among these are balance inquiries, fund transfers, customer
service, customer billing and marketing. Our service facilitates on-line
reconciliation to PC and web-based account registers, matching cleared items
with previously entered transactions.

Revenues are generated through contracts with individual financial
institutions. We typically negotiate with the financial institution an
implementation fee, a base monthly fee per customer account on the service
provided, and in some cases, a variable per transaction fee which may decrease
based on the volume of transactions. Contracts typically have three to five year
terms and generally provide for minimum fees if transaction volumes are not met.
We utilize direct sales and distribution alliances to market to financial
institutions and have the ability to customize services for each institution.

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Billing and Payment. Our electronic billing and payment service permits
billers to deliver full-color electronic bills to their customers, together with
detailed information and electronic promotional inserts. We also offer the
opportunity to market interactively, and to use one-to-one marketing techniques.
The recipients can use the service to electronically make the payment. We are
marketing the service to be incorporated into our electronic banking and bill
payment services. We have entered into a variety of arrangements with financial
institutions, Internet portals and billers to provide such services and, in some
cases, will share revenue derived from billers with the financial institutions
and the Internet portals. We believe that billers could eventually achieve
substantial savings by utilizing our billing and payment service, but we believe
that an even stronger incentive for billers to present bills electronically is
the opportunity our system offers for more effective marketing to customers.

Business Payments. We facilitate electronic payments for businesses
through our offerings of business bill payment and banking and electronic
accounts receivable processing services. As we do for consumers, we enable
businesses to make payments to anyone. We employ a direct sales force to market
the service through banks and others. Our electronic accounts receivable
collections for businesses are provided to health and fitness and various other
industries, enabling these businesses to collect monthly fees through electronic
funds transfer or credit cards. Services are typically provided under contracts
for three years with automatic renewals. For providing collection services,
businesses pay us implementation fees, transaction fees and credit card discount
fees.

Investment Services

We offer portfolio management and information services for fee-based money
managers and financial planners within investment advisory firms, brokerage
firms, banks and insurance companies. Our fee-based money manager clients are
typically sponsors or managers of wrap money management products or traditional
money managers, who manage investments of institutions and high net worth
individuals.

Our full range of portfolio management services provides our clients with
portfolio accounting, tax lot accounting, trade modeling, performance
measurement and reconciliation. Our information services and software allow
traditional money managers and consultants to allocate client assets, select and
benchmark performance of money managers and report on manager performance. Each
of these features allows our clients to avoid spending time on these functions
and focus on their key business.

Revenues in our portfolio management services are generated through one-to
three-year contracts which provide for monthly revenue on a portfolio basis.
Revenue from our information services and software is typically generated
through annual license agreements.

Our integrated outsourced solution utilizes a Unix platform. The system is
highly scalable, making us the system of choice for firms managing more than
1,000 portfolios.

Software

We are a leading provider of electronic commerce and financial applications
software and services for businesses and financial institutions. We design,
market, license and support software products for ACH processing, reconciliation
and regulatory compliance. In addition, we offer software consulting and remote
processing services.

Our financial application software revenues are derived primarily from the
sale of software licenses and software maintenance fees. Our software is sold
under perpetual licenses, and maintenance fees are received through renewable
agreements. We also receive revenues from project consulting services and remote
transaction processing fees.

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In April 1998, we announced our intention to divest ourselves of many of
our software products and businesses. By September 1998, we sold our item
processing, wire transfer and cash management, leasing, mortgage, and imaging
software products and businesses.

Our retained software products provide systems that range from back office
operations to front-end interface with the clients of our customers.
Applications include ACH origination and processing reconciliation, regulatory
compliance and safe deposit box accounting.

ACH. The ACH network was developed in the 1970s to permit the electronic
transfer of funds, curtailing the growth in the number of paper checks in
circulation. The ACH network acts as the clearing facility for routing
electronic funds transfer entries between financial institutions. All ACH
transfers are handled in a standard format established through the National
Automated Clearing House Association. More than 15,000 financial institutions
participate in the ACH system. There are 31 Automated Clearinghouses, which
geographically coincide with the twelve Federal Reserve Banks, their branches
and processing centers. Our electronic funds transfer products are interrelated
and may be used by either businesses or financial institutions depending on the
services they offer their customers and employees.

We developed the Paperless Entry Processing System Plus, or PEP+, the most
widely used, comprehensive ACH processing system in the United States. PEP+ is
an on-line, real-time system providing an operational interface for originating
and receiving electronic payments through the ACH.

Reconciliation. Our reconciliation products provide U.S. banks,
international banks and corporate treasury operations with automated check and
non-check reconciliations in high volume, multi-location environments. These
systems are often tailored so that banks and multi-bank holding companies may
deliver reconciliation services meeting the specific needs of corporate
customers. Those reconciliation products are also designed for non-banking
corporations that perform account reconciliation in-house as well as companies
with many branch locations. Services provided by our reconciliation products
include:

- Automated deposit verification;

- Consolidated bank account reconciliations and cash mobilization;

- Immediate and accurate funds availability data; and

- Improved cash control.

In 1995, we introduced RECON-PLUS for Windows, a client/server based
reconciliation system. RECON-PLUS for Windows is most frequently used for
internal reconciliation by large businesses, financial service firms, and
utilities, including the reconciliation of debit and credit card transactions,
checks, ATM transactions, ACH transfers and securities transactions.

Our Account Reconciliation Package, or ARP, is one of the most widely used
account reconciliation systems in the U.S. banking industry. The ARP/Service
Management System, or ARP/SMS, developed in 1995 to replace and augment the
existing ARP package, is a fully integrated on-line and real time system that
enables banks to immediately process their customer transactions to produce
accurate, timely reconciliations while streamlining back-office processes.
ARP/SMS also groups accounts across banks within bank holding companies and
allows banks to streamline their operations by reconciling their intra-bank
transactions.

Other Software Products. We also offer software products and services
dealing with safe box accounting and compliance with government regulations.

Licenses. We generally grant non-exclusive, non-transferable perpetual
licenses to use our application software at a single site. Our standard license
agreements contain provisions designed to prevent disclosure and unauthorized
use of our software. License fees vary according to a number of factors,
including the types and levels of services we provide. Multiple site licenses
are available for an additional fee. In our license agreements, we generally
warrant that our products will function in accordance with the specifications
set forth in our product documentation. A significant portion of the license fee
payable under our standard license agreement is due upon the delivery of the
product documentation and software to the
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customer, with the balance of the license fee due upon installation. The
standard license fee for most products covers the installation of our software
and maintenance for the first three to twelve months.

Maintenance and Support. Maintenance includes enhancements to our
software. Customers who obtain maintenance generally retain maintenance service
from year to year. To complement customer support, we frequently participate in
user groups with our customers. These groups exchange ideas and techniques for
using our products and provide a forum for customers to make suggestions for
product acquisition, development and enhancement.

COMPETITION

Electronic Commerce

Portions of the electronic commerce market are becoming increasingly
competitive. We face significant competition in all of our customer markets. A
number of banks have developed, and others may in the future develop, home
banking services in-house. A number of relatively small companies, such as
Travelers Express, recently acquired by Marshall & Ilsley Bank Inc., compete
with us in electronic bill payment. Additionally, TransPoint LLC, a joint
venture among Microsoft Corporation, First Data Corporation and Citibank N.A.,
competes aggressively with us in the area of electronic billing and payment.
TransPoint has announced its own agreements with financial institutions to offer
on-line home banking and electronic billing and payment to consumers. We also
compete for business bill payment customers with ACI and Deluxe Data, which
provide ACH processing.

Because the electronic commerce industry is expected to grow substantially
in the coming years, we anticipate continued strong competition, but we believe
that the increased attention and credibility such competition will bring to the
industry may broaden the market and increase the percentage of financial
transactions which are effected by electronic means.

Investment Services

Competition for portfolio services includes two main segments. We compete
with providers of portfolio accounting software, including Advent Software, and
PORTIA (a division of Thomson Financial). We also compete with service bureau
providers such as Shaw Data (a SunGard Company) and FMC Service Bureau.

Software

The computer application software industry is highly competitive. In the
financial applications software market, we compete directly or indirectly with a
number of firms, including large diversified computer software service companies
and independent suppliers of software products. We believe there is at least one
direct competitor for most of our software products, but no competitor competes
with us in all of our software product areas.

Our product lines also have numerous competitors. The RECON-PLUS product
competes with Chesapeake, Driscoll and Geac.

We believe that the major factors affecting customer decisions in our
market, in addition to price, are product availability, flexibility, the
comprehensiveness of offered products, and the availability and quality of
product maintenance, customer support and training. Our ability to compete
successfully also requires that we continue to develop and maintain software
products and respond to regulatory change and technological advances. We believe
that we currently compete favorably in the marketplace with respect to these
criteria. See "Risk Factors -- Competitive pressures we face may have a material
adverse effect on us."

SALES, MARKETING AND DISTRIBUTION

Our sales, marketing and distribution efforts are designed to maximize
access to potential customers. We market and support our services both directly
and indirectly through a direct sales and technical sales support force of over
100 employees and, to achieve deeper market penetration, through select
distribution

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alliances with companies which are involved in our target customer markets. In
order to foster a better understanding of the needs of our larger bank
customers, and to help us respond to identified needs, we employ a number of
account managers assigned to specific banks. We solicit billers for our
electronic billing and payment services through a regionally assigned sales
force.

In the electronic commerce segment, we offer our services and related
products to the nation's largest financial institutions directly through our
sales force, and market to smaller institutions through strategic alliances with
companies such as EDS, Fiserv, FiTech, Alltel and Gold Leaf. We currently offer
substantially all of our services and related products only to the domestic
marketplace.

Recently, we announced our initiative to offer our electronic commerce
services through Internet portals. We believe that these Internet portals will
enhance and speed up the rate of adoption of electronic commerce services by
consumers. Additionally, the distribution of electronic home banking and
electronic consumer and business billing and payment services is widened though
inclusion or access through front-end personal financial management software,
such as Quicken, Microsoft Money and Managing Your Money.

We market investment services through our direct sales force. We generate
new customers through direct solicitation, user groups and advertisements. We
also participate in trade shows and sponsor industry seminars for distribution
alliances.

We market financial application software products through our direct sales
force and through indirect sales through Alltel banking services. Salespersons
have specific product responsibility and receive support from technical
personnel as needed. We generate new customers through direct solicitations,
user groups, advertisements, direct mail campaigns and strategic alliances. We
also participate in trade shows and sponsor industry technology seminars for
prospective customers. Existing customers are often candidates for sales of
additional products or for enhancements to products they have already purchased.

An element of our strategy is the creation and maintenance of distribution
alliances that maximize access to potential customers for our electronic
commerce services and related products. We believe that these partnerships
enable us to offer services and related products to a larger customer base than
can be reached through stand-alone marketing efforts. We seek distribution
alliance partners who have maximum penetration and leading reputations for
quality with our target customers. To date, we have entered into or are
negotiating distribution alliances with several companies, including AT&T,
Alltel, EDS, Fiserv, FiTech, Five Paces, and Home Financial Network. We also
have arrangements with MicroBank for RECON-PLUS for Windows. On October 29,
1997, we entered into a 10-year processing partnership with Integrion Financial
Network, L.L.C. to provide financial institutions with a fully integrated,
end-to-end, cost effective electronic billing and payment processing service
employing Integrion's Gold Message Standard for Electronic Commerce, its
Interactive Financial Services platform and our processing infrastructure. For
more detailed information concerning the Integrion partnership, please refer to
our Form 8-K filed on November 12, 1997.

One of the ramifications of this strategy is that we do not, for the most
part, have a direct relationship with the end-users of our products. See "Risk
Factors -- We rely on third parties to distribute our electronic commerce
services, which may not result in widespread adoption."

CUSTOMER CARE AND TECHNICAL SUPPORT

The provision of high quality customer care, technical support and
operations is an integral component of our strategy in each business segment. To
meet customers' needs most efficiently, our customer care staff is organized
into vertical teams that support each of our business segments. These teams,
however, share common resources, training and orientation to ensure cost
efficiency and consistency of quality standards and measures. From an
accessibility standpoint, all customer care teams provide service by

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phone, e-mail and facsimile. Through advanced communications technology, we have
a virtual call center enabling incoming calls to be transparently routed to
various physical support sites as volume demands dictate. An important driver of
our profit margins is the percentage of transactions we complete electronically.
Experience has shown that the demand on customer care resources reduces
substantially as the percentage of electronic remittances grows. We have long
been a leader in electronic remittance, and our merchant systems group
continually establishes and maintains electronic links directly to the internal
systems of payees.

The level and types of services we provide vary by customer market. The
customer care group, consisting of more than 575 employees, supports payment
inquiry, customer service and technical support and interfaces with the merchant
systems group to improve posting efficiencies. Representatives in our business
customer care group are individually assigned to business customers in order to
provide high level customer service and technical support. Our retail services
customer care group provides various levels of support that depend upon the
customer's requirements. This includes providing direct customer care on a
private label basis as well as research and support.

To maintain our customer care standards, we employ extensive internal
monitoring systems and conduct ongoing customer surveys. The feedback from these
sources is used to identify areas of strength and opportunities for improvement
in customer care and to aid in adjusting resources to a level commensurate with
efficient response.

REMITTANCES

Payment Systems. Across our various electronic commerce service offerings,
we utilize the Federal Reserve's ACH for electronic funds transfers, and the
conventional paper check clearing systems for settlement of payments by check or
draft. Like other users of these payment clearance systems, we access these
systems through contractual arrangements with processing banks. For access to
conventional paper check clearing systems, we do not need a special contractual
relationship, except for contractual relationships with the processing bank and
its customers. Such users are subject to applicable federal and state laws and
regulations, Federal Reserve Bank operating letters, and the National Automated
Clearing House Association Operating Rules. There are risks typically faced by
companies utilizing each of these payment clearance systems, and we have our own
set of operating procedures and proprietary risk management systems and
practices to mitigate credit-related risks. See "Risk Factors -- The
transactions we process expose us to credit risks" and "Risk Factors -- Our
business could become subject to increased government regulation, which could
make our business more expensive to operate."

ACH. The ACH is used by banks, corporations and governmental entities for
electronic settlement of transactions, direct deposits of payroll and government
benefits and payment of bills like mortgages, utility payments and loans. We use
the ACH to execute some of our customers' payment instructions. Like other users
of the ACH, we bear credit risk resulting from returned transactions caused by
insufficient funds, stop payment orders, closed accounts, frozen accounts,
unauthorized use, disputes, theft or fraud. See "Risk Factors -- The
transactions we process expose us to credit risks" and "Risk Factors -- Our
business could become subject to increased government regulation, which could
make our business more expensive to operate."

Paper Drafts. We use conventional check clearance methods for paper drafts
to execute some customers' payment instructions. We bear no credit risk with
paper drafts written on a customer's checking account returned for insufficient
funds, stop payment orders, closed accounts or frozen accounts. Nonetheless, we
may bear other risks for theft or fraud associated with paper drafts due to
unauthorized use of our services. When a customer instructs us to pay a bill, we
have the ability to process the payment either by electronic funds transfer or
by paper draft, drawn on the customer's checking account, on which the
customer's pre-authorized signature is laser imprinted. We manage the risk we
assume by adjusting the mix of electronic and paper draft transactions in
individual cases and overall. Regardless of whether we use paper drafts or
electronic funds transfers, we retain all risks associated with transmission
errors when we are unable to have erroneously transmitted funds returned by an
unintended recipient.

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<PAGE> 42

Other Clearance Systems. While we presently utilize the two principal
payment clearance systems, we intend to use other clearance systems such as ATM
networks to provide balance inquiry and fund transfers functions, and other
clearance systems that may develop in the future.

Risk Mitigation. Our patented bill payment processing system (U.S. Letters
Patent No. 5,383,113, issued on January 17, 1995) determines the preferred
method of payment to balance processing costs, operational efficiencies and risk
of loss. We manage our risks associated with the use of the various payment
clearance systems through risk management systems, internal controls and system
security. We also maintain a reserve for such risks, which reserve was $1.6
million at April 30, 1999, and we have not incurred losses in excess of 0.76% of
our revenues in any of the past five years. As further protection against losses
due to transmission errors, we maintain errors and omissions insurance. See
"Risk Factors -- The transactions we process expose us to credit risks" and
"Risk Factors -- We may be unable to protect our proprietary technology,
permitting competitors to duplicate our products and services."

TECHNOLOGY

Our historical approach to technology has been to utilize a combination of
hardware, networks, proprietary software and databases to solve our customer
needs and to meet the varying requirements of the electronic commerce market.

Electronic Commerce. Our core technology capabilities were developed to
handle settlement services, merchant database services and on-line inquiry
services on a traditional mainframe system with direct bi-synchronous
communications to businesses.

We have implemented a logical, nationwide client-server system. Consumer,
business and financial institution customers all act as clients communicating
across dial-up telephone lines, private leased lines, a private X.25 network, a
frame relay network or the Internet to our computing complex in Norcross,
Georgia. Within this complex, there is a wide variety of application servers
which capture transactions and route them to our back-end banking, billing and
payment applications for processing. The back-end applications are run on either
IBM mainframes, Tandems or Unix servers.

We have developed proprietary databases within our client-server system,
including a financial institution file that allows accurate editing and
origination of ACH and paper transactions to financial institutions. We have
also developed a merchant information file consisting of over one million
companies that allows accurate editing and initiation of payments to billers.
These databases have been constructed over the past 15 years as a result of our
transaction processing experience.

Platform Integration: The Genesis Project. In 1998, we integrated the
existing legacy data processing sites and platforms operated in Columbus, Ohio,
Aurora, Illinois, and Austin, Texas, into our central processing site at our
headquarters in Norcross, Georgia. We are currently migrating our customers to
the new Genesis Platform from these three legacy platforms. We have designated
this integration the Genesis Project. The integration has required the
acquisition of, and investment in, extensive hardware and in operating and
system software, as well as extensive communications links and systems. The
Genesis Project requires substantial engineering and development of proprietary
software. Redundancy, anomaly monitoring, and off-site backup and recovery
systems are planned as a part of the project. See "Risk Factors -- We may
experience breakdowns in our payment processing system that could damage
customer relations and expose us to liability."

Significant numbers of high-level employees have been and will be hired to
facilitate the accomplishment of the Genesis Project, and to manage the
integrated site. We intend to operate the legacy platforms without substantial
disruption until all of our customers have been migrated to the Genesis
Platform. To date, over 600,000 of our nearly 3 million customers have been
migrated to the Genesis Platform. Nonetheless, because of the magnitude of the
project, and an aggressive schedule, no assurance can be given that the project
will be completed on time or successfully. See "Risk Factors -- We may
experience software defects and development delays, damaging customer relations,
decreasing our potential profitability and exposing us to liability."

39
<PAGE> 43

Redundancy and Back-up Systems. We believe that we have implemented
appropriate back-up and recovery procedures to ensure against any loss of data
on any platform. To maximize availability, we have redundant computer systems to
ensure that financial transaction requests can always be honored. Archival
storage is kept on site as well as off site in fireproof facilities. Diesel
generators provide power to the computing facilities in the event of a power
disruption.

Our operations are dependent on our ability to protect our computer
equipment against damage from fire, earthquake, power loss, telecommunications
failure or similar event. Although we have contracted for the emergency
provision of an alternate site to aid in disaster recovery, this measure will
not eliminate the significant risk to our operations from a natural disaster or
system failure. Any damage or failure that causes interruptions in our
operations could have a material adverse effect on our business, operating
results and financial condition. Our property and business interruption
insurance may not be adequate to compensate us for all losses that may occur.
See "Risk Factors -- We may experience breakdowns in our payment processing
system that could damage customer relations and expose us to liability."

Financial Application Software. Our financial application suite of
software products offers a wide range of software addressing both end user
access and back room operational systems located in the customer data centers.
Every effort is taken to insure that each system is targeted for the appropriate
platform to optimize the characteristics of available technology with the
business requirements of each application and its market.

Investment Services. Investment Services employs advanced technology for
its portfolio management services and utilizes IBM RS/6000's to process the
portfolio management software. Services are provided primarily as a service
bureau offering with the data center residing at our Chicago office. This data
center functions seven days a week, twenty-four hours a day. Clients can obtain
access from their PCs either through a dedicated circuit or through dial-up
applications. The Chicago data center is the communication center for more than
70 dedicated links together with four concentration hub sites located in New
Jersey, New York, Boston and San Diego. Each of these hub sites supports the
concentration of local dedicated links plus dial-up access. In addition to the
dedicated private network, clients use frame relay services from several
companies to access services.

RESEARCH AND DEVELOPMENT

We maintain a research and development group with a long-term perspective
of planning and developing new services and related products for the electronic
commerce, financial application software and investment services markets. We
have established the following guidelines for pursuing the development of new
services:

- Distinctive benefits to customers;

- Ability to establish a leadership position in the market served;

- Sustainable technological advantages; and

- First to market.

We believe that in the emerging electronic commerce market it will be
critical to rapidly develop, test and offer new services and enhancements. To
that end, our goal for the time period from conceptualization to commercial
availability of new services is less than one year. As of April 30, 1999, our
research and development group consisted of approximately 230 employees.
Additionally, we use independent third party software development contractors as
needed. We spent 19.4% of revenues during the six-month transition period ended
June 30, 1996, 18.6% of revenues during the fiscal year ended June 30, 1997,
15.5% of revenues during the fiscal year ended June 30, 1998, and 9.2% of
revenues during the nine months ended March 31, 1999 on research and
development. These research and development expenses have been reduced for
capitalized software development costs of $1.3 million in the six-month
transition period ended June 30, 1996, none in the fiscal year ended June 30,
1997, $0.7 million in the fiscal year ended June 30,

40
<PAGE> 44

1998 and $5.1 million in the nine months ended March 31, 1999. We anticipate
that we will continue to commit substantial resources to research and
development activities for the foreseeable future.

GOVERNMENT REGULATION

We believe that we are not required to be licensed by the OCC, the Federal
Reserve Board, or other federal or state agencies that regulate or monitor banks
or other types of providers of electronic commerce services. The OCC, however,
periodically audits us, since we are a supplier of products and services to
financial institutions. There can be no assurance that a federal or state agency
will not attempt to regulate us, which could impede our ability to do business
in the regulator's jurisdiction. A number of states have legislation regulating
or licensing check sellers, money transmitters or service providers to banks,
and we have registered under such legislation in specific instances. We do not
believe that any state or federal legislation of this type materially affects
us. In addition, through our processing agreements, we agree 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 our
processing banks. We may be subject to audit or examination under any of these
requirements. Violations of these requirements could limit or further restrict
our access to the payment clearance systems or our ability to obtain access to
such systems from banks. Further, the Federal Reserve rules provide that we can
only access the Federal Reserve's ACH through a bank. If the Federal Reserve
rules were to change to further restrict our access to the ACH or limit our
ability to provide ACH transaction processing services, our business could be
materially adversely affected.

In conducting various aspects of our business, we are subject to laws and
regulations relating to commercial transactions generally, such as the Uniform
Commercial Code, and are also subject to the electronic funds transfer rules
embodied in Regulation E, promulgated by the Federal Reserve Board. The Federal
Reserve's Regulation E implements the Electronic Fund Transfer Act, which was
enacted in 1978. Regulation E protects consumers engaging in electronic
transfers, and sets forth basic rights, liabilities, and responsibilities of
consumers who use electronic money transfer services and of financial
institutions that offer these services. For us, Regulation E sets forth
disclosure and investigative procedures. For consumers, Regulation E establishes
procedures and time periods for reporting unauthorized use of electronic money
transfer services and limitations on the consumer's liability if the
notification procedures are followed within prescribed periods. Such limitations
on the consumer's liability may result in liability to us.

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. 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 our business and industry and could
have a material adverse effect on our business, operating results and financial
condition.

EMPLOYEES

As of April 30, 1999, we employed 1,794 full-time employees, including 340
in systems and development (including software development), 575 in customer
care, and 200 in administration, financial control, corporate services, and
human resources. We are not a party to any collective bargaining agreement and
are not aware of any efforts to unionize our employees. We believe that our
relations with our employees are good. We believe our future success and growth
will depend in large measure upon our ability to attract and retain qualified
technical, management, marketing, business development and sales personnel.

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<PAGE> 45

MANAGEMENT

The following table sets forth information concerning our directors,
executive officers and key employees.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Peter J. Kight............................... 43 Chairman and Chief Executive Officer
Mark A. Johnson.............................. 46 Vice Chairman, Corporate Development and Director
William P. Boardman.......................... 57 Director
George R. Manser............................. 68 Director
Eugene F. Quinn.............................. 45 Director
Jeffrey M. Wilkins........................... 54 Director
Peter F. Sinisgalli.......................... 43 President
Allen L. Shulman............................. 50 Executive Vice President, Chief Financial
Officer, and General Counsel
Lynn D. Busing............................... 47 Executive Vice President, Account Management
James S. Douglass............................ 33 Executive Vice President, Mergers and
Acquisitions
Sean E. Feeney............................... 41 President, Software Division and Executive Vice
President, Sales
Ravi Ganesan................................. 33 Executive Vice President and Chief Technology
Officer
Matthew S. Lewis............................. 33 Senior Vice President, Electronic Commerce
Product Management and Marketing
John J. Limbert.............................. 51 Executive Vice President, Customer Operations
Gary A. Luoma, Jr............................ 42 Vice President, Chief Accounting Officer and
Assistant Secretary
Curtis A. Loveland........................... 52 Secretary
Keven M. Madsen.............................. 39 Vice President and Treasurer
Randal A. McCoy.............................. 36 Senior Vice President, Electronic Commerce
Development
Terrie O'Hanlon.............................. 37 Senior Vice President, Communications and Media
Relations
Stephen Olsen................................ 39 Senior Vice President and Chief Information
Officer
Harley J. Ostis.............................. 42 Senior Vice President, Human Resources
Francis X. Polashock......................... 44 Executive Vice President and General Manager,
Investment Services Division
Glen Sarvady................................. 36 Vice President, Financial Planning and Analysis
</TABLE>

Peter J. Kight, our founder, has served as Chairman and Chief Executive
Officer since 1981. He also serves as Chairman and Chief Executive Officer of
CheckFree Corporation and as President of CheckFree Investment Corporation and
CheckFree Management Corporation. From 1997 to 1999, Mr. Kight served as
President of CheckFree Holdings Corporation and, from 1981 to 1999, he served as
President of CheckFree Corporation. Mr. Kight is a Director of Metatec
Corporation, a publicly-held company that distributes information utilizing
CD-ROM technology.

Mark A. Johnson has served as Vice Chairman, Corporate Development since
May 1997. He has been a Director since 1983. Mr. Johnson also serves as
Executive Vice President of CheckFree Corporation, CheckFree Investment
Corporation and CheckFree Management Corporation. Mr. Johnson served as
Executive Vice President, Business Development from 1993 to 1997, as Treasurer
from 1993 to 1996, as Senior Vice President from 1991 to 1993, and as a Vice
President from 1982 to 1991. Mr. Johnson is a Director of Claris Corporation
(formerly SQL Financials International, Inc.), a publicly-held company that
develops, markets and supports client/server financial software applications.

William P. Boardman has served as a Director since July 1996. Mr. Boardman
has been an officer of Bank One Corporation since 1984 and is currently Senior
Executive Vice President.

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<PAGE> 46

George R. Manser has served as a Director since 1983. In 1998, Mr. Manser
became the Director of Corporate Finance for Uniglobe Travel (USA), L.L.C.,
which franchises travel agencies throughout the United States. Since July 1994,
Mr. Manser has served as Chairman of Uniglobe Travel (Capital Cities) Inc.,
which is the predecessor of Uniglobe and current holding company of Uniglobe.
From 1985 to 1994, he served as Chairman of North American National Corporation,
a life insurance holding company. Mr. Manser is a Director of Cardinal Health
Inc., a publicly-held wholesale drug distributor, State Auto Financial
Corporation, a publicly-held insurance company, AmeriLink Corporation, a
publicly-held cabling services company, and Hallmark Financial Services, Inc., a
publicly-held insurance services company. He is also an Advisory Director to the
Corporate Finance Department of J.C. Bradford & Co., a NASD broker-dealer.

Eugene F. Quinn has served as a Director since 1994. Mr. Quinn is a
principal of Confluence Capital, a private investment firm. From March 1997 to
April 1999, Mr. Quinn has served as Senior Vice President for Online and
Interactive Services at MTV Networks, a division of Viacom, Inc. From 1984 to
1997, Mr. Quinn served as a senior executive at Tribune Company and its Chicago
Tribune subsidiary.

Jeffrey M. Wilkins has served as a Director since 1990. Since August 1989,
Mr. Wilkins has served as Chairman and Chief Executive Officer of Metatec
Corporation, a publicly-held company which distributes information utilizing
CD-ROM technology.

