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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
CHECKFREE CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of Securities to which asset purchase
applies:
---------------------------------------------------------
2) Aggregate number of securities to which asset purchase
applies:
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3) Per unit price or other underlying value of asset purchase
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
---------------------------------------------------------
4) Proposed maximum aggregate value of asset purchase:
---------------------------------------------------------
5) Total fee paid:
---------------------------------------------------------
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed
Notes:
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CHECKFREE LOGO
CHECKFREE CORPORATION
4411 EAST JONES BRIDGE ROAD
NORCROSS, GEORGIA 30092
(678) 375-3000
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
[ ], 2000
AT [ ].M.
To Our Stockholders: [ ], 2000
Notice is hereby given that a special meeting of stockholders of CheckFree
Corporation will be held on [ ], 2000, at [ ], local
time, at our executive offices located at 4411 East Jones Bridge Road, Norcross,
Georgia for the following purposes:
(1) To consider and vote on a proposal to approve the issuance of 10
million shares of CheckFree common stock, $0.01 par value, and warrants
to purchase up to an additional 10 million shares of CheckFree common
stock, to Bank of America, N.A., a national banking association, under
a strategic agreement with Bank of America through which CheckFree
Services Corporation, our wholly owned subsidiary, will acquire certain
of Bank of America's electronic billing and payment assets and we will
provide electronic billing and payment services to Bank of America's
customers over the next ten years.
(2) To consider and act upon such other matters as may properly come before
the special meeting or any adjournment or postponement of the special
meeting.
CHECKFREE'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" APPROVAL OF THE SHARE ISSUANCE PURSUANT TO THE STRATEGIC AGREEMENT.
You are not being asked to approve the strategic agreement with Bank of
America or the asset purchase. Our board of directors has approved the strategic
agreement and the transactions contemplated by that agreement. You are being
asked only to approve the issuance of an aggregate of not less than 10 million
and up to 20 million shares of our common stock in connection with the
transactions contemplated in the strategic agreement. It is a condition to the
closing of the transactions contemplated in the strategic agreement that our
stockholders approve the share issuance proposal.
The accompanying proxy statement describes the strategic agreement, as well
as certain agreements related to the strategic agreement, and the proposed share
issuance. WE URGE YOU TO READ THESE MATERIALS, INCLUDING THE SECTION DESCRIBING
THE RISK FACTORS RELATING TO THE TRANSACTIONS CONTEMPLATED IN THE STRATEGIC
AGREEMENT THAT BEGINS ON PAGE [ ]. Only holders of our common stock at the
close of business on the record date, August 2, 2000, will be entitled to notice
of, and to vote at, the special meeting or any adjournment or postponement of
the meeting.
You will be most welcome at the special meeting, and we hope that you can
attend. Our directors and officers will be present to answer your questions. In
addition, as required under Delaware law, we will make available at our
principal executive offices at least ten days before the date of the special
meeting a complete list of all of our stockholders entitled to vote at the
special meeting.
Your vote is very important, regardless of the number of shares you own.
Please vote as soon as possible to make sure that your shares are represented at
the special meeting. To vote your shares, you may complete and return the
enclosed proxy card or you may be able to submit your proxy or voting
instructions by telephone or the Internet. If you are a holder of record, you
may also cast your vote in person at the special meeting. If your shares are
held in account at a brokerage firm or bank, you must instruct them on how to
vote your shares.
By Order of the Board of Directors,
Curtis A. Loveland
Secretary
Norcross, Georgia
[ ], 2000
PLEASE SIGN AND MAIL THE ENCLOSED PROXY
IN THE ACCOMPANYING ENVELOPE.
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES
<PAGE> 3
CHECKFREE CORPORATION
4411 EAST JONES BRIDGE ROAD
NORCROSS, GEORGIA 30092
(678) 375-3000
To Our Stockholders:
You are cordially invited to attend a special meeting of stockholders of
CheckFree Corporation, to be held on [ ], 2000, at [ ].,
local time, at our executive offices located at 4411 East Jones Bridge Road,
Norcross, Georgia.
At the meeting, you will be asked to vote on a proposal to approve the
issuance of 10 million shares of CheckFree common stock, $0.01 par value, and
warrants to purchase up to an additional 10 million shares of CheckFree common
stock, to Bank of America, N.A., a national banking association, under a
strategic agreement with Bank of America through which CheckFree Services
Corporation, our wholly owned subsidiary, will acquire certain of Bank of
America's electronic billing and payment assets and we will provide electronic
billing and payment services to Bank of America's customers over the next ten
years.
At the effective time of the share issuance, none of the warrants will be
vested and exercisable. The warrants will vest and become exercisable in stages
based on: (1) the number of Bank of America customers using our electronic
billing and payment services; and (2) the number of eBills that Bank of America
delivers per month. To earn all of the warrants, at least 10 million Bank of
America customers must be using our services, and Bank of America must be
delivering at least 10 million eBills per month.
You are not being asked to approve the strategic agreement with Bank of
America or the asset purchase. Our board of directors has approved the strategic
agreement and the transactions contemplated by the strategic agreement. You are
being asked only to approve the issuance of an aggregate of 20 million shares of
our common stock in connection with the transactions contemplated in the
strategic agreement.
Completion of the transactions contemplated by the strategic agreement is
subject to a number of conditions, including approval by our stockholders of the
proposed issuance of our common stock and warrants at the special meeting. Even
if you approve the issuance of our common stock and warrants to Bank of America,
however, we cannot assure you that the transactions will be completed. Approval
of the share issuance proposal requires the affirmative vote of holders of a
majority of the outstanding shares of our common stock.
Our common stock is listed on the Nasdaq National Market under the symbol
"CKFR." On August 14, 2000, the closing price of our common stock on the Nasdaq
National Market was $46.00 per share.
Your vote is very important, regardless of the number of shares you own.
Please vote as soon as possible to make sure that your shares are represented at
the special meeting. To vote your shares, you may complete and return the
enclosed proxy card, or you may vote by telephone or the Internet. If you are a
holder of record, you may also cast your vote in person at the special meeting.
If your shares are held in an account at a brokerage firm or bank, you must
instruct your broker or bank how to vote your shares.
Our board of directors has carefully reviewed and considered the terms of
the strategic agreement and has determined that the strategic agreement and the
transactions contemplated thereby are in the best interests of CheckFree and our
stockholders. Accordingly, the board of directors has unanimously approved the
strategic agreement and recommends that you vote "FOR" the share issuance to
Bank of America at the special meeting. The enclosed proxy statement provides
you with a summary of the proposed transactions with Bank of America and
additional information. Please give this information your careful attention.
This proxy statement is first being mailed to our stockholders on or about
[ ].
Very truly yours,
Peter J. Kight
Chairman of the Board
, 2000
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Questions and Answers about the Strategic Agreement and
Share Issuance............................................ 3
Summary..................................................... 5
Risk Factors................................................ 8
Forward Looking Statements.................................. 10
Where You Can Find More Information......................... 11
The Special Meeting......................................... 12
Proxy Statement........................................... 12
Date, Time and Place...................................... 12
Purpose of the Special Meeting............................ 12
Record Date............................................... 13
Vote Required for Adoption of the Share Issuance
Proposal............................................... 13
Proxies................................................... 13
Voting Electronically Over the Internet or by Telephone... 14
Solicitation of Proxies................................... 14
The Strategic Agreement and Share Issuance.................. 14
Overview.................................................. 14
Recommendation of Our Board of Directors; Our Reasons for
the Strategic Agreement................................ 15
Completion and Effectiveness of the Strategic Agreement... 16
Material United States Federal Income Tax Consequences of
the Strategic Agreement................................ 16
Accounting Treatment of the Strategic Agreement........... 16
Regulatory Matters........................................ 16
Nasdaq National Market Listing of CheckFree Common Stock
to be Issued Pursuant to the Strategic Agreement....... 17
Appraisal Rights.......................................... 17
Restrictions on Sales of Shares by Bank of America........ 17
Conditions Precedent to Closing........................... 17
Representations and Warranties............................ 18
Expenses.................................................. 19
Termination, Amendment and Waiver......................... 19
Description of Related Agreements........................... 19
Purchase and Assumption Agreement......................... 19
EBP Transition Agreement.................................. 20
Services Agreement........................................ 20
Warrant Agreement......................................... 21
Registration Rights Agreement............................. 21
Principal Stockholders and Share Ownership of Management.... 22
Stockholder Proposals....................................... 23
Other Matters............................................... 23
Appendix A -- Amended and Restated Strategic Alliance Master
Agreement................................................. A-1
Appendix B -- Purchase and Assumption Agreement............. B-1
</TABLE>
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QUESTIONS AND ANSWERS ABOUT THE STRATEGIC AGREEMENT AND SHARE ISSUANCE
Q. WHAT AM I BEING ASKED TO VOTE UPON?
A. You are being asked to approve the issuance of:
- 10 million shares of our common stock, $0.01 par value, and
- warrants to purchase up to an additional 10 million shares of our common
stock,
to Bank of America, under a strategic agreement with Bank of America, dated
as of April 26, 2000. Under the strategic agreement, CheckFree Services
Corporation, our wholly owned subsidiary, will acquire certain of Bank of
America's electronic billing and payment assets and we will provide
electronic billing and payment services to Bank of America's customers over
the next ten years.
At the effective time of the share issuance, none of the warrants issued will
be vested. The warrants will vest and become exercisable in stages based on:
- the number of Bank of America customers using our electronic billing and
payment services; and
- the number of eBills that Bank of America delivers per month.
To earn all of the warrants, at least 10 million Bank of America customers
must be using our services, and Bank of America must be delivering at least
10 million eBills per month.
Q. WHY ARE CHECKFREE AND BANK OF AMERICA ENTERING INTO THE STRATEGIC AGREEMENT?
A. We have entered into the strategic agreement because we believe that by
combining our expertise in providing electronic billing and payment services
with access to customers of the nation's largest bank, we will be able to
accelerate the growth and acceptance of electronic billing and payment
services faster than either company could do on its own. The increased
adoption of our electronic billing and payment services will create the
potential for stronger operating and financial results.
Q. WHAT STOCKHOLDER APPROVALS ARE NEEDED?
A. The affirmative vote of the holders of a majority of the shares of our
common stock voting in person or by proxy at the special meeting is required
to approve the issuance of the shares and warrants in connection with the
strategic agreement, provided that a quorum, which means a majority of the
shares of our common stock outstanding on the record date, votes in person
or by proxy at the special meeting.
Q. WHAT DO I NEED TO DO NOW?
A. After carefully reading and considering the information contained in this
proxy statement, please respond by:
- completing, signing and dating your proxy card or voting instructions and
returning it in the enclosed postage paid envelope; or
- if available, by submitting your proxy or voting instructions by telephone
or through the Internet, as soon as possible so that your shares may be
represented at the special meeting.
Q. WHAT IF I DO NOT VOTE?
A. If you fail to respond, your shares will not count toward a quorum necessary
to conduct the vote at the special meeting, and will not be counted as
either a vote for or against the share issuance proposal.
If you respond and do not indicate how you want to vote, your proxy will be
counted as a vote in favor of the share issuance proposal.
Q. CAN I CHANGE MY VOTE AFTER I HAVE DELIVERED MY PROXY?
A. Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of four ways.
- First, you can revoke your proxy.
- Second, you can submit a new proxy.
If you choose either of these two methods, you must submit your notice of
revocation or your new proxy to the Secretary of CheckFree before the special
meeting. If your shares are held in an account at a brokerage firm or bank,
you should contact your brokerage firm or bank to change your vote.
- Third, if you are a holder of record, you can attend the special meeting
and vote in person.
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- Fourth, if you submit your proxy or voting instructions electronically
through the Internet or by telephone, you can change your vote by
submitting a proxy at a later date, using the same procedures, in which
case your later submitted proxy will be recorded and your earlier proxy
revoked.
Q. WHEN DO YOU EXPECT THE SHARE ISSUANCE TO BE COMPLETED AND THE STRATEGIC
AGREEMENT TO BECOME EFFECTIVE?
A. We are working to complete the share issuance and the transactions
contemplated by the strategic agreement as soon as possible after our
special meeting. We expect to close the transactions in the Fall of 2000.
Q. WHO CAN HELP ANSWER MY QUESTIONS?
A. If you have any questions about the strategic agreement or the share
issuance proposal, or how to submit your proxy, or if you need additional
copies of the proxy statement or the enclosed proxy card or voting
instructions, you should contact:
CheckFree Corporation
Investor Relations
4411 East Jones Bridge Road
Norcross, Georgia 30092
(678) 375-3000
E-mail: [email protected]
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SUMMARY
This summary highlights selected information in this proxy statement. You
should carefully read this entire proxy statement and the other documents we
refer to for a more complete understanding of the strategic agreement. In
particular, you should read the Amended and Restated Strategic Master Alliance
Agreement attached as Appendix A and the Purchase and Assumption Agreement
attached as Appendix B.
THE COMPANIES
CHECKFREE CORPORATION
4411 EAST JONES BRIDGE ROAD
NORCROSS, GEORGIA 30092
(678) 375-3000
WWW.CHECKFREE.COM
The reference to our website address above does not constitute
incorporation by reference of the information contained on that website, so you
should not consider any information on this website to be a part of this proxy
statement.
We are the leading provider of electronic billing and payment services. We
operate our business through three independent but inter-related divisions:
- Electronic Commerce;
- Investment Services; and
- Software.
Our Electronic Commerce business provides services that allow consumers to:
- receive electronic bills through the Internet;
- pay bills received electronically or in paper form to anyone; and
- perform ordinary banking transactions, including balance inquiries,
transfers between accounts and on-line statement reconciliations.
Our Investment Services business offers portfolio accounting and
performance measurement services to investment advisors, brokerage firms, banks
and insurance companies and financial planning application software to financial
planners.
Our Software businesses provide electronic commerce and financial
applications software and services for businesses and financial institutions.
We are incorporating by reference important business and financial
information about us into this proxy statement that is not included in or
delivered with this proxy statement. You may obtain the information incorporated
by reference into this proxy statement without charge by following the
instructions in the section of this proxy statement entitled "Where You Can Find
More Information."
BANK OF AMERICA, N.A.
101 SOUTH TRYON STREET
CHARLOTTE, NORTH CAROLINA 28255
(704) 386-5000
WWW.BANKOFAMERICA.COM
The reference to Bank of America's website address above does not
constitute incorporation by reference of the information contained on that
website, so you should not consider any information on this website to be a part
of this proxy statement.
Bank of America is the largest bank in the United States. With full-service
operations in 21 states and the District of Columbia, Bank of America and its
affiliates provide financial products and services to 30 million households and
two million businesses. The Bank also supports business transactions in 190
countries. Bank of America, N.A. is a wholly owned subsidiary of Bank of America
Corporation, a Delaware corporation, whose common stock (ticker: BAC) is listed
on the New York, Pacific and London stock exchanges and certain shares are
listed on the Tokyo Stock Exchange.
THE STRATEGIC AGREEMENT AND SHARE ISSUANCE
We and CheckFree Services Corporation have entered into an Amended and
Restated Strategic Master Alliance Agreement with Bank of America, dated as of
April 26, 2000, which governs the share issuance and the purchase of certain of
Bank of America's electronic billing and payment assets, as well as the ongoing
business relationship between us and Bank of America and its subsidiaries.
Under the strategic agreement, at the closing:
- we will issue 10 million shares of our common stock and warrants to
purchase up to an additional 10 million shares of our common stock to
Bank of America, and will make an additional cash payment to Bank of
America of $35 million;
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- Bank of America will transfer certain of its electronic billing and
payment assets and liabilities to CheckFree Services Corporation pursuant
to a Purchase and Assumption Agreement; and
- we will begin to provide electronic billing and payment services to Bank
of America's customers pursuant to a Services Agreement between us and
Bank of America.
We have included a copy of the strategic agreement in this proxy statement
as Appendix A. We encourage you to read the strategic agreement because it is
the legal document that governs the share issuance and related transactions
described in this proxy statement. Additionally, we have either entered into, or
will at the closing of the strategic agreement enter into, the following
agreements:
- A Services Agreement, which details the electronic billing and payment
related services that we will supply to Bank of America, the level of
service, and the fees we will receive. It has a basic term of ten years,
although it may be extended, and on 12 months prior notice and payment of
half of the remaining minimum fees and forfeiture of all warrants, it may
be terminated by Bank of America any time after two years. The Services
Agreement provides for minimum fees to us of $50 million per year.
- A Registration Rights Agreement, which provides for the registration
under applicable securities laws of the stock issued under the strategic
agreement and related agreements.
- A Warrant Agreement, which sets forth the terms under which Bank of
America may acquire up to 10 million shares of our common stock.
- A Stock Restriction Agreement, which imposes certain restrictions on Bank
of America's ability to sell the stock and warrants issued under the
strategic agreement and related agreements.
- An EBP Transition Agreement, under the terms of which Bank of America
will continue to perform certain functions in support of the legacy
platforms and the gradual transition of these functions to us, and for
our payment of fees to Bank of America to reimburse it for certain of the
costs of providing these functions during the transition period.
- A Purchase and Assumption Agreement, which provides for the transfer of
certain tangible and intangible assets used by Bank of America in its
operation of the legacy systems.
