1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A NO. 1 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT: APRIL 28, 2000 CHECKFREE HOLDINGS CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Delaware 0-26802 58-2360335 - -------------------------------- --------------------------- ---------------------------- (STATE OR OTHER JURISDICTION OF (COMMISSION FILE NO.) (IRS EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 4411 East Jones Bridge Road Norcross, Georgia 30092 (678) 375-3000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER INCLUDING AREA CODE OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) Not Applicable (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)

2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On December 20, 1999, CheckFree Holdings Corporation, a Delaware corporation (the "Company"), CheckFree Acquisition Corporation IV, a Delaware corporation and a wholly owned subsidiary of the Company ("CheckFree Acquisition"), and BlueGill Technologies, Inc., a Delaware Corporation ("BlueGill") entered into an Agreement and Plan of Merger, dated December 20, 1999, as amended (the "Merger Agreement"), whereby CheckFree Acquisition would be merged with and into BlueGill with BlueGill being the surviving entity as a wholly owned subsidiary of the Company (the "Acquisition"). Under the terms of the Merger Agreement, the Company agreed to acquire the stock of BlueGill in exchange for common stock, $.01 par value, of the Company (the "Common Stock"). The Acquisition was completed on April 28, 2000. The total consideration paid by the Company was $250,000,000. Pursuant to the terms of the Merger Agreement, 5,000,000 shares of Common Stock were issued. The shares of Common Stock received by the stockholders of BlueGill have been registered under the Securities Act of 1933, as amended. BlueGill is an international software development company and the leader in electronic billing and payment. BlueGill software provides a powerful platform for electronic billing and payment by transforming legacy systems into interactive Web applications for managing customer relationships. BlueGill software is installed at financial service institutions, telecommunications companies, utilities, and service bureaus in North America, South America and Europe. The Company's Board of Directors approved the issuance of the 5,000,000 shares on December 14, 1999. The shares of Common Stock received by the stockholders of BlueGill have been registered under the Securities Act of 1933, as amended. The transaction was accomplished through arms-length negotiations between the Company's management and BlueGill's management. BlueGill's stockholders approved the Acquisition on April 26, 2000. There was no material relationship between the stockholders of BlueGill and the Company or any of the Company's affiliates, any of the Company's directors or officers, or any associate of any such Company director or officer, prior to this transaction. In addition, on July 7, 2000, the Company entered into an Amended and Restated Merger Agreement to acquire the business if TransPoint, a joint venture among Microsoft Corporation, First Data Corporation, Citibank, N.A., and various subsidiaries of each of these entities. Through a series of mergers, the entities that own the TransPoint business will become our wholly-owned subsidiaries. In connection with these transactions, the Company will issue an aggregate of 17,000,000 shares of its common stock to the owners of the TransPoint business. A copy of the Merger Agreement has been filed with the Company's S-4 Registration Statement, filed with the Securities and Exchange Commission on July 7, 2000. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. The financial statements of BlueGill Technologies, Inc. as audited by its independent auditors for the periods reflected therein are found on the Company's Form 8-K/A No.1 dated March 16, 2000, filed on April 27, 2000, and incorporated herein by reference. (b) PRO FORMA FINANCIAL INFORMATION. The following is a list of the pro forma condensed combining financial information for CheckFree, BlueGill and TransPoint, for CheckFree and BlueGill, and for CheckFree and the TransPoint Entities filed with this report: Unaudited Pro Forma Condensed Combining Balance Sheet with BlueGill Technologies, Inc. and TransPoint as of March 31, 2000................................ F-1 Unaudited Pro Forma Condensed Combining Statements of Operations with BlueGill Technologies, Inc. and TransPoint for the Year Ended June 30, 1999..... F-2 -2-

3 Unaudited Pro Forma Condensed Combining Statements of Operations with BlueGill Technologies, Inc. and TransPoint for the Nine Months Ended March 31, 2000...................................... F-3 Notes to Unaudited Pro Forma Condensed Combining Financial Information with BlueGill Technologies, Inc. and TransPoint................................. F-4 Unaudited Pro Forma Condensed Combining Balance Sheet with TransPoint as of March 31, 2000.......... F-8 Unaudited Pro Forma Condensed Combining Statement of Operations with TransPoint for the Year Ended June 30, 1999....................................... F-9 Unaudited Pro Forma Condensed Combining Statement of Operations with TransPoint for the Nine Months Ended March 31, 2000................................ F-10 Notes to Unaudited Pro Forma Condensed Combining Financial Information with TransPoint............... F-11 Unaudited Pro Forma Condensed Combining Balance Sheet with BlueGill Technologies, Inc. as of March 31, 2000...................................... F-15 Unaudited Pro Forma Condensed Combining Statement of Operations with BlueGill Technologies, Inc. for the Year Ended June 30, 1999.................... F-16 Unaudited Pro Forma Condensed Combining Statement of Operations with BlueGill Technologies, Inc. for the Nine Months Ended March 31, 2000................ F-17 Notes to Unaudited Pro Forma Condensed Combining Financial Information with BlueGill Technologies, Inc................................................. F-18 (c) EXHIBITS. EXHIBIT NO. DESCRIPTION 2(a) Agreement and Plan of Merger, dated as of December 20, 1999, among CheckFree Holdings Corporation, CheckFree Acquisition Corporation IV, and BlueGill Technologies, Inc. (Reference is made to Appendix A to Registration Statement on Form S-4, as amended (Registration No. 333-32644), filed with the Securities Exchange Commission on March 16, 2000, and incorporated herein by reference). 2(b) Amendment to Agreement and Plan of Merger, dated April 27, 2000, among CheckFree Holdings Corporation, CheckFree Acquisition Corporation IV, and BlueGill Technologies, Inc. (Reference is made to Exhibit 2(b) to Current Report on Form 8-K dated April 28, 2000, filed with the Securities and Exchange Commission on May 15, 2000, and incorporated herein by reference). -3-