Peter F. Sinisgalli has served as President since May 1999. He also has
served as President of CheckFree Corporation since May 1999 and as Chief
Operating Officer of CheckFree Corporation since November 1996. From 1994 to
1996, Mr. Sinisgalli was Executive Vice President and Chief Financial Officer of
Dun & Bradstreet Software. From 1993 to 1994, Mr. Sinisgalli was Senior Vice
President -- Group Finance of Dun & Bradstreet Corporation. From 1990 to 1992,
Mr. Sinisgalli held various positions with Nielson Media Research, a division of
Dun & Bradstreet Corporation.

Allen L. Shulman has served as Executive Vice President and Chief Financial
Officer since August 1998 and as General Counsel since May 1997. From May 1997
to August 1998, he also served as our Senior Vice President. Mr. Shulman also
serves as Executive Vice President and Treasurer of CheckFree Management
Corporation. Immediately prior to joining us, Mr. Shulman was the managing
attorney for the Atlanta office of Horvath & Lieber, P.C. From 1983 to 1996, Mr.
Shulman was General Counsel and Chief Financial Officer for United Refrigerated
Services, Inc.

Lynn D. Busing has served as Executive Vice President, Account Management
since February of 1996. Mr. Busing was Senior Vice President of Servantis
Systems Holdings, Inc. from 1993 to 1996. From 1987 to 1993, Mr. Busing held
various management positions with Digital Equipment Corporation.

James S. Douglass has served as Executive Vice President, Mergers and
Acquisitions since August 1998. From September 1996 to August 1998, he served as
our Executive Vice President and Chief Financial Officer. From 1994 to 1996, Mr.
Douglass was Vice President -- Corporate Controller and Chief Accounting Officer
for Medaphis Corporation. From 1988 to 1994, Mr. Douglass served in various
capacities with KPMG Peat Marwick LLP, finally as senior manager.

Sean E. Feeney has served as President, Software Division and Executive
Vice President, Sales since May 1998. From February 1997 to May 1998, he served
as served as our Executive Vice President, Software Solutions. During 1996, Mr.
Feeney served as Vice President, North America Channels and General Manager for
Dun & Bradstreet Software. From 1990 to 1995, Mr. Feeney held various sales
positions with Dun & Bradstreet.

Ravi Ganesan has served as Executive Vice President and Chief Technology
Officer since January 1997. From 1990 to 1997, Mr. Ganesan held various
positions with Bell Atlantic, including Vice President, Distributed Operations &
Information Technology from 1995 to 1997.

Matthew S. Lewis has served as Senior Vice President, Electronic Commerce
Product Management and Marketing since January 1998. From March 1996 to December
1997, Mr. Lewis served as Vice President, Corporate Strategy and Communications
for CheckFree Corporation. From 1988 to 1996,

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<PAGE> 47

Mr. Lewis held various positions at BankSouth Corporation including Vice
President, Corporate Affairs, Director of Compliance, and Director of
Communications and Manager of Public Relations.

John J. Limbert has served as Executive Vice President, Customer Operations
since May 1998. From 1977 to 1997, Mr. Limbert was employed at Banc One
Corporation in various capacities, most recently as the head of its Eastern
Region Consumer Banks.

Gary A. Luoma, Jr. has served as Vice President, Chief Accounting Officer
and Assistant Secretary since April 1997. From 1995 to 1997, Mr. Luoma served as
Vice President of Finance, Americas Operations and Assistant Secretary and, from
1990 to 1995, as Director of Finance, Planning and Analysis at Dun & Bradstreet
Software. From 1983 to 1990, Mr. Luoma held various financial positions with the
American Security Group, including Assistant Treasurer, Assistant Controller and
Internal Audit Manager. From 1980 to 1983, Mr. Luoma served as a Certified
Public Accountant on the audit staff of Ernst & Whinney.

Curtis A. Loveland has served as Secretary since 1983. Mr. Loveland has
been associated with the law firm of Porter, Wright, Morris & Arthur LLP since
1973 and a partner since 1979.

Keven M. Madsen has served as Vice President and Treasurer since July 1998.
From 1996 to 1998, Mr. Madsen served as Director of Tax & Treasury and Assistant
Treasurer of CheckFree Corporation. From 1990 to 1996, Mr. Madsen served as
Manager of Corporate Tax and Treasury for Dun & Bradstreet Software. Prior to
1990, Mr. Madsen was a Certified Public Accountant in the audit and tax
divisions of Arthur Andersen & Co.

Randal A. McCoy has served as Senior Vice President, Electronic Commerce
Development since February 1998. From May 1997 to February 1998, Mr. McCoy
served as Vice President, Genesis Platform Development of CheckFree Corporation.
From 1990 to 1997, Mr. McCoy was Vice President, Corporate Banking Development
at Servantis Systems, Inc. Prior to that, Mr. McCoy worked as a large systems
architect at BellSouth Corporation.

Terrie O'Hanlon has served as Senior Vice President, Communications and
Media Relations since June 1998. From 1997 to 1998, Ms. O'Hanlon served as Vice
President, Corporate Communications at Medaphis Corporation. From 1995 to 1997,
Ms. O'Hanlon was Corporate Communications Director of Dun & Bradstreet Software.
From 1990 to 1995, Ms. O'Hanlon served as Vice President of Crescent
Communications.

Stephen Olsen has served as Senior Vice President and Chief Information
Officer since March 1997. From 1996 to 1997, Mr. Olsen served as Vice President,
Chief Information Officer of Geac Computer Corporation. From 1990 to 1996, Mr.
Olsen served as Vice President, Chief Information Officer of Dun & Bradstreet
Software.

Harley J. Ostis has served as Senior Vice President, Human Resources since
January 1999. From 1981 to 1999, Mr. Ostis held various positions with Harris
Corporation, most recently as Vice President, Human Resources and Quality for
Lanier Worldwide, a division of Harris Corporation.

Francis X. Polashock has served as Executive Vice President and General
Manager, Investment Services Division since May 1997. From 1981 to 1993, Mr.
Polashock held several management positions within Dun & Bradstreet Corporation,
most recently as General Manager of Asia Pacific and Latin America. From 1993 to
May 1997 Mr. Polashock was involved with several entrepreneurial ventures
targeted at the Chinese marketplace.

Glen Sarvady has served as Vice President, Financial Planning and Analysis
since August 1998. From 1997 to 1998, Mr. Sarvady served as Vice President,
Business Development of CheckFree Corporation. From 1988 to 1997, Mr. Sarvady
held a variety of financial management positions with Dun & Bradstreet
Corporation, most recently as Vice President, Finance of Dun & Bradstreet
Software.

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<PAGE> 48

SELLING STOCKHOLDERS

The table below presents the following information about the number of
shares of our common stock that is owned by each selling stockholder:

- The number of shares that each selling stockholder owns as of the date of
the prospectus, including all shares beneficially owned and all options
to purchase shares of common stock held, whether or not deemed to be
beneficially owned;

- The percentage of the outstanding shares of our common stock that each
selling stockholder beneficially owns prior to the offering;

- The number of shares that each selling stockholder is offering under this
prospectus;

- The number of shares that each selling stockholder will own after the
completion of this offering, including all shares that will be
beneficially owned and all options to purchase shares of common stock
that will be held whether or not deemed to be beneficially owned, after
the completion of this offering; and

- The percentage of the outstanding shares of our common stock that each
selling stockholder will beneficially own after the completion of the
offering.

<TABLE>
<CAPTION>
SHARES OWNED AFTER
SHARES OWNED PRIOR TO THIS
THIS OFFERING(1) OFFERING(1)
---------------------- -------------------
SELLING STOCKHOLDERS NUMBER PERCENT SHARES OFFERED NUMBER PERCENT
- -------------------- ----------- -------- -------------- --------- -------
<S> <C> <C> <C> <C> <C>
Peter J. Kight(2)........................... 7,224,017 13.0% 654,578 6,569,439 11.2%
Mark A. Johnson(3).......................... 1,609,691 3.0% 70,000 1,539,691 2.7%
Peter F. Sinisgalli(4)...................... 312,814 * 75,000 237,814 *
Ravi Ganesan(5)............................. 260,874 * 47,789 213,085 *
KeyCorp N.A. (6)............................ 150,000 * 150,000 0 *
James S. Douglass(7)........................ 148,479 * 42,504 105,975 *
Lynn D. Busing(8)........................... 146,681 * 25,000 121,681 *
Sean E. Feeney(9)........................... 135,434 * 26,881 108,553 *
Frank X. Polashock(10)...................... 132,727 * 2,727 130,000 *
Allen L. Shulman(11)........................ 106,921 * 11,921 95,000 *
Randal A. McCoy(12)......................... 98,156 * 3,500 94,656 *
Stephen Olsen(13)........................... 92,831 * 7,500 85,331 *
Eugene F. Quinn(14)......................... 48,785 * 20,000 28,785 *
Curtis A. Loveland(15)...................... 35,614 * 10,000 25,614 *
Gary A. Luoma, Jr.(16)...................... 14,896 * 2,600 12,296 *
</TABLE>

- ---------------

* Represents beneficial ownership of less than 1% of the our outstanding
common stock.

(1) The numbers of shares listed in these columns include all shares
beneficially owned and all options to purchase shares held, whether or not
deemed to be beneficially owned, by each selling stockholder. The ownership
percentages listed in these columns include only shares beneficially owned
by the listed selling stockholder. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission. In
computing the percentage of shares beneficially owned by a selling
stockholder, shares of common stock subject to options held by that selling
stockholder that are exercisable now or within 60 days after May 28, 1999
are deemed outstanding, although those shares are not deemed outstanding
for the purpose of computing the percentage ownership of any other person.
The ownership percentages are calculated assuming that (a) 51,727,613
shares of common stock were outstanding immediately prior to the offering
and (b) 54,481,767 shares of common stock will be outstanding after the
offering.
(2) Prior to giving effect to the offering, Mr. Kight holds 6,196,877 shares of
common stock, options exercisable within 60 days after May 28, 1999 for
626,741 shares of common stock and unvested options to purchase 400,399
shares of common stock. After giving effect to the offering, Mr. Kight

45
<PAGE> 49

will hold 5,542,299 shares of common stock, options exercisable within 60
days of May 28, 1999 for 626,741 shares of common stock and unvested
options to purchase 400,399 shares of common stock.
(3) Prior to giving effect to the offering, Mr. Johnson holds 1,527,844 shares
of common stock, options exercisable within 60 days after May 28, 1999 for
29,495 shares of common stock and unvested options to purchase 52,352
shares of common stock. After giving effect to the offering, Mr. Johnson
will hold 1,457,844 shares of common stock, options exercisable within 60
days of May 28, 1999 for 29,495 shares of common stock and unvested options
to purchase 52,352 shares of common stock.
(4) Prior to giving effect to the offering, Mr. Sinisgalli holds 4,441 shares
of common stock, options exercisable within 60 days after May 28, 1999 for
88,249 shares of common stock and unvested options to purchase 220,124
shares of common stock. After giving effect to the offering, Mr. Sinisgalli
will hold 4,441 shares of common stock, options exercisable within 60 days
of May 28, 1999 for 13,249 shares of common stock and unvested options to
purchase 220,124 shares of common stock.
(5) Prior to giving effect to the offering, Mr. Ganesan holds 1,620 shares of
common stock and options exercisable within 60 days after May 28, 1999 for
46,169 shares of common stock and unvested options to purchase 213,085
shares of common stock. After giving effect to the offering, Mr. Ganesan
will hold unvested options to purchase 213,085 shares of common stock.
(6) Prior to giving effect to the offering, KeyCorp N.A., which is a member of
Integrion Financial Network, L.L.C., one of our strategic partners, holds
exercisable warrants to purchase 150,000 shares of common stock. After
giving effect to the offering, KeyCorp N.A. will not hold any shares of
common stock or warrants to purchase shares of common stock.
(7) Prior to giving effect to the offering, Mr. Douglass holds 723 shares of
common stock, options exercisable within 60 days after May 28, 1999 for
42,504 shares of common stock and unvested options to purchase 105,252
shares of common stock. After giving effect to the offering, Mr. Douglass
will hold 723 shares of common stock and unvested options to purchase
105,252 shares of common stock.
(8) Prior to giving effect to the offering, Mr. Busing holds 22,827 shares of
common stock, options exercisable within 60 days after May 28, 1999 for
29,337 shares of common stock and unvested options to purchase 94,517
shares of common stock. After giving effect to the offering, Mr. Busing
will hold 22,827 shares of common stock, options exercisable within 60 days
of May 28, 1999 for 4,337 shares of common stock and unvested options to
purchase 94,517 shares of common stock.
(9) Prior to giving effect to the offering, Mr. Feeney holds 1,112 shares of
common stock, options exercisable within 60 days after May 28, 1999 for
26,881 shares of common stock and unvested options to purchase 107,441
shares of common stock. After giving effect to the offering, Mr. Feeney
will hold 1,112 shares of common stock and unvested options to purchase
107,441 shares of common stock.
(10) Prior to giving effect to the offering, Mr. Polashock holds 2,727 shares of
common stock and unvested options to purchased 130,000 shares of common
stock. After giving effect to the offering, Mr. Polashock will hold
unvested options to purchase 130,000 shares of common stock.
(11) Prior to giving effect to the offering, Mr. Shulman holds 1,921 shares of
common stock, options exercisable within 60 days after May 28, 1999 for
10,000 shares of common stock and unvested options to purchase 95,000
shares of common stock. After giving effect to the offering, Mr. Shulman
will hold unvested options to purchase 95,000 shares of common stock.
(12) Prior to giving effect to the offering, Mr. McCoy holds 2,027 shares of
common stock, options exercisable within 60 days after May 28, 1999 for
6,429 shares of common stock and unvested options to purchase 89,700 shares
of common stock. After giving effect to the offering, Mr. McCoy will hold
2,027 shares of common stock, options exercisable within 60 days of May 28,
1999 for 2,929 shares of common stock and unvested options to purchase
89,700 shares of common stock.
(13) Prior to giving effect to the offering, Mr. Olsen holds 246 shares of
common stock, options exercisable within 60 days after May 28, 1999 for
10,890 shares of common stock and unvested options to purchase 81,695
shares of common stock. After giving effect to the offering, Mr. Olsen will
hold 246 shares of common stock, options exercisable within 60 days of May
28, 1999 for 3,390 shares of common stock and unvested options to purchase
81,695 shares of common stock.
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<PAGE> 50

(14) Prior to giving effect to the offering, Mr. Quinn holds 9,000 shares of
common stock, options exercisable within 60 days after May 28, 1999 for
26,523 shares of common stock and unvested options to purchase 13,262
shares of common stock. After giving effect to the offering, Mr. Quinn will
hold 4,000 shares of common stock, options exercisable within 60 days of
May 28, 1999 for 11,523 shares of common stock and unvested options to
purchase 13,262 shares of common stock.
(15) Prior to giving effect to the offering, Mr. Loveland holds 18,307 shares of
common stock and options exercisable within 60 days after May 28, 1999 for
15,307 shares of common stock and unvested options to purchase 2,000 shares
of common stock. After giving effect to the offering, Mr. Loveland will
hold 8,307 shares of common stock and options exercisable within 60 days of
May 28, 1999 for 15,307 shares of common stock and unvested options to
purchase 2,000 shares of common stock.
(16) Prior to giving effect to the offering, Mr. Luoma holds 574 shares of
common stock, options exercisable within 60 days after May 28, 1999 for
2,600 shares of common stock and unvested options to purchase 11,722 shares
of common stock. After giving effect to the offering, Mr. Luoma will hold
574 shares of common stock and unvested options to purchase 11,722 shares
of common stock.

47
<PAGE> 51

UNDERWRITING

GENERAL

Merrill Lynch, Pierce, Fenner & Smith Incorporated, BT Alex. Brown
Incorporated, Hambrecht & Quist LLC, and U.S. Bancorp Piper Jaffray Inc. are
acting as representatives of each of the underwriters named below. Subject to
the terms and conditions set forth in an underwriting agreement among us, the
selling stockholders and the underwriters, we and the selling stockholders have
agreed to sell to the underwriters, and each of the underwriters severally and
not jointly has agreed to purchase from us and the selling stockholders, the
number of shares of our common stock set forth opposite its name below.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
BT Alex. Brown Incorporated.................................
Hambrecht & Quist LLC.......................................
U.S. Bancorp Piper Jaffray Inc..............................
Total.......................................... 3,500,000
=========
</TABLE>

In the underwriting agreement, the several underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
shares of common stock being sold pursuant to the underwriting agreement if any
of the shares of common stock being sold pursuant to such agreement are
purchased. In some circumstances, the commitments of non-defaulting underwriters
may be increased or the underwriting agreement may be terminated.

The underwriters propose initially to offer the shares of our common stock
to the public at the public offering price set forth on the cover page of this
prospectus and to some dealers at such price less a concession not in excess of
$ per share of common stock. The underwriters may allow, and such
dealers may reallow, a discount not in excess of $ per share of common
stock on sales to some other dealers. After the initial public offering, the
public offering price, concession and discount may be changed.

We have granted an option to the underwriters, exercisable for 30 days
after the date of this prospectus, to purchase up to an aggregate of 525,000
additional shares of our common stock at the offering price set forth on the
cover page of this prospectus, less the underwriting discount. The underwriters
may exercise this option solely to cover over-allotments, if any, made on the
sale of the common stock offered hereby. If the underwriters exercise this
option, each underwriter will be obligated, subject to conditions, to purchase a
number of additional shares of common stock proportionate to each underwriter's
initial amount reflected in the foregoing table.

COMMISSIONS AND DISCOUNTS

The following table shows the per share and total underwriting discounts to
be paid by us and the selling stockholders to the underwriters and the proceeds
before expenses to us and the selling stockholders. This information is
presented assuming either no exercise or full exercise by the underwriters of
their over-allotment options.

<TABLE>
<CAPTION>
WITHOUT WITH
PER SHARE OPTION OPTION
--------- ------- ------
<S> <C> <C> <C>
Public offering price........................... $ $ $
Underwriting discount........................... $ $ $
Proceeds, before expenses, to CheckFree......... $ $ $
Proceeds to the selling stockholders............ $ $ $
</TABLE>

We will not receive any of the proceeds from the sale of shares by the
selling stockholders. The expenses of the offering are estimated at $525,000 and
are payable by us.

48
<PAGE> 52

The shares of common stock are being offered by the several underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of legal matters by counsel for the underwriters and other
conditions. The underwriters reserve the right to withdraw, cancel or modify the
offer and to reject orders in whole or in part.

We, our directors and executive officers and some of our stockholders,
including the selling stockholders, have entered into lock-up agreements with
the underwriters. Under those agreements, we and those stockholders may not
dispose of or hedge any shares of common stock or securities convertible into or
exchangeable for shares of common stock for a period of 90 days after the date
of this prospectus. At any time and without notice, Merrill Lynch may, in its
sole discretion, release all or some of the securities from these lock-up
agreements.

The underwriters do not expect sales of the common stock to any accounts
over which they exercise discretionary authority to exceed five percent of the
number of shares being offered in this offering.

We and the selling stockholders have agreed to indemnify the underwriters
against some liabilities, including liabilities under the Securities Act, or to
contribute to payments the underwriters may be required to make in respect of
those liabilities.

In connection with the offering, the underwriters may purchase and sell the
common stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created by the underwriters in connection with the offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or minimizing a decline in the market price of the common stock. Syndicate short
positions involve the sale by the underwriters of a greater number of shares of
common stock than they are required to purchase from us in the offering. The
underwriters also may impose a penalty bid, whereby selling concessions allowed
to broker-dealers in respect of the securities sold in the offering may be
reclaimed by the underwriters if such shares of common stock are repurchased by
the underwriters in stabilizing or covering transactions. These activities may
stabilize, maintain, or otherwise affect the market price of the common stock,
which may be higher than the price that may otherwise prevail in the open
market; and these activities, if commenced, may be discontinued at any time.
These transactions may be effected on the Nasdaq National Market, in the over-
the-counter market or otherwise.

Neither we nor any of the selling stockholders or underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the common stock. In
addition, neither we nor any of the selling stockholders or underwriters makes
any representation that the underwriters will engage in these types of
transactions or that, if commenced, they will not be discontinued without
notice.

Some of the underwriters or their affiliates have provided investment
services to us in the past and are likely to do so in the future. They receive
customary fees and commissions for these services. We provide services to
Merrill Lynch and some of its affiliates in the ordinary course of our business.
For the fiscal year ended June 30, 1998 and the nine month period ending March
31, 1999, Merrill Lynch paid $670,569 and $690,938, respectively, for services
provided by us. We also may provide services to other underwriters or their
affiliates in the ordinary course of business.

49
<PAGE> 53

LEGAL MATTERS

The validity of the issuance of the common stock offered in connection with
this offering will be passed upon for us by Porter, Wright, Morris & Arthur LLP,
Columbus, Ohio. Partners of Porter, Wright, Morris & Arthur LLP who participated
in the preparation of this prospectus beneficially own an aggregate of 36,114
shares of common stock (26,114 shares after this offering) consisting of a
combination of stock and options exercisable within 60 days after the date of
this prospectus. Other legal matters in connection with this offering will be
passed upon for the underwriters by Ropes & Gray, Boston, Massachusetts.

EXPERTS

The consolidated financial statements and financial statement schedule as
of June 30, 1997 and 1998 and for the fiscal year ended December 31, 1995, the
six months ended June 30, 1996, and the fiscal years ended June 30, 1997 and
1998 included and incorporated by reference in this prospectus have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their reports,
which are included and incorporated by reference herein, and have been so
included and incorporated in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.

FORWARD-LOOKING STATEMENTS

This prospectus, including the documents we incorporate by reference,
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements often, although not always, include words or phrases
such as "will likely result," "expect," "will continue," "anticipate,"
"estimate," "intend," "plan," "project," "outlook," or similar expressions. We
have based these forward-looking statements on our current expectations and
assumptions about future events. These forward-looking statements are subject to
various risks and uncertainties that could cause actual results to differ
materially from those statements. These risks and uncertainties include those
set forth under "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The forward-looking statements
contained in this prospectus include statements about the following:

- Anticipated trends in our business, including trends in the electronic
commerce, investment services, and software segments;

- Our intention to develop and introduce new products and services;

- Our anticipated growth and growth strategies;

- Anticipated levels of adoption of electronic billing and payment; and

- Our expectations regarding Year 2000 compliance and the costs of such
compliance.

We have no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.

50
<PAGE> 54

WHERE YOU CAN FIND MORE INFORMATION

We are subject to the informational requirements of the Securities Exchange
Act of 1934 and, therefore, we file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You can inspect and copy any document we file with the Commission at the
following locations:

- At the Public Reference Room of the Commission, Room 1024-Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549;

- At the Public Reference Room of the Commission's regional office at Seven
World Trade Center, 13th Floor, New York, New York 10048;

- At the Public Reference Room of the Commission's regional office at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661;

- By writing the Commission, Public Reference Section, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549;

- At the offices of the National Association of Securities Dealers, Inc.,
Reports Section, 1735 K Street, N.W., Washington, D.C. 20006; or

- From the Commission's web site at www.sec.gov.

Some of these locations may charge a prescribed fee or modest fee for
copies.

We have filed with the Commission a registration statement and related
exhibits under the Securities Act of 1933. The registration statement relates to
the common stock offered by us and the selling stockholders. As permitted by the
Commission, this prospectus, which constitutes a part of the registration
statement, does not contain all the information included in the registration
statement. Such additional information may be obtained from the locations
described above. Statements contained in this prospectus as to the contents of
any contract or other document are not necessarily complete. You should refer to
the contract or other document for all the details.

51
<PAGE> 55

INCORPORATION OF DOCUMENTS BY REFERENCE

The Commission allows us to incorporate by reference the information we
file with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we later file
with the Commission will automatically update and supersede this information.
Accordingly, we incorporate by reference the following documents we filed with
the Commission pursuant to Section 13 of the Securities Exchange Act of 1934
(Commission File Number 0-26802):

- Our Annual Report on Form 10-K for the fiscal year ended June 30, 1998
(filed September 25, 1998);

- Our Quarterly Reports on Form 10-Q for the quarters ended September 30,
1998 (filed November 23, 1998), December 31, 1998 (filed February 12,
1999), and March 31, 1999 (filed May 17, 1999);

- Our Proxy Statement for the Annual Meeting of Stockholders held on
November 9, 1998 (filed October 8, 1998);

- Our Current Reports on Form 8-K dated September 9, 1998 (filed September
14, 1998), October 9, 1998 (filed October 13, 1998), February 5, 1999
(filed February 16, 1999) and May 24, 1999 (filed May 24, 1999);

- The description of our common stock, contained in the registration
statement on Form 8-A filed with the Commission pursuant to Section 12 of
the Securities Exchange Act of 1934 and all amendments thereto and
reports filed for the purpose of updating such description; and

- All documents filed by us with the Commission pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date
of this prospectus and before the offering of the common stock thereby is
completed (other than portions of such documents described in paragraphs
(i), (k) and (l) of Item 402 of Regulation S-K promulgated by the
Commission).

These documents are or will be available for inspection or copying at the
locations identified above under the caption "Where You Can Find More
Information." We will provide without charge to each to whom this prospectus is
delivered, upon written or oral request, a copy of any and all of the documents
that have been incorporated by reference in this prospectus (other than exhibits
to such documents unless such exhibits are specifically incorporated by
reference). You should direct requests for documents to:

CheckFree Holdings Corporation
4411 East Jones Bridge Road
Norcross, Georgia 30092
Attention: Investor Relations
Telephone Number: (678) 375-3387

52
<PAGE> 56

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
<S> <C>
Audited Consolidated Financial Statements
Independent Auditors' Report.............................. F-2
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Operations..................... F-4
Consolidated Statements of Stockholders' Equity........... F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements................ F-7
Unaudited Consolidated Financial Statements
Unaudited Condensed Consolidated Balance Sheets........... F-26
Unaudited Condensed Consolidated Statements of
Operations............................................. F-27
Unaudited Condensed Consolidated Statements of Cash
Flows.................................................. F-28
Notes to Interim Unaudited Condensed Consolidated
Financial Statements................................... F-29
</TABLE>

F-1
<PAGE> 57

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of CheckFree Holdings Corporation and
Subsidiaries:

We have audited the accompanying consolidated balance sheets of CheckFree
Holdings Corporation (the "Company") and its subsidiaries as of June 30, 1997
and 1998 and the related consolidated statements of operations, stockholders'
equity and cash flows for the year ended December 31, 1995, the six months ended
June 30, 1996, and the years ended June 30, 1997 and 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company and its
subsidiaries at June 30, 1997 and 1998 and the results of their operations and
their cash flows for the year ended December 31, 1995, the six months ended June
30, 1996, and the years ended June 30, 1997 and 1998, in conformity with
generally accepted accounting principles.