CONDITIONS TO THE COMPLETION OF THE STRATEGIC AGREEMENT. Each of our and
Bank of America's obligations to consummate the strategic agreement is subject
to satisfaction or waiver of specified conditions, including those listed below:
- approval of the share issuance proposal by our stockholders;
- receipt of all required regulatory approvals and submission of all
required filings with governmental entities;
- the absence of legal prohibitions to the strategic agreement and the
transactions contemplated by the strategic agreement; and
- the other party's material compliance with its obligations under the
strategic agreement prior to the closing, and the truth and accuracy of
the representations made by such party.
In addition, it is a condition to Bank of America's obligation to
consummate the closing that the transactions contemplated by the strategic
agreement not trigger the issuance or exercise of any rights of our stockholders
under our Stockholders' Rights Plan.
TERMINATION OF THE STRATEGIC AGREEMENT. We and Bank of America may
terminate the strategic agreement at any time by mutual written consent. In
addition, either party may terminate the purchase agreement if:
- our stockholders fail to approve the share issuance proposal by October
1, 2000, or if the transaction is pending approval by a government
agency, and stockholder approval is not obtained by the earlier of
December 31, 2000, or 40 days following the receipt of such government
approval; or
- the Services Agreement is terminated.
STOCKHOLDER APPROVAL AND THE CHECKFREE SPECIAL MEETING
APPROVAL OF CHECKFREE'S STOCKHOLDERS. The affirmative vote of holders of a
majority of the shares of our common stock voting in person or by proxy at the
special meeting, provided that a
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quorum is present, is required to approve the share issuance proposal.
THE SPECIAL MEETING AND THE RECORD DATE. Our stockholders will vote on the
share issuance proposal at a special meeting that will be held at our executive
offices located at 4411 East Jones Bridge Road, Norcross, Georgia, on
[ ], 2000, starting at [ ].m., local time. Our stockholders
may vote at the special meeting if they owned shares of our common stock at the
close of business on August 2, 2000, which is the record date for the special
meeting. Each share will have one vote. On the record date, approximately
58,451,095 shares of our common stock were outstanding.
PROCEDURES FOR VOTING YOUR SHARES. Your vote is very important, regardless
of the number of shares you own. Please vote as soon as possible to make sure
that your shares are represented at the special meeting. You may vote your
shares by signing your proxy card and mailing it in the enclosed return
envelope, or you may be able to submit your proxy or voting instructions by
telephone or by the Internet. If you are a holder of record, you may vote in
person at the special meeting. If you do not include instructions on how to vote
your properly executed proxy card, your shares will be voted FOR approval of the
share issuance proposal. If your shares are held in an account at a brokerage
firm or bank, your broker will vote your shares only if you provide instructions
on how to vote by following the information provided to you by your broker.
PROCEDURE FOR CHANGING YOUR VOTE. You can change your vote at any time
before your proxy is voted at the special meeting. You can do this in one of
four ways.
- First, you can send a written notice stating that you are revoking your
proxy.
- Second, you can complete and submit a new proxy card.
If you choose either of these two methods, you must submit your notice of
revocation or your new proxy for our common stock to our Corporate Secretary at
the address indicated at the beginning of this "Summary" section of the proxy
statement. If your shares are held in an account at a brokerage firm or bank,
you should contact your broker to change your vote.
- Third, if you are a holder of record, you can attend the special meeting
of stockholders and vote in person.
- Fourth, to revoke a proxy previously submitted electronically through the
Internet or by telephone, you may simply submit a proxy at a later date,
using the same procedures, in which case your later submitted proxy will
be recorded and your earlier proxy revoked.
APPRAISAL RIGHTS. Under Delaware law, our stockholders are not entitled to
appraisal rights in connection with the share issuance proposal or the asset
purchase.
SHARE OWNERSHIP BY OUR MANAGEMENT. On the record date, our directors and
executive officers were entitled to vote approximately 12.6% of our outstanding
common stock.
FEDERAL INCOME TAX CONSEQUENCES
For United States federal income tax purposes, no income, gain or loss will
be recognized by CheckFree or our stockholders as a result of the strategic
agreement or the asset purchase. See "The Strategic Agreement and Share Issuance
-Material United States Federal Income Tax Consequences of the Strategic
Agreement." We urge you to consult your own tax advisor to determine the effect
of the strategic agreement under federal, state, local and foreign tax laws.
ACCOUNTING TREATMENT
The strategic agreement will be recorded as an asset purchase for
accounting purposes.
PER SHARE MARKET PRICE INFORMATION
Shares of our common stock are traded on the Nasdaq National Market under
the symbol "CKFR." On April 25, 2000, the last trading day before the public
announcement of the execution of the strategic agreement, our common stock
closed at $32.50 per share. On [ ], 2000, the most recent
practicable date prior to the printing of this proxy statement, our common stock
closed at $[ ] per share.
REGULATORY MATTERS
All material regulatory approvals required to permit the consummation of
the strategic agreement have already been obtained. The waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act expired on [ ],
2000.
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RISK FACTORS
In addition to the other information contained in or incorporated by
reference into this proxy statement, you should carefully consider the following
risk factors in deciding whether to vote for the share issuance proposal.
WE MAY FAIL TO REALIZE THE ANTICIPATED BENEFITS OF THE STRATEGIC AGREEMENT.
The success of the strategic agreement will depend, in part, on our ability
to realize the anticipated growth opportunities and synergies from combining
Bank of America's electronic billing and payment assets with our business. To
realize the anticipated benefits of the strategic agreement, our management team
must develop strategies and implement a business plan that will:
- effectively combine Bank of America's electronic billing and payment
assets with our assets and services;
- successfully use the anticipated opportunities for cross-promotion and
sales of the products and services of CheckFree and Bank of America; and
- while integrating Bank of America's electronic billing and payment assets
with our operations, maintain adequate focus on our core businesses in
order to take advantage of competitive opportunities and to respond to
competitive challenges.
If our management team is not able to develop strategies and implement a
business plan that achieves these objectives, we may not realize the anticipated
benefits of the strategic agreement. In particular, anticipated growth in
revenue, earnings before interest, taxes, depreciation, and amortization, or
"EBITDA," and cash flow may not be realized, which would have an adverse impact
on us and the market price of our common stock.
WE MAY NOT BE ABLE TO PROVIDE ELECTRONIC BILLING AND PAYMENT SERVICES TO THE
BANK OF AMERICA SUBSCRIBERS FOR THE FEES WE AGREED TO IN THE STRATEGIC
AGREEMENT.
The success of the strategic agreement will depend, in part, on our ability
to ultimately provide electronic billing and payment services to the Bank of
America subscribers at a cost to us that is less than the fees we have agreed to
receive. If we are unable to provide electronic billing and payment services to
the Bank of America subscribers profitably, the strategic agreement will have a
material adverse effect on our business, financial condition and results of
operations.
BANK OF AMERICA'S MARKETING EFFORTS MAY NOT BE SUCCESSFUL IN GENERATING
ADDITIONAL SUBSCRIBERS FOR OUR ELECTRONIC BILLING AND PAYMENT SERVICES.
If Bank of America's marketing efforts to generate additional subscribers
are not successful, it could have a material adverse effect on our business,
financial condition and results of operations. Although Bank of America
currently lists some 400,000 subscribers to their legacy electronic billing and
payment services, we do not know how many of those subscribers actively use
those services or how many of those subscribers will migrate to our electronic
billing and payment services. In order to realize the benefit of the strategic
agreement and to consistently increase and maintain our profitability, we must
encourage the existing Bank of America legacy subscribers to actively utilize
our billing and payment services, as well as generate additional subscribers
from the Bank of America base of customers. We currently serve an additional
approximately 400,000 Bank of America customers on our own systems under the
terms of a pre-existing contract.
OUR ASSUMPTION OF CERTAIN LONG-TERM LEASEHOLD OBLIGATIONS COULD HAVE AN ADVERSE
IMPACT ON OUR RESULTS OF OPERATIONS.
As part of the strategic agreement, we are assuming certain of Bank of
America's long-term leasehold obligations which, if we are unable to use the
leased premises efficiently in our business (or find a third party
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to assume the leasehold obligations), could have a material adverse effect on
our profitability and results of operations.
OUR ABILITY TO SUCCEED IN TRANSITIONING BANK OF AMERICA'S BILLING AND PAYMENT
SERVICES FROM ITS LEGACY SYSTEM TO OUR SYSTEM IS DEPENDENT ON RETAINING
QUALIFIED BANK OF AMERICA EMPLOYEES KNOWLEDGEABLE IN THE OPERATION OF BANK OF
AMERICA'S LEGACY SYSTEM.
The success of the strategic agreement is dependent on our ability to
retain qualified Bank of America employees with experience operating Bank of
America's billing and payment processing system. Bank of America operates its
electronic billing and payment services on a legacy system that we expect to
migrate to our processing systems. If we are unable to retain the experienced
Bank of America employees through the transition and migration process, we will
have to either divert our current employees from other important work or incur a
significant expense to hire people qualified to operate the legacy system to
assist us with the transition and migration process. Competition for qualified
employees is intense and employees qualified to operate a legacy system are in
short supply.
WE ARE REQUIRED TO DEPRECIATE THE ACQUIRED ASSETS OVER THEIR USEFUL LIVES WHICH
WILL CAUSE OUR EARNINGS PER SHARE TO DECREASE.
Because we will be accounting for the transaction as an asset purchase, the
purchase will result in a charge to our earnings that will decrease your
earnings per share. We will be required to amortize approximately $412 million
over a period of ten years or approximately $41.2 million per year.
We will issue 10 million shares of our common stock in connection with the
asset purchase. Assuming the transaction was completed on July 1, 1998, the
strategic agreement would result in immediate and substantial dilution of per
share earnings from $0.18 diluted to $(0.48) diluted for the year ended June 30,
1999, and dilution of per share earnings from $(0.23) to $(0.38) for the nine
months ended March 31, 2000. The anticipated dilution could have a negative
impact on the market price of our common stock. Analysts and investors carefully
review a company's earnings per share and often base investment decisions on a
company's per share earnings.
AVAILABILITY OF SIGNIFICANT AMOUNTS OF OUR COMMON STOCK FOR SALE IN THE FUTURE
COULD ADVERSELY AFFECT OUR STOCK PRICE.
If we complete the strategic agreement, we will issue to Bank of America an
aggregate of 10 million shares of our common stock and warrants to acquire an
additional 10 million shares of our common stock.
We have agreed to provide Bank of America with registration rights in
connection with the strategic agreement. If Bank of America, by exercising its
registration rights, causes a large number of shares to be registered and sold
in the public market, these sales may have an adverse effect on the market price
of our common stock. Two years after the closing of the strategic agreement, or
one year after the warrants are exercised, Bank of America may be able to sell
up to the greater of one percent of our outstanding common stock or our average
weekly trading volume over a four week period in reliance on registration
exemptions. Sales of substantial amounts of our common stock by Bank of America,
or the perception that these sales could occur, may adversely affect prevailing
market prices for our common stock.
OUR COMMON STOCK HAS BEEN VOLATILE SINCE DECEMBER 15, 1999.
Since December 15, 1999, our stock price has been extremely volatile,
trading at a high of $125.63 per share and a low of $28.50 per share for the
period. Our stock price could dramatically decrease between the time that our
stockholders vote on the share issuance proposal and the time the strategic
agreement closes. We cannot assure that the price of our common stock at the
time you vote on the share issuance proposal
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will be the same as the price of our common stock when we consummate the
strategic agreement. The volatility in our stock price has been caused by:
- actual or anticipated fluctuations in our operating results;
- actual or anticipated fluctuations in our subscriber growth;
- announcements by us, our competitors or our customers;
- announcement of the execution of merger agreements with BlueGill
Technologies, Inc. and TransPoint;
- announcement of the signing of the strategic agreement with Bank of
America;
- 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.
FORWARD LOOKING STATEMENTS
The Securities and Exchange Commission encourages companies to disclose
forward-looking information so that investors can better understand a company's
future prospects and make informed investment decisions. This proxy statement
contains "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements may be made directly
in this proxy statement referring to us and Bank of America, and they may also
be made as part of this proxy statement by reference to other documents filed
with the Securities and Exchange Commission by us, which is known as
"incorporation by reference." These statements may include statements regarding
the period following completion of the strategic agreement.
Words like "anticipate," "estimate," "expects," "projects," "intends,"
"plans," "believes" and words and terms of similar substance used in connection
with any discussion of future operating of financial performance, or the
strategic agreement involving us and Bank of America, identify forward-looking
statements. All forward-looking statements are management's present expectations
of future events and are subject to a number of factors and uncertainties that
could cause actual results to differ materially from those described in the
forward-looking statements. In addition to the risks related to the businesses
of us and Bank of America, the factors relating to the strategic agreement
discussed under "Risk Factors," among others, could cause actual results to
differ materially from those described in the forward-looking statements. These
factors include the relative value of our stock and the failure to realize the
anticipated benefits of the strategic agreement. Stockholders are cautioned not
to place undue reliance on the forward-looking statements, which speak only as
of the date of this proxy statement or the date of the document incorporated by
reference in this proxy statement. Neither we nor Bank of America is under any
obligation, and each of us expressly disclaims any obligation, to update or
alter any forward-looking statements, whether as a result of new information,
future events or otherwise.
For additional information that could cause actual results to differ
materially from those described in the forward-looking statements, please see
the annual report on Form 10-K/A that we have filed with the Securities and
Exchange Commission.
All subsequent forward-looking statements attributable to us or Bank of
America or any person acting on their behalf are expressly qualified in their
entirety by the cautionary statements contained or referred to in this section.
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<PAGE> 13
WHERE YOU CAN FIND MORE INFORMATION
This proxy statement incorporates documents by reference which are not
presented in or delivered with this proxy statement. You should rely only on the
information contained in this document or to which we have referred you. We have
not authorized anyone to provide you with any additional information.
The following documents, which we have filed with the Securities and
Exchange Commission (SEC file number 0-26802), are incorporated by reference
into, and considered to be a part of, this proxy statement:
- Annual Report on Form 10-K for the fiscal year ended June 30, 1999 (filed
September 28, 1999, amended July 10, 2000);
- Proxy Statement for the Annual Meeting of Stockholders held on November
4, 1999 (filed October 8, 1999);
- Quarterly Reports on Form 10-Q for the quarter ended September 30, 1999
(filed November 15, 1999, amended July 10, 2000), for the quarter ended
December 31, 1999 (filed February 10, 2000, amended July 10, 2000), and
for the quarter ended March 31, 2000 (filed May 12, 2000, amended July
10, 2000);
- Current Reports on Form 8-K dated November 29, 1999 (filed December 2,
1999), dated December 20, 1999 (filed December 23, 1999), dated January
10, 2000 (filed January 10, 2000), dated February 15, 2000 (filed
February 17, 2000), dated March 16, 2000 (filed March 22, 2000, amended
April 27, 2000), dated March 28, 2000 (filed March 28, 2000), dated April
2, 2000 (filed April 3, 2000), dated April 27, 2000 (filed April 27,
2000), dated April 28, 2000 (filed April 28, 2000), dated April 28, 2000
(filed May 15, 2000, amended July 10, 2000), dated May 22, 2000 (filed
May 23, 2000), dated June 6, 2000 (filed June 7, 2000), dated July 12,
2000 (filed July 12, 2000), and dated August 2, 2000 (filed August 3,
2000).
- The description of 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 this 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 proxy statement and before [ ], 2000, the date of
the stockholder meeting to approve the share issuance proposal, other
than portions of these documents described in paragraphs (i), (k) and (l)
of Item 402 of Regulation S-K promulgated by the Commission.
Any statement contained in a document incorporated or deemed to be
incorporated by reference into this proxy statement will be deemed to be
modified or superseded for purposes of this proxy statement to the extent that a
statement contained in this proxy statement or any other subsequently filed
document that is deemed to be incorporated by reference into this proxy
statement modifies or supersedes the statement. Any statement so modified or
superseded will not be deemed, except as so modified or superseded, to
constitute a part of this proxy statement.
We will provide a copy of any and all of the information that we
incorporate by reference in this proxy statement to any person, without charge,
upon written or oral request. If exhibits to the documents incorporated by
reference in this proxy statement are not themselves specifically incorporated
by reference in this proxy statement, then the exhibits will not be provided.
ANY REQUESTS FOR DOCUMENTS SHOULD BE MADE BY [ ], 2000, TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS PRIOR TO THE SPECIAL MEETING.
Requests for documents relating to us should be directed to:
CheckFree Corporation
4411 East Jones Bridge Road
Norcross, Georgia 30092
Attention: Investor Relations
Telephone: (678) 375-3000
E-mail: [email protected]
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<PAGE> 14
We must comply with the informational requirements of the Securities
Exchange Act of 1934 and its rules and regulations. Under the Securities
Exchange Act of 1934, we must file reports, proxy statements, and other
information with the Commission. Copies of these reports, proxy statements, and
other information can be inspected and copied at:
Public Reference Room
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
or at the public reference facilities of the regional offices of the Commission
at:
<TABLE>
<S> <C>
500 West Madison Street or: 7 World Trade Center
Suite 1400 Suite 1300
Chicago, Illinois 60661-2511 New York, New York 10048-1102
</TABLE>
You may obtain information on the operation of the Public Conference Room
by calling the Commission at 1-800-SEC-0330. You may also obtain copies of our
materials by mail at prescribed rates from the Public Reference Room at the
address noted above. Finally, you may obtain these materials electronically by
accessing the Commission's home page on the Internet at http://www.sec.gov.