4 23 Consent of Arthur Andersen LLP. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CHECKFREE HOLDINGS CORPORATION Date: July 7, 2000 By: /s/ David Mangum ------------------------------------------ David Mangum, Executive Vice President and Chief Financial Officer -4-

5 CHECKFREE HOLDINGS CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET WITH BLUEGILL TECHNOLOGIES, INC. AND TRANSPOINT AS OF MARCH 31, 2000 HISTORICAL AMOUNTS --------------------------------- CHECKFREE PRO FORMA HOLDINGS BLUEGILL TRANSPOINT ADJUSTMENTS TOTAL --------- -------- ---------- ----------- ---------- (IN THOUSANDS) ASSETS: Current Assets: Cash and cash equivalents................... $125,043 $ 15,044 $ 8,019 $ 100,000(1) $ 248,106 Investments................................. 26,292 -- -- -- 26,292 Accounts receivable, net.................... 53,343 1,151 -- -- 54,494 Prepaid expenses and other assets........... 11,716 189 750 -- 12,655 Deferred income taxes....................... 9,444 -- -- -- 9,444 --------- -------- -------- ----------- ---------- Total current assets................. 225,838 16,384 8,769 100,000 350,991 Property and equipment, net................... 84,461 1,453 763 -- 86,677 Capitalized software, net..................... 23,006 -- 9,926 195,673(1) 221,705 (6,900)(2) Goodwill, net................................. 29,539 -- -- 1,017,985(1) 1,047,524 Other intangible assets, net.................. 12,224 -- -- 577,500(1) 589,724 Investments................................... 52,869 -- -- -- 52,869 Deferred income taxes......................... 34,436 -- -- -- 34,436 Other noncurrent assets....................... 13,760 2 -- -- 13,762 --------- -------- -------- ----------- ---------- Total assets......................... $476,133 $ 17,839 $ 19,458 $ 1,884,258 $2,397,688 ========= ======== ======== =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable............................ $ 6,573 $ 1,294 $ 11,853 $ -- $ 19,720 Accrued liabilities......................... 41,032 228 4,547 3,925(1) 50,907 1,175(3) Deferred income taxes....................... -- -- -- 88,410(1) 88,410 Current portion of long-term obligations.... 6,533 159 -- -- 6,692 Deferred revenue............................ 29,638 1,191 4,500 -- 35,329 --------- -------- -------- ----------- ---------- Total current liabilities............ 83,776 2,872 20,900 93,510 201,058 Accrued rent and other........................ 6,653 -- -- -- 6,653 Obligations under capital leases -- less current portion............................. 820 337 -- -- 1,157 Convertible subordinated notes................ 172,500 -- -- -- 172,500 Minority interest............................. -- -- 40,329 (40,329)(1) -- Deferred income taxes......................... -- -- -- 221,933(1) 221,933 --------- -------- -------- ----------- ---------- Total liabilities.................... 263,749 3,209 61,229 275,114 603,301 Redeemable preferred stock.................... -- 25,963 -- (25,963)(1) -- Stockholders' equity: Common stock................................ 531 7 -- 210(1) 748 Additional paid-in capital.................. 517,912 1,753 -- 1,588,108(1) 2,106,598 (1,175)(3) Other....................................... (281) (650) -- 650(1) (281) Member's capital deficiency................. -- -- (41,771) 41,771(1) -- Accumulated deficit......................... (305,778) (12,443) -- 12,443(1) (312,678) (6,900)(2) --------- -------- -------- ----------- ---------- Total stockholders' equity........... 212,384 (11,333) (41,771) 1,635,107 1,794,387 --------- -------- -------- ----------- ---------- Total liabilities and stockholders' equity............................. $476,133 $ 17,839 $ 19,458 $ 1,884,258 $2,397,688 ========= ======== ======== =========== ========== See Notes to Unaudited Pro Forma Condensed Combining Financial Information. F-1