/s/ DELOITTE & TOUCHE LLP
--------------------------------------
Deloitte & Touche LLP

Atlanta, Georgia
August 11, 1998, except for Note 20 as to which
the date is September 11, 1998

F-2
<PAGE> 58

CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND 1998

<TABLE>
<CAPTION>
1997 1998
--------- ---------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 32,086 $ 36,535
Investments............................................... 4,431 24,533
Accounts receivable, net.................................. 44,507 32,960
Assets held for sale...................................... 15,881
Notes receivable.......................................... 14,882
Prepaid expenses and other assets......................... 2,197 4,678
Deferred income taxes..................................... 3,002 7,231
-------- --------
Total current assets.............................. 86,223 136,700
Property and equipment -- Net............................... 44,027 50,920
Other Assets:
Capitalized software, net................................. 26,644 11,387
Intangible assets, net.................................... 56,896 30,474
Investments............................................... 15 1,006
Deferred income taxes..................................... 3,063 12,889
Other noncurrent assets................................... 6,968 6,736
-------- --------
Total other assets................................ 93,586 62,492
-------- --------
$223,836 $250,112
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 7,051 $ 8,536
Accrued liabilities....................................... 31,056 24,738
Customer deposits......................................... 434 422
Current portion of long-term obligations.................. 953 1,180
Deferred revenue.......................................... 26,498 19,710
Income taxes payable...................................... 229 3,876
-------- --------
Total current liabilities......................... 66,221 58,462
Accrued rent and other...................................... 570 1,329
Long-term obligations -- Less current portion:
Obligations under capital leases.......................... 7,301 6,467
Note payable to bank...................................... 1,100
-------- --------
Total long-term obligations....................... 8,401 6,467
Commitments (Notes 11, 12 and 13)
Stockholders' equity:
Preferred stock -- 15,000,000 authorized shares, $.01 par
value; no amounts issued or outstanding
Common stock -- 150,000,000 authorized shares, $.01 par
value; issued 55,546,321 shares, 56,364,839 shares,
respectively........................................... 555 564
Additional paid-in capital................................ 454,850 492,109
Less:
Treasury stock -- at cost, 1,041,552 shares, 963,295
shares, respectively.................................. (6,007) (4,362)
Accumulated deficit.................................... (300,754) (304,457)
-------- --------
Total stockholders' equity........................ 148,644 183,854
-------- --------
$223,836 $250,112
======== ========
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE> 59

CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED YEAR ENDED JUNE 30,
DECEMBER 31, JUNE 30, -------------------------
1995 1996 1997 1998
------------ ----------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Processing and servicing.................. $ 39,536 $ 27,142 $ 94,528 $ 159,255
Merchant discount......................... 9,794 6,163 9,994
License fees.............................. 10,970 33,088 28,952
Maintenance fees.......................... 1,978 22,567 25,848
Other..................................... 4,787 16,268 19,809
----------- ----------- ----------- -----------
Total revenues.................... 49,330 51,040 176,445 233,864
Expenses:
Cost of processing, servicing and
support................................ 30,258 35,438 102,721 129,924
Research and development.................. 6,876 9,907 32,869 36,265
Sales and marketing....................... 7,242 17,167 32,670 28,839
General and administrative................ 4,134 7,338 18,707 20,677
Depreciation and amortization............. 2,485 6,997 24,919 24,999
In-process research and development....... 122,358 140,000 719
Charge for stock warrants................. 32,827
Exclusivity amortization.................. 5,958 2,963
----------- ----------- ----------- -----------
Total expenses.................... 50,995 199,205 357,844 277,213
Net gain on dispositions of assets........ 6,250 36,173
----------- ----------- ----------- -----------
Loss from Operations........................ (1,665) (148,165) (175,149) (7,176)
Other:
Interest income........................... 2,135 1,659 2,153 3,464
Interest expense.......................... (645) (325) (834) (632)
----------- ----------- ----------- -----------
Loss before Income Taxes.................... (175) (146,831) (173,830) (4,344)
Income Tax Expense (Benefit)................ 40 (8,628) (12,017) (641)
----------- ----------- ----------- -----------
Loss Before Extraordinary Item.............. (215) (138,203) (161,813) (3,703)
Extraordinary Item, Extinguishment of
Debt -- Net of tax........................ (364)
----------- ----------- ----------- -----------
Net Loss.................................... $ (215) $ (138,567) $ (161,813) $ (3,703)
=========== =========== =========== ===========
Basic and Diluted Loss Per Share:
Loss before extraordinary item............ $ (0.01) $ (3.69) $ (3.44) $ (0.07)
Extraordinary item........................ (0.01)
----------- ----------- ----------- -----------
Net Loss.......................... $ (0.01) $ (3.70) $ (3.44) $ (0.07)
=========== =========== =========== ===========
Equivalent Number of Shares................. 28,218,521 37,419,580 46,988,225 55,086,742
=========== =========== =========== ===========
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE> 60

CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES OF COMMON ADDITIONAL SHARES OF TREASURY
COMMON STOCK AT PAID-IN TREASURY STOCK AT
STOCK PAR CAPITAL STOCK COST
---------- -------- ---------- ---------- --------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994.... 27,619,193 $276 $ 17,210 (757,536) $ (629)
Net loss....................
Stock options exercised..... 270,262 3 172
Tax benefit associated with
exercise of stock
options................... 57
Sale of common stock, net of
expenses related to public
offering.................. 4,975,310 50 82,694
Repayment of loans to
stockholders..............
---------- ---- -------- ---------- -------
BALANCE -- December 31,
1995........................ 32,864,765 329 100,133 (757,536) (629)
Net loss....................
Stock options exercised..... 874,195 9 862
Tax benefit associated with
exercise of stock
options................... 1,100
Issuance of common stock and
stock options pursuant to
acquisitions.............. 8,535,840 85 174,727
Repayment of loans to
stockholders..............
---------- ---- -------- ---------- -------
BALANCE -- June 30, 1996...... 42,274,800 423 276,822 (757,536) (629)
Net loss....................
Stock options exercised..... 636,309 6 591
Tax benefit associated with
exercise of stock
options................... 887
Issuance of common stock and
stock options pursuant to
acquisitions.............. 12,635,212 126 176,550
Treasury stock acquired..... (284,016) (5,378)
---------- ---- -------- ---------- -------
BALANCE -- June 30, 1997...... 55,546,321 555 454,850 (1,041,552) (6,007)
Net loss....................
Stock options exercised..... 708,661 8 2,204 (47)
Employee stock purchases.... 109,857 1 1,572
401(k) match................ 78,257 1,692
Warrants issued............. 32,827
Tax benefit associated with
exercise of stock
options................... 656
---------- ---- -------- ---------- -------
BALANCE -- June 30, 1998...... 56,364,839 $564 $492,109 (963,295) $(4,362)
========== ==== ======== ========== =======

STOCKHOLDERS' TOTAL
NOTES ACCUMULATED STOCKHOLDERS'
RECEIVABLE DEFICIT EQUITY
------------- ----------- -------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
BALANCE, December 31, 1994.... $(326) $ (159) $ 16,372
Net loss.................... (215) (215)
Stock options exercised..... 175
Tax benefit associated with
exercise of stock
options................... 57
Sale of common stock, net of
expenses related to public
offering.................. 82,744
Repayment of loans to
stockholders.............. 192 192
----- --------- ---------
BALANCE -- December 31,
1995........................ (134) (374) 99,325
Net loss.................... (138,567) (138,567)
Stock options exercised..... 871
Tax benefit associated with
exercise of stock
options................... 1,100
Issuance of common stock and
stock options pursuant to
acquisitions.............. 174,812
Repayment of loans to
stockholders.............. 134 134
----- --------- ---------
BALANCE -- June 30, 1996...... -- (138,941) 137,675
Net loss.................... (161,813) (161,813)
Stock options exercised..... 597
Tax benefit associated with
exercise of stock
options................... 887
Issuance of common stock and
stock options pursuant to
acquisitions.............. 176,676
Treasury stock acquired..... (5,378)
----- --------- ---------
BALANCE -- June 30, 1997...... -- (300,754) 148,644
Net loss.................... (3,703) (3,703)
Stock options exercised..... 2,165
Employee stock purchases.... 1,573
401(k) match................ 1,692
Warrants issued............. 32,827
Tax benefit associated with
exercise of stock
options................... 656
----- --------- ---------
BALANCE -- June 30, 1998...... $ -- $(304,457) $ 183,854
===== ========= =========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 61

CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED YEAR ENDED JUNE 30,
DECEMBER 31, JUNE 30, ---------------------
1995 1996 1997 1998
------------ ---------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Operating Activities:
Net loss.................................................. $ (215) $(138,567) $(161,813) $ (3,703)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Extraordinary item, extinguishment of debt, net of
tax................................................... 364
Write-off of in-process research and development........ 122,358 140,000 719
Write-off of capitalized software....................... 3,619
Issuance of warrants.................................... 32,827
Exclusivity amortization................................ 4,938 2,963
Depreciation and amortization........................... 2,485 6,997 24,919 24,999
Deferred income taxes................................... 79 (8,654) (13,101) (5,499)
Net gain on dispositions of assets...................... (6,250) (36,173)
Loss on disposal of property and equipment.............. 13 100 641
Purchases of investments -- Trading..................... (28,799)
Proceeds from maturities and sales of investments,
net -- Trading........................................ 4,267
Accretion of investment discount -- net................. (337)
Change in certain assets and liabilities (net of
acquisitions):
Accounts receivable................................... (1,500) (1,110) (10,952) (5,095)
Prepaid expenses and other............................ (915) 821 (2,976) (1,834)
Refundable income taxes............................... (144)
Accounts payable...................................... 223 2,606 1,249 1,492
Accrued liabilities................................... 2,623 3,428 3,837 (555)
Customer deposits..................................... (26) 272 366 (13)
Deferred revenue...................................... 228 4,586 7,509 239
Income taxes payable.................................. (153) 153 183 2,492
-------- --------- --------- ---------
Net cash provided by (used in) operating
activities........................................ 2,361 (6,646) (7,831) (11,673)
Investing Activities:
Property additions........................................ (3,431) (7,090) (9,755) (27,939)
Proceeds from the sale of property and equipment.......... 29 588 340
Proceeds from the sale of assets.......................... 28,900 54,650
Purchase of note receivable............................... (14,882)
Proceeds from purchase price adjustment................... 8,889
Capitalization of software development costs.............. (1,312) (731)
Purchase of businesses, net of cash acquired.............. (39,404) (11,363) (11,000)
Purchases of investments -- Held-to-maturity.............. (54,079) (3,000) (1,006)
Purchases of investments -- Available-for-sale............ (19,311)
Proceeds from maturities and sales of investments,
net -- Available-for-sale............................... 37,725 10,645 19,542 23,757
Purchase of trademark license............................. (3,000)
-------- --------- --------- ---------
Net cash provided by (used in) investing
activities........................................ (22,785) (37,132) 24,912 12,767
Financing Activities:
Proceeds from sale of common stock........................ 82,744
Repayment of notes payable and other debt
extinguishment.......................................... (75) (609) (69) (1,144)
Proceeds from notes payable............................... 225 1,100
Principal payments under capital lease obligations........ (1,038) (571) (1,076) (931)
Proceeds from stock options exercised..................... 232 871 591 2,165
Proceeds from employee stock purchase plan................ 1,573
Proceeds from employee 401(k) plan........................ 1,692
Purchase of treasury stock................................ (5,378)
Receipts (payments) on stockholder notes.................. (33) 134 (50)
-------- --------- --------- ---------
Net cash provided by (used in) financing
activities........................................ 82,055 925 (5,982) 3,355
-------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents........ 61,631 (42,853) 11,099 4,449
Cash and cash equivalents:
Beginning of period....................................... 2,209 63,840 20,987 32,086
-------- --------- --------- ---------
End of period............................................. $ 63,840 $ 20,987 $ 32,086 $ 36,535
======== ========= ========= =========
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE> 62

CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995,
THE SIX MONTHS ENDED JUNE 30, 1996,
AND AS OF AND FOR THE YEARS ENDED JUNE 30, 1997 AND 1998

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization. CheckFree Holdings Corporation (the "Company") is the parent
company of CheckFree Corporation ("CFC"), the principal operating company of the
business. CFC was organized in 1981 and is a leading provider of transaction
procession services, software and related products to financial institutions and
businesses and their customers throughout the United States. See Note 18 for a
description of the Company's business segments. Following a number of
acquisitions and divestitures, CFC reorganized its corporate structure on
December 22, 1997. In connection with the restructuring, holders of common stock
("Common Stock") of CFC became holders of an identical number of shares of
Common Stock of the Company. The restructuring was effected by a merger
conducted pursuant to Section 251(g) of the Delaware General Corporation Law,
which provides for the formation of a holding company structure without a vote
of the stockholders of the Company.

Principles of Consolidation and Change in Fiscal Year. The accompanying
consolidated financial statements include the results of operations of the
Company and its wholly-owned subsidiaries. All significant intercompany
transactions have been eliminated.

The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP"). The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Effective January 1, 1996, the Company changed its fiscal year-end from
December 31 to June 30. The following presents unaudited summarized consolidated
financial information for the six months ended June 30, 1995:

<TABLE>
<S> <C>
Total revenues.............................................. $23,581,000
Loss from operations........................................ (68,000)
Income taxes................................................ 62,000
Net income.................................................. 75,000
Net income per share (basic and diluted).................... Nil
</TABLE>

Processing Agreements. The Company has agreements with transaction
processors to provide origination and settlement services for the Company. Under
the agreements, the Company must fund service fees and returned transactions
when presented. These agreements expire at various dates through June 1999.

Transaction Processing. In connection with the timing of the Company's
financial transaction processing, the Company is exposed to credit risk in the
event of nonperformance by other parties, such as returns and chargebacks. The
Company utilizes credit analysis and other controls to manage its credit risk
exposure. The Company also maintains a reserve for future returns and
chargebacks.

Cash and Cash Equivalents. The Company considers all highly liquid debt
instruments (primarily United States government agency obligations and
commercial paper) purchased with maturities of three months or less to be cash
equivalents. Substantially all cash and cash equivalents are on deposit with six
financial institutions.

Investments. The Company's investments consist primarily of United States
government, government agency or state obligations. The Company classifies these
investments as available-for-sale, trading or held-

F-7
<PAGE> 63
CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

to-maturity securities in accordance with Statement of Financial Accounting
Standards ("SFAS") 115, "Accounting for Certain Investments in Debt and Equity
Securities". Such investments are carried at amortized cost, which approximates
market value.

Property and Equipment. Property and equipment are stated at cost.
Property and equipment are depreciated using the straight-line and accelerated
methods over the estimated useful lives as follows: land improvements, building
and building improvements, 15 to 30 years; computer equipment, software, and
furniture, 3 to 7 years. Equipment under capital leases is amortized using the
straight-line method over the terms of the leases. Leasehold improvements are
amortized over the lesser of the estimated useful lives or remaining lease
periods.

Capitalized Software Costs. Software development costs incurred prior to
the establishment of technological feasibility are expensed as incurred.
Software development costs incurred after the technological feasibility of the
subject software product has been established are capitalized in accordance with
SFAS 86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or
Otherwise Marketed." Capitalized software development costs are amortized on a
product-by-product basis using either the estimated economic life of the product
on a straight-line method or the ratio of current year gross product revenue to
current and anticipated future gross product revenue, whichever is greater.
Unamortized software development costs in excess of estimated future net
revenues from a particular product are written down to estimated net realizable
value.

Amortization of software costs totaled $208,000, $2,521,000, $7,687,000,
and $5,198,000, for the year ended December 31, 1995, the six months ended June
30, 1996, and the years ended June 30, 1997 and 1998 respectively.

Intangible Assets. The costs of identified intangible assets are generally
amortized on a straight-line basis over periods from 8 months to 15 years.
Goodwill is amortized on a straight-line basis over 10 years. At each balance
sheet date, a determination is made by management to ascertain whether the
intangible assets have been impaired based on several criteria, including, but
not limited to, sales trends, undiscounted operating cash flows, and other
operating factors.

Capital Stock. On April 21, 1995, the Company's stockholders increased the
authorized number of shares of $.01 par value Common Stock to 25,000,000 and on
August 8, 1995 increased the number of authorized shares of $.01 par value
Common Stock to 150,000,000. In addition, on August 8, 1995, the Company's
stockholders authorized the Board of Directors to issue up to 15,000,000 shares
of $.01 par value preferred stock in one or more series and to establish such
relative voting, dividend, redemption, liquidation, conversion and other powers,
preferences, rights, qualifications, limitations and restrictions as the Board
of Directors may determine without further stockholder approval. No preferred
shares have been issued.

Advertising. The Company expenses advertising costs as incurred.
Advertising expenses were $1,758,000, $7,159,000, $2,110,000, and $4,275,000,
for the year ended December 31, 1995, the six months ended June 30, 1996, and
the years ended June 30, 1997 and 1998, respectively.

Basic and Diluted Loss Per Share. On July 1, 1997, the Company adopted the
provisions of SFAS 128 "Earnings Per Share" and has restated per share data for
all prior periods where applicable. Basic loss per common share is determined by
dividing loss available to common shareholders by the weighted average number of
common shares outstanding. Diluted per-common-share amounts assume the issuance
of common stock for all potentially dilutive equivalent shares outstanding.
Anti-dilution provisions of SFAS 128 requires consistency between diluted
per-common-share amounts and basic per-common-share amounts in loss periods. For
the periods reported, there were no differences between basic and diluted
earnings per share. The number of anti-dilutive equivalent shares excluded from
the per share calculations are 2,843,000, 1,931,000, 1,218,000, and 1,725,000,
for the year ended December 31, 1995, the six months
F-8
<PAGE> 64
CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ended June 30, 1996, and the years ended June 30, 1997 and 1998, respectively.
All share and per share information has been adjusted for the five-for-one stock
split on May 1, 1995 and the 5.2614-for-one split on the effective date of the
initial public offering (September 28, 1995).

Impairment of Long-Lived Assets. In accordance with SFAS 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
of," the Company periodically assesses the likelihood of recovering the cost of
long-lived assets based on its expectations of future profitability and
undiscounted cash flows of the related business operations. These factors, along
with management's plans with respect to the operations, are considered in
assessing the recoverability of property, equipment and purchased intangibles.
During 1998, in conjunction with the Company's platform integration efforts
referred to as project Genesis, the Company consolidated three processing
centers from Chicago, Illinois, Austin, Texas, and Columbus, Ohio, into one
processing center located in Norcross, Georgia. As a result of this
consolidation and a physical inventory of fixed assets at the related business
units, all identified assets which were determined to have no alternative use or
value were written off. Of the total write-off of $4.0 million, $3.0 million was
recorded in the quarter ended September 30, 1997 and the remaining $1.0 million
in the quarter ended June 30, 1998.

Recent Accounting Pronouncements. In June 1997, the Financial Accounting
Standards Board ("FASB") issued SFAS 130, "Reporting Comprehensive Income,"
which is effective for fiscal years beginning after December 15, 1997. The
Statement requires businesses to disclose comprehensive income and its
components in their general-purpose financial statements, with reclassification
of comparative (earlier period) financial statements. The adoption of SFAS 130
is not expected to have a material impact on the Company's financial statement
disclosures.

In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information," which is effective for fiscal years
beginning after December 15, 1997. SFAS 131 redefines how operating segments are
determined and requires disclosure of certain financial and descriptive
information about a company's operating segments. The adoption of SFAS 131 is
not expected to have a material impact on the Company's financial statement
disclosures.

In October 1997, the Accounting Standards Executive Committee ("AcSEC") of
the American Institute of Certified Public Accountants issued Statement of
Position ("SOP") 97-2, "Software Revenue Recognition," which is effective for
fiscal years beginning after December 15, 1997. The Statement provides guidance
for recognizing revenue on software transactions (superseding SOP 91-1,
"Software Revenue Recognition"). The adoption of SOP 97-2 is not expected to
have a material impact on the Company's revenue recognition policies or
financial statement disclosures.

In March 1998, the AcSEC issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," which is effective
for fiscal years beginning after December 15, 1998. The Statement distinguishes
accounting for the costs of computer software developed or obtained for internal
use from guidance under SFAS 86, "Accounting for the Costs of Computer Software
to Be Sold, Leased, or Otherwise Marketed." The adoption of SOP 98-1 is not
expected to have a material impact on the Company's software capitalization
policies or financial statement disclosures.

Reclassifications. Certain amounts in the prior years' financial
statements have been reclassified to conform to the 1998 presentation.

REVENUE RECOGNITION

- Processing and Servicing. Processing and servicing revenues include
revenues from transaction processing, electronic funds transfer and
monthly service fees on consumer funds transfer services. The Company
recognizes revenue when the services are performed.

F-9
<PAGE> 65
CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

- As part of processing certain types of transactions, the Company earns
interest from the time money is collected from its customers until the
time payment is made to the applicable merchants. These revenues, which
are generated from trust account balances not included on the Company's
balance sheet, are included in processing and servicing and totaled
$1,623,000, $1,019,000, $3,228,000, and $9,676,000, for the year ended
December 31, 1995, the six months ended June 30, 1996, and the years
ended June 30, 1997 and 1998, respectively.

- Merchant Discount. Merchant discount revenues are recognized when the
services are performed. Interchange fees incurred in the settlement of
merchant credit card transactions are included in processing and
servicing expenses.

- License Fees. Revenue from software license agreements is recognized
upon delivery of the software if there are no significant postdelivery
obligations in accordance with SOP 91-1. The revenue related to
significant postdelivery obligations is deferred and recognized using the
percentage-of-completion method.

- Maintenance Fees. Maintenance fee revenue is recognized ratably over the
term of the related contractual support period, generally 12 months.

- Other. Other revenue consists primarily of consulting and training
services. Consulting revenue is recognized principally on a
percentage-of-completion basis and training revenue is recognized upon
delivery of the related service.

EXPENSE CLASSIFICATION

- Processing, Servicing and Support. Processing, servicing and support
costs consist primarily of data processing costs, customer care and
technical support, and third party transaction fees, which consist
primarily of credit card interchange fees and ACH transaction fees.

- Research and Development. Research and development expenses consist
primarily of salaries and consulting fees paid to software engineers and
business development personnel.

- Sales and Marketing. Sales and marketing expenses consist primarily of
salaries and commissions of sales employees, public relations and
advertising costs, customer acquisition fees and royalties paid to
distribution partners.

- General and Administrative. General and administrative expenses consist
primarily of salaries for administrative, executive, finance, and human
resource employees.

- Depreciation and Amortization. Depreciation and amortization on
capitalized assets is recorded on a straight-line basis over the
appropriate useful lives.

- In-process Research and Development. In-process research and development
consists of charges resulting from acquisitions whereby the purchase
price allocated to in-process software development was based on the
determination that in-process research and development had no alternative
future use after taking into consideration the potential for usage of the
software in different products, resale of the software, or other internal
use.

- Charge for Stock Warrants. Charge for stock warrants consists of noncash
charges for vested warrants issued to third parties under agreements
whereby issued warrants vest upon achievement of certain strategic
objectives.

- Exclusivity Amortization. Exclusivity amortization consists of the
amortization of an intangible asset established in conjunction with a
marketing agreement with a strategic partner whereby the

F-10
<PAGE> 66
CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company retains certain exclusive rights to bill payment processing
through the partner's financial management software over a specific
period of time.

2. ACQUISITIONS AND DISPOSITIONS

On February 21, 1996, the Company acquired Servantis Systems Holdings, Inc.
("Servantis") for $165.1 million, including 5.7 million shares of common stock,
valued at $20.00 per share, the issuance of stock options valued at $8.2 million
and the retirement of certain debt of $42.5 million. The acquisition was treated
as a purchase for accounting purposes, and accordingly, the assets and
liabilities were recorded based on their fair values at the date of the
acquisition. Of the total purchase price, $11.2 million was allocated to
goodwill, $46.5 million to other identifiable intangible assets and $55.2
million to tangible assets. In addition, $90.6 million was allocated to
in-process research and development, which was charged to operations at the time
of the acquisition. Servantis' operations are included in the consolidated
results of operations from the date of the acquisition.

In March 1996, the Company acquired Interactive Solutions Corp. ("IS") for
$3.0 million, including 85,000 shares of common stock valued at $21.25 per
share. The acquisition was treated as a purchase for accounting purposes, and,
accordingly, the assets and liabilities were recorded based on their fair values
at the date of the acquisition. Of the total purchase price, $3.0 million was
allocated to in-process research and development, which was charged to
operations at the time of the acquisition. IS' operations are included in the
consolidated results of operations from the date of the acquisition.

On May 9, 1996, the Company acquired Security APL, Inc. ("Security APL")
for $53 million, including 2.8 million shares of common stock, valued at $18.50
per share. The acquisition was treated as a purchase for accounting purposes,
and, accordingly, the assets and liabilities were recorded based on their fair
values at the date of the acquisition. Of the total purchase price, $10.9
million was allocated to goodwill, $9.0 million to other identifiable intangible
assets and $9.8 million to tangible assets. Additionally, $28.8 million was
allocated to in-process research and development, which was charged to
operations at the time of the acquisition. Security APL's operations are
included in the consolidated results of operations from the date of the
acquisition.

On January 27, 1997, the Company acquired Intuit Services Corporation
("ISC") for a total of $199.0 million, including 12.6 million shares of common
stock valued at $177.2 million, the present value of cash payments due to
Intuit, Inc. under the Services and License Agreement of $19.6 million and
acquisition costs of $2.2 million. The acquisition was treated as a purchase for
accounting purposes, and, accordingly, the assets and liabilities were recorded
based on their fair values at the date of the acquisition. Of the total purchase
price, $28.9 million was allocated to goodwill. In addition, $140.0 million was
allocated to in-process research and development, which was charged to
operations at the time of the acquisition. $7.9 million was allocated to an
exclusivity agreement with Intuit, Inc. and is being amortized on a
straight-line basis over the contractual life of eight months. A further $3.5
million was allocated to other identifiable intangible assets and $20.3 million
allocated to tangible assets. ISC's operations are included in the consolidated
results of operations from the date of the acquisition.

On October 3, 1997, the Company acquired certain assets of Advanced
Mortgage Technologies, Inc. ("AMTI") for cash of $1.0 million. The acquisition
was treated as a purchase for accounting purposes, and accordingly, the assets
and liabilities were recorded based on their fair values at the date of the
acquisition. Of the total purchase price, $0.2 million was allocated to goodwill
and $0.1 million to other identifiable intangible assets. Additionally, $0.7
million was allocated to in-process research and development, which was charged
to operations at the time of the acquisition.

Consistent with the Company's policy for internally developed software, the
Company determined the amounts to be allocated to in-process research and
development based on whether technological feasibility

F-11
<PAGE> 67
CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

had been achieved and whether there was any alternative future use for the
technology. As of the date of the acquisitions, the Company concluded that the
in-process research and development had no alternative future use after taking
into consideration the potential for usage of the software in different
products, resale of the software and internal usage.

The unaudited pro forma results of operations of the Company for the twelve
months ended June 30, 1996, the six months ended June 30, 1996, and the year
ended June 30, 1997, assuming the acquisitions occurred at the beginning of each
period are as follows (in thousands, except per share data):

<TABLE>
<CAPTION>
12 MONTHS ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
1996 1996 1997
--------------- ---------------- ----------
<S> <C> <C> <C>
Total revenues.............................. $131,815 $ 69,607 $194,354
Loss before extraordinary item.............. (43,872) (34,290) (28,567)
Net loss.................................... (44,236) (34,655) (28,567)
Net loss per share (basic and diluted)...... $ (0.81) $ (0.65) $ (0.53)
Weighted average shares outstanding......... 54,529 53,630 54,272
</TABLE>

This information is presented to facilitate meaningful comparisons to
on-going operations and to other companies. The unaudited pro forma amounts
above do not include a charge for in-process research and development of $122.4
million and $140.0 million arising from the Servantis, Security APL and IS
acquisitions in 1996 and the ISC acquisition in 1997, respectively. Previous
operations of AMTI were insignificant and therefore, require no pro forma
considerations. The unaudited pro forma information is not necessarily
indicative of the actual results of operations had the transactions occurred at
the beginning of the periods presented, nor should it be used to project the
Company's results of operations for any future periods.

On March 26, 1997, the Company sold certain assets and certain contracts
and licensed certain proprietary software for processing automatic accounts
receivable through credit cards or the Automated Clearing House resulting in a
net gain on the sale of $6,250,000.

On August 29, 1997, the Company sold certain software and related assets of
its recovery management business for cash of $33.5 million resulting in a net
gain on the sale of $28.2 million.

On March 24, 1998, the Company sold certain software and related assets of
its item processing business for cash of $3.4 million resulting in a net gain on
the sale of $3.2 million.

On April 20, 1998, the Company sold certain software and related assets of
its wire transfer and cash management businesses for cash of $18.25 million
resulting in a net gain on the sale of $14.7 million.

3. INVESTMENTS

Investments as of June 30, 1997 and 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
JUNE 30,
----------------
1997 1998
------ -------
<S> <C> <C>
Available-for-Sale -- U.S. Government and Government Agency
Obligations............................................... $4,446
Held-to-Maturity -- State Obligations....................... $ 1,006
Trading..................................................... 24,533
------ -------
Total............................................. $4,446 $25,539
====== =======
</TABLE>

Available-for-Sale. Gross unrealized gains and losses related to
available-for-sale investments at June 30, 1997 were insignificant. In addition,
sales of securities and related realized gains/losses, based on the specific
identification cost method, were insignificant for each of the periods
presented.

F-12
<PAGE> 68
CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Held-to-Maturity. The difference between the amortized cost and the
aggregate fair value of held-to-maturity investment at June 30, 1998 was
insignificant.

Trading. Trading investments are classified as current assets and are
recorded at fair value.

Contractual maturities of debt securities classified as held-to-maturity at
June 30, 1998 are as follows:

<TABLE>
<S> <C>
Due after one year through five years....................... $1,006
======
</TABLE>

Expected maturities will differ from contractual maturities because debt
issuers may have the right to call or prepay obligations with or without call or
prepayment penalties.

4. ACCOUNTS RECEIVABLE

Accounts receivable consist of the following (in thousands):

<TABLE>
<CAPTION>
JUNE 30,
-----------------
1997 1998
------- -------
<S> <C> <C>
Trade accounts receivable................................... $22,049 $22,739
Unbilled trade accounts receivable.......................... 20,958 10,654
Other receivables........................................... 5,717 3,037
------- -------
48,724 36,430
Less allowance for doubtful accounts........................ 4,217 3,470
------- -------
Total............................................. $44,507 $32,960
======= =======
</TABLE>

5. ASSETS HELD FOR SALE

In April 1998, the Company announced plans to divest several of its
software businesses through the sale of software and related assets. Assets of
the Company's mortgage, leasing, imaging, and safe box accounting businesses
totaling $15.9 million are comprised of trade, unbilled, and other accounts
receivable (net of an allowance for doubtful accounts), property, and equipment
dedicated to the businesses, capitalized software, and other purchased
intangible assets. Sales of all businesses are expected to be completed by
September 30, 1998 and the assets are anticipated to be recovered from the
proceeds of the sales.