Our common stock is listed on the Nasdaq National Market. Accordingly,
reports and other information concerning us should be available for inspection
and copying at the offices of the Nasdaq Stock Market at: 1735 K Street, N.W.,
Washington, D.C. 20006-1504.
If you have any questions about the share issuance, please call our
Investor Relations at (678) 375-3000.
All information contained in this proxy statement regarding us was supplied
by us and all information contained in this proxy statement regarding Bank of
America was supplied by Bank of America. Neither we nor Bank of America can
warrant the accuracy of completeness of information relating to the other party.
THE SPECIAL MEETING
PROXY STATEMENT
We are furnishing this proxy statement to you in connection with the
solicitation of proxies by our board of directors in connection with the share
issuance proposal.
We are first sending this proxy statement to our stockholders on or about
[ ], 2000.
DATE, TIME AND PLACE
The special meeting is scheduled to be held as follows:
[ ], 2000
[ ], local time
4411 East Jones Bridge Road
Norcross, Georgia
PURPOSE OF THE SPECIAL MEETING
The special meeting is being held so that our stockholders may consider and
vote upon:
- a proposal to approve the issuance of 10 million shares of our common
stock and warrants to purchase up to an additional 10 million shares of
our common stock to Bank of America, under a strategic agreement with
Bank of America through which CheckFree Services Corporation, our wholly
owned subsidiary, will acquire certain of Bank of America's electronic
billing and payment assets and we will provide electronic billing and
payment services to Bank of America's customers over the next ten years;
and
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<PAGE> 15
- to transact any other business that properly comes before the special
meeting or any adjournment or postponement of the special meeting.
If our stockholders approve the share issuance proposal, upon the
completion of the strategic agreement, Bank of America will receive 10 million
shares of our common stock or approximately 14.6% of our outstanding common
stock. Bank of America will also receive warrants to purchase up to an
additional 10 million shares of our common stock, which will vest in stages as
Bank of America meets certain milestones. For all warrants to vest, at least 10
million Bank of America customers must be using CheckFree services, and Bank of
America must be delivering at least 10 million eBills per month. At closing,
none of the warrants will be vested or exercisable.
If our stockholders do not approve the share issuance proposal, we or Bank
of America may terminate the strategic agreement. See "The Strategic Agreement
and Share Issuance -- Termination, Amendment and Waiver."
RECORD DATE
Our board of directors has fixed the close of business on Wednesday, August
2, 2000, as the record date for determination of our stockholders entitled to
notice of, and to vote at, the special meeting. On the record date, there were
58,451,045 shares of our common stock outstanding, held by approximately 668
holders of record.
VOTE REQUIRED FOR ADOPTION OF THE SHARE ISSUANCE PROPOSAL
A majority of our outstanding shares of common stock must be represented,
either in person or by proxy, to constitute a quorum at the special meeting. A
quorum is the minimum number of stockholders required to transact business or
take a vote. Under the terms of the strategic agreement, the affirmative vote of
the holders of a majority of our common stock voting in person or by proxy at
the special meeting is required to approve the share issuance proposal.
As of the record date, our directors and executive officers and their
affiliates owned approximately 12.6% of the outstanding shares of our common
stock.
PROXIES
All shares of our common stock represented by properly executed proxies or
voting instructions received before or at the special meeting will, unless the
proxies or voting instructions are revoked, be voted in accordance with the
instructions indicated on those proxies or voting instructions. If no
instructions are indicated on a properly executed proxy card or voting
instructions, the shares will be voted "FOR" approval of the share issuance
proposal. You are urged to mark the box on the proxy card to indicate how to
vote your shares.
If a properly executed proxy card or voting instruction is returned and the
stockholder has abstained from voting on adoption of the share issuance
proposal, the CheckFree common stock represented by the proxy or voting
instructions will be considered present at the special meeting for purposes of
determining a quorum, but will not be considered to have been voted in favor of
approval of the share issuance proposal. If your shares are held in an account
at a brokerage firm or bank, you must instruct them on how to vote your shares.
If an executed proxy card is returned by a broker or bank holding shares which
indicates that the broker or bank does not have discretionary authority to vote
on approval of the share issuance proposal, the shares will be considered
present at the meeting for purposes of determining the presence of a quorum, but
will not be considered to have been voted in favor of approval of the share
issuance proposal. Your broker or bank will vote your shares only if you provide
instructions on how to vote by following the information provided to you by your
broker.
We do not expect that any matter other than approval of the share issuance
proposal will be brought before the special meeting. If, however, other matters
are properly presented, the persons named as proxies
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<PAGE> 16
will vote in accordance with their judgment with respect to those matters,
unless authority to do so is withheld on the proxy card.
A stockholder may revoke his or her proxy at any time before it is voted
by:
- notifying in writing the Corporate Secretary of CheckFree at 4411 East
Jones Bridge Road, Norcross, Georgia 30092;
- granting a subsequently dated proxy; or
- appearing in person and voting at the special meeting if you are a holder
of record.
Attendance at the special meeting will not in and of itself constitute
revocation of a proxy.
VOTING ELECTRONICALLY OVER THE INTERNET OR BY TELEPHONE
Instead of submitting your vote by mail on the enclosed proxy card or
voting instructions, you may have the option to submit your proxy or voting
instructions electronically through the Internet or by telephone. Please note
that there are separate arrangements for using the Internet and telephone
depending on whether your shares are registered in our stock records in your
name or in the name of a brokerage firm or bank. You should check your proxy
card or voting instructions forwarded by a broker, bank or other holder of
record to see which options are available.
The Internet and telephone procedures for submitting your proxy or voting
instructions are designed to authenticate stockholders identities, to allow
stockholders to have their shares voted and to confirm that their instructions
have been properly recorded. A prior proxy submitted by the Internet or
telephone may be revoked by the submission of a letter proxy using any allowable
method of proxy submission indicated in this proxy statement, including by a
subsequent Internet or telephonic proxy.
SOLICITATION OF PROXIES
We will bear the expenses incurred in connection with the printing and
mailing of this proxy statement. We and our proxy solicitors will also request
banks, brokers and other intermediaries holding shares of our common stock
beneficially owned by others to send this proxy statement to, and obtain proxies
from, the beneficial owners and will reimburse the holders for their reasonable
expenses in so doing.
THE STRATEGIC AGREEMENT AND SHARE ISSUANCE
OVERVIEW
We and CheckFree Services Corporation have entered into an Amended and
Restated Strategic Master Alliance Agreement with Bank of America, dated as of
April 26, 2000, which governs the asset purchase and share issuance, as well as
the ongoing business relationship between us and Bank of America. Under the
strategic agreement, at the closing:
- we will issue 10 million shares of our common stock and warrants to
purchase up to an additional 10 million shares of our common stock to
Bank of America;
- Bank of America will transfer certain of its electronic billing and
payment assets and liabilities to CheckFree Services Corporation pursuant
to a Purchase and Assumption Agreement; and
- we will begin to provide electronic billing and payment services to Bank
of America's customers pursuant to a Services Agreement between us and
Bank of America.
The strategic agreement consists of several related agreements between us and
Bank of America, which we have entered into either directly or through our
subsidiaries. These related agreements are described below.
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<PAGE> 17
RECOMMENDATION OF OUR BOARD OF DIRECTORS; OUR REASONS FOR THE STRATEGIC
AGREEMENT
Our board of directors has carefully reviewed and considered the terms of
the strategic agreement and has determined that the strategic agreement and the
transactions contemplated thereby are in the best interests of CheckFree and our
stockholders, are fair to you as a CheckFree stockholder and are in your best
interest. Accordingly, the board of directors has unanimously approved the
strategic agreement and recommends that you vote "FOR" the share issuance to
Bank of America at the special meeting. In reaching its decision to recommend
the approval of the share issuance proposal to you, our board of directors
consulted with our legal advisors and with our senior management and considered
the following material factors:
- the potential to accelerate the adoption of electronic billing and
payment services through marketing efforts by the nation's largest bank
to its customers;
- the expectation that we will have greater technology, sales, marketing,
distribution and customer service and resources leading to the
possibility of stronger operating and financial results for CheckFree;
- the strategic fit, including the belief that the strategic agreement has
the potential to enhance stockholder value through increased growth
opportunities and the cost savings achievable and synergies resulting
from the strategic agreement and the asset purchase;
- the opportunities, as a result of entering into the strategic agreement,
of a stronger strategic relationship with Bank of America;
- the benefit of obtaining a stream of minimum revenue guarantees equaling
$50 million during the next ten years from Bank of America;
- the potential benefits to:
(1) our customers, who should benefit from our end-to-end solution for
sending, receiving and paying bills being utilized by more users as
a result of the strategic agreement, and
(2) our strategic partners, who will be able to use our services and
technology to reach a greater combined group of consumers;
- the information and presentations by our management concerning the
results of their business due diligence and the potential growth
opportunities and synergies resulting from the strategic agreement; and
- the terms of the strategic agreement and the related agreements,
including the amount of the consideration to be received by Bank of
America.
Our board of directors also considered the potential adverse effects and
risks associated with the strategic agreement, including those risks set forth
in the section titled "Risk Factors" in this proxy statement and concluded that
the potential benefits of the strategic agreement outweighed the potential
adverse effects and risks. The list of potential adverse effects and risks
considered by our board included, but was not limited to, the following:
- the challenges of combining Bank of America's assets with our assets and
the risk of not being able to convert Bank of America's electronic
billing and payment customers from Bank of America's processing system to
our processing system;
- the risk of not achieving operational efficiencies or accelerating growth
of our electronic billing and payment services;
- the risk of diverting management focus and resources from other strategic
opportunities and from operational matters while working to implement the
strategic agreement;
- the risk that the strategic agreement and the transactions contemplated
by that agreement will not be consummated;
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<PAGE> 18
- the obligation of registering the shares of our common stock under
specified circumstances; and
- the assets that will be recorded initially on our balance sheet and
amortized on a straight-line basis as a charge against earnings over a
ten year period.
This discussion of the information and factors considered by our board of
directors is not intended to be exhaustive, but includes the material factors
considered. In view of the variety of material factors considered in connection
with the evaluation of the strategic agreement and share issuance, our board of
directors did not find it practicable to quantify or otherwise assign relative
weights or rank to the factors it considered in approving strategic agreement.
In considering the factors described above, individual members of the board may
have given different weight to various factors. Instead, our board of directors
considered all these factors as a whole and overall considered them to be
favorable and to support its recommendation.
COMPLETION AND EFFECTIVENESS OF THE STRATEGIC AGREEMENT
The transactions contemplated by the strategic agreement will be completed
when all of the conditions to completion of the strategic agreement are
satisfied or waived, including the approval of the share issuance proposal by
our stockholders. For a summary of the conditions of each of the parties to
close the strategic agreement, see "The Strategic Agreement and Share Issuance
-Conditions Precedent to Closing." We are working toward completing the
transactions contemplated by the strategic agreement as quickly as possible, and
expect to do so shortly after the special meeting of our stockholders, provided
that we have obtained the necessary regulatory approvals. We expect that the
strategic agreement will be closed during the Fall of 2000.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE STRATEGIC
AGREEMENT
For United States federal income tax purposes, no income, gain or loss will
be recognized by CheckFree or our stockholders as a result of the strategic
agreement or the asset purchase. We urge you to consult your own tax advisor to
determine the effect of the strategic agreement under federal, state, local and
foreign tax laws.
ACCOUNTING TREATMENT OF THE STRATEGIC AGREEMENT
The strategic agreement will be recorded as an asset purchase for
accounting purposes.
REGULATORY MATTERS
We have summarized below the material regulatory requirements affecting the
strategic agreement. All material regulatory approvals required to permit
consummation of the strategic agreement have already been obtained from the
applicable regulation authorities or the necessary waiting periods have expired.
The strategic agreement and related issuance of shares are subject to the
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, which
prevents specified transactions from being completed until required information
and materials are furnished to the Antitrust Division of the Department of
Justice and the Federal Trade Commission and specified waiting periods are
terminated or expire. On July 31, 2000, we filed the required information and
materials with the Department of Justice and the Federal Trade Commission. On
[ ], 2000, the waiting period under the Hart-Scott-Rodino Act
terminated.
The Antitrust Division of the Department of Justice or the Federal Trade
Commission may, however, challenge the strategic agreement on antitrust grounds
after termination of the waiting period. Accordingly, at any time before or
after the closing of the strategic agreement, either the Antitrust Division of
the Department of Justice or the Federal Trade Commission could take action
under the antitrust laws as it deems necessary or desirable in the public
interest, or other persons, including states, could take action under the
antitrust laws, including seeking to enjoin the transactions contemplated by the
strategic agreement. Additionally, at any time before or after the closing of
the strategic agreement, notwithstanding the fact that the applicable waiting
period was terminated, any state could take action under the antitrust laws as
it deems necessary or desirable in the public interest.
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Additionally, the parties will seek any and all other regulatory approvals
that may be required or imposed prior to the closing of the strategic agreement.
NASDAQ NATIONAL MARKET LISTING OF CHECKFREE COMMON STOCK TO BE ISSUED PURSUANT
TO THE STRATEGIC AGREEMENT
We will use our reasonable best efforts to cause the shares of our common
stock that are to be issued pursuant to the strategic agreement to be approved
for listing on the Nasdaq National Market, subject to official notice of
issuance, before the closing of the strategic agreement.
APPRAISAL RIGHTS
Under Delaware law, our stockholders are not entitled to appraisal rights
in connection with the share issuance proposal or any other transactions
contemplated by the strategic agreement.
RESTRICTIONS ON SALES OF SHARES BY BANK OF AMERICA
Bank of America will be limited in its ability to sell, transfer or assign
our common stock and warrants to purchase our common stock that it will receive
at closing. Under a Stock Restriction Agreement, dated as of April 26, 2000,
between us and Bank of America, Bank of America may not sell, assign or
otherwise transfer shares of our common stock except:
- in accordance with Rule 144 under the Securities Act of 1933, after
holding the shares of common stock for two years from the date of the
Stock Restriction Agreement, or, for shares acquired upon the exercise of
warrants, after one year from the date that the warrants were exercised;
- to a qualified institutional buyer, as defined in the Stock Restriction
Agreement;
- pursuant to an effective registration statement under the Securities Act
of 1933, covering the resale of the shares, which we have registered on
Bank of America's behalf under a Registration Rights Agreement between
the parties; or
- with our prior written consent.
We will also have a right of first refusal on any shares that Bank of America
proposes to sell or transfer, except for shares registered pursuant to the
Registration Rights Agreement. In addition, as long as the Stock Restriction
Agreement is in effect, Bank of America may not:
- purchase shares of our common stock without the prior written consent of
our board of directors or other authorized representative;
- solicit proxies in opposition to any recommendation of our management;
- grant a proxy to anyone other than our designated nominee; or
- initiate or participate in any group that proposes, without the support
of our board of directors, any change in control of CheckFree.
CONDITIONS PRECEDENT TO CLOSING
Our and Bank of America's respective obligations to effect the closing of
the strategic agreement are subject to the satisfaction or waiver of each of the
following conditions:
- approval of the share issuance proposal by our stockholders;
- no judgment, order, decree or injunction must be in effect that would
prohibit or restrain the completion of the transactions contemplated by
the strategic agreement; and
- all necessary regulatory approvals must have been obtained, and the
applicable waiting period under the Hart-Scott-Rodino Act must have
expired or terminated.
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Our obligations to effect the closing of the strategic agreement are
subject to the satisfaction of each of the following conditions:
- the representations and warranties made by Bank of America in the
strategic agreement must be true and correct in all material respects as
of the closing of the strategic agreement, provided that if a
representation or warranty has a specific date, it need only be true as
of that date; and
- we must have received from Bank of America all certificates, records and
documents required by the strategic agreement to be delivered.
Bank of America's obligations to effect the closing of the strategic
agreement are subject to the satisfaction of each of the following conditions:
- the representations and warranties that we made in the strategic
agreement must be true and correct in all material respects as of the
closing of the strategic agreement, provided that if a representation or
warranty has a specific date, it need only be true as of that date;
- Bank of America must have received from us the certificates and documents
required by the strategic agreement to be delivered; and
- the transactions contemplated by the strategic agreement must not have
triggered the issuance or exercise of any rights of our stockholders
under our Stockholders' Rights Plan.
REPRESENTATIONS AND WARRANTIES
We have made representations in the strategic agreement regarding, among
other things:
- our organization and good standing;
- our authority to enter into the strategic agreement and to complete the
transactions contemplated by the strategic agreement;
- the validity of our common stock;
- the compliance with the Securities Act of 1933 and the Securities
Exchange Act of 1934 of documents publicly filed by us and the accuracy
of the information contained in those documents;
- the absence of material changes or events concerning us since the date of
our most recent filing with the Commission;
- the absence of legal proceedings relating to us that could adversely
affect us, our business or our prospects;
- the accuracy of the information that we have provided for use in this
proxy statement; and
- the inapplicability of state anti-takeover laws and our Stockholder
Rights Plan to the transactions contemplated by the strategic agreement.