6 CHECKFREE HOLDINGS CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS WITH BLUEGILL TECHNOLOGIES, INC. AND TRANSPOINT FOR THE YEAR ENDED JUNE 30, 1999 HISTORICAL AMOUNTS --------------------------------- CHECKFREE PRO FORMA HOLDINGS BLUEGILL TRANSPOINT ADJUSTMENTS TOTAL --------- -------- ---------- ----------- --------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenues: Processing and servicing................ $201,059 $ -- $ -- $ -- $ 201,059 License fees............................ 15,975 2,517 -- -- 18,492 Maintenance fees........................ 17,746 48 -- -- 17,794 Other................................... 15,351 925 -- -- 16,276 -------- ------- -------- --------- --------- Total revenues.................. 250,131 3,490 -- -- 253,621 Expenses: Cost of processing, servicing and support.............................. 146,704 969 3,062 -- 150,735 Research and development................ 21,085 1,457 26,560 -- 49,102 Sales and marketing..................... 32,354 2,318 11,302 -- 45,974 General and administrative.............. 31,466 2,045 2,404 424,622(4) 460,537 Depreciation and amortization........... 24,630 106 1,870 26,606 In-process research and development..... 2,201 -- -- -- 2,201 -------- ------- -------- --------- --------- Total expenses.................. 258,440 6,895 45,198 424,622 735,155 Net gain on dispositions of assets...... 4,576 -- -- -- 4,576 -------- ------- -------- --------- --------- Loss from operations...................... (3,733) (3,405) (45,198) (424,622) (476,958) Other: Minority interest....................... -- -- 2,064 (2,064)(5) -- Interest, net........................... 2,181 194 464 -- 2,839 -------- ------- -------- --------- --------- Loss before income taxes.................. (1,552) (3,211) (42,670) (426,686) (474,119) Income tax benefit........................ (12,009) -- -- (88,410)(4) (100,419) -------- ------- -------- --------- --------- Net income (loss)......................... $ 10,457 $(3,211) $(42,670) $(338,276) $(373,700) ======== ======= ======== ========= ========= Basic earnings (loss) per share: Net income (loss) per common share...... $ 0.20 $ (5.04) ======== ========= Equivalent number of shares............. 52,444 21,714(1) 74,158 ======== ========= ========= Diluted earnings (loss) per share: Net income (loss) per common share...... $ 0.18 $ (5.04) ======== ========= Equivalent number of shares............. 56,529 17,629(6) 74,158 ======== ========= ========= See Notes to Unaudited Pro Forma Condensed Combining Financial Information. F-2

7 CHECKFREE HOLDINGS CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS WITH BLUEGILL TECHNOLOGIES, INC. AND TRANSPOINT FOR THE NINE MONTHS ENDED MARCH 31, 2000 HISTORICAL AMOUNTS --------------------------------- CHECKFREE PRO FORMA HOLDINGS BLUEGILL TRANSPOINT ADJUSTMENTS TOTAL --------- -------- ---------- ----------- --------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenues: Processing and servicing.......... $189,430 $ -- $ -- $ -- $ 189,430 License fees...................... 10,295 4,578 -- -- 14,873 Maintenance fees.................. 13,571 349 -- -- 13,920 Other............................. 8,399 1,180 7 -- 9,586 -------- ------- -------- ---------- --------- Total revenues............ 221,695 6,107 7 -- 227,809 Expenses: Cost of processing, servicing and support........................ 133,684 1,496 13,856 -- 149,036 Research and development.......... 24,276 2,142 5,997 -- 32,415 Sales and marketing............... 29,522 5,602 13,980 -- 49,104 General and administrative........ 28,837 4,463 1,858 -- 35,158 Depreciation and amortization..... 23,789 272 2,755 284,492(4) 311,308 In-process research and development.................... -- -- -- -- -- -------- ------- -------- ---------- --------- Total expenses............ 240,108 13,975 38,446 284,492 577,021 Net gain on dispositions of assets......................... -- -- -- -- -- -------- ------- -------- ---------- --------- Loss from operations................ (18,413) (7,868) (38,439) (284,492) (349,212) Other: Minority interest................. -- -- 5,608 (5,608)(5) -- Interest, net..................... (83) 619 1,054 -- 1,590 -------- ------- -------- ---------- --------- Loss before income taxes............ (18,496) (7,249) (31,777) (290,100) (347,622) Income tax benefit.................. (6,718) -- -- (52,718)(4) (59,436) -------- ------- -------- ---------- --------- Net income (loss)................... $(11,778) $(7,249) $(31,777) $ (237,382) $(288,186) ======== ======= ======== ========== ========= Basic earnings (loss) per share: Net income (loss) per common share.......................... $ (0.23) $ (3.90) ======== ========= Equivalent number of shares....... 52,246 21,714(1) 73,960 ======== ========== ========= Diluted earnings (loss) per share: Net income (loss) per common share.......................... $ (0.23) $ (3.90) ======== ========= Equivalent number of shares....... 52,246 21,714(1) 73,960 ======== ========== ========= See Notes to Unaudited Pro Forma Condensed Combining Financial Information F-3