6. NOTE RECEIVABLE

In May 1998, in anticipation of a tax-free exchange of property, the
Company loaned $14.9 million to a third party to purchase a building on its
behalf. Interest of 8% is earned monthly commencing in June 1998 and the note is
payable at the earlier of the sale of the Company's building in Columbus, Ohio,
or May 1999. The estimated fair value of the note receivable approximates the
carrying value based on currently available instruments with similar interests
rates and remaining maturities.

7. INCOME TAXES

The Company accounts for income taxes in accordance with SFAS 109,
"Accounting for Income Taxes," which requires an asset and liability approach to
financial accounting and reporting for income taxes. In accordance with SFAS
109, deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Income tax expense (benefit)
is the tax payable or refundable for the period plus or minus the change during
the period in deferred tax assets and liabilities.

F-13
<PAGE> 69
CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Income tax expense (benefit) consists of the following (in thousands):

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED YEAR ENDED JUNE 30,
DECEMBER 31, JUNE 30, --------------------
1995 1996 1997 1998
------------ ---------- --------- --------
<S> <C> <C> <C> <C>
Current:
Federal.................................. $(123) $ 3,795
State and local.......................... 85 $ 25 $ 1,084 1,063
----- ------- -------- -------
Total current.................... (38) 25 1,084 4,858
Deferred federal and state taxes........... 78 (8,653) (13,101) (5,499)
----- ------- -------- -------
Total income tax expense
(benefit)...................... $ 40 $(8,628) $(12,017) $ (641)
===== ======= ======== =======
</TABLE>

Income tax expense differs from the amounts computed by applying the U.S.
federal statutory income tax rate of 35 percent to income before income taxes as
a result of the following (in thousands):

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED YEAR ENDED JUNE 30,
DECEMBER 31, JUNE 30, --------------------
1995 1996 1997 1998
------------ ---------- --------- --------
<S> <C> <C> <C> <C>
Computed "expected" tax benefit............ $(60) $(49,923) $(60,844) $(1,520)
Nondeductible in-process research and
development of acquired businesses....... 41,602 49,000 252
Nondeductible intangible amortization...... 65 219 839 1,189
State and local taxes, net of federal
income tax benefit....................... 56 (626) (553) 21
Other, net................................. (21) 100 (459) (583)
---- -------- -------- -------
Total income tax expense
(benefit)...................... $ 40 $ (8,628) $(12,017) $ (641)
==== ======== ======== =======
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at June 30,
1997 and 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
JUNE 30,
------------------
1997 1998
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 9,150 $ 1,155
Intangible assets......................................... 5,117 1,870
Allowance for bad debts and returns....................... 1,812 1,699
Accrued compensation and related items.................... 339 1,731
Stock warrants............................................ 12,964
Reserve accruals.......................................... 911 3,212
Property and equipment.................................... 55
Valuation allowance....................................... (6,000)
------- -------
Total deferred tax assets......................... 11,384 22,631
Deferred tax liabilities:
Capitalized software...................................... (5,259) (1,926)
Property and equipment.................................... (19)
Prepaid expenses.......................................... (60) (566)
------- -------
Total deferred tax liabilities.................... (5,319) (2,511)
------- -------
Net deferred tax asset............................ $ 6,065 $20,120
======= =======
</TABLE>

The valuation allowance at June 30, 1997 reduced deferred tax assets to the
amount the Company believed more likely than not would be realized. During the
year ended June 30, 1998, gains resulted from

F-14
<PAGE> 70
CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the sale of certain software operations enabled the Company to realize the full
value of deferred tax assets. The resulting elimination of the valuation
allowance reduced unamortized intangible assets resulting from the Servantis
acquisition. At June 30, 1998, the Company has approximately $1,155,000 of state
net operating loss carryforwards available, expiring in 2009 to 2012.

8. PROPERTY AND EQUIPMENT

The components of property and equipment are as follows (in thousands):

<TABLE>
<CAPTION>
JUNE 30,
------------------
1997 1998
------- -------
<S> <C> <C>
Land and land improvements.................................. $ 3,146 $ 3,146
Building and building improvements.......................... 14,442 16,692
Computer equipment and software licenses.................... 41,264 55,526
Furniture and equipment..................................... 7,107 9,002
------- -------
Total............................................. 65,959 84,366
Less accumulated depreciation and amortization.............. 21,932 33,446
------- -------
Property -- net................................... $44,027 $50,920
======= =======
</TABLE>

9. INTANGIBLE ASSETS

The components of intangible assets are as follows (in thousands):

<TABLE>
<CAPTION>
JUNE 30,
-----------------
1997 1998
------- -------
<S> <C> <C>
Workforce................................................... $ 8,370 $ 5,179
Tradenames.................................................. 4,150 815
Customer base............................................... 3,440 1,231
Goodwill.................................................... 41,126 28,927
Exclusivity................................................. 7,900
------- -------
Total............................................. 64,986 36,152
Less accumulated amortization............................... 8,090 5,678
------- -------
Intangible assets, net.................................... $56,896 $30,474
======= =======
</TABLE>

10. ACCRUED LIABILITIES

The components of accrued liabilities are as follows (in thousands):

<TABLE>
<CAPTION>
JUNE 30,
-----------------
1997 1998
------- -------
<S> <C> <C>
Salaries and related costs.................................. $10,716 $ 9,374
Services and license agreement accrual...................... 9,887
Reserve for contract and other losses....................... 5,655
Processing fees............................................. 2,658 2,335
Reserve for returns and chargebacks......................... 1,224 1,944
Other....................................................... 6,571 5,430
------- -------
Total............................................. $31,056 $24,738
======= =======
</TABLE>

The reserve for contract and other losses at June 30, 1998 is comprised of
$4.7 million related to an estimated loss from the sale of the leasing business
that occurred on July 7, 1998 (see Note 20,

F-15
<PAGE> 71
CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

"Subsequent Events") and $1.0 million for accrued contract losses and related
costs which resulted in the decision to exit the Web Investor business.

11. LONG-TERM DEBT AND NOTE PAYABLE

In March 1996, the Company executed an unsecured note payable with a bank
for $1.1 million. The principal amount was due in July 1998, with interest
payable quarterly based on the LIBOR rate (total of 5.8% at June 30, 1997). In
January of 1998, the note was paid in full.

During the six months ended June 30, 1996, the Company retired certain debt
in connection with a business acquisition, resulting in an extraordinary loss of
$364,000, net of income taxes of $205,000.

The estimated fair value of the Company's note payable approximated its
carrying amounts as of June 30, 1997 based on currently available debt with
similar interest rates and remaining maturities.

In May, 1997 the Company obtained a working capital line-of-credit which
enables the Company to borrow up to $20 million, based on the collateral of
eligible accounts receivable. The line expires in October 1999, and contains
certain restrictive covenants, including defined quarterly operating results,
minimum tangible net worth requirements, and the prohibition of dividend
payments. No funds have been drawn against the line through June 30, 1998.

12. OBLIGATIONS UNDER CAPITAL LEASES

During 1993, the Company entered into a 20-year lease with the Department
of Development of the State of Ohio for land and an office building located in
Columbus, Ohio. The Company has the option to purchase the land and building for
$1 at the termination of the lease and thus, the Company has recorded the
transaction as a capital lease. The lease payments are secured by a $751,500
standby letter of credit agreement with a bank and are partially guaranteed by
an officer and principal stockholder of the Company. The standby letter of
credit is collateralized by a savings account totaling $609,292 at June 30, 1998
and certain real estate adjacent to the leased property. The lease contains
certain covenants, the most restrictive of which require the Company to maintain
certain debt to equity ratios and tangible net worth and working capital levels.

The Company also leases certain computer equipment, furniture and telephone
equipment under capital leases. The Company is required to pay certain taxes,
insurance and other expenses related to the leased property.

The following is a summary of property under capital leases included in the
accompanying balance sheets (in thousands):

<TABLE>
<CAPTION>
JUNE 30,
---------------
1997 1998
------ ------
<S> <C> <C>
Land........................................................ $3,146 $3,146
Building.................................................... 4,526 4,526
Computer equipment.......................................... 4,318 2,371
------ ------
Total............................................. 11,990 10,043
Less accumulated depreciation............................... 3,081 2,017
------ ------
Property held under capital leases........................ $8,909 $8,026
====== ======
</TABLE>

F-16
<PAGE> 72
CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum lease payments required by the capital leases and the net
future minimum lease payments are as follows (in thousands):

<TABLE>
<CAPTION>
FISCAL YEAR ENDING JUNE 30,
- ---------------------------
<S> <C>
1999...................................................... $ 1,372
2000...................................................... 1,332
2001...................................................... 1,091
2002...................................................... 976
2003...................................................... 837
Thereafter................................................ 5,451
-------
Total future minimum lease payments............... 11,059
Less amount representing interest......................... 3,681
-------
Net future minimum lease payments................. $ 7,378
=======
</TABLE>

13. OPERATING LEASES

The Company leases certain office space and equipment under operating
leases. Certain leases contain renewal options and generally provide that the
Company shall pay for insurance, taxes and maintenance. In addition, certain
leases include rent escalations throughout the terms of the leases. Total
expense under all operating lease agreements for the year ended December 31,
1995, the six months ended June 30, 1996, and the years ended June 30, 1997 and
1998, was $665,000, $1,936,000, $5,882,000, and $5,800,000, respectively.
Minimum future rental payments under these leases are as follows (in thousands):

<TABLE>
<CAPTION>
FISCAL YEAR ENDING JUNE 30,
- ---------------------------
<S> <C>
1999...................................................... $ 6,289
2000...................................................... 6,395
2001...................................................... 5,427
2002...................................................... 4,869
2003...................................................... 3,769
Thereafter................................................ 6,800
-------
Total............................................. $33,549
=======
</TABLE>

14. EMPLOYEE BENEFIT PLANS

Retirement Plan. The Company has a defined contribution 401(k) retirement
plan covering substantially all of its employees. Under the plan eligible
employees may contribute a portion of their salary until retirement and the
Company, at its discretion, may match a portion of the employee's contribution.
Total expense under the plan amounted to $97,000, $367,000, $1,862,000, and
$859,000, for the year ended December 31, 1995, the six months ended June 30,
1996, and the years ended June 30, 1997 and 1998, respectively.

Group Medical Plan The Company has a group medical self-insurance plan
covering certain of its employees. The Company has employed an administrator to
manage this plan. Under terms of this plan, both the Company and eligible
employees are required to make contributions to this plan. The administrator
reviews all claims filed and authorizes the payment of benefits. The Company has
stop-loss insurance coverage on all individual claims exceeding $100,000. Total
expense under this plan amounted to $626,000, $1,140,000, $3,458,000, and
$2,522,000 for the year ended December 31, 1995, the six months ended June 30,
1996, and the years ended June 30, 1997 and 1998, respectively. The Company
expenses amounts as claims are incurred and recognizes a liability for incurred
but not reported claims. At June 30,

F-17
<PAGE> 73
CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1997 and June 30, 1998, the Company has accrued $378,000 and $308,000,
respectively, as a liability for costs incurred but not paid under this plan.

15. COMMON STOCK

During 1995, the Company adopted the 1995 Stock Option Plan (the "1995
Plan"). The 1995 Plan replaces in its entirety the 1993 Stock Option Plan (the
"1993 Plan"). The options granted under the 1995 and 1993 Plans may be either
incentive stock options or non-statutory stock options. The terms of the options
granted under the 1995 and 1993 Plans are at the sole discretion of a committee
of members of the Company's Board of Directors, not to exceed ten years.
Generally, options vest at either 33% or 20% per year from the date of grant.
The 1995 Plan provides that the Company may grant options for not more than
5,000,000 shares of common stock to certain key employees, officers and
directors. Options granted under the 1995 and 1993 Plans are exercisable
according to the terms of each option, however, in the event of a change in
control or merger as defined, the options shall become immediately exercisable.
At June 30, 1998, 956,289 additional shares are available for grant in the
aggregate for all Plans.

Previously, the Company had adopted the 1983 Incentive Stock Option Plan
and the 1983 Non-Statutory Stock Option Plan (collectively, the "1983 Plans"),
which provided that the Board of Directors may grant options for shares of
common stock to certain employees and directors. Under the terms of the 1983
Plans, options are exercisable over a period up to ten years from the grant
date. In the event the Company is sold, options outstanding under the 1983 Plans
must be repurchased at a price calculated as if the options had been fully
exercised.

All options granted under the 1983 Plans, the 1993 Plan, and the 1995 Plan
were granted at exercise prices not less than the fair market value of the
underlying common stock at the date of grant. In the event that shares purchased
through the exercise of incentive stock options are sold within one year of
exercise, the Company is entitled to a tax deduction. The tax benefit of the
deduction is not reflected in the consolidated statements of operations but is
reflected as an increase in additional paid-in capital.

The following summarizes the stock option activity from January 1, 1995 to
June 30, 1998:
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED SIX MONTHS ENDED --------------------------
DECEMBER 31, 1995 JUNE 30, 1996 JUNE 30, 1997
-------------------------- -------------------------- --------------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------------- --------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding -- Beginning
of period............ 3,074,736 $0.82 2,901,782 $ 1.19 2,908,218 $ 4.58
Granted................ 160,746 7.12 459,289 21.79 2,282,056 14.32
Exercised.............. (270,262) 0.65 (874,195) 0.99 (636,309) 1.01
Cancelled.............. (63,438) 0.73 (22,020) 1.06 (112,504) 14.88
Issued in conjunction
with Servantis
Acquisition.......... 443,362 1.52
--------- --------- ---------
Outstanding -- End of
period............... 2,901,782 $1.19 2,908,218 $ 4.58 4,441,461 $ 9.59
========= ===== ========= ====== ========= ======
Options exercisable at
end of period........ 1,732,206 $0.84 1,433,781 $ 1.16 1,218,341 $ 1.17
========= ===== ========= ====== ========= ======
Weighted average per
share fair value of
options granted
during the year...... $2.92 $ 8.45 $ 6.68
===== ====== ======

<CAPTION>
YEAR ENDED
--------------------------
JUNE 30, 1998
--------------------------
WEIGHTED
NUMBER AVERAGE
OF EXERCISE
SHARES PRICE
--------- --------------
<S> <C> <C>
Outstanding -- Beginnin
of period............ 4,441,461 $ 9.59
Granted................ 1,377,334 25.60
Exercised.............. (711,227) 3.17
Cancelled.............. (742,006) 12.63
Issued in conjunction
with Servantis
Acquisition..........
---------
Outstanding -- End of
period............... 4,365,562 $15.23
========= ======
Options exercisable at
end of period........ 1,352,516 $ 6.81
========= ======
Weighted average per
share fair value of
options granted
during the year...... $10.77
======
</TABLE>

F-18
<PAGE> 74
CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information about options outstanding at
June 30, 1998:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------- --------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
--------------------------- --------------------
REMAINING EXERCISE EXERCISE
RANGE OF EXERCISE PRICES NUMBER CONTRACTUAL LIFE PRICE NUMBER PRICE
- ------------------------ --------- ---------------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
$0.85 - $10.00 1,012,811 4.9 $ 1.13 823,408 $ 0.98
$10.00 - $15.00 1,257,191 8.6 13.74 302,259 14.05
$15.00 - $20.00 697,860 8.4 17.60 182,060 17.35
$20.00 - $25.00 214,089 8.9 23.16 44,789 22.21
$25.00 - $30.00 1,183,611 9.8 26.07
--------- ---------
4,365,562 $15.23 1,352,516 $ 6.81
========= ====== ========= ======
</TABLE>

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in the year ended December 31, 1995, the six months
ended June 30, 1996, and the years ended June 30, 1997 and 1998, respectively:
dividend yield of 0% in all periods; expected volatility of 40%, 40%, 47%, and
48%; risk-free interest rates of 5.25%, 6.68%, 6.41%, and 5.21%; and expected
lives of 3-5 years.

Under the 1997 Associate Stock Purchase Plan, effective for the six-month
period beginning January 1, 1997, the Company is authorized to issue up to one
million shares of common stock to its full-time employees, nearly all of whom
are eligible to participate. Under the terms of the Plan, employees can choose,
every six months, to have up to 15% of their salary withheld to purchase the
Company's common stock. The purchase price of the stock is 85% of the lower of
its beginning-of-period or end-of-period market price. Approximately 39% of
eligible employees participated in the Plan in the second half of the year ended
June 30, 1997, approximately 32% in the first half of 1998 and approximately 49%
in the second half of 1998. Under the plan, 53,013 shares were issued in July of
1997, 56,844 in January of 1998 and 48,631 in July of 1998 from employees'
salary withholdings from the respective previous six-month period. Following is
a summary of the weighted average fair market value of this look-back option
estimated on the grant date using the Black-Scholes option pricing model, and
the related assumptions used:

<TABLE>
<CAPTION>
SIX-MONTH PERIOD ENDED
------------------------------------
JUNE 30, DECEMBER 31, JUNE 30,
1997 1997 1998
--------- ------------ ---------
<S> <C> <C> <C>
Fair value of options.............................. $ 3.93 $ 14.10 $ 9.68
Assumptions:
Risk-free interest rate.......................... 5.1% 5.0% 5.0%
Expected life.................................... 3 months 3 months 3 months
Volatility....................................... 47.0% 48.0% 48.0%
Dividend yield................................... 0.0% 0.0% 0.0%
</TABLE>

The Company applies APB Opinion 25 "Accounting for Stock Issued to
Employees" and related Interpretations in accounting for its stock option plans
and employee stock purchase plan. Had compensation cost for the Company's
stock-based compensation plans been determined based on the fair value at the
grant dates for awards under those plans in accordance with the provisions of
SFAS 123,

F-19
<PAGE> 75
CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

"Accounting for Stock-Based Compensation," the Company's net loss and net loss
per share, net of related income tax effects, would have been as follows (in
thousands, except per share data):

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED YEAR ENDED JUNE 30,
DECEMBER 31, JUNE 30, -------------------
1995 1996 1997 1998
------------ ---------- --------- -------
<S> <C> <C> <C> <C>
Pro forma net loss...................... $ (245) $(138,797) $(164,089) $(9,521)
====== ========= ========= =======
Pro forma net loss per share, (basic and
diluted).............................. $(0.01) $ (3.71) $ (3.49) $ (0.17)
====== ========= ========= =======
</TABLE>

The pro forma amounts are not representative of the effects on reported net
income (loss) for future years.

As of June 30, 1996 certain stockholders had an option to sell up to
280,565 shares of common stock to the Company at $19 per share which expired on
September 30, 1996. Of the eligible shares, 276,469 were sold to the Company and
were recorded as treasury stock.

In January 1997 the Board of Directors approved an amendment to the
Company's 401(k) plan which authorized up to 1,000,000 shares of Common Stock
for the Company's matching contribution. In September 1997, 78,257 shares were
issued out of treasury stock to fund the Company's match that accrued during the
year ended June 30, 1997.

As described below, the Company has issued certain stock warrants to third
parties and has accounted for the issuance of such warrants in accordance with
the provisions of EITF 96-18 "Accounting for Equity Instruments That Are Issued
to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services."

In January 1998 the Company entered into a 10-year processing agreement
with a strategic partner. Under the terms of the agreement, the partner acquired
10-year warrants exercisable at $20 15/16 for 10 million shares of the Company's
Common Stock. Three million warrants vested upon the execution of a related
processing outsourcing agreement on March 9, 1998 which resulted in the Company
recording a non-cash charge of $32.4 million. The charge was based on a
Black-Scholes option model valuation of $10.80 per vested share using the
following assumptions: risk-free rate of 5.7%, expected life of 10 years, and
volatility rate of 56.4%. The remaining seven million warrants are to vest upon
achievement of specific performance targets set forth in the agreement. Any
shares acquired by the strategic partner under the terms of this agreement are
subject to certain transfer and other restrictions. In March 1997 the Company
entered into a consulting agreement with a third party. Under the terms of the
agreement the consultant acquired 5-year options exercisable at $13.00 for up to
50,000 shares of the Company's Common Stock. In June of 1998, upon the execution
of a processing agreement with a key customer, 25,000 of the options vested
which resulted in the Company recording a non-cash charge of $418,000. The
charge was based on a Black-Scholes option pricing model valuation of $16.73 per
vested share using the following assumptions: risk-free rate of 5.6%, expected
life of 4 years, and volatility rate of 56.4%. The remaining 25,000 options are
to vest upon achievement of specific performance targets by the key customer set
forth in the agreement. Any shares acquired by the consultant under the terms of
the agreement are subject to certain transfer restrictions. In accordance with
the terms of a joint marketing agreement, a strategic partner has warrants to
purchase up to 650,000 shares of common stock at $20 per share should the
partner attain certain customer acquisition targets.

In September 1998 the Company offered an option repricing program to its
employees. Under the terms of the offer, employees had one week to decide
whether to cancel any outstanding option grant in its entirety and replace it on
a share-for-share basis with an option grant with an exercise price equal to the
fair market value of the Company's stock at the new grant date. Only those
cancellations received within
F-20
<PAGE> 76
CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

one day after the designated grant date were accepted and any vested options in
such canceled grants were forfeited. The lives of canceled historical grants
typically ranged from three to five years with straight line vesting beginning
one year from the original grant date. All newly issued option grants have a
life of five years and vesting occurs at 40% beginning two years from the new
grant date and 20% for each year thereafter. A total of 1,333,903 options were
returned and had the offer taken place at June 30, 1998, the options exercisable
would have reduced by 95,614 to 1,256,902.

16. PREFERRED STOCK

In January 1997, the Company's Board of Directors declared a dividend
distribution of Preferred Share Purchase Rights to protect its stockholders in
the event of an unsolicited attempt to acquire the Company. On February 14,
1997, the Rights were issued to the Company's stockholders of record, with an
expiration date of 10 years. Until a person or group acquires 15% or more of the
Company's Common Stock, the Rights will automatically trade with the shares of
Common Stock. Only when a person or group has acquired 15% or more of the
Company's Common Stock, will the Rights become exercisable and separate
certificates issued. Prior to the acquisition by a person or group of beneficial
ownership of 15% or more of the Company's Common Stock, the Rights are
redeemable for $.001 per Right at the option of the Board of Directors.

17. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS YEAR ENDED JUNE 30,
DECEMBER 31, ENDED JUNE 30, --------------------
1995 1996 1997 1998
------------ -------------- --------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest paid.................................... $ 645 $ 321 $ 585 $ 632
------ -------- -------- ------
Income taxes paid................................ $ 211 $ 468 $ 1,147 $1,434
====== ======== ======== ======
Supplemental disclosure of non-cash investing and
financing activities:
Capital lease additions and purchase of other
long-term assets............................ $ 262 $ 501 $ 1,914 $ 650
====== ======== ======== ======
Purchase price of business acquisitions........ $265,239 $200,997 $1,000
Less: Issuance of common stock and stock
options pursuant to acquisitions............ 174,812 177,188
Liabilities assumed......................... 44,065 1,619 145
Net present value of future payment due..... 9,610
Cash acquired in acquisitions............... 6,958 1,217
-------- -------- ------
Net cash paid.......................... $ 39,404 $ 11,363 $ 855
======== ======== ======
</TABLE>

F-21
<PAGE> 77
CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

18. BUSINESS SEGMENTS

Prior to 1996, the Company operated in one segment -- Electronic Commerce.
Approximately 13% of the Company's revenues for the year ended December 31,
1995, were from a single customer. With the acquisition of Servantis in February
1996 and Security APL in May 1996, the Company now also operates in the Software
and Institutional Investment Services segments. The net revenues of each segment
are principally domestic, and no single customer accounted for 10% or more of
consolidated revenues for the six months ended June 30, 1996 or the years ended
June 30, 1997 and 1998. A further description of each business segment follows:

- Electronic Commerce Electronic commerce includes electronic home
banking, electronic bill payment and business payments. These services
are primarily directed to financial institutions and businesses and their
customers.

- Software Software services includes end-to-end software products for 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.

- Investment Services Investment services includes investment portfolio
management services and investment trading and reporting services. These
products and services are primarily directed to institutional investment
managers.

F-22
<PAGE> 78
CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following sets forth certain financial information attributable to the
Company's business segments for the six months ended June 30, 1996 and the years
ended June 30, 1997 and 1998 (in thousands):

<TABLE>
<CAPTION>
SIX-MONTHS YEAR ENDED
ENDED --------------------
JUNE 30, 1996 1997 1998
------------- --------- --------
<S> <C> <C> <C>
Revenues:
Electronic Commerce............................... $ 29,783 $ 85,926 $137,972
Software.......................................... 18,271 68,113 66,143
Investment Services............................... 2,986 22,406 29,749
--------- --------- --------
Total..................................... $ 51,040 $ 176,445 $233,864
========= ========= ========
Operating income (loss):
Electronic commerce, including charge for acquired
in-process research and development of $140,000
in 1997........................................ $ (92,160) $(160,195) $(39,423)
Software, including charge for acquired in-process
research and development of $719 in 1998....... (24,675) 4,324 48,854
Investment Services............................... (28,629) 2,171 5,040
Corporate......................................... (2,701) (21,449) (21,647)
--------- --------- --------
Total..................................... $(148,165) $(175,149) $ (7,176)
========= ========= ========
Identifiable assets:
Electronic Commerce............................... $ 29,425 $ 59,265 $ 70,192
Software.......................................... 96,844 61,701 39,346
Investment Services............................... 25,099 23,187 21,187
Corporate......................................... 44,862 79,683 119,387
--------- --------- --------
Total..................................... $ 196,230 $ 223,836 $250,112
========= ========= ========
Capital expenditures:
Electronic Commerce............................... $ 4,651 $ 3,182 $ 19,532
Software.......................................... 1,087 1,171 2,197
Investment Services............................... 686 1,973 895
Corporate......................................... 666 3,429 5,315
--------- --------- --------
Total..................................... $ 7,090 $ 9,755 $ 27,939
========= ========= ========
Depreciation and amortization:
Electronic Commerce............................... $ 1,698 $ 2,094 $ 9,964
Software.......................................... 4,345 10,501 6,051
Investment Services............................... 632 4,379 4,558
Corporate......................................... 322 7,945 4,426
--------- --------- --------
Total..................................... $ 6,997 $ 24,919 $ 24,999
========= ========= ========
</TABLE>

F-23
<PAGE> 79
CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

19. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following quarterly financial information for the years ended June 30,
1997 and 1998 includes all adjustments necessary for a fair presentation of
quarterly results of operations:

<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
------------- ------------ ----------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
FISCAL 1997
Total revenue............................... $ 32,662 $ 38,505 $ 50,188 $ 55,089
Loss from operations........................ (12,263) (8,695) (144,957) (9,235)
Net loss.................................... (7,730) (5,321) (142,856) (5,905)
Loss per share (basic and diluted).......... $ (0.19) $ (0.13) $ (2.83) $ (0.11)
=========== =========== =========== ===========
Basic and diluted equivalent number of
shares.................................... 41,620,174 41,533,981 50,499,173 5,446,762
=========== =========== =========== ===========
FISCAL 1998
Total revenue............................... $ 52,087 $ 56,515 $ 61,750 $ 63,512
Income (loss) from operations............... 17,187 (2,771) (29,323) 7,731
Net income (loss)........................... 9,771 (1,692) (17,540) 5,758
Earnings (loss) per share (basic and
diluted).................................. $ 0.17 $ (0.03) $ (0.32) $ 0.10
=========== =========== =========== ===========
Basic equivalent number of shares........... 56,702,917 55,028,174 55,281,335 55,375,715
=========== =========== =========== ===========
Dilutive equivalent number of shares........ 56,919,685 55,028,174 55,281,335 55,735,090
=========== =========== =========== ===========
</TABLE>

The sum of quarterly earnings (loss) per share does not equal the
year-to-date earnings (loss) per share for the respective fiscal periods due to
changes in number of shares outstanding at each quarter end.

Significant Fourth Quarter Adjustments -- In the fourth quarter of 1998 the
Company recorded adjustments to reduce its 401(k) match accrual by $2.4 million
and its management incentive bonus accrual by $1.7 million. Both incentive
amounts had been provided for ratably over the year in anticipation of
achievement of financial results that would have resulted in distribution of the
amounts accrued in accordance with related plan provisions.

20. SUBSEQUENT EVENTS

On July 6, 1998 the Company divested itself of certain software related to
its leasing line of business. The Company paid the acquiring party $639,000 in
cash and agreed to five additional quarterly installments of $60,000 each.
Additionally, in conjunction with this transaction, the Company agreed to pay
$3.0 million to a customer to relieve the Company and acquiring party of further
obligations relating to a product related consulting agreement. The expected
loss of $4.7 million was recorded as an accrued liability in the fourth quarter
of the year ended June 30, 1998 and is included in the Net Gain on Dispositions
of Assets in the Company's Statement of Operations.