Bank of America has made representations and warranties in the strategic
agreement regarding, among other things:
- their organization and good standing;
- their authority to enter into the strategic agreement and to complete the
transactions contemplated by the strategic agreement;
- the absence of legal proceedings relating to Bank of America that could
adversely affect the company, its business or its prospects;
- the accuracy of information supplied by Bank of America for submission on
forms and reports, including but not limited to this proxy statement,
required to be filed by CheckFree with the Commission; and
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- the acquisition of shares of our common stock and warrants to be acquired
under the strategic agreement for investment purposes.
EXPENSES
The parties agreed to pay their own costs and expenses, including legal and
accounting fees, in connection with the transactions contemplated by the
strategic agreement.
TERMINATION, AMENDMENT AND WAIVER
Termination. We and Bank of America may terminate the strategic agreement
at any time by mutual written consent. In addition, either party may terminate
the strategic agreement if:
- our stockholders fail to approve the share issuance proposal by October
1, 2000, or if the transaction is pending approval by a government
agency, our stockholders fail to approve the proposal by the earlier of
December 31, 2000, or 40 days following the receipt of such government
approval; or
- the Services Agreement, which governs the ongoing business relationship
between the parties and under which we will provide electronic billing
and payment services to Bank of America's customers, is terminated.
Amendment and Waiver. We and Bank of America may modify or amend the
strategic agreement only by a subsequent writing signed by authorized
representatives of each party. The strategic agreement may not be amended by an
oral statement made by a representative of any of the parties, or by any
pattern, practice or course of dealing of the parties. In addition, either party
may waive any term, condition, warranty, representation, or obligation contained
in the strategic agreement, provided that the waiver is in writing and is signed
by an authorized officer of the party against whom the waiver is to be charged.
DESCRIPTION OF RELATED AGREEMENTS
In addition to strategic agreement, we, either directly or through
CheckFree Services Corporation, have entered into the following related
agreements with Bank of America or Banc of America E-Commerce.
PURCHASE AND ASSUMPTION AGREEMENT
We and CheckFree Services Corporation have entered into a Purchase and
Assumption Agreement with Bank of America and its wholly owned subsidiary Bank
of America Technology and Operations, Inc., dated as of August 8, 2000, under
which CheckFree Services Corporation will purchase certain of Bank of America's
electronic billing and payment assets, property and rights. These assets,
property and rights comprise Bank of America's bill payment and presentment
platform, and include software, equipment, machinery, supplier lists, and
proprietary rights. We will also assume certain liabilities and commitments of
Bank of America relating to the electronic billing and payment assets.
Under the purchase agreement, Bank of America will retain a perpetual,
royalty free, non-transferable, non-exclusive license to use the software that
CheckFree Services Corporation is acquiring in the asset purchase. In addition,
Bank of America will retain a similar license to use the software, processes and
ideas covered by a pending patent application with the U.S. Patent and Trademark
Office, which application is also being acquired in the asset purchase.
The closing of the asset purchase is subject to satisfaction or waiver of
conditions similar to those provided in the strategic agreement, including the
approval of our stockholders of the share issuance proposal and the receipt of
all necessary regulatory approvals. In addition, each party's obligations to
complete the closing of the asset purchase are subject to the other party's
compliance with its covenants and obligations
19
<PAGE> 22
under the purchase agreement. One such covenant requires that, from the date of
the purchase agreement until the effective time of the asset purchase, Bank of
America not:
- sell, license, contract or otherwise encumber any of the purchased assets
other than in the ordinary course of business in a manner that does not
materially devalue the purchased assets; or
- amend, modify or terminate any contract or agreement to which it is a
party relating to the purchased assets without the prior written consent
of CheckFree Services Corporation.
In addition, Bank of America agreed that from the date of the purchase agreement
until the time such agreement closes, it and its officers and employees would
use their best efforts to preserve the purchased assets in good order.
We have included a copy of the Purchase and Assumption Agreement as
Appendix B to this proxy statement.
EBP TRANSITION AGREEMENT
CheckFree Services Corporation, Bank of America and Bank of America
Technology and Operations have entered into a EBP Transition Agreement, dated as
of August 8, 2000, which governs Bank of America's gradual migration from its
current legacy operating system to the Genesis system. The transition agreement
addresses the terms and schedule of the migration, as well as each party's
obligations during the transition period. The agreement requires that Bank of
America continue to perform certain functions in support of the legacy platforms
and that we pay fees to Bank of America to reimburse it for certain of the costs
of providing these functions during the transition period.
The agreement will be effective from the closing date of the Purchase and
Assumption Agreement until the earlier of such time as:
- the parties terminate the strategic agreement;
- 18 months following the closing date of the Purchase and Assumption
Agreement; or
- until the completion of all of the triggering events set forth in the
schedules to the EBP Transition Agreement.
If, however, all of the triggering events referenced above are not completed
within 18 months of the closing date, the term of the agreement may be extended
at Bank of America's sole discretion.
SERVICES AGREEMENT
We and Bank of America have entered into a Services Agreement, effective as
of the closing date of the strategic agreement, which details the electronic
billing and payment related services that we will supply to Bank of America, as
well as the level of service and the fees we will receive. The agreement has a
basic term of ten years, although it may be extended, and on 12 months prior
notice and payment of half of the remaining minimum fees and forfeiture of all
warrants, it may be terminated by Bank of America any time after two years. The
Services Agreement provides for minimum fees to us of $50 million per year.
In connection with our provision of services under the Services Agreement,
we will create an instance of our Genesis operating system for Bank of America.
Bank of America and its customers will then be migrated from the various systems
currently used for its electronic billing and payment services to the new
operating system over time, currently estimated to be less than 18 months.
During this migration period, the terms of the EBP Transition Agreement provide
that Bank of America will continue to operate certain of the legacy systems
until they are transitioned to us. We will pay Bank of America to reimburse it
for the costs of providing these operating services.
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<PAGE> 23
WARRANT AGREEMENT
We and CheckFree Services Corporation have entered into a Warrant
Agreement, dated as of April 26, 2000, with Bank of America, concerning the
issuance and terms of the warrants that we will issue to Bank of America at the
effective time. Each warrant represents the right to purchase one share of our
common stock at a price of $32.50 per share, subject to adjustment in the event
of a dividend, stock split, combination, reclassification, or other issuance.
At the closing none of the warrants issued will be vested. The warrants
will vest and become exercisable in stages based on:
- the number of Bank of America customers using our electronic billing and
payment services; and
- the number of eBills that Bank of America delivers per month.
Bank of America may only transfer the warrants to an affiliate in
compliance with applicable securities laws, and provided that the transferee:
- first agrees to sell or transfer the warrants only under the terms of the
warrant agreement; and
- enters into an agreement with us equivalent to the Stock Restriction
Agreement.
Once vested, Bank of America may exercise the warrants by providing us with
the warrant certificate, the warrant subscription, and payment for the number of
shares for which such warrant is being exercised. We will then issue and deliver
to Bank of America a certificate representing the shares, which may bear the
restrictive legends required by federal and applicable state securities laws.
The warrants are also subject to the restrictions on transferability set
forth in the Stock Restriction Agreement between us and Bank of America. See
"The Strategic Agreement and Share Issuance -- Restrictions on Sales of Shares
by Bank of America."
REGISTRATION RIGHTS AGREEMENT
In connection with the share issuance, we have agreed to grant Bank of
America certain registration rights with respect to the 10 million shares of
common stock and warrants to purchase up to an additional 10 million shares of
common stock that Bank of America will receive at closing. Under a Registration
Rights Agreement, dated as of April 26, 2000, between the parties:
- Bank of America will have the right to have its shares and warrants
included in any registration statement that we file under the Securities
Act of 1933 (other than a Form S-4 or a Form S-8 registration statement)
for an offering of our equity securities for our own account or for the
account of any of our equity security holders; and
- Bank of America may request that we file a registration statement on Form
S-3 for the sale of the shares and warrants in an offering reasonably
anticipated to exceed $2 million, provided that we will not be required
to make such a registration if we have already effected two registrations
in any twelve month period.
The number of shares or warrants that Bank of America may include in any
registration statement may be reduced in the event that the managing underwriter
of such offering determines that:
- the size of the offering that the parties intend to make, or
- the combination of securities that the parties intend to include,
are such that the success of the offering would be materially and adversely
affected. In addition, Bank of America's registration rights will be subordinate
to the registration rights we have previously granted to Intuit Inc.
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<PAGE> 24
PRINCIPAL STOCKHOLDERS AND SHARE OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of our common stock, $.01 par value, as of June 30, 2000, by each
person known by us to own beneficially more than five percent our outstanding
common stock, by each of our directors, by each of our named executive officers,
and by all directors and executive officers as a group. Except as otherwise
noted, each person named in the table has sole voting and investment power with
respect to all shares shown as beneficially owned.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED (1)(2)
--------------------
STOCKHOLDER NUMBER PERCENT
----------- --------- -------
<S> <C> <C>
Peter J. Kight(3)........................................... 6,602,617 11.2%
4411 East Jones Bridge Road
Norcross, Georgia 30092
Intuit, Inc................................................. 3,675,000 6.3%
2535 Garcia Avenue
Mountain View, California 94039
Brown Investment Advisory & Trust Company(4)................ 6,190,827 10.6%
Brown Advisory Incorporated
19 South Street
Baltimore Maryland 21202
FMR Corp.(5)................................................ 3,721,986 6.4%
82 Devonshire Street
Boston, Massachusetts 02109
Mark A. Johnson(6).......................................... 1,457,380 2.5%
Peter F. Sinisgalli......................................... 67,244 *
Francis X. Polashock........................................ 6,084 *
William P. Boardman......................................... 19,216 *
George R. Manser(7)......................................... 35,000 *
Eugene F. Quinn............................................. 28,000 *
Jeffrey M. Wilkins.......................................... 8,000 *
All directors and executive officers as a group (24 8,452,777 14.2%
total)(3)(6)(7).............................................
</TABLE>
---------------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power
and/or investment power with respect to those shares.
(2) Includes shares purchasable within 60 days after June 30, 2000, pursuant to
the exercise of options covering:
- 726,940 shares for Mr. Kight;
- 56,646 shares for Mr. Johnson;
- 33,458 shares for Mr. Sinisgalli;
- 5,000 shares for Mr. Polashock;
- 19,000 shares for Mr. Boardman;
- 34,000 shares for Mr. Manser;
- 24,000 shares for Mr. Quinn;
- 8,000 shares for Mr. Wilkins; and
- 1,078,333 shares for all directors and executive officers as a group
(3) Includes 8,600 shares held by the Peter J. Kight and Teresa J. Kight 1995
Children's Trust, 764,471 shares held by The PJK GRAT 97-1, The PJK GRAT
97-2, The PJK GRAT 98-1, The PJK GRAT 98-2, The PJK GRAT 98-3 and The PJK
GRAT 98-4, and 600,000 shares held by the Peter J. Kight Irrevocable Trust.
Mr. Kight disclaims ownership of these shares in which he has no pecuniary
interest. Does not include 54,850 shares held by a charitable foundation of
which Mr. Kight is the trustee and disclaims any beneficial ownership.
22
<PAGE> 25
(4) Based on information contained in Schedule 13G filed with the Securities and
Exchange Commission on February 14, 2000.
(5) Based on information contained in Schedule 13G filed with the Securities and
Exchange Commission on February 11, 2000.
(6) Includes 8,786 shares held by the Mark A. Johnson 1997 Irrevocable
Children's Trust. Mr. Johnson disclaims ownership of these shares in which
he has no pecuniary interest.
(7) Includes 1,000 shares held by Mr. Manser's spouse which Mr. Manser disclaims
any beneficial ownership. Mr. Manser retired as a director of CheckFree
effective on August 3, 2000.
STOCKHOLDER PROPOSALS
If any of our stockholders wish to submit a proposal to be included in the
proxy statement for our 2000 annual meeting of stockholders, the proposal must
be received by our corporate Secretary at our principal executive offices, 4411
East Jones Bridge Road, Norcross, Georgia 30092, prior to the close of business
on August 25, 2000. Any stockholder proposal submitted outside the processes of
Rule 14a-8 under the Securities Exchange Act of 1934 for presentation to our
2000 annual meeting of stockholders will be considered untimely for purposes of
Rule 14a-4 and 14a-5 if notice thereof is received by us after August 25, 2000.
OTHER MATTERS
As of the date of this proxy statement, our management knows of no other
business that will come before the special meeting. Should any other matter
requiring a vote of the stockholders arise, the proxy in the enclosed form
confers upon the persons designated to vote the shares discretionary authority
to vote with respect to these matter in accordance with their best judgment
By Order of the Board of Directors,
Curtis A. Loveland
Secretary
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<PAGE> 26
APPENDIX A
AMENDED AND RESTATED
STRATEGIC ALLIANCE MASTER AGREEMENT
This Amended and Restated Strategic Alliance Master Agreement ("Agreement"
or "Master Agreement") is made by, between and among CHECKFREE HOLDINGS
CORPORATION ("CKFR") and its wholly-owned subsidiary CHECKFREE SERVICES
CORPORATION ("CSC") both Delaware corporations with their principal office at
4411 East Jones Bridge Road, Norcross, Georgia 30092, and BANK OF AMERICA, N.A.
("Bank"), a national banking association, with its principal office at 101 South
Tryon Street, Charlotte, North Carolina 28255. CKFR and CSC are occasionally
referred to herein as "CheckFree." Each are occasionally referred to as a
"Party" and collectively the "Parties." This Master Agreement amends and
restates the Strategic Alliance Master Agreement among the Parties dated April
26, 2000, and is and shall be effective as of such date.
BACKGROUND
CheckFree is one of the preeminent providers of electronic billing and
payment ("EBP") services in the United States. While Bank also provides billing
and payment services to its customers, the Parties believe that through the
relationship provided for in this Master Agreement and the other agreements and
schedules referred to herein (collectively, the "Alliance Agreements"), the
Parties can (i) accelerate user adoption of EBP; (ii) generate substantial
economies of scale in the provision of such services; and (iii) take advantage
of the relative strengths of the Parties.
The relationship provided for in the Alliance Agreements encompasses (i)
outsourcing the EBP activities currently conducted by Bank to CheckFree,
including related commitments from Bank; (ii) the acquisition by CheckFree of
the assets, and the assumption of certain liabilities, associated with the EBP
activities conducted by Bank of America; (iii) a transition plan to govern the
interim period preceding CheckFree's creation for Bank of a separate and
segregated instance of its Genesis operating system, and the migration of Bank
and its customers from the various systems currently used for its EBP functions
to this targeted operating system; (iv) and the grant to Bank of shares of the
$0.01 par value common stock of CKFR (the "CKFR Common Stock") and warrants to
acquire additional shares of CKFR Common Stock, and other consideration
furnished by CheckFree; (v) the commitment by Bank to market EBP services to its
customers, and; (vi) various other matters as provided in the Alliance
Agreements.
Consummation of all of the transactions required by this Master Agreement
and the other Alliance Agreements will require the clearance of the Federal
Trade Commission under the Hart-Scott-Rodino Anti-Trust Improvements Act (the
"HSR Act") and the approval of the shareholders of CheckFree. Accordingly, while
certain of the Alliance Agreements and schedules will be executed
contemporaneously herewith, with respect to certain other matters, certain
schedules are to be prepared and added later, and with respect to certain
agreements there are agreed-upon principles to be incorporated into agreements
that will be prepared and executed at a later date. The Parties agree, however,
to work in good faith to complete all such matters, with the objective of having
unfinished items completed by the date of the filing of the Proxy Statement for
the CheckFree Shareholders' Meeting.
NOW THEREFORE, in consideration of the premises and the mutual agreements
and covenants herein, Bank and CheckFree hereby agree as follows:
ARTICLE 1
THE SERVICES AGREEMENT AND RELATED AGREEMENTS
1.1. Services Agreement. The Parties shall, contemporaneously with the
execution of this Agreement, and with an effective date as of the Closing (as
such term is defined in Section 8.1), enter into the Services
<PAGE> 27
Agreement in the form attached hereto as Exhibit A, which shall govern the
ongoing business relationship under which CheckFree shall provide EBP services
to Bank.
1.2. Warrant Agreement. CKFR and Bank shall, contemporaneously with the
execution of this Agreement, and with an effective date as of the Closing, enter
into the Warrant Agreement, in the form attached hereto as Exhibit B,
establishing the conditions under which Bank will acquire vested rights in
warrants to purchase shares of CKFR Common Stock (any such warrants obtained by
Bank are referred to as the "Warrants" and any shares obtained upon exercise of
the Warrants are referred to as the "Warrant Shares"), and setting forth the
terms and conditions applying to the Warrants..
1.3 Creation and Use of Special Marketing Fund.
(a) Year One. At the Closing, Bank shall establish a special marketing fund
for the use and benefit of Bank for the express purpose of enhancing the
adoption and usage of EBP services by retail customers of Bank (the "Marketing
Fund"). Although the Parties will consult with respect to the usage of the
Marketing Fund, the timing, usage and allocation of the funds in the Marketing
Fund shall be under the control and direction of Bank provided Bank acts
consistently with the terms hereof. Bank shall expend not less than $25 million
of the Marketing Fund over a twelve-month period commencing with the launch of
EBP services on the Genesis platform for Bank as contemplated by the Services
Agreement (the "Marketing Date").