8 CHECKFREE HOLDINGS CORPORATION NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION WITH BLUEGILL TECHNOLOGIES, INC. AND TRANSPOINT 1. Adjustment to reflect the issuance of CheckFree Holdings common stock, options and related direct acquisition expenses as the total purchase price for the net assets of BlueGill and the TransPoint business, and the elimination of BlueGill's redeemable preferred stock and stockholders' equity and revaluation of TransPoint's capitalized software costs and the elimination of TransPoint's minority interest and member's capital deficiency. The fair market values of intangible assets are preliminary estimates based on independent appraisals and current facts and circumstances. (IN THOUSANDS) -------------- Cash........................................................ $ 100,000 Capitalized software, net................................... 195,673 Goodwill, net............................................... 1,017,985 Other intangible assets, net................................ 577,500 BlueGill redeemable preferred stock......................... 25,963 BlueGill common stock....................................... 7 BlueGill additional paid in capital......................... 1,753 TransPoint minority interest................................ 40,329 CheckFree Holdings common stock........................... $ 217 CheckFree Holdings additional paid in capital............. 1,589,861 BlueGill accumulated deficit.............................. 12,443 BlueGill other equity..................................... 650 TransPoint member's capital deficiency.................... 41,771 Current deferred income tax liability..................... 88,410 Long-term deferred income tax liability................... 221,933 Accrued acquisition expenses.............................. 3,925 ---------- ---------- Totals............................................ $1,959,210 $1,959,210 ========== ========== The following chart indicates the components of the estimated purchase prices of the acquisitions inherent in the adjusting entry: BLUEGILL TRANSPOINT COMBINED ACQUISITION ACQUISITION TOTAL ----------- ----------- ---------- (IN THOUSANDS) CheckFree Holdings common stock................. $221,449 $1,350,083 $1,571,532 Issuance of CheckFree Holdings options.......... 18,546 -- 18,546 TransPoint cash infusion........................ -- (100,000) (100,000) Estimated direct acquisition costs.............. 600 3,325 3,925 -------- ---------- ---------- Total estimated purchase price........ $240,595 $1,253,408 $1,474,003 ======== ========== ========== The combined estimated purchase price will be issued in exchange for the net assets of BlueGill and TransPoint on their respective closing dates. The purchase price of BlueGill reflects the issuance of 4,713,736 shares of CheckFree Holdings common stock at $46.98 per share which is the average closing price of CheckFree Holdings common stock for the three trading days preceding and the three trading days following the closing of the acquisition. Under the terms of the BlueGill merger agreement, CheckFree Holdings has also issued 634,145 CheckFree Holdings options to replace BlueGill options, 286,264 of which are already vested. The value of the assumed CheckFree Holdings option grant is based on a Black-Scholes valuation model assuming a $46.98 stock price, an average strike price of $2.18, an average life of 2.9 years, a risk-free interest rate of 6.47% and volatility of 83.4%. F-4

9 The purchase price of TransPoint and the entering into the related commercial agreements reflects the assumed issuance of 17,000,000 shares of CheckFree Holdings common stock at $79.42 per share, which is the average end of day price of CheckFree Holdings common stock for the three trading days preceding and the three days following the announcement of the acquisition. Under the terms of the merger agreement, the TransPoint business is to have $100 million in cash immediately prior to the closing of the Transfers. The following table provides the preliminary allocation of the purchase price inherent in the adjusting entry: BLUEGILL TRANSPOINT ACQUISITION ACQUISITION COMBINED ----------- ----------- ---------- (IN THOUSANDS) In process research and development............. $ 6,900 $ -- $ 6,900 Current technologies and products............... 13,700 185,000 198,700 -------- ---------- ---------- Sub-total capitalized software, net........ 20,600 185,000 205,600 Goodwill, net................................... 193,007 824,978 1,017,985 Other intangible assets: Workforce in place............................ 2,600 -- 2,600 Customer list................................. 10,600 25,000 35,600 Tradename..................................... 15,100 29,000 44,100 Strategic agreements.......................... -- 494,000 494,000 Covenants not to compete...................... 1,200 -- 1,200 -------- ---------- ---------- Sub-total other intangible assets.......... 29,500 548,000 577,500 Deferred income taxes........................... (17,142) (293,200) (310,342) Net assets of respective company: Cash and cash equivalents..................... 15,044 8,019 23,063 Property and equipment........................ 1,452 763 2,215 Other, net.................................... (1,866) (20,152) (22,018) -------- ---------- ---------- Sub-total net assets....................... 14,630 (11,370) 3,260 -------- ---------- ---------- Total purchase price............................ $240,595 $1,253,408 $1,494,003 ======== ========== ========== Details of specific technologies and the related useful lives of all intangible assets are described in the Notes to Unaudited Pro Forma Condensed Combining Financial Information for CheckFree Holdings and TransPoint on page F-12 and CheckFree Holdings and BlueGill on page F-19. 2. Adjustment to write off the balance of in-process research and development. As the amounts are non-deductible for federal and state tax purposes, there is no related income tax benefit resulting from the charge. Refer to Note B in the Notes to Unaudited Pro Forma Condensed Combining Financial Information for CheckFree Holdings and TransPoint on page F-14 and CheckFree Holdings and BlueGill on page F-21 for a detailed description of in-process research and development for the respective acquisition. The amount of in-process research and development is $6.9 million for BlueGill and $0 for TransPoint. x (IN THOUSANDS) Accumulated deficit................................ $6,900 Capitalized software, net........................ $6,900 3. Adjustment to accrue the cost of registering CheckFree Holdings shares to be issued for BlueGill of $500,000 and registering CheckFree Corporation shares to be issued for TransPoint of $675,000. (IN THOUSANDS) Additional paid-in capital......................... $1,175 Accrued liabilities.............................. $1,175 F-5