On September 11, 1998 the Company sold certain software and other assets
related to its mortgage line of business for $21.1 million. As part of the sale
agreement, the Company retained responsibility for certain customer obligations
and agreed to subcontract with the acquiring company to perform consulting
services relating to retained customer obligations. The estimated gain on the
sale transaction of approximately $5.4 million will be recorded in the first
quarter of fiscal 1999.

F-24
<PAGE> 80

[This page intentionally left blank]

F-25
<PAGE> 81

CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1998 1999
--------- ---------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 36,535 $ 16,199
Investments............................................... 24,533 9,425
Accounts receivable, net.................................. 32,960 45,695
Assets held for sale...................................... 15,881 --
Notes receivable.......................................... 14,882 15,390
Prepaid expenses.......................................... 4,678 6,461
Deferred income taxes..................................... 7,231 10,160
--------- ---------
Total current assets.............................. 136,700 103,330
Property and equipment, net............................... 50,920 58,087
Capitalized software, net................................. 11,387 17,955
Intangible assets, net.................................... 30,474 47,173
Investments............................................... 1,006 --
Deferred income taxes..................................... 12,889 17,505
Other noncurrent assets................................... 6,736 6,640
--------- ---------
Total............................................. $ 250,112 $ 250,690
========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 8,536 $ 7,704
Accrued liabilities and other............................. 30,365 26,373
Current portion of long-term obligations.................. 1,180 1,072
Deferred revenue.......................................... 19,710 23,708
--------- ---------
Total current liabilities......................... 59,791 58,857
Long-term obligations -- less current portion............. 6,467 6,616
--------- ---------
Total liabilities................................. 66,258 65,473
Commitments and contingencies
Stockholders' equity:
Preferred stock -- 15,000,000 authorized shares, $.01 par
value; no shares issued or outstanding................. -- --
Common stock -- 150,000,000 authorized shares, $.01 par
value; issued 56,364,839 shares, 57,219,744 shares;
outstanding 56,364,839 shares, 51,670,363 shares....... 564 517
Additional paid-in capital................................ 492,109 479,558
Treasury stock -- at cost, 963,295 shares, no shares...... (4,362) --
Accumulated deficit....................................... (304,457) (294,858)
--------- ---------
Total stockholders' equity........................ 183,854 185,217
--------- ---------
Total............................................. $ 250,112 $ 250,690
========= =========
</TABLE>

See Notes to Interim Unaudited Condensed Consolidated Financial Statements.

F-26
<PAGE> 82

CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
---------------------
1998 1999
--------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Revenues:
Processing and servicing.................................. $115,093 $145,468
License................................................... 21,411 10,005
Maintenance............................................... 19,904 13,314
Other..................................................... 13,945 10,592
-------- --------
Total revenues.................................... 170,353 179,379
Expenses:
Cost of processing, servicing and support................. 94,332 107,572
Research and development.................................. 26,157 16,539
Sales and marketing....................................... 22,002 21,945
General and administrative................................ 15,748 21,556
Depreciation and amortization............................. 19,380 18,001
In-process research and development....................... 719 2,201
Charge for stock warrants................................. 32,409 --
Exclusivity amortization.................................. 2,963 --
-------- --------
Total expenses.................................... 213,710 187,814
Net gain on dispositions of assets.......................... 28,449 3,914
-------- --------
Loss from operations........................................ (14,908) (4,521)
Interest, net............................................... 1,866 1,698
-------- --------
Loss before income taxes.................................... (13,042) (2,823)
Income tax benefit.......................................... (3,581) (12,422)
-------- --------
Net income (loss)........................................... $ (9,461) $ 9,599
======== ========
Basic earnings per share:
Net income (loss) per common share........................ $ (0.17) $ 0.18
======== ========
Equivalent number of shares............................... 54,989 52,696
======== ========
Diluted earnings per share:
Net income (loss) per common share........................ $ (0.17) $ 0.17
======== ========
Equivalent number of shares............................... 54,989 56,117
======== ========
</TABLE>

See Notes to Interim Unaudited Condensed Consolidated Financial Statements.

F-27
<PAGE> 83

CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31,
-----------------------------------------
1998 1999
------------------- -------------------
(IN THOUSANDS)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss)........................................ $ (9,461) $ 9,599
Adjustments to reconcile net income (loss) to cash
provided by (used in) operating activities:
Charge for stock warrants............................. 32,409 --
Depreciation and amortization......................... 19,380 18,001
Exclusivity amortization.............................. 2,963 --
Deferred income taxes (net of acquisitions)........... (4,082) (10,418)
Net gain on dispositions of assets.................... (28,449) (3,914)
Write-off of in-process research and development...... 719 2,201
Loss on disposal of property and equipment............ 506 202
Proceeds from maturities and sales of
investments-trading................................. -- 18,169
Purchases of investments-trading...................... -- (3,061)
Changes in operating assets and liabilities (net of
acquisitions):
Accounts receivable, net............................ (6,228) (6,401)
Prepaid expenses and other.......................... (1,408) 1,570
Accounts payable.................................... (2,222) (943)
Accrued liabilities and customer deposits........... 2,725 (1,012)
Deferred revenues................................... 2,019 5,257
Income taxes payable................................ 30 (4,541)
------------------- -------------------
Net cash provided by operating activities........ 8,901 24,709
Cash Flows From Investing Activities:
Purchase of property and software........................ (17,183) (21,581)
Capitalization of software development costs............. -- (5,111)
Proceeds from the sale of property and equipment......... 344 --
Purchase of business, net of cash acquired............... (11,000) (125)
Proceeds from purchase price adjustment.................. 8,889 --
Proceeds from the sale of assets......................... 36,900 11,421
Purchase of investments.................................. (7,941) --
Proceeds from maturities and sales of investments, net... 12,372 1,006
------------------- -------------------
Net cash provided by (used in) investing
activities..................................... 22,381 (14,390)
Cash Flows From Financing Activities:
Repayment of notes payable............................... (1,144) (752)
Principal payments under capital lease obligations....... (549) (822)
Purchase of treasury stock............................... -- (31,335)
Proceeds from exercise of stock options including related
tax benefits.......................................... 1,544 1,184
Proceeds from employee stock purchase plan............... 754 1,070
------------------- -------------------
Net cash provided by (used in) financing
activities..................................... 605 (30,655)
------------------- -------------------
Net Increase (Decrease) In Cash And Cash Equivalents....... 31,887 (20,336)
Cash And Cash Equivalents At Beginning Of Period........... 32,086 36,535
------------------- -------------------
Cash And Cash Equivalents At End Of Period................. $ 63,973 $ 16,199
=================== ===================
Supplemental Disclosure of Cash Flow Information
Interest paid............................................ $ 401 $ 491
=================== ===================
Income taxes paid........................................ $ 1,587 $ 2,392
=================== ===================
Capital lease additions.................................. $ -- $ 1,583
=================== ===================
Stock funding of 401(k) match............................ $ 1,692 $ 1,932
=================== ===================
</TABLE>

See Notes to Interim Unaudited Condensed Consolidated Financial Statements.

F-28
<PAGE> 84

CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 1998 AND 1999

1. The accompanying condensed consolidated financial statements and notes
thereto have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission for Form 10-Q and include all of the
information and disclosures required by generally accepted accounting principles
for interim financial reporting. The results of operations for the nine months
ended March 31, 1998 and 1999 are not necessarily indicative of the results for
the full year.

These financial statements should be read in conjunction with the financial
statements, accounting policies and financial notes thereto included in the
Company's Annual Report filed with the Securities and Exchange Commission on
Form 10-K. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments (consisting only of
normal recurring adjustments) which are necessary for a fair representation of
financial results for the interim periods presented.

2. Basic earnings (loss) per common share amounts were computed by dividing
income (loss) available to stockholders by the weighted average number of shares
outstanding. Diluted per-common-share amounts assume the issuance of common
stock for all potentially dilutive equivalent shares outstanding except in loss
periods when such an adjustment would be anti-dilutive. The following table
reconciles differences in income and shares outstanding between basic and
dilutive for the periods indicated.

<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
---------------------------------------------------------------------------------
MARCH 31, 1998 MARCH 31, 1999
--------------------------------------- ---------------------------------------
INCOME SHARES PER-SHARE INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Income (loss) available
to common
shareholders.......... $(9,461) 54,989 $(0.17) $9,599 52,696 $0.18
====== =====
Effect of Dilutive
Securities Stock
Options.................. 0 0 0 3,421
------- ------ ------ ------
Diluted EPS
Income (loss) available
to stockholders and
assumed conversions... $(9,461) 54,989 $(0.17) $9,599 56,117 $0.17
======= ====== ====== ====== ====== =====
</TABLE>

Options to purchase shares of common stock at various prices outstanding at
March 31, 1998 and 1999, that were not included in the computation of diluted
earnings per share because the options' exercise price was greater than the
average market price of the common shares during the were as follows:

<TABLE>
<CAPTION>
MARCH 31,
-----------------
1998 1999
------- -------
<S> <C> <C>
Nine Month Period Ended..................................... 232,384 587,083
======= =======
</TABLE>

3. In the quarter ended September 30, 1998, the Company adopted Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." The
Statement requires disclosure of total non-shareowner changes in equity in
interim periods and additional disclosures of the components of non-shareowner
changes in equity on an annual basis. Total non-shareowner changes in equity
includes all changes in equity during a period except those resulting from
investments by and distributions to shareowners. The only components of
comprehensive income applicable to the Company would be unrealized gains or
losses on the Company's available-for-sale securities. There were no
available-for-sale securities held during the nine month period ended March 31,
1999 and the carrying value of available-for-sale securities held during the
nine month period ended March 31, 1998 approximated market value.
F-29
<PAGE> 85

As a result, there were no reported unrealized gains or losses reported on
available-for-sale securities in either period.

4. In the quarter ended September 30, 1998, the Company adopted Statement
of Position ("SOP") 97-2, "Software Revenue Recognition." The Statement provides
guidance for recognizing revenue on software transactions and supercedes SOP
91-1, "Software Revenue Recognition." The adoption of the Statement did not
result in a material impact on reported results.

5. In the quarter ended September 30, 1998, the Company issued 74,981
shares of common stock out of treasury to fund its 401(k) match, the cost of
which was accrued during the year ended June 30, 1998. Additionally, during the
quarter ended September 30, 1998, the Company issued 48,631 shares of common
stock out of treasury in conjunction with the employee stock purchase plan,
which was funded through employee payroll deductions accumulated in the
immediately preceding six-month period. During the quarter ended March 31, 1999,
the Company issued an additional 48,748 shares of common stock in conjunction
with the employee stock purchase plan, covering the immediately preceding
six-month period.

6. During the quarter ended September 30, 1998, the Company purchased
575,000 shares of its common stock and recorded them as treasury shares. During
the quarter ended December 31, 1998, the Company purchased an additional
4,130,341 shares of its common stock and recorded them as treasury shares. At
March 31, 1999, the Company had retired all shares of its treasury stock.

7. On September 11, 1998, the Company sold certain software and other
assets related to its mortgage line of business for $19.1 million, net of a
working capital adjustment. As part of the sales agreement, the Company retained
responsibility for certain customer obligations and agreed to subcontract with
the acquiring company to perform consulting services at retail hourly rates for
these retained obligations. The Company received cash of $15 million, net of
$4.0 million of prepaid subcontract services due the acquiring company. The net
gain on the sale of $6.4 million is included in the Net Gain on Dispositions of
Assets in the Company's Statement of Operations. Certain assets of this business
were acquired in the October 1997 acquisition of Advanced Mortgage Technologies,
Inc. ("AMTI"), and in connection with the acquisition, the Company acquired
certain in-process research and development assets (valued at $719,000) which
were written off at the time of the acquisition. Such research and development
projects continued to be developed as planned by the Company, and are included
in the software and other assets sold on September 11, 1998.

8. On October 1, 1998, the Company sold certain software and other assets
related to its imaging line of business for $0.8 million consisting of a note
receivable of $0.5 million and future services of $0.3 million. The estimated
loss on the sale of $2.4 million was recorded in the quarter ended September 30,
1998 and is included in the Net Gain on Dispositions of Assets in the Company's
Statement of Operations.

9. In the quarter ended December 31, 1998, a special purpose subsidiary was
created to administer the Company's employee medical benefits program. The
Company owns a controlling interest in the subsidiary and, therefore, the
accompanying condensed consolidated financial statements include the
subsidiary's results of operations.

10. In the quarter ended December 31, 1998, the Company reported a one-time
tax benefit of approximately $12.2 million arising out of the creation of the
special purpose subsidiary described above. In addition, the Company's annual
effective tax rate, exclusive of the impact of the one-time tax benefit,
decreased from approximately 45% to approximately 38%, on a year to date basis,
primarily due to state job tax credits, and increased tax-exempt interest.

F-30
<PAGE> 86

11. On March 8, 1999, the Company acquired Mobius Group, Inc. ("Mobius
Group") for a total of $19.1 million, consisting of 537,314 shares of common
stock valued at $18 million, $0.2 million of acquisition costs, and $0.9 million
of assumed debt. The acquisition was treated as a purchase for accounting
purposes, and, accordingly, the assets and liabilities were recorded based on
their preliminary fair values at the date of the acquisition. The values
ascribed to acquired intangible assets and their respective useful lives are as
follows:

<TABLE>
<CAPTION>
INTANGIBLE USEFUL
ASSET LIFE
-------------- ------
(IN THOUSANDS)
<S> <C> <C>
Goodwill.................................................... $10,392 15
Customer base............................................... 4,429 15
Tradenames.................................................. 3,709 10
Existing product technology................................. 1,864 5
Workforce................................................... 940 5
</TABLE>

Amortization of intangible assets is on a straight line basis over the
assets' respective useful life. Mobius Group's operations are included in the
condensed consolidated statements of operations from the date of acquisition.

At the acquisition date, Mobius had four products under development that
had not demonstrated technological or commercial feasibility. These products
included M-Plan Retirement & Estate Planning Modules, M-Plan Cash Flow, Tax and
Education Planning Modules, a new version of M-Search and a new version of
M-Vest. The in-process technology has no alternative use in the event that the
proposed products do not prove to be feasible. These development efforts fall
within the definition of In-Process Research and Development ("IPR&D") contained
in Statement of Financial Accounting Standards ("SFAS") No. 2.

M-Plan Integrated Financial Planning System: M-Plan will be a Windows
based integrated financial planning system for retirement and estate planning,
cash flow, tax and educational planning and capital needs analysis. It will
produce over 100 reports for retirement, new investments, estate planning, and
other analysis as well as provide historical returns and standard deviations for
various asset allocations integrated with extensive modeling to provide detailed
and usable analysis. M-Plan's wizards will give users the ability to produce and
to analyze alternative scenarios quickly. M-Plan will consist of five main
disciplines: Retirement and Estate Planning, Cash Flow, Tax and Education
modules. M-Plan Retirement and Estate Planning are the core disciplines; a user
must own one of these two in order to add future disciplines.

- M-Plan Retirement & Estate Planning Modules: Significant development is
required to convert trust and gift tax calculations from formulas to C++
programming language. Additionally, work must be performed to create
necessary database fields to capture a variety of user scenario analyses.
These modules will be used by sophisticated financial planners that will
be expected to produce reports for a variety of individuals with specific
circumstances and therefore, calculations must produce results under all
possible scenarios. In addition, there are over 100 reports to be
programmed and customized into usable and readable format and Mobius does
not currently have the ability to insert data into all of the reports.
Finally, developed technology is not in a modular format and, as M-Plan
will be sold in modules, additional work must be performed to divide code
into modules.

- Cash Flow, Tax and Education Planning Modules: Reports for the Cash Flow
Planning module have not yet been developed. Mobius had not yet determined
how it would integrate tax tables into its tax calculations, as only tax
rate calculations are currently available in the Tax Planning module and
significant work remains to complete reports and database fields. There
has been no significant data gathering for the Education Planning module
and therefore the code had not yet been written for the calculations, the
database fields and the reports.

F-31
<PAGE> 87

The technology utilized in the M-Plan is based entirely on new technology.
Although the Company has been selling another comprehensive financial planning
program, it operated on a DOS platform and the new programs are being developed
in C++ for Windows.

M-Search Revision: M-Search is Mobius Group's Investment Manager Database
System, containing comprehensive qualitative and quantitative data on over 1,300
investment management firms and 5,000 composites. In-process development is
designed to allow the user to customize reports based on selection criteria,
which the current version does not offer. This effort requires a rewrite of a
significant portion of the source code. Based on engineers' estimates of the
percentage of reuse of developed technology within particular components of the
product, 25% of its value is attributable to core technology.

M-Vest Revision: M-Vest is Mobius Group's 16-bit asset allocation system
that is under development to port the entire program over to 32-bit. This
development effort requires significant changes to the user interface, a
revision of most of the reports and changes to core algorithms. Management
estimates that it would have taken six man months to recreate the code from the
beginning and the entire porting would take 12 man months and as a result, 30%
of its value is attributable to core technology.

The following table presents information regarding the status of various
in-process research and development projects acquired in connection with the
Mobius Group acquisition:

<TABLE>
<CAPTION>
ESTIMATED STAGE EXPECTED EXPECTED COST
OF COMPLETION RELEASE TO COMPLETE VALUATION
--------------- -------------- -------------- --------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
M-Plan:
Retirement and Estate Planning
Module........................... 92% May 1999 $ 49 $ 693
Cash Flow, Tax and Education
Module........................... 64% December 1999 208 183
M-Search Revision..................... 56% September 1999 176 1,218
M-Vest Revision....................... 20% September 1999 220 107
---- ------
Total....................... $653 $2,201
==== ======
</TABLE>

The method used to allocate the purchase consideration to IPR&D was the
modified income approach. Under the income approach, fair value reflects the
present value of the projected free cash flows that will be generated by the
IPR&D projects and that is attributable to the acquired technology, if
successfully completed. The modified income approach takes the income approach,
modified to include the following factors:

- Analysis of the stage of completion of each project;

- Exclusion of value related to research and development yet-to-be
completed as part of the on-going IPR&D projects; and

- The contribution of existing products/technologies.

The projected revenues used in the income approach are based upon the
incremental revenues associated with a portion of the project related to Mobius
technology likely to be generated upon completion of the project and the
beginning of commercial sales, as estimated by Company management. The
projections assume that the product will be successful and the products'
development and commercialization are as set forth by management. The discount
rate used in this analysis is an after-tax rate of 20%.

Certain risks and uncertainties are associated with the completion of the
development with a reasonable projected period of time. Such risks include:

- The Retirement and Estate Planning module has been sent to a development
partner for testing and identification of errors. Due to the nature of
the product and the necessity that all calculations work correctly in
order for the product to be commercially viable and to function as
designed, this testing is considered a significant part of the
development effort.

F-32
<PAGE> 88

- The Cash Flow module reports have not been developed. As the reports are
the only output seen by the end user, this represents a major development
effort.

- The Company has not yet determined how it will integrate tax tables into
its tax calculation in the tax module. Significant work remains to
complete reports and database fields.

- For the Education Module, significant data gathering had not occurred
and, therefore, the code had not yet been written for the calculations,
the database fields, and the reports.

- Significant risks still exist related to the completion and reintegration
of the M-Plan Modules (Retirement and Estate Planning and Cash Flow, Tax,
and Education Modules). For example, a user who borrows for education
purposes from his retirement fund should see his retirement decrease (in
the Retirement Module) and education investment increase (in the
Education Module).

- The M-Plan Modules are based entirely on new technology, since they are
written in C++ for a Windows platform and utilize no existing technology.

- M-Vest is Mobius Group's current asset allocation system. There is an
on-going development program to migrate this program to run on 32-bit
hardware. This effort requires significant changes to interfaces, to
reports and some core algorithms.

- Each of the acquired IPR&D projects have not demonstrated their
technological or commercial feasibility as of the valuation date.
Significant risks exist because of uncertainties the Company may face in
the form of time and costs necessary to produce technologically feasible
products.

- If the proposed products fail to become viable, there is uncertainty that
the Company would be able to realize any value from the sale of the
technology to another party.

Consistent with the Company's policy for internally developed software, the
Company determined the amounts to be allocated to IPR&D based on whether
technological feasibility had been achieved and whether there was any
alternative future use for the technology. As of the date of the acquisition,
the Company concluded that the IPR&D had no alternative future use after taking
into consideration the potential for usage of the software in different
products, resale of the software and internal usage.

The following unaudited proforma information presents the results of
operations of the Company as if the acquisition had taken place on July 1, 1997,
and excludes the write-off of purchased research and development of $2.2
million:

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31, 1998 MARCH 31, 1999
-------------- --------------
<S> <C> <C>
Revenues.................................................. $174,710 $184,550
Net income (loss)......................................... $ (9,226) $ 12,175
Basic earnings per share:
Net income (loss) per common share...................... $ (0.17) $ 0.23
Equivalent number of shares............................. 55,526 53,188
Diluted earnings per share:
Net income (loss) per common share...................... $ (0.17) $ 0.22
Equivalent number of shares............................. 55,526 56,609
</TABLE>

12. During the quarter ended March 31, 1999, the Company established a
deferred compensation plan (the "DCP") covering highly-compensated employees.
Under the plan, eligible employees may contribute a portion of their salary on a
pre-tax basis. The DCP is a non-qualified plan, therefore the associated
liabilities are included in the condensed consolidated balance sheets. In
addition, the Company is establishing a rabbi trust to finance obligations under
the DCP with corporate-owned life insurance

F-33
<PAGE> 89

policies on participants. The cash surrender value of such policies is also
included in the condensed consolidated balance sheets.

13. During the week of April 26, 1999, the Company experienced a system
error that led some users of its electronic billing and payment service to
experience intermittent problems accessing and using the system. The Company
believes that reserves established for service level agreements are sufficient
to cover contractually determined penalties due to customers resulting from this
error.

14. On March 2, 1999, Intuit filed a lawsuit against the Company in the
Superior Court of Santa Clara County, California. In the lawsuit, Intuit alleges
that the Company threatened to violate the terms of an April 1998 bill
presentment services contract and requests the court to provide equitable relief
and other remedies. The parties to the lawsuit have agreed that the outcome of
the case would be determined by arbitration. The arbitration has commenced and
proceedings are currently being held to determine the outcome of the dispute.
The net financial impact on the Company of the arbitration is not possible to
determine at this time given the outstanding issues. The ultimate outcome is not
expected to have a material adverse effect on the Company's business, financial
condition or results of operations.

15. In June 1997, the Financial Accounting Statements Board ("FASB") issued
SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information," which is effective for fiscal years beginning after December 15,
1997. SFAS 131 redefines how operating segments are determined and requires
disclosures of certain financial and description information about a company's
operating segments. The adoption of SFAS 131 is not expected to have a material
impact on the Company's financial statement disclosures.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which will require that all derivative
financial instruments be recognized as either assets or liabilities in the
balance sheet. SFAS No. 133 will be effective for the Company's first quarter of
fiscal 2000. The Company is in the process of evaluating the effects of this new
statement.

In March 1998, the Accounting Standards Executive Committee ("AcSEC")
issued SOP 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use," which is effective for fiscal years beginning after
December 15, 1998. The statement distinguishes accounting for the costs of
computer software developed or obtained for internal use from guidance under
SFAS 86, "Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed." The adoption of SOP 98-1 is not expected to have a material
impact on the Company's software capitalization policies or financial statement
disclosures.

16. Certain amounts in the June 30, 1998 balance sheet have been
reclassified to conform with the March 31, 1999 presentation. In addition,
certain amounts in the condensed consolidated statements of operations for the
nine months ended March 31, 1998 have been reclassified to conform with the
March 31, 1999 presentation.

F-34
<PAGE> 90

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

3,500,000 SHARES

(CHECKFREE HOLDINGS LOGO)

COMMON STOCK

----------------------

PROSPECTUS
----------------------

MERRILL LYNCH & CO.

BT ALEX. BROWN

HAMBRECHT & QUIST

U.S. BANCORP PIPER JAFFRAY

, 1999

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 91

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses to be paid by the
Company in connection with the sale and distribution of the securities being
registered hereby, other than underwriting discounts and commissions. All
amounts shown are estimates, except the SEC registration fee, the NASD filing
fee and the Nasdaq National Market listing fee:

<TABLE>
<S> <C>
SEC registration fee........................................ $ 49,279
NASD filing fee............................................. 18,226
Nasdaq National Market listing fee.......................... 17,500
Printing and engraving fee.................................. 125,000
Legal fees and expenses..................................... 225,000
Accounting fees and expenses................................ 50,000
Blue Sky fees and expenses (including fees of counsel)...... 5,000
Transfer agent and registrar's fees and expenses............ 5,000
Miscellaneous expenses...................................... 29,995
--------
Total............................................. $525,000
========
</TABLE>

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 under Article IX, 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 and not subject to invalidity by reason of any interested
directors.

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

II-1
<PAGE> 92

directors, by a written opinion of independent counsel under certain
circumstances, by the Registrant's stockholders, if a majority of the
disinterested directors determines the issue should be submitted to the
stockholders, or, if none of the persons empowered to make a determination have
been appointed and have made a determination 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 General Corporation Law,
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 as such of another
corporation or enterprise at the request of the corporation is permitted against
expenses (including attorneys' fees), judgments fines and amounts paid in
settlement actually and reasonably incurred by the indemnified person 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 Law in those
cases where the person to be indemnified has been successful on the merits or
otherwise in defense of a lawsuit 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 a committee of the
disinterested directors designated by a majority vote of such directors, even
though less than a quorum, 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 Law 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,
while serving in such capacity, is or was at the request of the Registrant, 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 that,
subject to certain exceptions, insures the directors and officers of the
Registrant and its subsidiary.

(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 Law (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
II-2
<PAGE> 93

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 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) The underwriting agreement provides for indemnification of the
Registrant's directors and officers by the Underwriters. The indemnification
provided for by the Underwriters is limited to matters arising in connection
with this registration statement.

(f) 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.