(b) Year Two. On or before the first anniversary of the Marketing Date,
Bank shall contribute $20 million to the Marketing Fund for the express purpose
of enhancing the adoption and usage of EBP services by retail customers of Bank
provided Bank acts consistently with the terms hereof. The Parties shall
continue to consult regarding the usage of the funds, but timing, usage and
allocation shall remain under the control and direction of the Bank. The funds
contributed by Bank shall be expended over the twelve-month period commencing on
the first anniversary of the Marketing Date.
ARTICLE 2
CONSIDERATION, THE GRANT OF CKFR COMMON STOCK AND RELATED AGREEMENTS
2.1. Stock Grant. CKFR shall, at the Closing, issue to Bank, or to a
wholly-owned subsidiary of the Bank if so directed by the Bank, for no
additional consideration, ten million shares of CKFR Common Stock.
2.2 Stock Restriction Agreement. CKFR and Bank shall, contemporaneously
with the execution of this Master Agreement, and with an effective date as of
the Closing, enter into and execute a Stock Restriction Agreement in the form
attached hereto as Exhibit C. The Stock Restriction Agreement imposes certain
restrictions on Bank's ability to sell, transfer or assign the shares of CKFR
Common Stock received pursuant to Section 2.1 above. The Stock Restriction
Agreement also imposes restrictions on Bank of America's ability to sell,
transfer or assign the Warrant Shares.
2.3 Registration Rights Agreement. CKFR and Bank shall, contemporaneously
with the execution of this Master Agreement, and with an effective date as of
the Closing, enter into and execute a Registration Rights Agreement in the form
attached hereto as Exhibit D, providing the terms and conditions under which the
Shares of CKFR Common stock acquired by Bank pursuant to Section 2.1 and the
Warrant Shares may be registered under the securities laws of the United States.
2.4 Voting Agreement. CKFR and Bank shall, contemporaneously with the
execution of this Master Agreement, enter into and execute a Voting Agreement
substantially in the form attached hereto as Exhibit E (which Voting Agreement
also contemplates the execution by Microsoft Corporation and First Data
Corporation), which imposes certain restrictions on the transfer of the shares
of CKFR Common Stock acquired and to be acquired by Bank pursuant to this Master
Agreement and the Alliance Agreements, and requires that such shares be voted in
accordance with specific provisions of the Voting Agreement. CKFR shall use
commercially efforts to obtain the appropriate execution of the voting agreement
by Microsoft Corporation and First Data Corporation, and to obtain from
Microsoft Corporation and First Data Corporation an Approval of Conduct
Agreement substantially in the form of Exhibit F hereto.
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<PAGE> 28
2.5 Cash Payment. CKFR shall, at closing, pay to Bank the sum of $35
million. Such funds shall be wired or otherwise transferred to an account at
Bank as Bank shall direct.
ARTICLE 3
AGREEMENTS REGARDING TRANSITION OF EBP OPERATIONS
3.1 EBP Preliminary Services Agreement. CSC and Bank of America shall,
contemporaneously with the execution of this Agreement, execute a EBP
Preliminary Services Agreement substantially in the form attached hereto as
Exhibit G, setting forth the preliminary activities of CSC in working with Bank
during the period commencing on the Closing provided in Section 8.1 and ending
at the Closing Time of the Purchase and Assumption Agreement described in
Section 3.3 ("P&A Agreement").
3.2 EBP Transition Agreement. The Parties contemplate that they will,
contemporaneously with the execution of the P&A Agreement, execute an EBP
Transition Agreement following the principles recited in Exhibit H, setting
forth the agreed upon plan whereby CSC and Bank will work together to migrate
certain Bank EBP customers from the systems currently used and operated by Bank
("Legacy Systems") to the target CSC Genesis system, and to provide for
operation of the Legacy Systems during the transition.
3.3 Purchase and Assumption Agreement. The parties agree to negotiate in
good faith and with diligence to, as soon as practical following the execution
of this Agreement, execute a Purchase and Assumption Agreement following the
principles recited (and, where appropriate, incorporating the provisions set
forth) in Exhibit I providing for the acquisition and assumption by CSC of
certain assets, liabilities and relationships of Bank relating to the Legacy
Systems. The Parties acknowledge that there will be substantial due diligence
conducted during the period from the date hereof through the date of execution
and of the closing of the P&A Agreement and the transactions contemplated
thereby, and the Parties agree to conduct such due diligence in a manner
designed not to interrupt the business operations of the other. All such due
diligence shall be governed by the obligation of confidentiality set forth in
this Master Agreement. It is the intent of the Parties to finalize and execute a
definitive P&A Agreement on or before the date the Proxy is mailed to the
shareholders of CKFR as contemplated in Section 4.1 hereof, or as soon
thereafter as reasonably practicable.
ARTICLE 4
SHAREHOLDERS MEETING, REGULATORY REQUIREMENTS AND RELATED MATTERS
4.1 Shareholders Meeting. As soon as reasonably practicable, CKFR shall
call a shareholders' meeting (the "Shareholders' Meeting"), to be held as soon
as reasonably practicable following receipt of all necessary clearances by the
SEC with respect to the proxy statement, for the purpose of voting upon approval
of the issuance of the shares of CKFR Common Stock and Warrants to Bank and such
other related matters as CKFR shall deem appropriate. In connection with the
Shareholders' Meeting, (i) CKFR shall prepare and file a preliminary proxy
statement (the "Proxy Statement") with the SEC and mail the final Proxy
Statement to its shareholders, (ii) Bank of America shall furnish to CKFR all
information concerning it that CKFR may reasonably request in connection with
such Proxy Statement, (iii) the Board of Directors of CKFR shall recommend
(subject to compliance with its fiduciary duties, following consultation with
its legal advisers) to its shareholders the approval of this Master Agreement
and other matters in connection therewith, and (iv) the Board of Directors and
officers of CKFR shall use their reasonable efforts to obtain such shareholders'
approval (subject to compliance with their fiduciary duties, following
consultation with CKFR's legal advisers).
4.2 The Proxy Statement. To the best knowledge of CheckFree, neither the
Proxy Statement nor any other materials (or amendments thereof or supplements
thereto) to be furnished by CKFR to its shareholders in connection with the
transactions contemplated by this Agreement will, at the times such documents
are distributed to CKFR shareholders through the Effective Date, contain, with
respect to CKFR or any of its subsidiaries, any untrue statement of a material
fact or omit to state any information required to be stated
A-3
<PAGE> 29
therein or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they are made
with respect to CKFR and its shareholders, not misleading.
4.3 HSR Filing. To the extent required by applicable laws, rules or
regulations, as soon as practicable following the date hereof, Bank and
CheckFree shall make all pre-merger notification filings as may be required by
the HSR Act and implementing regulations; shall each provide the requisite
information in connection therewith, and shall copy each other on all filings
made thereunder, and all relevant correspondence to and from the respective
agencies with jurisdiction and authority under such Act. Further, Bank shall
undertake and make all filings or applications that may be required in order to
consummate the transactions contemplated by this Master Agreement. In the event
for any reason Bank is not able to acquire or hold the shares of CKFR Common
Stock or acquire or exercise the Warrants due to the lack of the requisite
clearances under the HSR Act and implementing regulations, or the restrictions
imposed on Bank or its holding company by the Office of the Comptroller of the
Currency or the Board of Governors of the Federal Reserve System, the Parties
shall take such steps as may be reasonably requested by Bank to allow it to
realize the economic value associated with the Warrants and the shares of CKFR
Common Stock, including, without limitation, facilitating a transfer of all or a
portion of the Warrants and shares of CKFR Common Stock to a Person able to
acquire the same, but all such transfers shall be nonetheless subject to the
provisions of the Stock Restriction Agreement; provided, however, that inasmuch
as the Parties recognize that ownership of the Shares, Warrants and Warrant
Shares by Bank is expected by CheckFree to provide an incentive to Bank to
foster and accelerate user and biller adoption of EBP, any steps requested by
Bank for the transfer of Shares, Warrants or Warrant Shares pursuant to this
Section 4.3 which are reasonably likely to diminish the financial incentive to
Bank shall be deemed unreasonable and therefore not required to be granted.
4.4 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Master Agreement and the other Alliance Agreements, each
Party agrees to use commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary,
proper, or advisable under applicable laws to obtain all necessary consents and
approvals reasonably required in order to, and to consummate and make effective
as soon as reasonably practicable after the date of this Master Agreement, the
transactions contemplated by this Master Agreement and the other agreements
contemplated hereby, including using commercially reasonable efforts to lift or
rescind any order adversely affecting its ability to consummate the transactions
contemplated herein and therein. Bank shall maintain its EBP operations in the
ordinary course of business, consistent with past practices and shall use
commercially reasonable efforts to maintain key employees associated therewith.
ARTICLE 5
CERTAIN REPRESENTATIONS AND WARRANTIES OF CHECKFREE
CheckFree hereby represents and warrants to Bank as follows:
5.1 Organization, Standing, and Power. CKFR is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Delaware, and has the power and authority to carry on its business as now
conducted and to own, lease and operate its assets.
5.2 Authority of CheckFree; No Breach By Agreement.
(a) Subject to receipt of the approval of the shareholders of CKFR,
CheckFree has the corporate power and authority necessary to execute, deliver,
and perform its obligations under this Master Agreement and the Alliance
Agreements and to consummate the transactions contemplated hereby and thereby,
and such Agreements are, or shall be when executed and delivered, legal, valid,
and binding obligations of CheckFree, enforceable against CheckFree in
accordance with its terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
A-4
<PAGE> 30
(b) Neither the execution and delivery of this Master Agreement by
CheckFree, nor the consummation by CheckFree of the transactions contemplated
hereby or by the other Alliance Agreements, nor compliance by CheckFree with any
of the provisions hereof or thereof, will (i) conflict with or result in a
breach of any provision of CheckFree's Certificate of Incorporation or Bylaws or
any resolution adopted by the board of directors or the stockholders of
CheckFree, or (ii) result in a breach of any material contract to which
CheckFree is a party or, (iii) otherwise have a material adverse effect on
CheckFree, its business, operations or future prospects.
(c) Other than in connection or compliance with the provisions of the
securities laws, and other than compliance with the HSR Act, no notice to,
filing with, or consent of, any public body or authority is necessary for the
consummation by CheckFree of the transactions contemplated in this Master
Agreement or any of the Alliance Agreements.
5.3 Capital Stock.
(a) The authorized capital stock of CKFR consists of (i) 150,000,000 shares
of CKFR Common Stock, of which 52,486,670 shares were issued and outstanding as
of February 7, 2000 as reported in CKFR's Form 10-Q as filed with the SEC for
the quarterly period ending December 31, 1999, and (ii) 15,000,000 shares of
preferred stock, par value $0.01 per share, none of which are issued and
outstanding. All of the issued and outstanding shares of capital stock of CKFR
are duly and validly issued and outstanding and are fully paid and
nonassessable. None of the outstanding shares of capital stock of CKFR has been
issued in violation of any preemptive rights of the current or past stockholders
of CKFR. CKFR has agreed to issue 17,000,000 shares of CKFR Common stock in
connection with an announced transaction with First Data Corporation and
Microsoft Corporation, and has agreed to issue additional shares of CKFR Common
stock in connection with an announced transaction with Bluegill Technologies,
Inc., the number of which is dependent on a procedure set forth in the Agreement
and Plan of Merger dated as of December 20, 1999.
(b) Except as set forth above or as previously disclosed in CKFR's SEC
Reports (as defined below) or otherwise set forth on Schedule 5.3, there are no
shares of capital stock or other equity securities of CheckFree outstanding and
no outstanding warrants, options or other similar rights relating to the capital
stock of CKFR.
(c) The shares of CKFR Common Stock to be issued pursuant to Section 2.1
hereof, and the Warrant Shares, if, when, and as issued, shall be fully paid and
non-assessable.
5.4 SEC Filings; Financial Statements. CKFR has timely filed all with the
SEC reports and other materials required to be filed by CKFR since September 28,
1995 (the "CheckFree SEC Reports"). The CheckFree SEC Reports (i) at the time
filed, complied in all material respects with the applicable requirements of the
securities laws and other applicable laws and (ii) did not, at the time they
were filed (or, if amended or superseded by a filing prior to the date of this
Master Agreement, then on the date of such filing) contain any untrue statement
of a material fact or omit to state a material fact required to be stated in
such CheckFree SEC Reports or necessary in order to make the statements in such
CheckFree SEC Reports, in light of the circumstances under which they were made,
not misleading. No CheckFree Subsidiary is required to file any reports or make
filings with the SEC. The financial statements contained in the CheckFree SEC
Reports also comply in all material respects with the applicable published rules
and regulations of the SEC, and were prepared in accordance with Generally
Accepted Accounting Principles applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited interim statements, as permitted by Form
10-Q of the SEC), and fairly presented in all material respects the consolidated
financial position of CKFR and its subsidiaries as at the respective dates and
the consolidated results of operations and cash flows for the periods indicated.
5.5 Absence of Certain Changes or Events. Since the filing of the most
recent of the CKFR SEC Reports, except as disclosed on Schedule 5.5, there have
been no events, changes, or occurrences which have had, or are reasonably likely
to have, individually or in the aggregate, a material adverse effect on
CheckFree, its business or its prospects.
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5.6 Legal Proceedings. Except as disclosed on Schedule 5.6, there is no
litigation instituted or pending, or, to the knowledge of CheckFree, threatened
(or unasserted but considered probable of assertion and which if asserted would
have at least a reasonable probability of an unfavorable outcome) against
CheckFree, or against any director, employee or employee benefit plan of
CheckFree, or against any Asset, interest, or right of CheckFree, seeking
damages in excess of $10 million, nor are there any orders of any regulatory
authorities, other governmental authorities, or arbitrators outstanding against
CheckFree, that are reasonably likely to have, individually or in the aggregate,
a material adverse effect on CheckFree, its business or its prospects.
5.7 Statements True and Correct. No statement, certificate, instrument or
other writing furnished or to be furnished by CheckFree thereof to Bank pursuant
to this Master Agreement or any other document, agreement or instrument referred
to herein contains or will contain any untrue statement of material fact or will
omit to state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by CheckFree for inclusion in any
documents to be filed with the SEC or any other regulatory Authority in
connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All documents that CheckFree thereof is responsible for filing
with any regulatory authority in connection with the transactions contemplated
hereby will comply as to form in all material respects with the provisions of
applicable law.
5.8 State Takeover Laws. The transactions contemplated by this Master
Agreement and the other Alliance Agreements do not require compliance with any
applicable "moratorium," "fair price," "business combination," "control share,"
or other anti-takeover laws, including Section 203 of the Delaware General
Corporation Law.
5.9 Charter Provisions. CKFR has taken all action so that the entering into
of this Agreement and the consummation of the transactions contemplated by this
Master Agreement and the Alliance Agreements do not and will not result in the
grant of any rights to any person under the Certificate of Incorporation, Bylaws
or other governing instruments of CKFR or any of its subsidiaries, or restrict
or impair the ability of Bank to vote, or otherwise to exercise the rights of a
stockholder with respect to, shares of CKFR Common Stock that may be directly or
indirectly acquired or controlled by them.
5.10 Rights Agreement. Except as Previously Disclosed, the entering into of
this Master Agreement and consummation of the transactions contemplated hereby
and by the Alliance Agreements do not and will not result in any person becoming
able to exercise any "Rights" as defined in and under the CheckFree Rights
Agreement or enabling or requiring the Rights to be separated from the shares of
CKFR Common Stock to which they are attached or to be triggered or to become
exercisable.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BANK
Bank hereby represents and warrants to CheckFree as follows:
6.1 Organization, Standing, and Power. Bank is a national banking
association duly organized, validly existing and in good standing under the laws
of the United States, with the power and authority to carry on its business as
now conducted and to own, lease and operate its material assets.
6.2 Authority; No Breach By Agreement.
(a) Bank has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Master Agreement and the Alliance
Agreements and to consummate the transactions contemplated hereby and thereby,
and such Agreements are, or shall be when executed and delivered, legal, valid,
and binding obligations of Bank, enforceable against Bank in accordance with
their terms (except in all cases as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar laws affecting the enforcement of
creditors' rights generally and
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except that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought).
(b) Neither the execution and delivery of this Master Agreement and the
related Alliance Agreements by Bank, nor the consummation by Bank of the
transactions contemplated hereby and thereby, nor compliance by Bank with any of
the provisions hereof, will (i) conflict with or result in a breach of any
provision of Bank's Articles of Association or Bylaws, or any resolution adopted
by the board of directors or the stockholders of Bank or (ii) result in a breach
of any material contract to which Bank is a party or, (iii) otherwise have a
material adverse effect on Bank, its business, operations or future prospects.
(c) Other than in connection or compliance with the provisions of the
securities laws, and other than compliance with the HSR Act, no notice to,
filing with, or consent of, any public body or authority is necessary for the
consummation by Bank of the transactions contemplated in this Master Agreement
or any of the Alliance Agreements.
6.3 Legal Proceedings. Except as set forth on Schedule 6.3, there is no
litigation instituted or pending, or, to the knowledge of Bank of America,
threatened (or unasserted but considered probable of assertion and which if
asserted would have at least a reasonable probability of an unfavorable outcome)
against Bank, or against any director, employee or employee benefit plan of
Bank, or against any asset, interest, or right of Bank, nor are there any orders
of any regulatory authorities, other governmental authorities, or arbitrators
outstanding against Bank, that are reasonably likely to have, individually or in
the aggregate, a material adverse effect on Bank, its business or its prospects.