10 4. Adjustment to reflect additional amortization expense and the related income tax benefit associated with the intangible assets acquired. BLUEGILL TRANSPOINT COMBINED ADJUSTMENT -------- ---------- -------------------- (IN THOUSANDS) YEAR ENDED JUNE 30, 1999 Depreciation and amortization............ $61,826 $362,796 $424,622 Current deferred income tax liability.... 9,290 79,120 88,410 Capitalized software, net.............. 3,938 61,667 $ 65,605 Goodwill, net.......................... 38,601 164,996 203,597 Other intangible assets, net........... 19,287 136,133 155,420 Income tax benefit..................... 9,290 79,120 88,410 -------- -------- Total............................... $513,032 $513,032 ======== ======== NINE MONTHS ENDED MARCH 31, 2000 Depreciation and amortization............ $34,145 $250,347 $284,492 Current deferred income tax liability.... 2,078 50,640 52,718 Capitalized software, net.............. 2,954 46,250 $ 49,204 Goodwill, net.......................... 28,951 123,747 152,698 Other intangible assets, net........... 2,240 80,350 82,590 Income tax benefit..................... 2,078 50,640 52,718 -------- -------- Total............................... $337,210 $337,210 ======== ======== Goodwill amortization is non-deductible for federal and state income tax purposes. A blended effective income tax rate of 40% was applied to the deductible amortization to determine the related income tax benefit in the entries above. 5. Adjustment to reflect the elimination of minority interest recorded in the period due to the acquisition of all of the ownership interest in TransPoint by CheckFree Holdings. 6. When combined with BlueGill's historical loss, TransPoint's historical loss and the combined pro forma adjustments, the historical CheckFree Holdings net income for the year ended June 30, 1999 resulted in a combined net loss. As a result, due to the anti-dilutive effect on earnings per share, the equivalent number of shares for purposes of determining diluted earnings per share, was reduced to agree with the equivalent number of shares for basic earnings per share. The following chart identifies by type of potentially dilutive security, the number of additional shares that could potentially dilute basic earnings per share in the future and the number of shares issued for both BlueGill and TransPoint. (IN THOUSANDS) CheckFree Holdings common shares issued for: TransPoint............................................ 13,000 BlueGill.............................................. 4,714 Potentially dilutive securities: Options and warrants.................................. (4,085) ------ Net adjustment to dilutive shares outstanding........... 17,629 ====== F-6