The above discussion of the Registrant's By-Laws, Restated Certificate of
Incorporation, indemnification agreements, and of Section 145 of the Delaware
Law 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

<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
1 -- *Form of Purchasing Agreement, dated as of , 1999,
among the Company and Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, BT Alex. Brown
Incorporated, Hambrecht & Quist LLC, and U.S. Bancorp Piper
Jaffray Inc. as representatives of several underwriters.
2(a) -- Asset Purchase Agreement, dated as of July 1, 1997, among
CheckFree Corporation, Servantis Systems Holdings, Inc.,
Servantis Systems, Inc., London Bridge Software Holdings
plc, and LBSS, Inc. (Reference is made to Exhibit 2 to the
Current Report on Form 8-K, dated July 1, 1997, filed with
the Securities and Exchange Commission on July 3, 1997, and
incorporated herein by reference.)
2(b) -- Agreement and Plan of Merger, dated as of December 22, 1997,
among the Company, CheckFree Corporation, and CheckFree
Merger Corporation. (Reference is made to Exhibit 2 to the
Current Report on Form 8-K, dated December 22, 1997, filed
with the Securities and Exchange Commission on December 30,
1997, and incorporated herein by reference.)
3(a) -- Restated Certificate of Incorporation of the Company.
(Reference is made to Exhibit 3(a) to the Current Report on
Form 8-K, dated December 22, 1997, filed with the Securities
and Exchange Commission on December 30, 1997, and
incorporated herein by reference.)
3(b) -- By-Laws of the Company. (Reference is made to Exhibit 3(b)
to the Current Report on Form 8-K, dated December 22, 1997,
filed with the Securities and Exchange Commission on
December 30, 1997, and incorporated herein by reference.)
3(c) -- Form of Specimen Stock Certificate. (Reference is made to
Exhibit 3(c) to the Current Report on Form 8-K, dated
December 22, 1997, filed with the Securities and Exchange
Commission on December 30, 1997, and incorporated herein by
reference.)
</TABLE>

II-3
<PAGE> 94

<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
4(a) -- Articles FOURTH, FIFTH, SEVENTH, EIGHTH, TENTH AND ELEVENTH
of the Company's Restated Certificate of Incorporation
(contained in the Company's Restated Certificate of
Incorporation filed as Exhibit 3(a) hereto) and Articles II,
III, IV, VI and VIII of the Company's By-Laws (contained in
the Company's By-Laws filed as Exhibit 3(b) hereto).
4(b) -- Rights Agreement, dated as of December 16, 1997, by and
between the Company and The Fifth Third Bank, as Rights
Agent. (Reference is made to Exhibit 4.1 to Amendment No. 1
to Registration Statement on Form 8-A, filed with the
Securities and Exchange Commission on May 12, 1999, and
incorporated herein by reference.)
5 -- *Opinion of Porter, Wright, Morris & Arthur LLP.
10(a) -- CheckFree Holdings Corporation Amended and Restated
Associate Stock Purchase Plan. (Reference is made to Exhibit
4(a) to Post-Effective Amendment No. 1 to Form S-8, as
amended (Registration No. 333-21795), filed with the
Securities and Exchange Commission on January 14, 1998, and
incorporated herein by reference.)
10(b) -- CheckFree Holdings Corporation Second Amended and Restated
1995 Stock Option Plan. (Reference is made to Exhibit 4(a)
to Form S-8 (Registration No. 333-70599), filed with the
Securities and Exchange Commission on January 14, 1999, and
incorporated herein by reference.)
10(c) -- CheckFree Holdings Corporation Amended and Restated 1993
Stock Option Plan. (Reference is made to Exhibit 4(a) to
Post-Effective Amendment No. 1 to Form S-8, as amended
(Registration No. 33-98442), filed with the Securities and
Exchange Commission on January 9, 1998, and incorporated
herein by reference.)
10(d) -- CheckFree Holdings Corporation Amended and Restated 1983
Non-Statutory Stock Option Plan. (Reference is made to
Exhibit 4(a) to Post-Effective Amendment No. 1 to Form S-8,
as amended (Registration No. 33-98440), filed with the
Securities and Exchange Commission on January 9, 1998, and
incorporated herein by reference.)
10(e) -- CheckFree Holdings Corporation Second Amended and Restated
1983 Incentive Stock Option Plan. (Reference is made to
Exhibit 4(a) to Post-Effective Amendment No. 1 to Form S-8,
as amended (Registration No. 33-98444), filed with the
Securities and Exchange Commission on January 9, 1998, and
incorporated herein by reference.)
10(f) -- Form of Indemnification Agreement. (Reference is made to
Exhibit 10(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.)
10(g) -- Schedule identifying material details of Indemnification
Agreements substantially identical to Exhibit 10(f).
(Reference is made to Exhibit 10(g) to the Company's Form
10-K for the year ended June 30, 1997, filed with the
Securities and Exchange Commission on September 26, 1997,
and incorporated herein by reference.)
10(h) -- Noncompete, Nondisclosure, and Assignment Agreement, dated
February 1, 1990, between Peter J. Kight and the Company.
(Reference is made to Exhibit 10(i) 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.)
10(i) -- Noncompete, Nondisclosure, and Assignment Agreement, dated
February 1, 1990, between Mark A. Johnson and the Company.
(Reference is made to Exhibit 10(j) 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.)
</TABLE>

II-4
<PAGE> 95

<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
10(j) -- Electronic Bill Payment Services Agreement, dated March 10,
1995, between the Company and FiTech, Inc. (Reference is
made to Exhibit 10(gg) 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.)**
10(k) -- Amendment to Bill Payment and Remote Banking Services
Agreement, dated July 1, 1995, between the Company and
FiTech, Inc. (Reference is made to Exhibit 10(hh) 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.)**
10(l) -- ACH Operations Agreement, dated April 1, 1994, between the
Company and Society National Bank. (Reference is made to
Exhibit 10(ii) 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.)
10(m) -- Merchant Processing Agreement, dated March 13, 1995, between
the Company and Society National Bank. (Reference is made to
Exhibit 10(jj) 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.)
10(n) -- Lease, dated August 1, 1993, between the Company and The
Director of Development of the State of Ohio. (Reference is
made to Exhibit 10(rr) 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.)
10(o) -- Guaranty Agreement, dated August 1, 1993, between the
Company and The Provident Bank. (Reference is made to
Exhibit 10(ss) 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.)
10(p) -- Demand Mortgage Note, dated August 25, 1993, of the Company.
(Reference is made to Exhibit 10(tt) 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.)
10(q) -- Irrevocable Letter of Credit from Society National Bank for
the Company, dated August 25, 1993 (including second renewal
thereof). (Reference is made to Exhibit 10(uu) 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.)
10(r) -- Open-End Mortgage, Assignment of Rents and Security
Agreement, dated August 25, 1993, with the Company as
mortgagor and Society National Bank as mortgagee. (Reference
is made to Exhibit 10(vv) 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.)
10(s) -- Loan and Security Agreement, dated August 25, 1993, between
the Company and Society National Bank. (Reference is made to
Exhibit 10(ww) 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.)
10(t) -- Commercial Note Variable Rate, dated January 3, 1995, of the
Company. (Reference is made to Exhibit 10(xx) 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.)
</TABLE>

II-5
<PAGE> 96

<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
10(u) -- Reimbursement Agreement, dated August 25, 1993, between the
Company and Peter J. Kight. (Reference is made to Exhibit
10(yy) 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.)
10(v) -- License Agreement, dated October 27, 1995, between the
Company and Block Financial Corporation. (Reference is made
to Exhibit 10(ddd) to the Company's Annual Report on Form
10-K for the year ended December 31, 1995, filed with the
Securities and Exchange Commission, and incorporated herein
by reference.)**
10(w) -- Joint Marketing and Trademark License Agreement, dated
December 28, 1995, between the Company and Electronic Data
Systems Corporation. (Reference is made to Exhibit 10(eee)
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995, filed with the Securities and
Exchange Commission, and incorporated herein by
reference.)**
10(x) -- Joint Marketing Agreement, dated November 3, 1995, between
the Company and Fiserv, Inc. (Reference is made to Exhibit
10(fff) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995, filed with the Securities and
Exchange Commission, and incorporated herein by
reference.)**
10(y) -- Payment Services, Software Development and Marketing
Agreement, dated as of February 27, 1996, between the
Company and CyberCash. (Reference is made to Exhibit 10(a)
to the Form 10-Q for the quarter ended March 31, 1996, filed
with the Securities and Exchange Commission, and
incorporated herein by reference.) **
10(z) -- Executive Employment Agreement between the Company and Peter
J. Kight. (Reference is made to Exhibit 10(z) to the
Company's Form 10-K for the year ended June 30, 1997, filed
with the Securities and Exchange Commission on September 26,
1997, and incorporated herein by reference.)
10(aa) -- First Amendment to Loan and Security Agreement by and
between KeyBank National Association, as Lender, and
CheckFree Corporation, as Borrower, dated as of December 9,
1998. (Reference is made to Exhibit 10.1 to the Company's
Form 10-Q for the quarter ended March 31, 1999, filed with
the Securities and Exchange Commission on May 17, 1999, and
incorporated herein by reference.)
10(bb) -- Executive Employment Agreement between the Company and Lynn
D. Busing. (Reference is made to Exhibit 10(f) to the Form
10-Q for the quarter ended March 31, 1996, filed with the
Securities and Exchange Commission, and incorporated herein
by reference.)
10(cc) -- Agreement for ACH Services between the Company and The Chase
Manhattan Bank, N.A., dated as of July 1, 1996. (Reference
is made to Exhibit 10(qqq) to the Form 10-K for the
transition period ended June 30, 1996, filed with the
Securities and Exchange Commission, and incorporated herein
by reference.)
10(dd) -- Loan and Security Agreement, dated as of May 13, 1997, among
KeyBank National Association, the Company, CheckFree
Software Solutions, Inc., CheckFree Services Corporation,
Security APL, Inc., Servantis Systems, Inc., and Servantis
Services, Inc. (Reference is made to Exhibit 10(ee) to the
Company's Form 10-K for the year ended June 30, 1997, filed
with the Securities and Exchange Commission on September 26,
1997, and incorporated herein by reference.)
10(ee) -- CheckFree Corporation Incentive Compensation Plan.
(Reference is made to Exhibit 10(ff) to the Company's Form
10-K for the year ended June 30, 1997, filed with the
Securities and Exchange Commission on September 26, 1997,
and incorporated herein by reference.)
23(a) -- *Consent of Deloitte & Touche LLP.
23(b) -- Consent of Porter, Wright, Morris & Arthur LLP (Reference is
made to Exhibit 5 to this Registration Statement.)
</TABLE>

II-6
<PAGE> 97

<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
24 -- *Power of Attorney.
</TABLE>

- ---------------

* Filed with this Registration Statement.

** Portions of this Exhibit have been given confidential treatment by the
Securities and Exchange Commission.

II-7
<PAGE> 98

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 June 1, 1999.

CHECKFREE HOLDINGS CORPORATION

By: /s/ ALLEN L. SHULMAN
------------------------------------
Allen L. Shulman,
Executive Vice President,
Chief Financial Officer and General
Counsel

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated on the 1st day of June, 1999.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>

/s/ *PETER J. KIGHT Chairman of the Board and Chief Executive
- ----------------------------------------------------- Officer (Principal Executive Officer)
Peter J. Kight

/s/ *MARK A. JOHNSON Vice Chairman and Director
- -----------------------------------------------------
Mark A. Johnson

/s/ ALLEN L. SHULMAN Executive Vice President, Chief Financial
- ----------------------------------------------------- Officer and General Counsel (Principal
Allen L. Shulman Financial Officer)

/s/ *GARY A. LUOMA, JR. Vice President, Chief Accounting Officer and
- ----------------------------------------------------- Assistant Secretary (Principal Accounting
Gary A. Luoma, Jr. Officer)

/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

*By: /s/ CURTIS A. LOVELAND
------------------------------------------------
Curtis A. Loveland,
Attorney-in-Fact
</TABLE>

II-8

<PAGE> 1
EXHIBIT 1

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

CHECKFREE HOLDINGS CORPORATION

a Delaware corporation

[_________] Shares of Common Stock

PURCHASE AGREEMENT

Dated: ________, 1999

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

<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1. Representations and Warranties.........................................................3
(a) Representations and Warranties by the Company..........................................3
(i) Compliance with Registration Requirements.............................3
(ii) Incorporated Documents................................................4
(iii) Independent Accountants...............................................4
(iv) Financial Statements..................................................4
(v) No Material Adverse Change in Business................................5
(vi) Good Standing of the Company..........................................5
(vii) Good Standing of Subsidiaries.........................................5
(viii) Capitalization........................................................6
(ix) Authorization of Agreement............................................6
(x) Authorization and Description of Securities..........................6
(xi) Absence of Defaults and Conflicts.....................................6
(xii) Absence of Labor Dispute..............................................7
(xiii) Absence of Proceedings................................................7
(xiv) Accuracy of Exhibits..................................................7
(xv) Possession of Intellectual Property...................................8
(xvi) Absence of Further Requirements.......................................8
(xvii) Possession of Licenses and Permits....................................8
(xviii) Title to Property.....................................................8
(xix) Compliance with Cuba Act..............................................9
(xx) Investment Company Act................................................9
(xxi) Environmental Laws....................................................9
(xxii) Registration Rights..................................................10
(b) Representations and Warranties by the Selling Stockholders............................10
(i) Accurate Disclosure..................................................10
(ii) Authorization of Agreements..................................................10
(iii) Good and Valid Title.................................................11
(iv) Due Execution of Power of Attorney and Custody
Agreement.............................................................................11
(v) Absence of Manipulation..............................................11
(vi) Absence of Further Requirements......................................11

(vii) Restriction on Sale of Securities...........................12
(viii) Certificates Suitable for Transfer...................................12
(ix) No Association with NASD.............................................12
(c) Officer's Certificates................................................................12

SECTION 2. Sale and Delivery to Underwriters; Closing............................................12
</TABLE>

<PAGE> 3

<TABLE>
<CAPTION>
<S> <C> <C>
(a) Initial Securities....................................................................12
(b) Option Securities.....................................................................13
(c) Payment...............................................................................13
(d) Denominations; Registration...........................................................14

SECTION 3. Covenants of the Company..............................................................14
(a) Compliance with Securities Regulations and Commission Requests........................14
(b) Filing of Amendments..................................................................15
(c) Delivery of Registration Statements...................................................15
(d) Delivery of Prospectuses. ...........................................................15
(e) Continued Compliance with Securities Laws.............................................15
(f) Blue Sky Qualifications...............................................................16
(g) Rule 158..............................................................................16
(h) Use of Proceeds.......................................................................16
(i) Listing...............................................................................16
(j) Restriction on Sale of Securities.....................................................16
(k) Reporting Requirements................................................................17

SECTION 4. Payment of Expenses...................................................................17
(a) Expenses..............................................................................17
(b) Expenses of the Selling Stockholders..................................................18
(c) Termination of Agreement..............................................................18
(d) Allocation of Expenses................................................................18

SECTION 5. Conditions of Underwriters' Obligations...............................................18
(a) Effectiveness of Registration Statement...............................................18
(b) Opinion of Counsel for Company........................................................19
(c) Opinion of Counsel for the Selling Stockholders. ....................................19
(d) Opinion of Counsel for Underwriters...................................................19
(e) Officers' Certificate.................................................................20
(f) Certificate of Selling Stockholders...................................................20
(g) Accountant's Comfort Letter...........................................................20
(h) Bring-down Comfort Letter.............................................................20
(i) Approval of Listing...................................................................21
(j) No Objection..........................................................................21
(k) Lock-up Agreements....................................................................21
(l) Conditions to Purchase of Option Securities...........................................21
(i) Officers' Certificate................................................21
(ii) .....................................................................21
Opinion of Counsel for Underwriters............................................................21
(iv) Bring-down Comfort Letter............................................21
</TABLE>

<PAGE> 4

<TABLE>
<CAPTION>
<S> <C> <C>
(m) Additional Documents..................................................................22
(n) Termination of Agreement..............................................................22

SECTION 6. Indemnification.......................................................................22
(a) Indemnification of Underwriters.......................................................22
(b) Indemnification of Company, Directors and Officers and Selling Stockholders...........23
(c) Company Indemnification of Selling Stockholders.......................................24
(d) Selling Stockholders Indemnification of Company.......................................24
(e) Actions against Parties; Notification.................................................24
(f) Settlement without Consent if Failure to Reimburse....................................25
(g) Other Agreements with Respect to Indemnification......................................25

SECTION 7. Contribution..........................................................................25

SECTION 8. Representations, Warranties and Agreements to Survive Delivery........................27

SECTION 9. Termination of Agreement..............................................................27
(a) Termination; General..................................................................27
(b) Liabilities...........................................................................28

SECTION 10. Default by One or More of the Underwriters............................................28

SECTION 11. Default by one or more of the Selling Stockholders or the Company.....................29

SECTION 12. Notices...............................................................................29

SECTION 13. Parties...............................................................................30

SECTION 14. GOVERNING LAW AND TIME................................................................30

SECTION 15. Effect of Headings....................................................................30
</TABLE>

iii

<PAGE> 5

<TABLE>
<CAPTION>
<S> <C> <C>
SCHEDULES

Schedule A - List of Underwriters Sch A-1

Schedule B - List of Selling Stockholders Sch B-1

Schedule C - Pricing Information Sch C-1

Schedule D - Capitalization of Certain Subsidiaries Sch D-1

Schedule E - List of Subsidiaries Sch E-1

Schedule F - Liens on Assets Sch F-1

Schedule G - Registration Rights Sch G-1

Schedule H - List of Persons subject to Lock-up Sch H-1

EXHIBITS

Exhibit A - Form of Opinion of Company's Counsel A-1

Exhibit B - Form of Opinion for the Selling Stockholders(s) B-1

Exhibit C - Form of Lock-up Letter C-1
</TABLE>

<PAGE> 6

CHECKFREE HOLDINGS CORPORATION

(a Delaware corporation)

[_________] Shares of Common Stock

(Par Value $0.01 Per Share)

PURCHASE AGREEMENT

______________, 1999

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
BT ALEX. BROWN INCORPORATED
HAMBRECHT & QUIST LLC
U.S. BANCORP PIPER JAFFRAY INC.,
as Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
North Tower
World Financial Center
New York, New York 10281-1209

Ladies and Gentlemen:

CheckFree Holdings Corporation, a Delaware corporation (the "Company"),
and the persons listed in Schedule B hereto (the "Selling Stockholders"),
confirm their respective agreements with Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and each of the other
Underwriters named in Schedule A hereto (collectively, the "Underwriters," which
term shall also include any underwriter substituted as hereinafter provided in
Section 10 hereof), for whom Merrill Lynch, BT Alex. Brown Incorporated,
Hambrecht & Quist LLC and U.S. Bancorp Piper Jaffray Inc. are acting as
representatives (in such capacity, the "Representatives"), with respect to (i)
the sale by the Company and the Selling Stockholders, acting severally and not
jointly, and the purchase by the Underwriters, acting severally and not jointly,
of the respective numbers of shares of Common Stock, par value $0.01 per share,
of the Company ("Common Stock") set forth in Schedules A and B hereto and (ii)
the grant by the Company to the Underwriters, acting severally and not jointly,
of the option described

<PAGE> 7

in Section 2(b) hereof to purchase all or any part of [_____] additional shares
of Common Stock to cover over-allotments, if any. The aforesaid [_________]
shares of Common Stock (the "Initial Securities") to be purchased by the
Underwriters and all or any part of the [______] shares of Common Stock subject
to the option described in Section 2(b) hereof (the "Option Securities") are
hereinafter called, collectively, the "Securities."

The Company and the Selling Stockholders understand that the
Underwriters propose to make a public offering of the Securities as soon as the
Representatives deem advisable after this Agreement has been executed and
delivered.

The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-o) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). The
information included in such prospectus or in such Term Sheet, as the case may
be, that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred
to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is
referred to as "Rule 434 Information."

Each prospectus used before such registration statement became
effective, and any prospectus that omitted, as applicable, the Rule 430A
Information or the Rule 434 Information, that was used after such effectiveness
and prior to the execution and delivery of this Agreement, is herein called a
"preliminary prospectus." Such registration statement, including the exhibits
thereto, schedules thereto, if any, and the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 under the 1933 Act, at the time it
became effective and including the Rule 430A Information and the Rule 434
Information, as applicable, is herein called the "Registration Statement." Any
registration statement filed pursuant to Rule 462(b) of the 1933 Act Regulations
is herein referred to as the "Rule 462(b) Registration Statement," and after
such filing the term "Registration Statement" shall include the Rule 462(b)
Registration Statement. The final prospectus, including the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933
Act, in the form first furnished to the Underwriters for use in connection with
the offering of the Securities is herein called the "Prospectus." If Rule 434 is
relied on, the term "Prospectus" shall refer to the preliminary prospectus dated
May __, 1999 together with the Term Sheet and all references in this Agreement
to the date of the Prospectus shall mean the date of the Term Sheet. For
purposes of this Agreement, all references to the Registration Statement, any
preliminary prospectus, the Prospectus or any Term Sheet or any amendment or
supplement

2
<PAGE> 8

to any of the foregoing shall be deemed to include the copy filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
system ("EDGAR").

All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934, as amended (the "1934
Act"), which is incorporated by reference in the Registration Statement, such
preliminary prospectus or the Prospectus, as the case may be.

SECTION 1. Representations and Warranties

(a) Representations and Warranties by the Company. The Company
represents and warrants to each Underwriter as of the date hereof, as of the
Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery
(if any) referred to in Section 2(b) hereof, and agrees with each Underwriter,
as follows:

(i) Compliance with Registration Requirements. The
Company meets the requirements for use of Form S-3 under the 1933 Act.
Each of the Registration Statement and any Rule 462(b) Registration
Statement has become effective under the 1933 Act and no stop order
suspending the effectiveness of the Registration Statement or any Rule
462(b) Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional information
has been complied with.

At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the Closing Time (and, if any Option Securities
are purchased, at the Date of Delivery), the Registration Statement,
the Rule 462(b) Registration Statement and any amendments and
supplements thereto complied and will comply in all material respects
with the requirements of the 1933 Act and the 1933 Act Regulations and
did not and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.

Neither the Prospectus nor any amendments or supplements
thereto, at the time the Prospectus or any such amendment or supplement
was issued and at the Closing Time (and, if any Option Securities are
purchased, at the Date of Delivery), included or will

3
<PAGE> 9

include an untrue statement of a material fact or omitted or will omit
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. If Rule 434 is used, the Company will comply with the
requirements of Rule 434 and the Prospectus shall not be "materially
different," as such term is used in Rule 434, from the prospectus
included in the Registration Statement at the time it became effective.
The representations and warranties in this subsection shall not apply
to statements in or omissions from the Registration Statement or
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by any Underwriter through the
Representatives expressly for use in the Registration Statement or
Prospectus.

Each preliminary prospectus and the prospectus filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and each preliminary prospectus and the Prospectus
delivered to the Underwriters for use in connection with this offering
was identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted
by Regulation S-T.

(ii) Incorporated Documents. The documents incorporated
or deemed to be incorporated by reference in the Registration Statement
and the Prospectus, when they became effective or at the time they were
or hereafter are filed with the Commission, as applicable, complied and
will comply in all material respects with the requirements of the 1933
Act and the 1933 Act Regulations or the 1934 Act and the rules and
regulations of the Commission thereunder (the "1934 Act Regulations"),
as applicable, and, when read together with the other information in
the Prospectus, at the time the Registration Statement became
effective, at the time the Prospectus was issued and at the Closing
Time (and, if any Option Securities are purchased, at the Date of
Delivery), did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.

(iii) Independent Accountants. The accountants who
certified the financial statements and supporting schedules included in
the Registration Statement are independent public accountants as
required by the 1933 Act and the 1933 Act Regulations.

(iv) Financial Statements. The financial statements
included in the Registration Statement and the Prospectus, together
with the related schedules and notes, present fairly the financial
position of the Company and its consolidated subsidiaries at the dates
indicated and the statement of operations, stockholders' equity and
cash flows of the Company and its consolidated subsidiaries for the
periods specified; said financial statements have been prepared in
conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved. The
supporting

4
<PAGE> 10

schedules, if any, included in the Registration Statement present
fairly in accordance with GAAP the information required to be stated
therein. The selected financial data and the summary financial
information (excluding Other Data included therein) included in the
Prospectus present fairly the information shown therein and have been
compiled on a basis consistent with that of the audited financial
statements included in the Registration Statement.

(v) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise stated therein, (a)
there has been no material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business
(a "Material Adverse Effect"), (b) there have been no transactions
entered into by the Company or any of its subsidiaries, other than
those in the ordinary course of business, which are material with
respect to the Company and its subsidiaries considered as one
enterprise, and (c) there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital
stock.

(vi) Good Standing of the Company. The Company has been
duly organized and is validly existing as a corporation in good
standing under the laws of the state of Delaware and has corporate
power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus and to enter into
and perform its obligations under this Agreement; and the Company is
duly qualified as a foreign corporation to transact business and is in
good standing in each other jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure so to qualify or to
be in good standing would not result in a Material Adverse Effect.

(vii) Good Standing of Subsidiaries. Each "significant
subsidiary" of the Company (as such term is defined in Rule 1-02 of
Regulation S-X) (each a "Subsidiary" and, collectively, the
"Subsidiaries") has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a
Material Adverse Effect; except as set forth in Schedule D hereto and
as otherwise disclosed in the Registration Statement, all of the issued
and outstanding capital stock of each such Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and is
owned by the Company, directly or through subsidiaries, free and clear
of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity; none

5
<PAGE> 11

of the outstanding shares of capital stock of any Subsidiary was issued
in violation of the preemptive or similar rights of any securityholder
of such Subsidiary. The only subsidiaries of the Company are the
Subsidiaries listed on Schedule E hereto.

(viii) Capitalization. The authorized, issued and
outstanding capital stock of the Company is as set forth in the
Prospectus in the column entitled "Actual" under the caption
"Capitalization" (except for subsequent issuances, if any, pursuant to
this Agreement, pursuant to reservations, agreements or employee
benefit plans referred to in the Prospectus or pursuant to the exercise
of convertible securities or options referred to in the Prospectus).
The shares of issued and outstanding capital stock, including the
Securities to be purchased by the Underwriters from the Selling
Stockholders, have been duly authorized and validly issued and are
fully paid and non-assessable; none of the outstanding shares of
capital stock, including the Securities to be purchased by the
Underwriters from the Selling Stockholders, was issued in violation of
the preemptive or other similar rights of any securityholder of the
Company.

(ix) Authorization of Agreement. This Agreement has been
duly authorized, executed and delivered by the Company.

(x) Authorization and Description of Securities. The
Securities to be purchased by the Underwriters from the Company have
been duly authorized for issuance and sale to the Underwriters pursuant
to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement against payment of the consideration set
forth herein, will be validly issued and fully paid and non-assessable;
the Common Stock conforms to all statements relating thereto contained
in the Prospectus and such description conforms to the rights set forth
in the instruments defining the same; no holder of the Securities will
be subject to personal liability by reason of being such a holder; and
the issuance of the Securities is not subject to the preemptive or
other similar rights of any securityholder of the Company.

(xi) Absence of Defaults and Conflicts. Neither the
Company nor any of its Subsidiaries is in violation of its charter or
by-laws or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or other agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which it or any of them may be bound,
or to which any of the property or assets of the Company or any
Subsidiary is subject (collectively, "Agreements and Instruments")
except for such defaults that would not result in a Material Adverse
Effect; and the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated herein and in the
Registration Statement (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities
as described in the Prospectus under the caption "Use of Proceeds") and
compliance by the Company with its

6
<PAGE> 12

obligations hereunder have been duly authorized by all necessary
corporate action and do not and will not, whether with or without the
giving of notice or passage of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined
below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
Subsidiary pursuant to, the Agreements and Instruments (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that
would not result in a Material Adverse Effect), nor will such action
result in any violation of the provisions of the charter or by-laws of
the Company or any Subsidiary or any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any Subsidiary or any of their assets,
properties or operations. As used herein, a "Repayment Event" means any
event or condition which gives the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of
all or a portion of such indebtedness by the Company or any Subsidiary.

(xii) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any Subsidiary exists or, to the knowledge
of the Company, is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its
or any Subsidiary's principal suppliers, manufacturers, customers or
contractors, which, in either case, may reasonably be expected to
result in a Material Adverse Effect.

(xiii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the
Company or any Subsidiary, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which
might reasonably be expected to result in a Material Adverse Effect, or
which might reasonably be expected to materially and adversely affect
the properties or assets thereof or the consummation of the
transactions contemplated in this Agreement or the performance by the
Company of its obligations hereunder; the aggregate of all pending
legal or governmental proceedings to which the Company or any
Subsidiary is a party or of which any of their respective property or
assets is the subject which are not described in the Registration
Statement, including ordinary routine litigation incidental to the
business, could not reasonably be expected to result in a Material
Adverse Effect.

(xiv) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement, the Prospectus or the documents incorporated by reference
therein or to be filed as exhibits thereto which have not been so
described and filed as required.

7
<PAGE> 13

(xv) Possession of Intellectual Property. The Company and
its Subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") necessary
to carry on the business now operated by them, and neither the Company
nor any of its Subsidiaries has received any notice or is otherwise
aware of any infringement of or conflict with asserted rights of others
with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of its
Subsidiaries therein, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity
or inadequacy, singly or in the aggregate, would result in a Material
Adverse Effect.

(xvi) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance or
sale of the Securities hereunder or the consummation of the
transactions contemplated by this Agreement, except such as have been
already obtained or as may be required under the 1933 Act or the 1933
Act Regulations or state securities laws.

(xvii) Possession of Licenses and Permits. The Company and
its Subsidiaries possess such permits, licenses, approvals, consents
and other authorizations (collectively, "Governmental Licenses") issued
by the appropriate federal, state, local or foreign regulatory agencies
or bodies necessary to conduct the business now operated by them; the
Company and its Subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses, except where the failure
so to comply would not, singly or in the aggregate, have a Material
Adverse Effect; all of the Governmental Licenses are valid and in full
force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full
force and effect would not have a Material Adverse Effect; and neither
the Company nor any of its Subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would result in a
Material Adverse Effect.

(xviii) Title to Property. The Company and its Subsidiaries
have good and marketable title to all real property owned by the
Company and its Subsidiaries and good title to all other properties
owned by them, in each case, free and clear of all mortgages, pledges,
liens, security interests, claims, restrictions or encumbrances of any
kind except such as (a) are described in the Prospectus or in Schedule
F hereto or (b) do not, singly or in the aggregate, materially affect
the value of such property and do not interfere with the

8
<PAGE> 14

use made and proposed to be made of such property by the Company or any
of its Subsidiaries; and all of the leases and subleases material to
the business of the Company and its Subsidiaries, considered as one
enterprise, and under which the Company or any of its Subsidiaries
holds properties described in the Prospectus, are in full force and
effect, and neither the Company nor any Subsidiary has any notice of
any material claim of any sort that has been asserted by anyone adverse
to the rights of the Company or any Subsidiary under any of the leases
or subleases mentioned above, or affecting or questioning the rights of
the Company or such Subsidiary to the continued possession of the
leased or subleased premises under any such lease or sublease.

(xix) Compliance with Cuba Act. The Company has complied
with, and is and will be in compliance with, the provisions of that
certain Florida act relating to disclosure of doing business with Cuba,
codified as Section 517.075 of the Florida statutes, and the rules and
regulations thereunder (collectively, the "Cuba Act") or is exempt
therefrom.

(xx) Investment Company Act. The Company is not, and upon
the issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the
Prospectus will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").