6.4 Statements True and Correct. No statement, certificate, instrument or
other writing furnished or to be furnished by Bank to CheckFree pursuant to this
Agreement or any other document, agreement or instrument referred to herein
contains or will contain any untrue statement of material fact or will omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by Bank for inclusion in any documents to
be filed with the SEC or any other regulatory Authority in connection with the
transactions contemplated hereby, will, at the respective time such documents
are filed, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. All documents that
Bank is responsible for filing with any regulatory authority in connection with
the transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable law.
6.5 Acquisition for Investment. All shares of CKFR Common Stock acquired or
to be acquired pursuant to the Master Agreement or pursuant to the other
Alliance Agreements are and will be acquired for the purpose of investment.
ARTICLE 7
CERTAIN OTHER ITEMS
7.1 Publicity. The form, substance and timing of any press release or other
public disclosure of matters related to this Master Agreement and the other
Alliance Agreements shall be mutually agreed to by CheckFree and Bank of America
in writing which consent shall not be unreasonably withheld, except to the
extent of disclosure for which CheckFree or Bank of America is required by law
to make, in which instance, the parties shall consult prior to making such
public disclosure.
7.2 Transition Matters.
(a) The Coordinating Committee. Each of Bank of America and CheckFree will
create a committee composed of senior officers to effect the various items set
forth in this Agreement as well as other items that may arise from time to time
in the preparation and finalization of definitive documents, exhibits and
schedules, the transition contemplated by the EBP Preliminary Services
Agreement, the EBP Transition Agreement or the implementation of the various
Alliance Agreements. This committee shall meet periodically. This committee may
create or empower various subcommittees to address specific items. To the
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extent that there are disagreements regarding any matter that may arise with
respect to the matters contemplated by the Alliance Agreements, if the committee
is unable to reach a satisfactory resolution, the matter will be addressed by
the Chairman of CKFR and the Chief Technology Officer of Bank or their
designees.
(b) Transition and Preparation Matters. The Parties acknowledge that during
the period commencing on the date of execution of this Master Agreement, and
continuing though the Closing, the Parties will be involved in intensive sharing
of information and data, both in an effort to complete the documentation
referred to above, but also to prepare for the actual implementation of those
various agreements and obligations. Specific and detailed transition plans and
schedules must be prepared. The Parties agree to devote sufficient personnel to
carry out this effort, to create and staff transition teams and take other steps
necessary to facilitate the smooth transition of functions and responsibilities
to CheckFree as contemplated by this Master Agreement and the other Alliance
Agreements.
7.3 Allocation of Consideration. The Parties agree and acknowledge that the
grant of shares of CKFR Common Stock provided in Section 2.1 must be properly
valued and then allocated over a variety of assets and other rights and benefits
created pursuant to this Master Agreement and the other Alliance Agreements.
During the 120 day period following the date hereof, the parties shall work
together to determine both the appropriate value to be assigned to the Stock,
taking into consideration the various restrictions and limitations imposed on
the CKFR Stock under the Stock Restriction Agreement and Registration Rights
Agreement, and the allocation of the consideration among the assets, rights and
benefits. Within this 120-day period, Bank shall determine the appropriate value
to be assigned to the shares of CKFR Common Stock. If CheckFree disagrees with
the value so assigned, the matter shall be determined by a firm of
nationally-recognized certified public accountants selected and compensated by
Bank. Within this 120-day period, CKFR shall determine the appropriate
allocation of the consideration. If Bank disagrees with the value so assigned,
the matter shall be determined by a firm of nationally-recognized certified
public accountants selected and compensated by CheckFree.
7.4 Confidentiality. The Parties acknowledge that during the course of the
transactions contemplated by this Master Agreement and the other Alliance
Agreements, each has received and will continue to receive sensitive commercial
information regarding the other and the business and affairs of the other that
has not been disclosed to the public and the disclosure of which would be
detrimental to the business and affairs of the other. While there may be
separate privacy and confidentiality obligations contained in the other Alliance
Agreements, which in the event of conflict shall control, the Parties generally
agree to respect the confidentiality of such sensitive commercial information.
The Parties will attempt to identify such confidential information or the types
of information to be treated in a confidential fashion. Each Party shall, and
shall cause its advisers and agents to, maintain the confidentiality of all such
information (the "Confidential Information") furnished to it by the other
concerning its businesses, operations, and financial positions and shall not use
such Confidential Information for any purpose except in as contemplated by this
Agreement, and shall not disclose such Confidential Information to any third
party without the prior written consent of the other. In the event that a Party
or any affiliate or representative of a Party, or any officer, director,
employee or representative thereof is requested or required by documents
subpoena, civil investigative demand, interrogatories, requests for information,
or other similar process to disclose any Confidential Information which
otherwise may not be disclosed except as set forth in the preceding sentence,
such Party will provide the other with prompt notice of such request, demand or
other similar process so that the Party may seek an appropriate protective order
or, if such request, demand or other similar process is not mandatory, waive
compliance with the provisions of this Section. The term "Confidential
Information" as to a Party does not include information which (i) becomes
generally available to the public other than as a result of disclosure by the
other Party in breach hereof, (ii) was available on a non-confidential basis
prior to its disclosure by the Party, including through disclosures by such
persons prior to the date of this Agreement, or (iii) becomes available to other
Party on a non-confidential basis from a source other than the Party, provided
that such source is not bound by a confidentially agreement with the Party.
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7.5 Arbitration.
(a) Mandatory Arbitration. Any controversy or claim arising out of or
relating to this Master Agreement or the other Alliance Agreements (except to
the extent other dispute resolution procedures are specifically provided
therein), or the breach thereof, including claims for equitable relief, shall be
settled by arbitration in Atlanta, Georgia. The arbitration shall be
administered by the American Arbitration Association ("AAA") in accordance with
its Commercial Arbitration Rules, and shall be heard by a panel of three (3)
arbitrators selected in accordance with these Rules. After a demand for
arbitration is made, each party may conduct two (2) party and two (2) non-party
depositions and may further request discovery through up to thirty (30) document
requests, twenty (20) written interrogatories, and ten (10) requests for
admission, and/or such other further discovery as permitted by the arbitration
panel upon request and for good cause shown. The arbitrators may grant any
remedy or relief, including equitable relief, that they deem just and equitable,
except the arbitrators will have no authority to award punitive or other damages
not measured by the prevailing party's actual damages unless required by
statute. Each party shall be responsible for its own costs and expenses, except
that the arbitrators shall have the discretion to allocate the costs and
expenses of the Parties, including attorney's fees, as well as the compensation
and fees of the arbitrators, as the arbitrators may determine based upon the
position of the parties with respect to the matter in dispute, the outcome of
the arbitration, and such similar factors as the arbitrators may determine
equitable under the circumstances. Judgment on the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
(b) Interim Relief. If either party is in need of emergency relief prior to
the constitution of the arbitration panel, that party may apply to the AAA for
such emergency relief in accordance with its Optional Rules for Emergency
Measures of Protection. Pursuant to those Rules, the AAA shall appoint a single
emergency arbitrator to rule on emergency applications, which emergency
arbitrator may enter an interim award granting the relief and stating the
reasons therefor. After the panel is constituted, it may take whatever interim
measures it deems necessary, in accordance with Rule R-36, including the de
novoreview of any award or relief granted by the emergency arbitrator, either
upon the motion of a party or its own motion, and the emergency arbitrator shall
have no further power to act. The procedure outlined in this paragraph shall be
the sole mechanism for seeking interim relief, and any request for interim
measures addressed by a party to a judicial authority shall be deemed
incompatible with the agreement to arbitrate. The Parties hereto agree that
irreparable damage may occur in the event that any of the provisions of this
Master Agreement were not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the Parties shall be entitled
to an injunction or injunctions to prevent breaches of this Master Agreement and
to enforce specifically the terms and provisions hereof.
(c) Intellectual Property Claims. Intellectual property claims shall also
be subject to mandatory arbitration, except that questions concerning the
existence, validity, enforceability, and ownership of intellectual property
shall be decided by a special arbitrator, appointed by the AAA, who shall be
skilled in the technical and legal areas of intellectual property involved. The
findings of the special arbitrator shall be binding on the arbitration panel,
which shall then determine any damages or other relief to be awarded in
accordance thereunder. Such findings however, even if forming the basis for a
judgment filed in court, may not be relied upon by any other party, nor shall
the judgment act to collaterally estop the party adversely affected by the
finding or judgment from contesting the same or similar claim, or from raising
the same or similar defenses, in any proceeding involving any entity not a party
to this Master Agreement.
(d) Binding Effect of Arbitration Decisions. Any decision by the arbitrator
or arbitrators pursuant hereto shall be final and binding as to any matters
submitted to the arbitrator, and may be enforced by judicial proceeding having
jurisdiction over the Party subject to such decision.
ARTICLE 8
CLOSING; CONDITIONS PRECEDENT TO CLOSING
8.1 Closing. Upon satisfaction of the conditions precedent set forth in
Sections 8.2, 8.3 and 8.4 below, a closing shall be held (the "Closing") at a
time and place agreed to by the Parties, or if no agreement can be
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reached, at the offices of Alston & Bird LLP on the fifth business day after
satisfaction of such conditions precedent. At the Closing:
(a) CKFR shall deliver to Bank the various certificates required by
Section 8.3 hereof;
(b) Bank shall deliver to CKFR the various certificates and documents
required by Section 8.4 hereof; and
(c) CKFR shall issue to Bank (or to a direct or indirect wholly owned
subsidiary of Bank), the shares of CKFR Common Stock required by Section
2.1 hereof and the Warrants;
(d) CheckFree shall make the $35 million payment to Bank as required
by Section 2.5 hereof.
(e) To the extent the Parties have agreed upon the definitive forms of
the P&A Agreement and the EBP Transition Agreement, such documents may also
be executed and delivered at the Closing.
8.2 Conditions Precedent to the Obligations of Each Party. The respective
obligations of the Parties to consummate the Closing and take the actions
required thereat shall be subject to the satisfaction of the following
conditions, unless waived by the Parties as contemplated in Section 10.6:
(a) Shareholder Approval. The shareholders of CKFR shall have approved
the issuance of the shares of CKFR Common Stock and the issuance of the
Warrants and shall have approved any other matter associated with this
Master Agreement for which shareholder approval is required under the
Articles or Bylaws of CKFR, the Delaware General Corporation Law or
otherwise.
(b) Regulatory Approval. All consents of, filings and registrations
with, and notifications to all regulatory authorities required for
consummation of the transactions contemplated by this Master Agreement and
the other Alliance Agreements (including but not limited to the expiration
or earlier termination of any waiting period under the HSR Act) shall have
been obtained, made or occurred and shall be in full force and effect, and
all waiting periods shall have expired. There shall be no condition imposed
in connection with any such regulatory consent or approval that shall, in
the reasonable judgment of the Board of Directors of either CKFR or Bank,
would so materially and adversely impact the economic or business benefits
of the transactions contemplated by this Master Agreement that, had such
condition been known, such Party would not have entered into this
Agreement.
(c) Legal Proceedings. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued or
promulgated any order or taken any other action that restricts or make
illegal consummation of the transactions contemplated by this Master
Agreement.
8.3 Conditions to the Obligations of Bank. The obligations of Bank to
consummate the Closing and take the actions required thereat shall be subject to
the satisfaction of the following conditions, unless waived by Bank as
contemplated in Section 10.6:
(a) Representations and Warranties. The representations and warranties
of CheckFree set forth in this Master Agreement shall be true and correct,
both on the date of this Master Agreement and as of the Closing Date, as
though such representations and warranties had been made on the Closing
Date (except that representations and warranties that are confined to a
specific date shall speak only to that date.
(b) Certificates. CKFR shall have delivered to Bank (i) a certificate,
dated as of the date of the Closing, to the effect that the condition set
forth in Section 8.3(a) has been satisfied, and (ii) certified copies of
the resolutions adopted by the Board of Directors and shareholders of CKFR
necessary to authorize the consummation of the transactions and actions
contemplated by this Master Agreement.
(c) Rights Agreement. None of the events described in CKFR's Rights
Agreement triggering the issuance or exercise of rights provided therein
shall have occurred or occur upon consummation of the actions to be taken
at Closing.
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8.4 Conditions to the Obligations of CKFR. The obligations of CKFR to
consummate the Closing and take the actions required thereat shall be subject to
the satisfaction of the following conditions, unless waived by CKFR as
contemplated in Section 10.6:
(a) Representations and Warranties. The representations and warranties
of Bank set forth in this Master Agreement shall be true and correct, both
on the date of this Master Agreement and as of the Closing Date, as though
such representations and warranties had been made on the Closing Date
(except that representations and warranties that are confined to a specific
date shall speak only to that date.
(b) Certificates. Bank shall have delivered to CKFR (i) a certificate,
dated as of the date of the Closing, to the effect that the condition set
forth in Section 8.4(a) has been satisfied, and (ii) certified copies of
any corporate resolutions or actions by the Board of Directors of Bank
necessary to authorize the consummation of the transactions and actions
contemplated by this Master Agreement.
ARTICLE 9
TERMINATION
9.1 Termination. Notwithstanding any other provision of this Master
Agreement, this Master Agreement may be terminated subject to the provisions of
Section 9.2:
(a) By written mutual consent of Bank and CKFR; or
(b) By either Party upon termination of the Services Agreement; or
(c) By either Party if the shareholders of CKFR fail to approve the
transactions contemplated by this Master Agreement by October 1, 2000,
unless the transaction is pending approval or action by a governmental
agency, in which case the Master Agreement may not be terminated until the
earlier of December 31, 2000, or forty (40) days following such approval or
action.
9.2 Effect of Termination. In the event of the termination and abandonment
of this Agreement pursuant to Section 9.1, this Agreement shall become void and
have no effect, except that this Section 8.2 and Sections 7.4, 7.5 and Article 9
shall survive any such termination and abandonment. Termination of this Master
Agreement, or of the Services Agreement by Bank other than for cause or other
than upon expiration of the stated term thereof or upon the mutual agreement of
the parties thereto shall terminate any rights of Bank under the Registration
Rights Agreement.
9.3 Termination of the Services Agreement. Termination of the Services
Agreement for convenience as provided in Section 4.5 thereof prior to the
initial term thereof (as defined in Section 2.1 thereof) shall terminate, nunc
pro tunc, all rights of Bank under the Warrant Agreement such that Bank shall
return to CKFR that number of (a) certificates representing Warrants, whether
exercisable or not, plus (b) shares of CKFR Common Stock, such that the sum of
(a) and (b) represents ten million shares of CKFR Common Stock, which number
shall be adjusted to take into consideration stock splits, stock dividends and
other adjustments contemplated by Article 2 of the Warrant Agreement.
ARTICLE 10
MISCELLANEOUS
10.1 Definitions.
(a) Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
"AAA" shall have the meaning set forth in Section 7.5.
"Affiliate" shall mean a business entity Controlled by, Controlling, or
under common Control with, such person.
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"Alliance Agreements" shall have the meaning set forth in the Preamble.
"CKFR Common Stock" shall have the meaning set forth in the Preamble.
"CKFR SEC Reports" shall have the meaning set forth in Section 5.4.
"Closing" shall have the meaning set forth in Section 8.1.
"Control" shall mean the ownership by the controlling entity of more than
50% of the outstanding shares or other equity interests entitled to vote for all
directors or other governing body of the controlled entity.
"EBP" shall have the meaning set forth in the Preamble.
"HSR Act" shall mean Section 7A of the Clayton Act, as added by Title II of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the rules and
regulations promulgated thereunder.
"Legacy Systems" shall have the meaning set forth in Section 3.2.
"Marketing Date" shall have the meaning set forth in Section 1.3.
"Marketing Fund" shall have the meaning set forth in Section 1.3.
"P&A Agreement" shall have the meaning set forth in Section 3.1.
"Proxy Statement" shall have the meaning set forth in Section 4.1.
"SEC" shall mean the Securities and Exchange Commission of the United
States.
"Shareholders' Meeting" shall have the meaning set forth in Section 4.1.
"Warrants" shall have the meaning set forth in Section 1.2.
(b) Unless the context of this Master Agreement clearly requires otherwise,
references to the plural include the singular, to the singular include the
plural, and to the part include the whole. The term "including" is not limiting
and the term "or" has the inclusive meaning represented by the term "and/or" The
words "hereof," "herein," "hereunder," and similar terms in this Agreement refer
to this Agreement as a whole and not to any particular provision of this
Agreement. References to "Articles", "Sections," "Subsections," "Exhibits" and
"Schedules" are to Articles, Sections, Subsections, Exhibits and Schedules,
respectively, of this Agreement, unless otherwise specifically provided.
10.2 Expenses. Each of the Parties shall bear and pay all direct costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including filing and application fees, printing fees,
and fees and expenses of its own financial or other consultants, investment
bankers, accountants, and counsel.
10.3 Brokers and Finders. Each of the Parties represents and warrants that
neither it nor any of its officers, directors, employees has employed any broker
or finder or incurred any liability for any financial advisory fees, investment
bankers' fees, brokerage fees, commissions, or finders' fees in connection with
this Master Agreement or the transactions contemplated hereby. In the event of a
claim by any broker or finder based upon his or its representing or being
retained by or allegedly representing or being retained by Bank or by CheckFree,
each of CheckFree and Bank as the case may be, agrees to indemnify and hold the
other Party harmless of and from any Liability in respect of any such claim.