11 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION Note A: Management believes that the assumptions used in preparing the Unaudited Pro Forma Condensed Combining Balance Sheet and the Unaudited Pro Forma Condensed Combining Statement of Operations provide a reasonable basis for presenting the significant effects of the acquisitions of BlueGill and TransPoint; that the pro forma adjustments give appropriate effect to those assumptions; and that the pro forma adjustments are properly applied in the Unaudited Pro Forma Condensed Combining Balance Sheet and Statement of Operations. Note B: The Unaudited Pro Forma Condensed Combining Balance Sheet of CheckFree Holdings, BlueGill and TransPoint has been prepared as if the acquisitions were completed as of March 31, 2000 and were accounted for as purchases. CheckFree Holdings issued 4,713,736 shares of CheckFree Holdings common stock in the BlueGill merger with a fair market value of $46.98 per share. CheckFree Holdings also issued 634,145 CheckFree Holdings options to replace BlueGill options, 286,264 of which are already vested. The excess of fair value over the strike price of options issued per the merger agreement carry a value of $18,546,000. CheckFree Holdings incurred $600,000 of direct acquisition costs. The total purchase price of $240,595,000 was allocated to the assets acquired and liabilities assumed based on BlueGill's March 31, 2000 balance sheet. CheckFree Holdings will issue 17,000,000 shares of its common stock at an assumed value of $79.42 for the net assets of TransPoint and the entering into of the related commercial agreements. Under the merger agreement, TransPoint is to have $100 million of cash immediately prior to the closing of the mergers. CheckFree Holdings expects to incur approximately $3,325,000 of direct acquisition costs. The total purchase price of $1,253,408,000 was allocated to assets acquired and liabilities assumed based on TransPoint's March 31, 2000 balance sheet. The allocation of the BlueGill and TransPoint purchase prices among their related identifiable tangible and intangible assets and purchased in-process research and development is based on preliminary estimates of the fair market value of those assets. Final determination of the allocation of the purchase prices will be based on independent appraisals that CheckFree Holdings expects to have completed shortly after the respective acquisitions are consummated. For a detailed description of in-process research and development charges, see Note B for TransPoint on page F-14 and Note B for BlueGill on page F-21. Note C: CheckFree Holdings' statement of operations for the year ended June 30, 1999, has been combined with the BlueGill statement of operations and the TransPoint statement of operations for the twelve months ended June 30, 1999. CheckFree Holdings' statement of operations for the nine month period ended March 31, 2000 has been combined with the BlueGill statement of operations and the TransPoint statement of operations for the nine months ended March 31, 2000. Actual statements of operations of CheckFree Holdings and BlueGill, and CheckFree Holdings and TransPoint will be combined from the effective date of the respective acquisitions, with no retroactive restatement. Note D: The unaudited pro forma condensed combining statement of operations for CheckFree Holdings, BlueGill and TransPoint have been prepared as if the merger was completed as of July 1, 1998, the beginning of the earliest period presented. The unaudited pro forma combined net income (loss) per share is based on the weighted average number of shares of CheckFree Holdings common stock outstanding during the periods, adjusted to give effect to shares assumed to be issued had the acquisitions taken place as of July 1, 1998. Note E: The unaudited pro forma condensed combining statement of operations do not include a charge for the value of the estimated $6.9 million (no income tax effect) of purchased research and development arising from the merger with BlueGill, which will be expensed at acquisition, as this expense will have no continuing impact. F-7

12 CHECKFREE HOLDINGS CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET WITH TRANSPOINT AS OF MARCH 31, 2000 HISTORICAL AMOUNTS ---------------------- CHECKFREE PRO FORMA HOLDINGS TRANSPOINT ADJUSTMENTS TOTAL --------- ---------- ----------- ---------- (IN THOUSANDS) ASSETS: Current assets: Cash and cash equivalents.................. $ 125,043 $ 8,019 $ 100,000(1) $ 233,062 Investments................................ 26,292 -- -- 26,292 Accounts receivable, net................... 53,343 -- -- 53,343 Prepaid expenses and other assets.......... 11,716 750 -- 12,466 Deferred income taxes...................... 9,444 -- -- 9,444 --------- -------- ---------- ---------- Total current assets............... 225,838 8,769 100,000 334,607 Property and equipment, net.................. 84,461 763 -- 85,224 Capitalized software, net.................... 23,006 9,926 175,073(1) 208,005 Goodwill, net................................ 29,539 -- 824,978(1) 854,517 Other intangible assets, net................. 12,224 -- 548,000(1) 560,224 Investments.................................. 52,869 -- -- 52,869 Deferred income taxes........................ 34,436 -- -- 34,436 Other noncurrent assets...................... 13,760 -- -- 13,760 --------- -------- ---------- ---------- Total assets....................... $ 476,133 $ 19,458 $1,648,051 $2,143,642 ========= ======== ========== ========== LIABILITIES AND STOCKHOLDER'S EQUITY: Current liabilities: Accounts payable........................... $ 6,573 $ 11,853 $ -- $ 18,426 Accrued liabilities........................ 41,032 4,547 3,325(1) 49,579 675(2) Deferred income taxes...................... -- -- 79,120(1) 79,120 Current portion of long-term obligations... 6,533 -- -- 6,533 Deferred revenue........................... 29,638 4,500 -- 34,138 --------- -------- ---------- ---------- Total current liabilities.......... 83,776 20,900 83,120 187,796 Accrued rent and other....................... 6,653 -- -- 6,653 Obligations under capital leases -- less current portion............................ 820 -- -- 820 Convertible subordinated notes............... 172,500 -- -- 172,500 Minority interest............................ -- 40,329 (40,329)(1) -- Deferred income taxes........................ -- -- 214,081(1) 214,081 --------- -------- ---------- ---------- Total liabilities.................. 263,749 61,229 256,872 581,850 Stockholders' equity: Common stock............................... 531 170(1) 701 Additional paid-in capital................. 517,912 -- 1,349,913(1) 1,867,150 (675)(2) Members' capital deficiency................ -- (41,771) 41,771(1) -- Other...................................... (281) -- -- (281) Accumulated deficit........................ (305,778) -- -- (305,778) --------- -------- ---------- ---------- Total stockholder's equity......... 212,384 (41,771) 1,391,179 1,561,792 --------- -------- ---------- ---------- Total liabilities and stockholders' equity........................... $ 476,133 $ 19,458 $1,648,051 $2,143,642 ========= ======== ========== ========== See Notes to Unaudited Pro Forma Condensed Combining Financial Information F-8