(xxi) Environmental Laws. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (a) neither the Company
nor any of its Subsidiaries is in violation of any federal, state,
local or foreign statute, law, rule, regulation, ordinance, code,
policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent, decree or judgment, relating to pollution or protection of
human health, the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum
or petroleum products (collectively, "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (b) the Company and its Subsidiaries have all
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements,
(c) there are no pending or, to the knowledge of the Company or its
Subsidiaries, threatened administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigation or proceedings relating to
any Environmental Law against the Company or any of its Subsidiaries
and (d) to the knowledge of the Company or its Subsidiaries, there are
no events or circumstances that might reasonably be expected to form
the basis of an order for clean-up or remediation, or an action, suit
or proceeding by

9
<PAGE> 15

any private party or governmental body or agency, against or affecting
the Company or any of its Subsidiaries relating to Hazardous Materials
or any Environmental Laws.

(xxii) Registration Rights. Other than the Selling
Stockholders or as set forth in Schedule G, there are no persons with
registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement or otherwise
registered by the Company under the 1933 Act.

(b) Representations and Warranties by the Selling Stockholders.
Each Selling Stockholder severally represents and warrants to each Underwriter
as of the date hereof, and as of the Closing Time, and agrees with each
Underwriter, as follows:

(i) Accurate Disclosure. To the best knowledge of such
Selling Stockholder, the representations and warranties of the Company
contained in Section 1(a) hereof are true and correct; such Selling
Stockholder has reviewed and is familiar with the Registration
Statement and the Prospectus and neither the Prospectus nor any
amendments or supplements thereto includes any untrue statement of a
material fact or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; such Selling Stockholder is not
prompted to sell the Securities to be sold by such Selling Stockholder
hereunder by any information concerning the Company or any Subsidiary
of the Company which is not set forth in the Prospectus.

(ii) Authorization of Agreements. Such Selling
Stockholder has the full right, power and authority to enter into this
Agreement and a Power of Attorney and Custody Agreement (the "Power of
Attorney and Custody Agreement") and to sell, transfer and deliver the
Securities to be sold by such Selling Stockholder hereunder. The
execution and delivery of this Agreement and the Power of Attorney and
Custody Agreement and the sale and delivery of the Securities to be
sold by such Selling Stockholder and the consummation of the
transactions contemplated herein and compliance by such Selling
Stockholder with its obligations hereunder have been duly authorized by
such Selling Stockholder and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with
or constitute a breach of, or default under, or result in the creation
or imposition of any tax, lien, charge or encumbrance upon the
Securities to be sold by such Selling Stockholder or any property or
assets of such Selling Stockholder pursuant to any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, license, lease
or other agreement or instrument to which such Selling Stockholder is a
party or by which such Selling Stockholder may be bound, or to which
any of the property or assets of such Selling Stockholder is subject,
nor will such action result in any violation of the provisions of the
charter or by-laws or other organizational instrument of such Selling
Stockholder, if applicable, or any applicable treaty, law, statute,
rule, regulation, judgment, order, writ

10
<PAGE> 16

or decree of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over such Selling Stockholder
or any of its properties.

(iii) Good and Valid Title. Such Selling Stockholder has
and will at the Closing Time have good and valid title to the
Securities to be sold by such Selling Stockholder hereunder, free and
clear of any security interest, mortgage, pledge, lien, charge, claim,
equity or encumbrance of any kind, other than pursuant to this
Agreement; and upon delivery of such Securities and payment of the
purchase price therefor as herein contemplated, assuming each such
Underwriter has no notice of any adverse claim, each of the
Underwriters will receive good and marketable title to the Securities
purchased by it from such Selling Stockholder, free and clear of any
security interest, mortgage, pledge, lien, charge, claim, equity or
encumbrance of any kind.

(iv) Due Execution of Power of Attorney and Custody
Agreement. Such Selling Stockholder has duly executed and delivered, in
the form heretofore furnished to the Representatives, the Power of
Attorney and Custody Agreement with Robert J. Tannous, Esq., as
attorney-in-fact (the "Attorney-in-Fact") and as custodian (the
"Custodian"); the Custodian is authorized to deliver the Securities to
be sold by such Selling Stockholder hereunder and to accept payment
therefor; and each Attorney-in-Fact is authorized to execute and
deliver this Agreement and the certificate referred to in Section 5(f)
or that may be required pursuant to Sections 5(l) and 5(m) on behalf of
such Selling Stockholder, to sell, assign and transfer to the
Underwriters the Securities to be sold by such Selling Stockholder
hereunder, to determine the purchase price to be paid by the
Underwriters to such Selling Stockholder, as provided in Section 2(a)
hereof, to authorize the delivery of the Securities to be sold by such
Selling Stockholder hereunder, to accept payment therefor, and
otherwise to act on behalf of such Selling Stockholder in connection
with this Agreement.

(v) Absence of Manipulation. Such Selling Stockholder
has not taken, and will not take, directly or indirectly, any action
which is designed to or which has constituted or which might reasonably
be expected to cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale
of the Securities.

(vi) Absence of Further Requirements. No filing with, or
consent, approval, authorization, order, registration, qualification or
decree of, any court or governmental authority or agency, domestic or
foreign, is necessary or required for the performance by such Selling
Stockholder of its obligations hereunder or in the Power of Attorney
and Custody Agreement, or in connection with the sale and delivery of
the Securities hereunder or the consummation of the transactions
contemplated by this Agreement, except such as may have previously been
made or obtained or as may be required under the 1933 Act or the 1933
Act Regulations or state securities laws.

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<PAGE> 17

(vii) Restriction on Sale of Securities. During a period
of 90 days from the date of the Prospectus, such Selling Stockholder
will not, without the prior written consent of Merrill Lynch, (i)
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, any share of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or
file any registration statement under the 1933 Act with respect to any
of the foregoing or (ii) enter into any swap or any other agreement or
any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Common Stock,
whether any such swap or transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not
apply to the Securities to be sold hereunder.

(viii) Certificates Suitable for Transfer. Certificates for
all of the Securities to be sold by such Selling Stockholder pursuant
to this Agreement, in suitable form for transfer by delivery or
accompanied by duly executed instruments of transfer or assignment in
blank with signatures guaranteed, have been placed in custody with the
Custodian with irrevocable conditional instructions to deliver such
Securities to the Underwriters pursuant to this Agreement.

(ix) No Association with NASD. Neither such Selling
Stockholder nor any of his/her/its affiliates directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or
is under common control with, or has any other association with (within
the meaning of Article I, Section 1(m) of the By-laws of the National
Association of Securities Dealers, Inc.), any member firm of the
National Association of Securities Dealers, Inc.

(c) Officer's Certificates. Any certificate signed by any officer
of the Company or any of its Subsidiaries delivered to the Representatives or to
counsel for the Underwriters shall be deemed a representation and warranty by
the Company to each Underwriter as to the matters covered thereby; and any
certificate signed by or on behalf of the Selling Stockholders as such and
delivered to the Representatives or to counsel for the Underwriters pursuant to
the terms of this Agreement shall be deemed a representation and warranty by
such Selling Stockholder to the Underwriters as to the matters covered thereby.

SECTION 2. Sale and Delivery to Underwriters; Closing.

(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company and each Selling Stockholders, severally and not jointly,
agree to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Company and
each Selling Stockholder, at the price per share set forth in Schedule C, that
proportion of the

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<PAGE> 18

number of Initial Securities set forth in Schedule B opposite the name of the
Company or such Selling Stockholder, as the case may be, which the number of
Initial Securities set forth in Schedule A opposite the name of such
Underwriter, plus any additional number of Initial Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof, bears to the total number of Initial Securities, subject, in
each case, to such adjustments among the Underwriters as the Representatives in
their sole discretion shall make to eliminate any sales or purchases of
fractional securities.

(b) Option Securities. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase up to an additional
[_________] shares of Common Stock, as set forth in Schedule B, at the price per
share set forth in Schedule C, less an amount per share equal to any dividends
or distributions declared by the Company and payable on the Initial Securities
but not payable on the Option Securities. The option hereby granted will expire
30 days after the date hereof and may be exercised in whole or in part from time
to time only for the purpose of covering over-allotments which may be made in
connection with the offering and distribution of the Initial Securities upon
notice by the Representatives to the Company setting forth the number of Option
Securities as to which the several Underwriters are then exercising the option
and the time and date of payment and delivery for such Option Securities. Any
such time and date of delivery (a "Date of Delivery") shall be determined by the
Representatives, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Time, as
hereinafter defined. If the option is exercised as to all or any portion of the
Option Securities, each of the Underwriters, acting severally and not jointly,
will purchase that proportion of the total number of Option Securities then
being purchased which the number of Initial Securities set forth in Schedule A
opposite the name of such Underwriter bears to the total number of Initial
Securities, subject in each case to such adjustments as the Representatives in
their discretion shall make to eliminate any sales or purchases of fractional
shares.

(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of [ ], or
at such other place as shall be agreed upon by the Representatives and the
Company, at 9:00 A.M. (Eastern time) on the third (fourth, if the pricing occurs
after 4:30 P.M. (Eastern time) on any given day) business day after the date
hereof (unless postponed in accordance with the provisions of Section 10), or
such other time not later than ten business days after such date as shall be
agreed upon by the Representatives and the Company (such time and date of
payment and delivery being herein called "Closing Time").

In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed

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<PAGE> 19

upon by the Representatives and the Company, on each Date of Delivery as
specified in the notice from the Representatives to the Company.

Payment shall be made to the Company and the Selling Stockholders by
wire transfer of immediately available funds to bank accounts designated by the
Company and the Custodian pursuant to each Selling Stockholder's Power of
Attorney and Custody Agreement, as the case may be, against delivery to the
Representatives for the respective accounts of the Underwriters of certificates
for the Securities to be purchased by them. It is understood that each
Underwriter has authorized the Representatives, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Initial Securities and the Option Securities, if any, which it has agreed to
purchase. Merrill Lynch, individually and not as representative of the
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Initial Securities or the Option Securities, if any, to be
purchased by any Underwriter whose funds have not been received by the Closing
Time or the relevant Date of Delivery, as the case may be, but such payment
shall not relieve such Underwriter from its obligations hereunder.

(d) Denominations; Registration. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations and
registered in such names as the Representatives may request in writing at least
one full business day before the Closing Time or the relevant Date of Delivery,
as the case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representatives in The City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time or the relevant Date of Delivery,
as the case may be.

SECTION 3. Covenants of the Company. The Company covenants
with each Underwriter as follows:

(a) Compliance with Securities Regulations and Commission
Requests. The Company, subject to Section 3(b), will comply with the
requirements of Rule 430A or Rule 434, as applicable, and will notify the
Representatives immediately, and confirm the notice in writing, (1) when any
post-effective amendment to the Registration Statement shall become effective,
or any supplement to the Prospectus or any amended Prospectus shall have been
filed, (ii) of the receipt of any comments from the Commission, (iii) of any
request by the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional information, and
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, or of
the initiation or threatening of any proceedings for any of such purposes. The
Company will promptly effect the filings necessary pursuant to Rules 424(b) and
434 and will take such steps as it deems necessary to ascertain promptly whether
the form of prospectus transmitted for filing under Rule 424(b) or Rule 434 was
received for filing by the Commission and, in the event that it was not, it will
promptly file such

14
<PAGE> 20

prospectus. The Company will make every reasonable effort to prevent the
issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.

(b) Filing of Amendments. The Company will give the
Representatives notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)), any Term Sheet
or any amendment, supplement or revision to either the prospectus included in
the Registration Statement at the time it became effective or to the Prospectus,
whether pursuant to the 1933 Act, the 1934 Act or otherwise, will furnish the
Representatives with copies of any such documents a reasonable amount of time
prior to such proposed filing or use, as the case may be, and will not file or
use any such document to which the Representatives or counsel for the
Underwriters shall object.

(c) Delivery of Registration Statements. The Company has
furnished or will deliver to the Representatives and counsel for the
Underwriters, without charge, signed copies of the Registration Statement as
originally filed and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein and documents incorporated or
deemed to be incorporated by reference therein) and signed copies of all
consents and certificates of experts, and will also deliver to the
Representatives, without charge, a conformed copy of the Registration Statement
as originally filed and of each amendment thereto (without exhibits) for each of
the Underwriters. The copies of the Registration Statement and each amendment
thereto furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T.

(d) Delivery of Prospectuses. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus as
such Underwriter reasonably requested, and the Company hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each Underwriter, without charge, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, such
number of copies of the Prospectus (as amended or supplemented) as such
Underwriter may reasonably request. The Prospectus and any amendments or
supplements thereto furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
EDGAR, except to the extent permitted by Regulation S-T.

(e) Continued Compliance with Securities Laws. The Company will
comply with the 1933 Act, the 1933 Act Regulations, the 1934 Act and the 1934
Act Regulations so as to permit the completion of the distribution of the
Securities as contemplated in this Agreement and in the Prospectus. If at any
time when a prospectus is required by the 1933 Act to be delivered in connection
with sales of the Securities, any event shall occur or condition shall exist as
a result of which it is necessary, in the opinion of counsel for the
Underwriters or for the Company, to amend the Registration Statement or amend or
supplement the Prospectus in order that the Prospectus will not include any
untrue statements of a material fact or omit to state a material fact necessary
in order to make the statements therein not misleading in the light of the
circumstances

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<PAGE> 21

existing at the time it is delivered to a purchaser, or if it shall be
necessary, in the opinion of such counsel, at any such time to amend the
Registration Statement or amend or supplement the Prospectus in order to comply
with the requirements of the 1933 Act or the 1933 Act Regulations, the Company
will promptly prepare and file with the Commission, subject to Section 3(b),
such amendment or supplement as may be necessary to correct such statement or
omission or to make the Registration Statement or the Prospectus comply with
such requirements, and the Company will furnish to the Underwriters such number
of copies of such amendment or supplement as the Underwriters may reasonably
request.

(f) Blue Sky Qualifications. The Company will use its best
efforts, in cooperation with the Underwriters, to qualify the Securities for
offering and sale under the applicable securities laws of such states and other
jurisdictions (domestic or foreign) as the Representatives may designate and to
maintain such qualifications in effect for a period of not less than one year
from the later of the effective date of the Registration Statement and any Rule
462(b) Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not less
than one year from the effective date of the Registration Statement and any Rule
462(b) Registration Statement.

(g) Rule 158. The Company will timely file such reports pursuant
to the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.

(h) Use of Proceeds. The Company will use the net proceeds
received by it from the sale of the Securities in the manner specified in the
Prospectus under "Use of Proceeds."

(i) Listing. The Company will use its best efforts to effect and
maintain the quotation of the Securities on the Nasdaq National Market and will
file with the Nasdaq National Market all documents and notices required by the
Nasdaq National Market of companies that have securities that are traded in the
over-the-counter market and quotations for which are reported by the Nasdaq
National Market.

(j) Restriction on Sale of Securities. During a period of 90 days
from the date of the Prospectus, the Company will not, without the prior written
consent of Merrill Lynch, (i) directly or indirectly, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of any share of Common Stock or any securities convertible
into or exercisable or

16
<PAGE> 22

exchangeable for Common Stock or file any registration statement under the 1933
Act with respect to any of the foregoing or (ii) enter into any swap or any
other agreement or any transaction that transfers, in whole or in part, directly
or indirectly, the economic consequence of ownership of the Common Stock,
whether any such swap or transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to (a) the Securities to be
sold hereunder, (b) any shares of Common Stock issued by the Company upon the
exercise of an option or warrant or the conversion of a security outstanding on
the date hereof and referred to in the Prospectus or the documents incorporated
therein by reference, (c) any shares of Common Stock issued or options to
purchase Common Stock granted pursuant to existing employee benefit plans of the
Company referred to in the Prospectus or the documents incorporated therein by
reference, (d) any shares of Common Stock issued pursuant to any non-employee
director stock plan or dividend reinvestment plan, or (e) warrants to purchase
Common Stock issued by the Company in connection with a business acquisition,
but only if such warrants may not be exercised for or converted into shares of
Common Stock prior to the date which is 90 days after the date hereof.

(k) Reporting Requirements. The Company, during the period when
the Prospectus is required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant to the
1934 Act within the time periods required by the 1934 Act and the 1934 Act
Regulations.

SECTION 4. Payment of Expenses.

(a) Expenses. The Company will pay or cause to be paid all
expenses incident to the performance of their obligations under this Agreement,
including (i) the preparation, printing and filing of the Registration Statement
(including financial statements and exhibits) as originally filed and of each
amendment thereto, (ii) the preparation, printing and delivery to the
Underwriters of this Agreement, any Agreement among Underwriters and such other
documents as may be required in connection with the offering, purchase, sale,
issuance or delivery of the Securities, (iii) the preparation, issuance and
delivery of the certificates for the Securities to the Underwriters, including
any stock or other transfer taxes and any stamp or other duties payable upon the
sale, issuance or delivery of the Securities to the Underwriters, (iv) the fees
and disbursements of the Company's counsel, accountants and other advisors, (v)
the qualification of the Securities under securities laws in accordance with the
provisions of Section 3(f) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of each
preliminary prospectus, any Term Sheets and of the Prospectus and any amendments
or supplements thereto, (vii) the preparation, printing and delivery to the
Underwriters of copies of the Blue Sky Survey and any supplement thereto, (viii)
the fees and expenses of any transfer agent or registrar for the Securities,
(ix) the filing fees in connection with, the review by the National Association
of Securities Dealers, Inc.

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<PAGE> 23

(the "NASD") of the terms of the sale of the Securities and (x) the fees and
expenses incurred in connection with the inclusion of the Securities in the
Nasdaq National Market.

(b) Expenses of the Selling Stockholders. Notwithstanding the
provisions of Section 4(a), the Selling Stockholders will pay all expenses
incident to the performance of their respective obligations under, and the
consummation of the transactions contemplated by this Agreement, including (i)
any stamp duties, capital duties and stock transfer taxes, if any, payable upon
the sale of the Securities to the Underwriters, and their transfer between the
Underwriters pursuant to an agreement between such Underwriters, and (ii) the
fees and disbursements of their respective counsel and accountants.

(c) Termination of Agreement. If this Agreement is terminated by
the Representatives in accordance with the provisions of Section 5, Section
9(a)(i) or Section 11 hereof, the Company and the Selling Stockholders shall
reimburse the Underwriters for all of their out-of-pocket expenses, including
the reasonable fees and disbursements of counsel for the Underwriters.

(d) Allocation of Expenses. The provisions of this Section shall
not affect any agreement that the Company and the Selling Stockholders may make
for the sharing of such costs and expenses.

SECTION 5. Conditions of Underwriters' Obligations. The
obligations of the several Underwriters hereunder are subject to the accuracy of
the representations and warranties of the Company and the Selling Stockholders
contained in Section 1 hereof or in certificates of any officer of the Company
or any Subsidiary of the Company or on behalf of any Selling Stockholder
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:

(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission, and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to the Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A) or, if the Company has elected to rely upon Rule 434,
a Term Sheet shall have been filed with the Commission in accordance with Rule
424(b).

(b) Opinion of Counsel for Company. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Porter, Wright, Morris & Arthur LLP, counsel for the Company, in form
and substance satisfactory to counsel for the Underwriters, together with signed
or reproduced copies of such letter for each of the other

18
<PAGE> 24

Underwriters, to the effect set forth in Exhibit A hereto and to such further
effect as counsel to the Underwriters may reasonably request. In giving such
opinion, such counsel may rely, as to all matters governed by the laws of
jurisdictions other than the law of the State of Ohio, the federal law of the
United States and the General Corporation Law of the State of Delaware, upon the
opinions of counsel satisfactory to the Representatives. Such counsel may also
state that, insofar as such opinion involves factual matters, they have relied,
to the extent they deem proper, upon certificates of officers of the Company and
its Subsidiaries, certificates of the Selling Stockholders and certificates of
public officials. The foregoing opinion may be qualified by statements to the
effect that (i) such counsel does not assume any responsibility for the
accuracy, completeness, or fairness of the statements contained in the
Registration Statement, including any Rule 462(b) Registration Statement, or the
Prospectus or amended Prospectus, and (b) that such counsel express no belief as
to the financial statements and other financial and statistical information
included therein.

(c) Opinion of Counsel for the Selling Stockholders. At Closing
Time, the Representatives shall have received the favorable opinion, dated as of
Closing Time, of Porter, Wright, Morris & Arthur LLP, counsel for the Selling
Stockholders, in form and substance satisfactory to counsel for the
Underwriters, together with signed or reproduced copies of such letter for each
of the other Underwriters to the effect set forth in Exhibit B hereto and to
such further effect as counsel to the Underwriters may reasonably request. In
giving such opinion, such counsel may rely, as to all matters governed by the
laws of jurisdictions other than the law of the State of Ohio, the federal law
of the United States and the General Corporation Law of the State of Delaware,
upon the opinions of counsel satisfactory to the Representatives. Such counsel
may also state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers of the
Company and its Subsidiaries, certificates of the Selling Stockholders and
certificates of public officials. The foregoing opinion may be qualified by
statements to the effect that (i) such counsel does not assume any
responsibility for the accuracy, completeness, or fairness of the statements
contained in the Registration Statement, including any Rule 462(b) Registration
Statement, or the Prospectus or amended Prospectus, and (b) that such counsel
expresses no opinion as to the financial statements and other financial and
statistical information included therein.

(d) Opinion of Counsel for Underwriters. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Ropes & Gray, counsel for the Underwriters, together with signed or
reproduced copies of such letter for each of the other Underwriters with respect
to the matters set forth in clauses (i), (ii), (iv), (v), (viii), (xv) (solely
as to the information in the Prospectus under "Description of Capital
Stock--Common Stock") and the penultimate paragraph of Exhibit A hereto. In
giving such opinion, such counsel may rely, as to all matters governed by the
laws of jurisdictions other than the law of The Commonwealth of Massachusetts,
the federal law of the United States and the General Corporation Law of the
State of Delaware, upon the opinions of counsel satisfactory to the
Representatives. Such counsel

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<PAGE> 25

may also state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers of the
Company and its Subsidiaries and certificates of public officials.

(e) Officers' Certificate. At Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its Subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
Representatives shall have received a certificate of the President or a Vice
President of the Company and of the chief financial or chief accounting officer
of the Company, dated as of Closing Time, to the effect that (1) there has been
no such material adverse change, (ii) the representations and warranties in
Section 1(a) hereof are true and correct with the same force and effect as
though expressly made at and as of Closing Time, (iii) the Company has complied
with all agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to Closing Time, and (iv) no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or are contemplated by the
Commission.

(f) Certificate of Selling Stockholders. At Closing Time, the
Representatives shall have received a certificate of an Attorney-in-Fact on
behalf of each Selling Stockholder, dated as of Closing Time, to the effect that
(1) the representations and warranties of each Selling Stockholder contained in
Section 1(b) hereof are true and correct in all respects with the same force and
effect as though expressly made at and as of Closing Time and (ii) each Selling
Stockholder has complied in all material respects with all agreements and all
conditions on its part to be performed under this Agreement at or prior to
Closing Time.

(g) Accountant's Comfort Letter. At the time of the execution of
this Agreement, the Representatives shall have received from Deloitte & Touche,
LLP a letter dated such date, in form and substance satisfactory to the
Representatives, together with signed or reproduced copies of such letter for
each of the other Underwriters containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus.

(h) Bring-down Comfort Letter. At Closing Time, the
Representatives shall have received from Deloitte & Touche, LLP a letter, dated
as of Closing Time, to the effect that they reaffirm the statements made in the
letter furnished pursuant to subsection of this Section, except that the
specified date referred to shall be a date not more than three business days
prior to Closing Time.

(i) Approval of Listing. At Closing Time, the Securities shall
have been approved for inclusion in the Nasdaq National Market, subject only to
official notice of issuance.

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<PAGE> 26

(j) No Objection. The NASD has confirmed that it has not raised
any objection with respect to the fairness and reasonableness of the
underwriting terms and arrangements.

(k) Lock-up Agreements. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the form of
Exhibit C hereto signed by the persons listed on Schedule H hereto.

(l) Conditions to Purchase of Option Securities. In the event
that the Underwriters exercise their option provided in Section 2(b) hereof to
purchase all or any portion of the Option Securities, the representations and
warranties of the Company contained herein and the statements in any
certificates furnished by the Company and any Subsidiary of the Company
hereunder shall be true and correct as of each Date of Delivery and, at the
relevant Date of Delivery, the Representatives shall have received:

(i) Officers' Certificate. A certificate, dated such
Date of Delivery, of the President or a Vice President of the Company
and of the chief financial or chief accounting officer of the Company
confirming that the certificate delivered at the Closing Time pursuant
to Section 5(e) hereof remains true and correct as of such Date of
Delivery.

(ii) Opinion of Counsel for Company. The favorable
opinion of Porter, Wright, Morris & Arthur LLP, counsel for the
Company, in form and substance satisfactory to counsel for the
Underwriters, dated such Date of Delivery, relating to the Option
Securities to be purchased on such Date of Delivery and otherwise to
the same effect as the opinion required by Section 5(b) hereof.

(iii) Opinion of Counsel for Underwriters. The favorable
opinion of Ropes & Gray, counsel for the Underwriters, dated such Date
of Delivery, relating to the Option Securities to be purchased on such
Date of Delivery and otherwise to the same effect as the opinion
required by Section 5(d) hereof.

(iv) Bring-down Comfort Letter. A letter from Deloitte &
Touche, LLP, in form and substance satisfactory to the Representatives
and dated such Date of Delivery, substantially in the same form and
substance as the letter furnished to the Representatives pursuant to
Section 5(g) hereof, except that the "specified date" in the letter
furnished pursuant to this paragraph shall be a date not more than five
days prior to such Date of Delivery.

(m) Additional Documents. At Closing Time and at each Date of
Delivery counsel for the Underwriters shall have been furnished with such
documents and opinions as they may require for the purpose of enabling them to
pass upon the issuance and sale of the Securities as herein contemplated, or in
order to evidence the accuracy of any of the representations or warranties, or
the fulfillment of any of the conditions, herein contained; and all proceedings
taken by the

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<PAGE> 27

Company and the Selling Stockholders in connection with the issuance and sale of
the Securities as herein contemplated shall be satisfactory in form and
substance to the Representatives and counsel for the Underwriters.

(n) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of Option Securities
on a Date of Delivery which is after the Closing Time, the obligations of the
several Underwriters to purchase the relevant Option Securities, may be
terminated by the Representatives by notice to the Company at any time at or
prior to Closing Time or such Date of Delivery, as the case may be, and such
termination shall be without liability of any party to any other party except as
provided in Section 4 and except that Sections 1, 6, 7 and 8 shall survive any
such termination and remain in full force and effect.

SECTION 6. Indemnification.

(a) Indemnification of Underwriters. The Company and the Selling
Stockholders, jointly and severally, agree to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:

(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement (or any amendment thereto), including the
Rule 430A Information and the Rule 434 Information, if applicable, or
the omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;

(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 6(f) below) any such settlement is effected
with the written consent of the Company; and

22
<PAGE> 28

(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;

provided, however, that this indemnity agreement shall not apply to any
loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through the Representatives expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) and
provided, further, that (i) the liability of each Selling Stockholder shall be
limited to any loss, liability, claim, damage or expense which arises out of, or
is based upon, any untrue statement or alleged untrue statement or omission or
alleged omission made in any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto) or in any Registration Statement (or any
amendment thereto) including the Rule 430A Information and the Rule 434
Information in reliance upon and in conformity with written information
concerning such Selling Stockholder furnished to the Company by or on behalf of
the Selling Stockholder specifically for inclusion therein, and (ii) the
liability of each Selling Stockholder pursuant to this Section 6(a) shall not
exceed the product of the number of Securities sold by such Selling Stockholder
and the public offering price per share (net of the underwriting discount) of
the Securities as set forth in the Prospectus.

(b) Indemnification of Company, Directors and Officers and
Selling Stockholders. Each Underwriter severally and not jointly agrees to
indemnify and hold harmless the Company, its directors, each of its officers who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act, and each Selling Stockholder and each person, if any, who controls any
Selling Stockholder within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act against any and all loss, liability, claim, damage and
expense described in the indemnity contained in Section 6(a) hereof, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by such Underwriter through the
Representatives expressly for use in the Registration Statement (or any
amendment thereto) or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).

23
<PAGE> 29

(c) Company Indemnification of Selling Stockholders. The Company
agrees to indemnify and hold harmless each Selling Stockholder and each person,
if any, who controls any Selling Stockholder within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in Section 6(a)
hereof, as incurred, but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in the Registration Statement (or
any amendment thereto), including Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished by the Company expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or Prospectus (or any amendment or supplement thereto); provided, however, that
in no event shall any Selling Stockholder be indemnified or held harmless
pursuant to this Section 6(c) for any matter with respect to which such Selling
Stockholder has indemnification obligations pursuant to Section 6(a).