10.4 Entire Agreement. Except as otherwise expressly provided herein, this
Master Agreement (including the other Alliance Agreements and documents and
instruments referred to herein and therein) constitutes the entire agreement
between the Parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereto,
written or oral. Nothing in this Master Agreement expressed or implied, is
intended to confer upon any person, other than the parties or their respective
successors, any rights, remedies, obligations, or liabilities under or by reason
of this Master Agreement.
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10.5 Amendments. This Agreement may be amended only by a subsequent writing
signed by duly authorized representatives of each of the Parties. Without
limiting the foregoing, this Agreement may not be amended by any oral statement
made by any officer, director or representative of any of the Parties, or by any
pattern, practice or course of dealing of the Parties.
10.6 Waivers. No waiver of any term, condition, warranty, representation,
covenant or obligation in this Master Agreement shall be effective unless in
writing signed by a duly authorized officer of the Party against whom the waiver
is to be charged. The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
10.7 Assignment.
(a) Except as expressly contemplated hereby, neither this Master Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any Party hereto without the prior written consent of the other Party. Subject
to the preceding sentence, this Master Agreement will be binding upon, inure to
the benefit of and be enforceable by the Parties and their respective successors
and assigns. Certain of the Alliance Agreements contemplate assignments of
rights, duties or obligations to the extent specifically provided therein.
(b) The Parties acknowledge that in connection with the various provisions
of this Agreement and the other Alliance Agreements, there are various
subsidiaries of Bank that shall be required to perform certain obligations,
carry out the duties and responsibilities and otherwise be subject to the
provisions of this Master Agreement and the other Alliance Agreements. For
example, certain of the assets that will be subject to the P&A Agreement are
held by Banc of America Technology and Operations, Inc. The shares of CKFR
Common Stock, Warrants and Warrant Shares may be issued to or acquired by Banc
of America E-Commerce Holdings, Inc. or any other wholly-owned subsidiary of
Bank Notwithstanding their not joining in and executing this Master Agreement,
Bank will assure the appropriate subsidiary of Bank performs and carries out the
duties and responsibilities imposed on Bank hereunder and under the other
Alliance Agreements. Compliance with the foregoing shall not constitute an
impermissible assignment hereunder.
(c) To the extent that this Master Agreement imposes upon CKFR or CheckFree
the obligation to perform services under this Agreement, the Services Agreement
or the other Alliance Agreements, the Parties acknowledge that such services
will be performed by CSC. Compliance with the foregoing shall not constitute an
impermissible assignment hereunder.
10.8 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission (if receipt thereof is acknowledged by the receiving
party by other than automatic means), by registered or certified mail, postage
pre-paid, or by courier or overnight carrier, to the persons at the addresses
set forth below (or at such other address as may be provided hereunder), and
shall be deemed to have been delivered as of the date so delivered:
CheckFree: CheckFree Corporation
4411 East Jones Bridge Road
Norcross, GA 30092
Telecopy Number: (770) 417-1149
Attention: Peter J. Kight
With a copy to Allen Shulman, General Counsel and Chief Financial Officer
Telecopy Number: (678) 375-3633
And with a Copy to Counsel: Porter, Wright, Morris & Arthur
41 South High Street
Columbus, OH 43215-6194
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Telecopy Number: (614) 227-2100
Attention: Robert C. Tannous
Bank: Bank of America, N.A.
201 North Tryon Street
Charlotte, North Carolina 28255.
Telecopy Number: (704) 386-0577
Attention: Mark A. Argosh, Senior Vice President
And with a copy to Office of the General Counsel
Telecopy Number: (704) 370-3515
- and -
600 Peachtree Road, NW
Atlanta, GA 30308
Telecopy Number: (404) 607-6226
Attention: James D. Dixon
10.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to any
applicable conflicts of Laws.
10.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
10.11 Captions; Articles and Sections. The captions contained in this
Agreement are for reference purposes only and are not part of this Agreement.
Unless otherwise indicated, all references to particular Articles or Sections
shall mean and refer to the referenced Articles and Sections of this Agreement.
10.12 Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any Party, whether under
any rule of construction or otherwise. No Party to this Agreement shall be
considered the draftsman. The Parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all Parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all Parties
hereto.
10.13 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable. The terms of this subsection shall not be
applied, however, if the result would, in the reasonable judgment of either
Party, deprive it of a material financial or business benefit of the
transaction, such that, had the unenforceability been known, such Party would
not have entered into this Agreement.
[continued on following page]
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<PAGE> 40
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
on its behalf by its duly authorized officers effective as of this 26th day of
April, 2000.
<TABLE>
<S> <C>
BANK OF AMERICA, N.A CHECKFREE HOLDINGS CORPORATION
By: /s/ Jeanine R. Brown By: /s/ Peter F. Sinisgalli
---------------------------------------------- ----------------------------------------------
Name: Jeanine R. Brown Name: Peter F. Sinisgalli
---------------------------------------------- ----------------------------------------------
Title: Executive Vice President Title: President and COO
---------------------------------------------- ----------------------------------------------
CHECKFREE SERVICES CORPORATION
By: /s/ Peter F. Sinisgalli
----------------------------------------------
Name: Peter F. Sinisgalli
----------------------------------------------
Title: President and COO
----------------------------------------------
</TABLE>
EXHIBITS TO THE MASTER SERVICES AGREEMENT:
<TABLE>
<S> <C>
A. Services Agreement
B. Warrant Agreement
C. Stock Restriction Agreement
D. Registration Rights Agreement
E. Voting Agreement
F. Approval of Conduct Agreement
G. Preliminary EBP Services Agreement
H. Principles Regarding the EBP Services Agreement
I. Principles Regarding P&A Agreement
</TABLE>
A-15
<PAGE> 41
APPENDIX B
PURCHASE AND ASSUMPTION AGREEMENT
THIS PURCHASE AND ASSUMPTION AGREEMENT (this "Agreement") is entered into
as of August , 2000 by and between BANK OF AMERICA, N.A. ("Bank"), a national
banking association whose address is 101 South Tryon Street, Charlotte, North
Carolina 28255, and BANK OF AMERICA TECHNOLOGY AND OPERATIONS, INC., a Delaware
corporation whose address is 100 North Tryon Street, Charlotte, North Carolina
28255 ("BATO") (collectively referred to herein as "Seller"), CHECKFREE
CORPORATION, a Delaware corporation whose address is 4411 East Jones Bridge
Road, Norcross, Georgia 30092 ("Parent"), and CHECKFREE SERVICES CORPORATION, a
Delaware corporation whose address is 4411 East Jones Bridge Road, Norcross,
Georgia 30092 ("Purchaser").
W I T N E S S E T H:
WHEREAS, Seller owns and operates certain bill payment and presentment
operations through business units located in San Francisco, California, and
Houston, Texas (the "Bill Payment and Presentment Platform");
WHEREAS, Seller wishes to divest, upon the terms and conditions set forth
herein, certain assets and certain liabilities associated with the Bill Payment
and Presentment Platform (collectively, the "Acquired Operations");
WHEREAS, Parent desires for its wholly-owned subsidiary, Purchaser, to buy
the Acquired Operations and, in consideration therefor, Parent will tender
certain good and valuable consideration as set forth in Section 1.2 below to
Seller;
WHEREAS, Purchaser wishes to buy the Acquired Operations and certain
intangible rights related thereto and assume such liabilities upon the terms and
conditions set forth herein;
WHEREAS, capitalized terms not defined herein shall have the meanings set
forth in that certain Strategic Alliance Master Agreement dated April 26, 2000,
by, between, and among the Bank, Parent and Purchaser (the "Master Agreement");
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter set forth, Seller and Purchaser agree as follows:
ARTICLE I
TRANSFER OF ASSETS AND LIABILITIES
Section 1.1. Transferred Assets.
As of the Effective Time (as defined in Section 2.1 below) and upon the
terms and conditions set forth herein, Seller will sell, assign, transfer,
convey and deliver to Purchaser, and Purchaser will purchase from Seller, with
the exceptions set forth herein, all of the right, title and interest of Seller
in and to the following assets, properties and rights of Seller relating to the
Acquired Operations (collectively, the "Acquired Assets"); provided that (i) the
term "Acquired Assets" shall not include the Excluded Assets (as defined in
Section 1.3 below); and (ii) in the case of any assets that are used or held for
use in both the Acquired Operations and the Retained Operations (collectively
the "Operations"), (x) if such asset is readily divisible among the Operations,
then that portion of the asset used or held for use in the Acquired Operations
shall be an Acquired Asset and that portion used or held for use in the Retained
Operations shall be an Excluded Asset and (y) if such asset is not of the type
described in the preceding clause (x) but is readily capable of
<PAGE> 42
being lawfully replicated or duplicated, then such asset shall be an Acquired
Asset and such replica or duplicate shall be an Excluded Asset. The Acquired
Assets shall include:
(a) the machinery, equipment, furniture, fixtures, furnishings,
computers and similar property software used with the Acquired Operations
and specifically defined and described in the Schedule of Equipment,
Schedule A, attached hereto and made a part hereof (the "Equipment");
(b) the software (including object and source code) used with the
Acquired Operations specifically defined and described in the Schedule of
Software, Schedule B, attached hereto and made a part hereof (the
"Software");
(c) the copyrights, trade secrets, trademarks, trade names, service
marks and other proprietary rights based or included in or covering the
Acquired Operations or Software or any portion thereof specifically defined
and described in the Schedule of Proprietary Rights, Schedule C, attached
hereto and made a part hereof (hereinafter collectively referred to as the
"Proprietary Rights"); and
(d) All transferable rights under all Permits granted or issued to
Seller or otherwise held by Seller relating to or for the benefit of the
Acquired Operations;
(e) All of Seller's supplier lists, computer media, invoices,
correspondence, files, books and records relating to or arising in
connection with the Acquired Operations, and such other assets and
information as may be reasonably requested by Parent or Purchaser so long
as such information principally relates to the Acquired Operations and
Parent and Purchaser agree to abide by any and all of Seller's privacy and
confidentiality policies related to the same; provided further, that Seller
shall have reasonable access to all such other assets and information
requested by Parent or Purchaser;
(f) All of Seller's rights to insurance proceeds (and those proceeds
actually received), if any, in connection with (i) any casualty to the
Acquired Assets occurring between the date hereof and the Effective Time,
(ii) any business interruption of the Acquired Operations prior to the
Effective Time to the extent such proceeds compensate for interruption
extending past the Effective Time, and (iii) any insurance claim in respect
of the Acquired Operations which claim arises after the Effective Time but
relates to a prior period loss of or damage to the Acquired Assets; and
(g) All of Seller's claims, causes of action and other legal rights
and remedies, whether or not known as of the Effective Time, relating to
Seller's ownership of the Acquired Assets or operation of the Acquired
Operations, but excluding any such rights against Buyer.
Section 1.2. Purchase Price.
The consideration for the purchase of the Acquired Assets is included in
the stock consideration ("Parent Stock") paid by Parent to Seller pursuant to
the Master Agreement and allocated to various items of consideration provided by
Seller according to the procedure set forth in the Master Agreement (the
"Purchase Price"). Purchaser also assumes, as of the Effective Time, all of the
duties, obligations and liabilities of Seller arising under the "Assumed
Liabilities" as hereinafter defined.
Section 1.3. Excluded Assets.
The assets set forth on Schedule D and those assets deemed to be Excluded
Assets pursuant to Section 1.1 shall be retained by Seller and shall not be
sold, transferred, conveyed, assigned or delivered hereunder to Purchaser by
Seller and shall not be purchased or acquired hereunder by Purchaser from Seller
(collectively, the "Excluded Assets").
Section 1.4. Assumed Liabilities.
As of the Effective Time, Purchaser shall assume those certain liabilities,
obligations, or commitments of Seller associated with or arising out of the
Acquired Assets and the Acquired Operations that are set forth on Schedule E
("Assumed Liabilities") in accordance with the terms and conditions thereof and
any laws, rules and regulations applicable thereto.
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Section 1.5. Excluded Liabilities.
Except for the Assumed Liabilities and as otherwise provided in this
Agreement, Purchaser shall not assume any or have any responsibility for any
liabilities, obligations or commitments of Seller (the "Excluded Liabilities"),
and Seller agrees to pay, honor and discharge such Excluded Liabilities when
due. Purchaser shall not assume liability to, or related, to any employee of
Seller except as expressly provided pursuant to the terms and conditions of that
certain Employee Agreement dated August 1, 2000 by, between, and among Bank,
BATO, and Purchaser (the "Employee Agreement").
Section 1.6. Taxes.
(a) The Seller shall be liable for and shall pay all Taxes (whether
assessed or unassessed) applicable to the Acquired Operations, the Acquired
Assets or the Assumed Liabilities, in each case attributable to periods (or
portions thereof) ending on or prior to the Closing Date. The Purchaser shall be
liable for and shall pay all Taxes (whether assessed or unassessed) applicable
to the Acquired Operations, the Acquired Assets or the Assumed Liabilities, in
each case attributable to periods (or portions thereof) beginning after the
Closing Date. For purposes of this paragraph (a), any period beginning before
and ending after the Closing Date shall be treated as two partial periods, one
ending at the close of the Closing Date and the other beginning after the
Closing Date, except that Taxes imposed on a periodic basis (such as property
Taxes) shall be apportioned on a daily basis. The term "Taxes" shall not include
income taxes, which shall in each case be the responsibility of each party
according to law.
(b) Any documentary stamp Tax, Uniform Commercial Code or other filing or
recording fees, transfer or similar Tax directly attributable to the sale or
transfer of the Acquired Assets or the Assumed Liabilities shall be paid by the
Purchaser. The Seller shall pay all income, gains, or similar Tax relating to
the transactions contemplated by this Agreement and which accrue or are
attributable to a period ending on or prior to the Closing Date.
(c) Each party hereto shall provide reimbursement for any Tax which is the
responsibility of such party in accordance with the terms of this Section 1.6
and which is paid by the other party. Within a reasonable time prior to the
payment of any such Tax, the party paying such Tax shall give notice to the
other party of the Tax payable and the portion which is the liability of each
party, although failure to do so will not relieve the other party from its
liability hereunder.
ARTICLE II
CLOSING AND EFFECTIVE TIME
Section 2.1. Effective Time.
The purchase and sale of assets provided for in this Agreement shall occur
at a closing (the "Closing") to be held at a mutually acceptable location at the
later of (i) 30 calendar days after the date hereof, or (ii) within five
business days after the receipt of all applicable shareholder and regulatory
approvals required by law, or at such other place, time or date on which the
parties mutually agree, upon the taking of the actions set forth in Section 2.2
below. The effective time (the "Effective Time") shall be 2:00 p.m., local time,
on the day on which the Closing occurs (the "Closing Date").
Section 2.2. Closing.
(a) All actions taken and documents delivered at the Closing shall be
deemed to have been taken and executed simultaneously, and no action shall be
deemed taken nor any document delivered until all have been taken and delivered.
B-3
<PAGE> 44
(b) At the Closing, subject to all the terms and conditions of this
Agreement, Seller shall deliver to Purchaser or make reasonably available to
Purchaser:
(1) A Bill of Sale, in substantially the form attached hereto as
Exhibit 2.2(b)(1), transferring to Purchaser all of Seller's interests in
the Acquired Assets;
(2) Seller's files and records related to the Acquired Assets in
accordance with the provisions of Section 1.1(f) above;
(3) Such of the other Acquired Assets as shall be capable of physical
delivery;
(4) A certificate of a proper officer of Seller, dated as of the date
of Closing, certifying to the fulfillment of all conditions which are the
obligation of Seller and that all of the representations and warranties of
Seller set forth in this Agreement remain true and correct in all material
respects as of Effective Time;
(5) Such certificates and other documents as Purchaser may reasonably
require to evidence the receipt by Seller of all necessary corporate and
regulatory authorizations and approvals for the consummation of the
transactions provided for in this Agreement; and
(6) An Assignment of Patent Application, in substantially the form
attached hereto as Exhibit 2.2(b)(6) transferring to Purchaser all of
Seller's interests in the "Patent Application" as hereinafter defined.
(c) At the Closing, subject to all the terms and conditions of this
Agreement, Purchaser shall deliver to Seller:
(1) A certificate and receipt acknowledging the delivery and receipt
of possession of the property referred to in this Agreement;
(2) The Purchase Price pursuant to the terms of the Master Agreement;
(3) A certificate of a proper officer of Purchaser, dated as of the
Date of Closing, certifying to the fulfillment of all conditions which are
the obligation of Purchaser and that all of the representations and
warranties of Purchaser set forth in this Agreement remain true and correct
in all material respects as of the Effective Time; and
(4) Such certificates and other documents as Seller may reasonably
require to evidence the receipt of Purchaser of all necessary corporate and
regulatory authorizations and approvals for the consummation of the
transactions provided for in this Agreement.
(d) All instruments, agreements and certificates described in this Section
2.2 shall be in form and substance reasonably satisfactory to the respective
parties.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows, which
representations and warranties shall survive the Effective Time for a period of
12 months:
Section 3.1. Corporate Organization.
Seller is a national banking association duly organized, validly existing
and in good standing under the laws of the United States, with the power and
authority to carry on its business as now conducted and to own, lease and
operate its material assets.
B-4
<PAGE> 45
Section 3.2. No Violation.