13 CHECKFREE HOLDINGS CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS WITH TRANSPOINT FOR THE YEAR ENDED JUNE 30, 1999 HISTORICAL AMOUNTS ----------------------- CHECKFREE PRO FORMA HOLDINGS TRANSPOINT ADJUSTMENTS TOTAL --------- ---------- ----------- --------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenues: Processing and servicing.................... $201,059 $ -- $ -- $ 201,059 License fees................................ 15,975 -- -- 15,975 Maintenance fees............................ 17,746 -- -- 17,746 Other....................................... 15,351 -- -- 15,351 -------- -------- --------- --------- Total revenues...................... 250,131 -- -- 250,131 Expenses: Cost of processing, servicing and support... 146,704 3,062 -- 149,766 Research and development.................... 21,085 26,560 -- 47,645 Sales and marketing......................... 32,354 11,302 -- 43,656 General and administrative.................. 31,466 2,403 -- 33,869 Depreciation and amortization............... 24,630 1,870 362,796(3) 389,296 In-process research and development......... 2,201 -- -- 2,201 -------- -------- --------- --------- Total expenses...................... 258,440 45,197 362,796 666,433 Net gain on dispositions of assets.......... 4,576 -- -- 4,576 -------- -------- --------- --------- Loss from operations.......................... (3,733) (45,197) (362,796) (411,726) Other: Minority interest........................... -- 2,063 (2,063)(4) -- Interest, net............................... 2,181 464 2,645 -------- -------- --------- --------- Loss before income taxes...................... (1,552) (42,670) (364,859) (409,081) Income tax benefit............................ (12,009) -- (79,120)(3) (91,129) -------- -------- --------- --------- Net income (loss)............................. $ 10,457 $(42,670) $(285,739) $(317,952) ======== ======== ========= ========= Basic earnings (loss) per share: Net income (loss) per common share.......... $ 0.20 $ (4.58) ======== ========= Equivalent number of shares................. 52,444 17,000(1) 69,444 ======== ========= ========= Diluted earnings (loss) per share: Net income (loss) per common share.......... $ 0.18 $ (4.58) ======== ========= Equivalent number of shares................. 56,529 12,915(5) 69,444 ======== ========= ========= See Notes to Unaudited Pro Forma Condensed Combining Financial Information F-9

14 CHECKFREE HOLDINGS CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS WITH TRANSPOINT FOR THE NINE MONTHS ENDED MARCH 31, 2000 HISTORICAL AMOUNTS ----------------------- CHECKFREE PRO FORMA HOLDINGS TRANSPOINT ADJUSTMENTS TOTAL --------- ---------- ----------- --------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenues: Processing and servicing.................... $189,430 $ -- $ -- $ 189,430 License fees................................ 10,295 -- -- 10,295 Maintenance fees............................ 13,571 -- -- 13,571 Other....................................... 8,399 7 -- 8,406 -------- -------- --------- --------- Total revenues...................... 221,695 7 -- 221,702 Expenses: Cost of processing, servicing and support... 133,684 13,856 -- 147,540 Research and development.................... 24,276 5,997 -- 30,273 Sales and marketing......................... 29,522 13,980 -- 43,502 General and administrative.................. 28,837 1,858 -- 30,695 Depreciation and amortization............... 23,789 2,755 250,347(3) 276,891 In-process research and development......... -- -- -- -- -------- -------- --------- --------- Total expenses...................... 240,108 38,446 250,347 528,901 Net gain on dispositions of assets.......... -- -- -- -- -------- -------- --------- --------- Loss from operations.......................... (18,413) (38,439) (250,347) (307,199) Other: Minority interest........................... -- 5,608 (5,608)(4) -- Interest, net............................... (83) 1,054 -- 971 -------- -------- --------- --------- Loss before income taxes...................... (18,496) (31,777) (255,955) (306,228) Income tax benefit............................ (6,718) -- (50,640)(3) (57,358) -------- -------- --------- --------- Net income (loss)............................. $(11,778) $(31,777) $(205,315) $(248,870) ======== ======== ========= ========= Basic earnings (loss) per share: Net income (loss) per common share.......... $ (0.23) $ (3.59) ======== ========= Equivalent number of shares................. 52,246 17,000(1) 69,246 ======== ========= ========= Diluted earnings (loss) per share: Net income (loss) per common share.......... $ (0.23) $ (3.59) ======== ========= Equivalent number of shares................. 52,246 17,000(1) 69,246 ======== ========= ========= See Notes to Unaudited Pro Forma Condensed Combining Financial Information F-10