(d) Selling Stockholders Indemnification of Company. Each Selling
Stockholder severally and not jointly agrees to indemnify and hold harmless the
Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in Section 6(a) hereof, as incurred, but only with respect to untrue statements
or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto), including Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished by such
Selling Stockholder to the Company expressly for use in the Registration
Statement (or any amendment thereto) or such preliminary prospectus or
Prospectus (or any amendment or supplement thereto); provided, however,that the
liability of each Selling Stockholder pursuant to this Section 6(d) shall not
exceed the product of the number of Securities sold by such Selling Stockholder
and the public offering price per share (net of the underwriting discount) of
the Securities as set forth in the Prospectus. The provisions of this Section
6(d) are in addition to the Selling Stockholders indemnification obligations
contained in Section 6(a) and shall in no way limit, supercede, offset or
otherwise affect such obligations.

(e) Actions against Parties; Notification. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it is
not materially prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Sections
6(a) above, counsel to the indemnified parties shall be selected

24
<PAGE> 30

by Merrill Lynch, and, in the case of parties indemnified pursuant to Section
6(b), 6(c) or 6(d) above, counsel to the indemnified parties shall be selected
by the Company. An indemnifying party may participate at its own expense in the
defense of any such action; provided, however, that counsel to the indemnifying
party shall not (except with the consent of the indemnified party) also be
counsel to the indemnified party. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.

(f) Settlement without Consent if Failure to Reimburse. If at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement. Notwithstanding the immediately preceding sentence,
if at any time an indemnified party shall have requested an indemnifying party
to reimburse the indemnified party for fees and expenses of counsel, an
indemnifying party shall not be liable for any settlement of the nature
contemplated by Section 7(a)(ii) effected without its consent if such
indemnifying party (i) reimburses such indemnified party in accordance with such
request to the extent it considers such request to be reasonable and (ii)
provides written notice to the indemnified party substantiating the unpaid
balance as unreasonable, in each case prior to the date of such settlement.

(g) Other Agreements with Respect to Indemnification. The
provisions of this Section shall not affect any agreement among the Company and
the Selling Stockholders with respect to indemnification.

SECTION 7. Contribution. If the indemnification provided for
in Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party

25
<PAGE> 31

shall contribute to the aggregate amount of such losses, liabilities, claims,
damages and expenses incurred by such indemnified party, as incurred, (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company and the Selling Stockholders on the one hand and the Underwriters on
the other hand from the offering of the Securities pursuant to this Agreement or
(ii) if the allocation provided by clause (i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company and the Selling Stockholders on the one hand and of the Underwriters on
the other hand in connection with the statements or omissions which resulted in
such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.

The relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other hand in
connection with the offering of the Securities pursuant to this Agreement shall
be deemed to be in the same respective proportions as the total net proceeds
from the offering of the Securities pursuant to this Agreement (before deducting
expenses) received by the Company and the Selling Stockholders and the total
underwriting discount received by the Underwriters, in each case as set forth on
the cover of the Prospectus, or, if Rule 434 is used, the corresponding location
on the Term Sheet bear to the aggregate initial public offering price of the
Securities as set forth on such cover.

The relative fault of the Company and the Selling Stockholders on the
one hand and the Underwriters on the other hand shall be determined by reference
to, among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or the Selling Stockholders or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.

The Company, the Selling Stockholders and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 7
were determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
7. The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 7 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.

Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of

26
<PAGE> 32

any damages which such Underwriter has otherwise been required to pay by reason
of any such untrue or alleged untrue statement or omission or alleged omission.

No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company or any
Selling Stockholder within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as the Company or
such Selling Stockholder, as the case may be. The Underwriters' respective
obligations to contribute pursuant to this Section 7 are several in proportion
to the number of Initial Securities set forth opposite their respective names in
Schedule A hereto and not joint.

The provisions of this Section shall not affect any agreement among the
Company and the Selling Stockholders with respect to contribution.

SECTION 8. Representations, Warranties and Agreements to
Survive Delivery. All representations, warranties and agreements contained in
this Agreement or in certificates of officers of the Company or any of its
Subsidiaries or the Selling Stockholders submitted pursuant hereto, shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any Underwriter or controlling person, or by or on behalf of the
Company or the Selling Stockholders, and shall survive delivery of the
Securities to the Underwriters.

SECTION 9. Termination of Agreement.

(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time (i)
if there has been, since the time of execution of this Agreement or since the
respective dates as of which information is given in the Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
Subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material adverse
change in the financial markets in the United States, any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which is
such as to make it, in the judgment of the Representatives, impracticable to
market the Securities or to enforce contracts for the sale of the Securities, or
(iii) if trading in any securities of the Company has been suspended or
materially limited by the Commission or the Nasdaq National Market, or if
trading generally on the

27
<PAGE> 33

American Stock Exchange or the New York Stock Exchange or in the Nasdaq National
Market has been suspended or materially limited, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices have been required, by
any of said exchanges or by such system or by order of the Commission, the
National Association of Securities Dealers, Inc. or any other governmental
authority, or (iv) if a banking moratorium has been declared by Federal or state
authorities.

(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.

SECTION 10. Default by One or More of the Underwriters. If one
or more of the Underwriters shall fail at Closing Time or a Date of Delivery to
purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the Representatives shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all, but not
less than all, of the Defaulted Securities in such amounts as may be agreed upon
and upon the terms herein set forth; if, however, the Representatives shall not
have completed such arrangements within such 24-hour period, then:

(i) if the number of Defaulted Securities does not exceed 10% of
the number of Securities to be purchased on such date, each of the
non-defaulting Underwriters shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that
their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Underwriters, or

(ii) if the number of Defaulted Securities exceeds 10% of the
number of Securities to be purchased on such date, this Agreement or,
with respect to any Date of Delivery which occurs after the Closing
Time, the obligation of the Underwriters to purchase and of the Company
to sell the Option Securities to be purchased and sold on such Date of
Delivery shall terminate without liability on the part of any
non-defaulting Underwriter.

No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.

In the event of any such default which does not result in a termination
of this Agreement or, in the case of a Date of Delivery which is after the
Closing Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Company to sell the relevant Option Securities,
as the case may be, either (i) the Representatives or (ii) the Company and any
Selling Stockholder shall have the right to postpone Closing Time or the
relevant Date of Delivery, as the case may be, for a period not exceeding seven
days in order to effect any required changes

28
<PAGE> 34

in the Registration Statement or Prospectus or in any other documents or
arrangements. As used herein, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 10.

SECTION 11. Default by one or more of the Selling Stockholders
or the Company. (a) If a Selling Stockholder shall fail at Closing Time to sell
and deliver the number of Securities which such Selling Stockholder or Selling
Stockholders are obligated to sell hereunder, and the remaining Selling
Stockholders do not exercise the right hereby granted to increase, pro rata or
otherwise, the number of Securities to be sold by them hereunder to the total
number to be sold by all Selling Stockholders as set forth in Schedule B hereto,
then the Underwriters may, at the option of the Representatives, by notice from
the Representatives to the Company, either (i) terminate this Agreement without
any liability on the fault of any non-defaulting party except that the
provisions of Sections 1, 4, 6, 7 and 8 shall remain in full force and effect or
(ii) elect to purchase the Securities which the non-defaulting Selling
Stockholders and the Company have agreed to sell hereunder; provided, however,
that clause (i) shall apply only if the aggregate number of Securities which
Selling Stockholders fail to sell and deliver at Closing Time exceeds 100,000.
No action taken pursuant to this Section 11 shall relieve any Selling
Stockholder so defaulting from liability, if any, in respect of such default.

In the event of a default by any Selling Stockholder as referred to in
this Section 11, the Representatives and the Company shall have the right to
postpone Closing Time or Date of Delivery for a period not exceeding seven days
in order to effect any required change in the Registration Statement or
Prospectus or in any other documents or arrangements.

(b) If the Company shall fail at Closing Time or at the Date of
Delivery to sell the number of Securities that it is obligated to sell
hereunder, then this Agreement shall terminate without any liability on the part
of any nondefaulting party; provided, however, that the provisions of Sections
1, 4, 6, 7 and 8 shall remain in full force and effect. No action taken pursuant
to this Section shall relieve the Company from liability, if any, in respect of
such default.

SECTION 12. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives at Merrill Lynch & Co.,
5500 Sears Tower, Chicago, Illinois 60606, attention of Mr. Steve Moss, with a
copy to Merrill Lynch & Co., North Tower, World Financial Center, New York, New
York 10281-1201, attention of IBK counsel; notices to the Company or the Selling
Stockholders shall be directed to it or them at CheckFree Holdings Corporation,
4411 East Jones Bridge Road, Norcros, Georgia 30092, attention of Allen L.
Shulman, Esq., with a copy to Porter, Wright, Morris & Arthur LLP, 41 South High
Street, Columbus, Ohio 43215, attention of Robert J. Tannous, Esq.

29
<PAGE> 35

SECTION 13. Parties. This Agreement shall each inure to the
benefit of and be binding upon the Underwriters, the Company and the Selling
Stockholders and their respective successors. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Underwriters, the Company and the Selling
Stockholders and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Underwriters, the Company and the Selling Stockholders
and their respective successors, and said controlling persons and officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Securities from any
Underwriter shall be deemed to be a successor by reason merely of such purchase.

SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.

SECTION 15. Effect of Headings. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.

30
<PAGE> 36

If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Attorney-in-Fact for
the Selling Stockholders a counterpart hereof, whereupon this instrument, along
with all counterparts, will become a binding agreement among the Underwriters,
the Company and the Selling Stockholders in accordance with its terms.

Very truly yours,

CHECKFREE HOLDINGS CORPORATION

By:
-------------------------------------------
Name:
Title:

[List of Selling Stockholders]

By:
-------------------------------------------
Name:
Title:

As Attorney-in-Fact acting on behalf of the
Selling Stockholders named in Schedule B hereto

CONFIRMED AND ACCEPTED,
as of the date first above written:

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
BT ALEX. BROWN INCORPORATED
HAMBRECHT & QUIST LLC
U.S. BANCORP PIPER JAFFRAY INC.

By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED

By:
----------------------------------
Authorized Signatory

For itself and as Representatives of the other Underwriters named in
Schedule A hereto.

<PAGE> 37

SCHEDULE A

<TABLE>
<CAPTION>
Name of Underwriter Number
of
Initial
Securities
----------

<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.........................................................
BT Alex. Brown Incorporated................................................................
Hambrech & Quist LLC.......................................................................
US Bancorp Piper Jaffray Inc...............................................................

Total...................................................................................... [ ]
===========
</TABLE>

<PAGE> 38

SCHEDULE B

<TABLE>
<CAPTION>
Number of Initial Maximum Number of Option
Securities to be Sold Securities to Be Sold
--------------------- ------------------------
<S> <C> <C>
CheckFree Holdings Corporation
[Selling Stockholders]

Total......................................
</TABLE>

<PAGE> 39

SCHEDULE C
CheckFree Holdings Corporation
[_________] Shares of Common Stock
(Par Value $0.01 Per Share)

1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $________.

2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $________, being an amount equal to the initial
public offering price set forth above less $________ per share; provided that
the purchase price per share for any Option Securities purchased upon the
exercise of the over-allotment option described in Section 2(b) shall be reduced
by an amount per share equal to any dividends or distributions declared by the
Company and payable on the Initial Securities but not payable on the Option
Securities.

<PAGE> 40

SCHEDULE D

Capitalization of Certain Subsidiaries

<PAGE> 41

SCHEDULE E

List of Subsidiaries

<PAGE> 42

SCHEDULE F

Liens on Assets

<PAGE> 43

SCHEDULE G

Registration Rights

<PAGE> 44

SCHEDULE H

List of persons and entities
subject to lock-up

<PAGE> 45

Exhibit A

FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO

(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the state of Delaware.

(ii) The Company has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectus and to enter into and perform its
obligations under the Purchase Agreement.

(iii) The Company is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would
not result in a Material Adverse Effect.

(iv) The authorized, issued and outstanding capital stock
of the Company is as set forth in the Prospectus in the column entitled
"Actual" under the caption "Capitalization" (except for subsequent
issuances, if any, pursuant to the Purchase Agreement or pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectus or pursuant to the exercise of convertible securities or
options referred to in the Prospectus); the shares of issued and
outstanding capital stock of the Company, including the Securities to
be purchased by the Underwriters from the Selling Stockholders, have
been duly authorized and validly issued and are fully paid and
non-assessable; and none of the outstanding shares of capital stock of
the Company was issued in violation of the preemptive or other similar
rights of any securityholder of the Company.

(v) The Securities to be purchased by the Underwriters
from the Company have been duly authorized for issuance and sale to the
Underwriters pursuant to the Purchase Agreement and, when issued and
delivered by the Company pursuant to the Purchase Agreement against
payment of the consideration set forth in the Purchase Agreement, will
be validly issued and fully paid and non-assessable and no holder of
the Securities is or will be subject to personal liability by reason of
being such a holder.

(vi) The issuance and sale of the Securities by the
Company and the sale of the Securities by the Selling Stockholders is
not subject to the preemptive or other similar rights of any
securityholder of the Company.

<PAGE> 46

(vii) Each Subsidiary has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and is duly qualified as a
foreign corporation to transact business and is in good standing in
each jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect; except as set
forth in Schedule D to the Purchase Agreement and as otherwise
disclosed in the Registration Statement, all of the issued and
outstanding capital stock of each Subsidiary has been duly authorized
and validly issued, is fully paid and non-assessable and, to the best
of our knowledge, is owned by the Company, directly or through
Subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity; none of the outstanding
shares of capital stock of any Subsidiary was issued in violation of
the preemptive or similar rights of any securityholder of such
Subsidiary.

(viii) The Purchase Agreement has been duly authorized,
executed and delivered by the Company.

(ix) The Registration Statement, including any Rule
462(b) Registration Statement, has been declared effective under the
1933 Act; any required filing of the Prospectus pursuant to Rule 424(b)
has been made in the manner and within the time period required by Rule
424(b); and, to the best of our knowledge, no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or
threatened by the Commission.

(x) The Registration Statement, including any Rule
462(b) Registration Statement, the Rule 430A Information and the Rule
434 Information, as applicable, the Prospectus, excluding the documents
incorporated by reference therein, and each amendment or supplement to
the Registration Statement and Prospectus, excluding the documents
incorporated by reference therein, as of their respective effective or
issue dates (other than the financial statements and supporting
schedules included therein or omitted therefrom, as to which we need
express no opinion) complied as to form in all material respects with
the requirements of the 1933 Act and the 1933 Act Regulations.

(xi) The documents incorporated by reference in the
Prospectus (other than the financial statements and supporting
schedules included therein or omitted therefrom, as to which we need
express no opinion), when they became effective or were filed with the
Commission, as the case may be, complied as to form in all material
respects with the

2
<PAGE> 47

requirements of the 1933 Act or the 1934 Act, as applicable, and the
rules and regulations of the Commission thereunder.

(xii) If Rule 434 has been relied upon, the Prospectus was
not "materially different," as such term is used in Rule 434, from the
prospectus included in the Registration Statement at the time it became
effective.

(xiii) The form of certificate used to evidence the Common
Stock complies in all material respects with all applicable statutory
requirements, with any applicable requirements of the charter and
by-laws of the Company and the requirements of the Nasdaq National
Market.

(xiv) To the best of our knowledge and except as described
in the Prospectus, there is not pending or threatened any action, suit,
proceeding, inquiry or investigation, to which the Company or any
Subsidiary is a party, or to which the property of the Company or any
Subsidiary is subject, before or brought by any court or governmental
agency or body, domestic or foreign, which might reasonably be expected
to result in a Material Adverse Effect, or which might reasonably be
expected to materially and adversely affect the properties or assets
thereof or the consummation of the transactions contemplated in the
Purchase Agreement or the performance by the Company of its obligations
thereunder.

(xv) The information in the Prospectus under "Business--
Regulatory Matters," "Business--Litigation," and "Risk Factors--
Antitakeover provisions in our organizational documents and Delaware
law make any change in control of us more difficult" and in the
Registration Statement under Item 15, to the extent that it constitutes
matters of law, summaries of legal matters, the Company's charter and
bylaws or legal proceedings, or legal conclusions, has been reviewed by
us and is correct in all material respects.

(xvi) To the best of our knowledge, there are no statutes
or regulations that are required to be described in the Prospectus that
are not described as required.

(xvii) All descriptions in the Registration Statement of
contracts and other documents to which the Company or its Subsidiaries
are a party are accurate in all material respects; to the best of our
knowledge, there are no franchises, contracts, indentures, mortgages,
loan agreements, notes, leases or other instruments required to be
described or referred to in the Registration Statement or to be filed
as exhibits thereto other than those described or referred to therein
or filed or incorporated by reference as exhibits thereto, and the
descriptions thereof or references thereto are correct in all material
respects.

3
<PAGE> 48

(xviii) To the best of our knowledge, neither the Company
nor any Subsidiary is in violation of its charter or by-laws and no
default by the Company or any Subsidiary exists in the due performance
or observance of any material obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument that is
described or referred to in the Registration Statement or the
Prospectus or filed or incorporated by reference as an exhibit to the
Registration Statement.

(xix) No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or
governmental authority or agency, domestic or foreign (other than under
the 1933 Act and the 1933 Act Regulations, which have been obtained, or
as may be required under the securities or blue sky laws of the various
states, as to which we need express no opinion) is necessary or
required in connection with the due authorization, execution and
delivery of the Purchase Agreement or for the offering, issuance, sale
or delivery of the Securities.

(xx) The execution, delivery and performance of the
Purchase Agreement and the consummation of the transactions
contemplated in the Purchase Agreement and in the Registration
Statement (including the issuance and sale of the Securities and the
use of the proceeds from the sale of the Securities as described in the
Prospectus under the caption "Use Of Proceeds") and compliance by the
Company with its obligations under the Purchase Agreement do not and
will not, whether with or without the giving of notice or lapse of time
or both, conflict with or constitute a breach of, or default or
Repayment Event (as defined in Section 1(a)(xi) of the Purchase
Agreement) under or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
Subsidiary pursuant to any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or any other agreement or
instrument, known to me, to which the Company or any Subsidiary is a
party or by which it or any of them may be bound, or to which any of
the property or assets of the Company or any Subsidiary is subject
(except for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not have a Material Adverse Effect), nor will
such action result in any violation of the provisions of the charter or
by-laws of the Company or any Subsidiary, or any applicable law,
statute, rule, regulation, judgment, order, writ or decree, known to
us, of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any Subsidiary or any
of their respective properties, assets or operations.

(xxi) The Company is not an "investment company" or an
entity "controlled" by an "investment company," as such terms are
defined in the 1940 Act.

4
<PAGE> 49

(xxii) The Rights under the Company's Shareholder Rights
Plan to which holders of the Securities will be entitled have been duly
authorized and validly issued.

(xxiii) Nothing has come to our attention that would lead us
to believe that the Registration Statement or any amendment thereto,
including the Rule 430A Information and Rule 434 Information (if
applicable), (except for financial statements and schedules and other
financial data included or incorporated by reference therein or omitted
therefrom, as to which we need make no statement), at the time such
Registration Statement or any such amendment became effective,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus or any
amendment or supplement thereto (except for financial statements and
schedules and other financial data included or incorporated by
reference therein or omitted therefrom, as to which we need make no
statement), at the time the Prospectus was issued, at the time any such
amended or supplemented prospectus was issued or at the Closing Time,
included or includes an untrue statement of a material fact or omitted
or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.

In rendering such opinion, such counsel may rely as to matters
of fact (but not as to legal conclusions), to the extent they deem
proper, on certificates of responsible officers of the Company and
public officials.

5
<PAGE> 50

Exhibit B

FORM OF OPINION OF COUNSEL FOR THE SELLING STOCKHOLDERS
TO BE DELIVERED PURSUANT TO SECTION 5(c)

(i) No filing with, or consent, approval, authorization,
license, order, registration, qualification or decree of, any court or
governmental authority or agency, domestic or foreign, (other than the
issuance of the order of the Commission declaring the Registration
Statement effective and such authorizations, approvals or consents as
may be necessary under state securities laws, as to which we need
express no opinion) is necessary or required to be obtained by the
Selling Stockholders for the performance by each Selling Stockholder of
its obligations under the Purchase Agreement or in the Power of
Attorney and Custody Agreement, or in connection with the offer, sale
or delivery of the Securities.

(ii) `Each Power of Attorney and Custody Agreement has
been duly executed and delivered by the respective Selling Stockholders
named therein and constitutes the legal, valid and binding agreement of
such Selling Stockholder.

(iii) The Purchase Agreement has been duly authorized,
executed and delivered by or on behalf of each Selling Stockholder.

(iv) Each Attorney-in-Fact has been duly authorized by
the Selling Stockholders to deliver the Securities on behalf of the
Selling Stockholders in accordance with the terms of the Purchase
Agreement.

(v) The execution, delivery and performance of the
Purchase Agreement and the Power of Attorney and Custody Agreement and
the sale and delivery of the Securities and the consummation of the
transactions contemplated in the Purchase Agreement and in the
Registration Statement and compliance by the Selling Stockholders with
its obligations under the Purchase Agreement have been duly authorized
by all necessary action on the part of the Selling Stockholders and do
not and will not, whether with or without the giving of notice or
passage of time or both, conflict with or constitute a breach of, or
default under or result in the creation or imposition of any tax, lien,
charge or encumbrance upon the Securities or any property or assets of
the Selling Stockholders pursuant to, any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, license, lease
or other instrument or agreement to which any Selling Stockholder is a
party or by which his/her/it/they may be bound, or to which any of the
property or assets of the Selling Stockholders may be subject nor will
such action result in any violation of the provisions of the charter or
by-laws of the Selling Stockholders, if applicable, or any law,
administrative regulation, judgment or order of any governmental agency
or body or any administrative or court decree having jurisdiction over
such Selling Stockholder or any of its properties.

(vi) To the best of our knowledge, each Selling
Stockholder has valid title to the Securities to be sold by such
Selling Stockholder pursuant to the Purchase Agreement, free

<PAGE> 51

and clear of any pledge, lien, security interest, charge, claim, equity
or encumbrance of any kind, and has full right, power and authority to
sell, transfer and deliver such Securities pursuant to the Purchase
Agreement. By delivery of a certificate or certificates therefor such
Selling Stockholder will transfer to the Underwriters who have
purchased such Securities pursuant to the Purchase Agreement (without
notice of any defect in the title of such Selling Stockholder and who
are otherwise bona fide purchasers for purposes of the Uniform
Commercial Code) valid title to such Securities, free and clear of any
pledge, lien, security interest, charge, claim, equity or encumbrance
of any kind.

(vii) Nothing has come to our attention that would lead us
to believe that the Registration Statement or any amendment thereto,
including the Rule 430A Information and Rule 434 Information (if
applicable), (except for financial statements and schedules and other
financial data included or incorporated by reference therein or omitted
therefrom, as to which we need make no statement), at the time such
Registration Statement or any such amendment became effective,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus or any
amendment or supplement thereto (except for financial statements and
schedules and other financial data included or incorporated by
reference therein or omitted therefrom, as to which we need make no
statement), at the time the Prospectus was issued, at the time any such
amended or supplemented prospectus was issued or at the Closing Time,
included or includes an untrue statement of a material fact or omitted
or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.

2
<PAGE> 52

FORM OF LOCK-UP FROM DIRECTORS, OFFICERS OR OTHER STOCKHOLDERS PURSUANT TO
SECTION 5(K)

Exhibit C

______________, 1999

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
BT ALEX. BROWN INCORPORATED
HAMBRECHT & QUIST LLC
U.S. BANCORP PIPER JAFFRAY INC.
as Representatives of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
North Tower
World Financial Center
New York, New York 10281-1209

Re: Proposed Public Offering by CheckFree Holdings Corporation

Dear Sirs:

The undersigned, a stockholder [and an officer and/or director] of
CheckFree Holdings Corporation, a Delaware corporation (the "Company"),
understands that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), BT Alex. Brown Incorporated, Hambrecht & Quist
LLC and U.S. Bancorp Piper Jaffray Inc. propose to enter into a Purchase
Agreement (the "Purchase Agreement") with the Company and certain selling
stockholders providing for the public offering of shares (the "Securities") of
the Company's common stock, par value $0.01 per share (the "Common Stock"). In
recognition of the benefit that such an offering will confer upon the
undersigned as a stockholder [and an officer and/or director] of the Company,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the undersigned agrees with each underwriter to
be named in the Purchase Agreement that, during a period of 90 days from the
date of the Purchase Agreement, the undersigned will not, without the prior
written consent of Merrill Lynch, directly or indirectly, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant for the sale

<PAGE> 53

of, or otherwise dispose of or transfer any shares of the Company's Common Stock
or any securities convertible into or exchangeable or exercisable for Common
Stock, whether now owned or hereafter acquired by the undersigned or with
respect to which the undersigned has or hereafter acquires the power of
disposition, or file any registration statement under the Securities Act of
1933, as amended, with respect to any of the foregoing or (ii) enter into any
swap or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction is to be settled by delivery
of Common Stock or other securities, in cash or otherwise.

Very truly yours,

Signature:
-------------------------

Print Name:
------------------------

<PAGE> 1

EXHIBIT 5

PORTER, WRIGHT, MORRIS & ARTHUR LLP
41 South High Street
Columbus, Ohio 43215-6194
Telephone: (614) 227-2000
Fax: (614) 227-2100

June 1, 1999

CheckFree Holdings Corporation
4411 East Jones Bridge Road
Norcross, Georgia 30092

Ladies and Gentlemen:

With respect to the Registration Statement on Form S-3 (the
"Registration Statement") being filed by CheckFree Holdings Corporation (the
"Company") under the Securities Act of 1933, as amended, relating to the
registration of 4,025,000 common shares of the Company, $0.01 par value (the
"Shares"), which includes 525,000 shares which may be issued for the purpose of
covering over-allotments, 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 Amended and
Restated Certificate of Incorporation, as amended to date, the corporate action
taken to date in connection with the Registration Statement and the issuance and
sale of the Shares, and such other documents and authorities as we deem relevant
for the purpose of this opinion.

Based upon the foregoing, we are of the opinion that, upon compliance
with the Securities Act of 1933, as amended, and with the securities or "Blue
Sky" laws of the states in which the Shares are to be offered for sale, and
delivery of the Shares to the underwriters against payment therefor in
accordance with the terms of the underwriting agreements to be entered into
between the Company and the underwriters, the Shares will be validly issued,
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
Experts" in the prospectus included in the Registration Statement.

Very truly yours,

/s/Porter, Wright, Morris & Arthur LLP

Porter, Wright, Morris & Arthur LLP

<PAGE> 1
EXHIBIT 23 (a)

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in this Registration
Statement of CheckFree Holdings Corporation on Form S-3 of our reports dated
August 11, 1998, except for Note 20 to the consolidated financial statements as
to which the date is September 11, 1998, included and incorporated by reference
in the Annual Report on Form 10-K of CheckFree Holdings Corporation for the
year ended June 30, 1998, and to the use of our report dated August 11, 1998,
except for Note 20 as to which the date is September 11, 1998, appearing in the
Prospectus, which is part of this Registration Statement. We also consent to
the references to us under the headings "Summary Consolidated Financial
Information", "Selected Consolidated Financial Data" and "Experts" in such
Prospectus.

/s/ DELOITTE & TOUCHE LLP
------------------------------
Deloitte & Touche LLP

Atlanta, Georgia

May 27, 1999

<PAGE> 1

EXHIBIT 24

POWER OF ATTORNEY

Each of the undersigned directors and/or officers of CheckFree Holdings
Corporation (the "Corporation") hereby appoints Peter J. Kight, Mark A. Johnson,
and Curtis A. Loveland as the undersigned's attorneys or any of them
individually as the undersigned's attorney, to sign, in the undersigned's name
and behalf and in any and all capacities stated below, and to cause to be filed
with the Securities and Exchange Commission (the "Commission"), the
Corporation's Registration Statement on Form S-3 (the "Registration Statement"),
and any and all amendments, including post-effective amendments, to the
Registration Statement, and any registration statement relating to the same
offering as this Registration Statement that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, hereby granting unto
such attorney-in-fact, 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 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, we have hereunto set our hands this 7th day of May,
1999.

Signature Title

/s/ Peter J. Kight Chairman of the Board of Directors,
- -------------------------------- President, and Chief Executive Officer
Peter J. Kight

/s/ Mark. A. Johnson Vice Chairman and Director
- --------------------------------
Mark A. Johnson

/s/ Allen L. Shulman Executive Vice President, Chief
- -------------------------------- Financial Officer and General Counsel
Allen L. Shulman

/s/ Gary A. Luoma, Jr. Vice President, Chief Accounting
- -------------------------------- Officer and Assistant Secretary
Gary A. Luoma, Jr.

/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