The Acquired Operations have been operated in all material respects in
accordance with applicable laws, rules and regulations. Neither the execution
and delivery of this Agreement, nor the consummation of the transactions
contemplated herein will (i) conflict with or result in a breach of any
provision of Seller's Articles of Association or Bylaws, or any resolution
adopted by the board of directors or the stockholders of Seller, or (ii) result
in a breach of any material contract to which Seller is a party, or (iii)
otherwise have a material adverse effect on Seller, its business, operations or
future prospects.
Section 3.3. Corporate Authority.
Seller has the corporate power and authority necessary to execute, deliver
and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby and thereby, and such Agreement is, or shall be
when executed and delivered, legal, valid, and binding obligation of Seller,
enforceable against Seller in accordance with their terms (except in all cases
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought).
Section 3.4. Enforceable Agreement.
This Agreement has been duly authorized, executed and delivered by Seller
and is the legal, valid and binding agreement of Seller, enforceable in
accordance with its terms.
Section 3.5. No Brokers.
All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried on by Seller and Purchaser, and there has
been no participation or intervention by any other person, firm or corporation
employed or engaged by or on behalf of Seller in such a manner as to give rise
to any valid claim against Seller or Purchaser for a brokerage commission,
finder's fee or like commission.
Section 3.6. Acquired Assets.
Seller owns, and will convey to Purchaser at the Closing, all of Seller's
right, title and interest to all of the Acquired Assets free and clear of any
security interests, pledges, liens, charges, encumbrances, equities, claims and
options of whatever nature, except as may otherwise be set forth in this
Agreement.
Section 3.7. Infringements by Seller.
(a) To Seller's knowledge, the Acquired Operations, the Software and the
Proprietary Rights do not infringe on any copyrights, trade marks or trade
secrets, know-how or other proprietary rights of any third parties and no rights
or licenses are required from third parties to exercise any rights with respect
to the Acquired Assets or any portion thereof;
(b) There is no pending, or to Seller's knowledge, threatened suit,
proceeding, claim, demand, action or investigation of any nature or kind against
Seller relating to the Acquired Operations or the Software or the manner in
which they are operated; and
(c) There is no claim of which Seller has received notice (formal or
informal) or is otherwise aware that any of the Acquired Operations, Software,
advertising or material that Seller employs in the operation and marketing of
the Acquired Operations breaches, violates, infringes or interferes with any
rights of any persons or requires payment for the use of any copyright, trade
mark or trade secret, know-how or technology of another person or any other
intellectual property right of any person.
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<PAGE> 46
Section 3.8. Third Party Infringements.
There are no infringements of or other interference with the Acquired
Operations or the Software by third parties of which Seller has received notice
(formal or informal) or is otherwise aware.
Section 3.9. Software.
There are no known errors, malfunctions and/or defects in the Software. The
Software and all portions thereof have been licensed for use by third parties
only in accordance with the terms and conditions of the software license
agreements referenced on Schedule B, attached hereto and made a part hereof,
copies of which were previously made available to Purchaser for its review.
Section 3.10. Employees.
With respect to the Acquired Operations, seller is not party to or bound by
any written or oral employment agreement or arrangement or any agreements or
arrangements for the retention of the services of independent contractors,
consultants or advisors.
Section 3.11. Disclosure.
No statement, certificate, instrument or other writing furnished or to be
furnished by Seller to Purchaser pursuant to this Agreement or any other
document, agreement or instrument referred to herein contains or will contain
any untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to be
supplied by Seller for inclusion in any documents to be filed with the
Securities and Exchange Commission (the "SEC") or any other regulatory authority
in connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All documents that Seller is responsible for filing with any
regulatory authority in connection with the transactions contemplated hereby
will comply as to form in all material respects with the provisions of
applicable law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser hereby represent and warrant to Seller as follows,
which representations and warranties shall survive the Effective Time for a
period of 12 months:
Section 4.1. Corporate Organization.
Purchaser is a corporation duly organized, validly existing, and in good
standing under the Laws of the State of Delaware, and has the power and
authority to carry on its business as now conducted and to own, lease and
operate its assets.
Section 4.2. No Violation.
Neither the execution and delivery of this Agreement, nor the consummation
of the transactions contemplated herein, will (i) conflict with or result in a
breach of any provision of Purchaser's Certificate of Incorporation or Bylaws or
any resolution adopted by the board of directors or the stockholders of
Purchaser, or (ii) result in a breach of any material contract to which
Purchaser is a party, or (iii) otherwise have a material adverse effect on
Purchaser, its business, operations or future prospects.
Section 4.3. Corporate Authority.
Purchaser has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby, and such
B-6
<PAGE> 47
Agreement is, or shall be when executed and delivered, legal, valid, and binding
obligations of Purchaser, enforceable against Purchaser in accordance with its
terms (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
moratorium, or similar laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought).
Section 4.4. Enforceable Agreement.
This Agreement has been duly authorized, executed and delivered by
Purchaser and is the legal, valid and binding agreement of Purchaser enforceable
in accordance with its terms.
Section 4.5. Parent Stock.
The Parent Stock to be issued pursuant to the provisions of this Agreement
and the Master Agreement will, upon such issuance, be duly authorized, legally
and validly issued, and fully paid and nonassessable.
Section 4.6. No Brokers.
All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried on by Seller and Purchaser, and there has
been no participation or intervention by any other person, firm or corporation
employed or engaged by or on behalf of Purchaser in such a manner as to give
rise to any valid claim against Seller or Purchaser for a brokerage commission,
finder's fee or like commission.
Section 4.7. Disclosure.
The representations and warranties of Purchaser contained in this Agreement
and in any agreement, certificate, affidavit, statutory declaration or other
document delivered or given pursuant to this Agreement are true and correct and
do not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained in such representations
and warranties not misleading to Seller.
ARTICLE V
OBLIGATIONS OF PARTIES PRIOR TO AND AFTER EFFECTIVE TIME
Section 5.1. Conduct of Business.
From the date hereof until the Effective Time, Seller covenants that:
(a) Seller shall not sell, license, contract, commit or otherwise
encumber the Acquired Assets, other than in the ordinary course of business
in a manner that does not create a material detriment to the value of the
Acquired Assets;
(b) Seller shall not amend, modify or terminate any Contract or other
agreement to which it is a party and which in any way relates to the
Acquired Assets, without the prior written consent of Purchaser; and
(c) Seller and its officers and employees shall use their best efforts
to preserve the Acquired Operations, the Software and the Proprietary
Rights in good order.
Section 5.2. Further Assurances.
The parties hereto shall execute and deliver such instruments and take such
other actions as the other party may reasonably require in order to carry out
the intent of this Agreement.
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<PAGE> 48
Section 5.3. Fees and Expenses.
Purchaser shall be responsible for the costs of its own attorneys' and
accountants' fees and expenses and other expenses arising in connection with the
transactions contemplated hereby. Seller shall be responsible for their own
attorneys' and accountants' fees and other expenses arising in connection with
the transactions contemplated hereby.
ARTICLE VI
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligation of Purchaser to complete the transactions contemplated in
this Agreement are conditioned upon fulfillment, on or before the Closing, of
each of the following conditions:
Section 6.1. Representations and Warranties True.
The representations and warranties made by Seller in this Agreement shall
be true in all material respects on and as of the Effective Time as though such
representations and warranties were made at and as of such time, except for any
changes permitted by the terms hereof or consented to by Purchaser.
Section 6.2. Obligations Performed.
Seller shall (a) deliver or make available to Purchaser those items
required by Section 2.2 hereof, and (b) perform and comply in all material
respects with all obligations and agreements required by this Agreement to be
performed or complied with by them prior to or on the Effective Time.
Section 6.3. Regulatory Matters.
Any waiting period applicable to the transactions contemplated hereby under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), or under such other applicable laws, including any waiting periods
imposed by the Office of the Comptroller of the Currency (the "OCC"), if any,
shall have expired or been terminated. Any shareholder approval required by law
or regulation, or by rule of a listing market shall have been granted.
Section 6.4. Master Agreement.
All of the conditions precedent to closing specified in Article 8 of the
Master Agreement shall have occurred prior to or contemporaneous with the
Effective Time.
ARTICLE VII
CONDITIONS TO SELLERS' OBLIGATIONS
The obligation of Seller to complete the transactions contemplated in this
Agreement are conditioned upon fulfillment, on or before the Closing, of each of
the following conditions:
Section 7.1. Representations and Warranties True.
The representations and warranties made by Purchaser in this Agreement
shall be true in all material respects at and as of the Effective Time as though
such representations and warranties were made at and as of such time, except for
any changes permitted by the terms hereof or consented to by Seller.
Section 7.2. Obligations Performed.
Purchaser shall (a) deliver to Seller those items required by Section 2.2
hereof, and (b) perform and comply in all material respects with all obligations
and agreements required by this Agreement to be performed or complied with by it
prior to or on the Effective Time.
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Section 7.3. Regulatory Matters.
Any waiting period applicable to the transactions contemplated hereby under
the HSR Act, or under such other applicable laws, including any waiting periods
imposed by the OCC, if any, shall have expired or been terminated.
Section 7.4. Master Agreement.
All of the conditions precedent to closing specified in Article 8 of the
Master Agreement shall have occurred prior to or contemporaneous with the
Effective Time.
ARTICLE VIII
TERMINATION
Section 8.1. Methods of Termination.
This Agreement may be terminated in any of the following ways:
(a) at any time on or prior to the Effective Time by the mutual
consent in writing of Purchaser and Seller; or
(b) any time prior to the Effective Time, by Purchaser or Seller in
writing if the other shall have been in breach of any representation and
warranty in any material respect (as if such representation and warranty
had been made on and as of the date hereof and on the date of the notice of
breach referred to below), or in breach of any covenant, undertaking or
obligation contained herein, and such breach has not been cured within 30
calendar days after the giving of notice to the breaching party of such
breach.
Section 8.2. Procedure Upon Termination.
In the event of termination pursuant to Section 8.1 hereof, and except as
otherwise stated therein, written notice thereof shall be given to the other
party, and this Agreement shall terminate immediately upon receipt of such
notice unless an extension is consented to by the party having the right to
terminate.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1. Arbitration.
Any disputes arising out of this Agreement shall be governed by Section 7.5
of the Master Agreement.
Section 9.2. Licenses.
(a) In connection with the sale of the Software described in Section 1.1(b)
above, Parent and Purchaser hereby grant to Seller a perpetual, royalty free,
nontransferable, non-exclusive license to use the Software, subject to any
exclusivity or non-competition provisions contained in the Master Agreement by
and between the parties hereto and the other agreements and schedules referred
to therein.
(b) In connection with the transfer as an Acquired Asset of that certain
pending patent application dealing with certain aspects of bill presentment and
payment as more clearly specified on Schedule 9.2(b) (the "Patent Application"),
Parent shall grant to Seller a perpetual, royalty free, nontransferable,
nonexclusive license to use the software, processes, and other ideas and
inventions covered by the Patent Application. Parent shall actively prosecute
such Patent Application and keep Seller informed of such efforts. Parent shall
not disclose the existence of the Patent Application to any third party prior to
a patent being issued. If Parent determines in its reasonable judgment that the
Patent Application should be abandoned, it will so notify Seller and will assign
all rights in and to the Patent Application to Seller at no charge. Nothing in
this paragraph is intended to affect any exclusivity or non-competition
provision in the Master Agreement and the other agreements and schedules
referred to therein.
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Section 9.3. Amendment and Modification.
The parties hereto, by mutual consent, may amend, modify and supplement
this Agreement in such manner as may be agreed upon by them in writing.
Section 9.4. Waiver or Extension.
Either party, by written instrument duly signed, may extend the time for
the performance of any of the obligations or other acts of the other party and
may waive (a) any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto or (b) compliance with any
of the undertakings, obligations, covenants or other acts contained herein.
Section 9.5. Assignment.
This Agreement and all of the provisions hereof shall be binding upon, and
shall inure to the benefit of, the parties hereto and their successors and
permitted assigns, but neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by either of the parties hereto
without the prior written consent of the other.
Section 9.6. Addresses for Notices, Etc.
All notices, requests, demands, consents and other communications provided
for hereunder and under the related documents shall be in writing and either
mailed to the respective address set forth below (by registered or certified
mail, return receipt requested, or by nationally-recognized overnight delivery
service) or personally delivered to such address in a manner which would
constitute effective service of process under the law of the place of delivery.
Any other form of delivery shall also be effective, but only if receipt is
acknowledged in writing by other than automatic means:
<TABLE>
<S> <C>
If to Seller: Bank of America, N.A.
201 North Tryon Street
Charlotte, North Carolina 28255
Telecopy Number: (704) 386-0577
Attention: Mark A. Argosh, Senior Vice President
And with a copy to the Office of the General Counsel
Telecopy Number: (704) 370-3515
If to Purchaser: Checkfree Services Corporation
4411 East Jones Bridge Road
Norcross, Georgia 30092
Attention: Chief Operating Officer
And with a copy to Attention: General Counsel
If to Parent: Checkfree Corporation
4411 East Jones Bridge Road
Norcross, Georgia 30092
Attention: Chief Operating Officer
And with a copy to Attention: General Counsel
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or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this Section.
Section 9.7. Counterparts.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
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<PAGE> 51
Section 9.8. Governing Law.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware.
Section 9.9. Sole Agreement.
This Agreement, the Master Agreement, the Employee Agreement, the Alliance
Agreements and their respective exhibits and attachments represent the sole
agreements between the parties hereto respecting the transactions contemplated
hereby and all prior or contemporaneous written or oral proposals, agreements in
principle, representations, warranties and understandings between the parties
with respect to such matters are superseded hereby and merged herein.
Section 9.10. Severability.
If any provision of this Agreement is invalid or unenforceable, the balance
of this Agreement shall remain in effect.
Section 9.11. Parties In Interest.
Nothing in this Agreement, express or implied, is intended or shall be
construed to confer upon or give to any person (other than the parties hereto,
their successors and permitted assigns) any rights or remedies under or by
reason of this Agreement, or any term, provision, condition, undertaking,
warranty, representation, indemnity, covenant or agreement contained herein.
[SIGNATURES ON NEXT PAGE]
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<PAGE> 52
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
"SELLER"
BANK OF AMERICA, N.A.
By: /s/ Jeanine R. Brown
--------------------------------------
Name: Jeanine R. Brown
--------------------------------------
Title: Executive Vice President
--------------------------------------
BANK OF AMERICA TECHNOLOGY AND
OPERATIONS, INC.
By: /s/ Duane L. Smith
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Name: Duane L. Smith
--------------------------------------
Title: Senior Vice President
--------------------------------------
"PARENT"
CHECKFREE CORPORATION
By: /s/ Peter F. Sinsigalli
--------------------------------------
Name: Peter F. Sinsigalli
--------------------------------------
Title: President and COO
--------------------------------------
"PURCHASER"
CHECKFREE SERVICES CORPORATION
By: /s/ Peter F. Sinsigalli
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Name: Peter F. Sinsigalli
--------------------------------------
Title: President and COO
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<PAGE> 53
CHECKFREE CORPORATION
4411 EAST JONES BRIDGE ROAD, NORCROSS, GEORGIA 30092
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS - [ ], 2000
The undersigned stockholder of CheckFree Corporation (the "Company")
hereby appoints Peter J. Kight, Peter F. Sinisgalli, and Curtis A. Loveland, or
any one of them, as attorneys and proxies with full power of substitution to
each, to vote all shares of Common Stock of the Company which the undersigned is
entitled to vote at the Special Meeting of Stockholders of the Company to be
held at the Company's headquarters located at 4411 East Jones Bridge Road,
Norcross, Georgia, on [ ], [ ], at [ .m.] local time, and at any adjournment or
adjournments thereof, with all of the powers such undersigned stockholder would
have if personally present, for the following purposes:
1. To consider and vote on a proposal to approve the issuance of
10 million shares of CheckFree common stock, $0.01 par value,
and warrants to purchase up to an additional 10 million shares
of CheckFree common stock, to Bank of America, N.A., a
national banking association, under a strategic agreement with
Bank of America through which CheckFree Services Corporation,
our wholly owned subsidiary, will acquire certain of Bank of
America's electronic billing and payment assets and we will
provide electronic billing and payment services to Bank of
America's customers over the next ten years.
|_| FOR
|_| AGANIST
|_| ABSTAIN
2. To transact any other business which may properly come before
the special meeting or any adjournment or any postponement of
the special meeting
(Continued and to be signed on other side.)
(Continued from other side.)
THIS PROXY, WHEN EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.
The undersigned hereby acknowledges receipt of the Notice of Special
Meeting of Stockholders, dated [ ], 2000, and the proxy statement of the Company
furnished therewith. Any proxy heretofore given to vote said shares is hereby
revoked.
PLEASE SIGN AND DATE THIS PROXY BELOW AND RETURN IN THE ENCLOSED
ENVELOPE.
Dated: , 2000
--------------------------------
-------------------------------------
(Signature)
-------------------------------------
(Signature)
SIGNATURE(S) SHALL AGREE WITH THE NAME(S)
PRINTED ON THIS PROXY. IF SHARES ARE
REGISTERED IN TWO NAMES, BOTH STOCKHOLDERS
SHOULD SIGN THIS PROXY. IF SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE
OR GUARDIAN, PLEASE GIVE YOUR FULL TITLE AS
SUCH.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