15 CHECKFREE HOLDINGS CORPORATION NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION WITH TRANSPOINT 1. Adjustment to reflect the issuance of CheckFree Holdings common stock and related acquisition expenses as the total purchase price for the net assets of TransPoint, and the revaluation of TransPoint's capitalized software costs and the elimination of TransPoint's minority interest and member's capital deficiency, net of a contractual infusion of $100 million of cash by TransPoint. The fair market values of intangible assets are preliminary estimates based on an independent appraisal, and current facts and circumstances. The final value of intangible assets will change with any change in the final purchase price and any resulting change could be material. (IN THOUSANDS) Cash........................................................ $ 100,000 Capitalized software, net................................... 175,073 Goodwill, net............................................... 824,978 Other intangible assets, net................................ 548,000 TransPoint minority interest................................ 40,329 CheckFree Holdings common stock........................... $ 170 CheckFree Holdings additional paid-in capital............. 1,349,913 TransPoint member's capital deficiency.................... 41,771 Current deferred income tax liability..................... 79,120 Long term deferred income tax liability................... 214,081 Accrued acquisition expenses.............................. 3,325 ---------- ---------- Totals............................................ $1,688,380 $1,688,380 ========== ========== The following chart indicates the components of the estimated purchase price inherent in the adjusting entry: (IN THOUSANDS) CheckFree Holdings common stock......................... $1,350,083 TransPoint cash infusion................................ (100,000) Estimated direct acquisition costs...................... 3,325 ---------- Total estimated purchase price................ $1,253,408 ========== The estimated purchase price will be issued in exchange for the net assets of TransPoint on the closing date. The purchase price reflects the assumed issuance of 17,000,000 shares of CheckFree Holdings common stock at $79.42 per share, which is the average end of day price of CheckFree Holdings common stock for the three trading days preceding and the three days following the announcement of the acquisition of TransPoint. Under the terms of the merger and contribution agreement, TransPoint will have $100 million in cash at the effective time of the closing of the mergers. F-11

16 The following table provides the allocation of the purchase price inherent in the adjusting entry: (IN THOUSANDS) In-process research and development (Note B)................................... $ 0 Current technology and products: BIS/communications (estimated life of 3 years)....... 26,000 Service center (estimated life of 3 years)....... 85,000 Delivery applications (estimated life of 3 years)....... 50,000 Payments/interface (estimated life of 3 years)....... 24,000 ---------- Sub-total IPRD and current technology and products........................ 185,000 Goodwill (estimated life of 5 years)........................................... 824,978 Other intangible assets: Customer list (estimated life of 3 years)....... 25,000 Tradename (estimated life of 1 year )....... 29,000 Strategic agreements (estimated life of 5 years)....... 494,000 ---------- Sub-total other intangible assets.................................... 548,000 Deferred income taxes.......................................................... (293,200) Net assets of TransPoint: Cash and cash equivalents.................................................... 8,019 Property and equipment....................................................... 763 Liabilities assumed.......................................................... (20,901) Other, net................................................................... 749 ---------- Sub-total net assets................................................. (11,370) ---------- Total Purchase Price................................................. $1,253,408 ========== The useful lives of the various intangible assets identified are based on management's preliminary estimates. Under the caption of current technology and products, lives are based on assumptions regarding the time expected for the indicated technology or product to become obsolete, which are driven primarily by planed future development work designed to replace the existing technology or product. The useful life assigned to goodwill is based upon currently acceptable lives for these assets. The useful life CheckFree Holdings assigned to the customer list is based on the estimate of the future revenue base from the existing customers. The useful life CheckFree Holdings assigned to tradename is based on the estimated time that will pass before CheckFree Holdings discontinues the use of the related name. CheckFree Holdings assigned a five-year life to the strategic agreements to coincide with the contractual life of the related agreements. CheckFree Holdings will amortize these intangible assets on a straight-line basis over their estimated useful lives. 2. Adjustment to accrue the cost of registering CheckFree Holdings shares of its common stock to be issued for TransPoint. (IN THOUSANDS) Additional paid-in capital............................ $675 Accrued liabilities................................. $675 F-12

17 3. Adjustment to reflect additional amortization expense and the related income tax benefit associated with the intangible assets acquired from TransPoint. (IN THOUSANDS) YEAR ENDED JUNE 30, 1999 Depreciation and amortization............................... $362,796 Current deferred income tax liability....................... 79,120 Capitalized software, net................................. $ 61,667 Goodwill, net............................................. 164,996 Other intangible assets, net.............................. 136,133 Income tax benefit........................................ 79,120 -------- -------- Total.................................................. $441,916 $441,916 ======== ======== NINE MONTHS ENDED MARCH 31, 2000 Depreciation and amortization............................... $250,347 Current deferred income tax liability....................... 50,640 Capitalized software, net................................. $ 46,250 Goodwill, net............................................. 123,747 Other intangible assets, net.............................. 80,350 Income tax benefit........................................ 50,640 -------- -------- Total.................................................. $300,987 $300,987 ======== ======== Goodwill amortization is non-deductible for federal and state income tax purposes. A blended effective income tax rate of 40% was applied to the deductible amortization to determine the related income tax benefit in the entries above. 4. Adjustment to reflect the elimination of minority interest recorded in the period due to the acquisition of all of the ownership interest in TransPoint by CheckFree Corporation. 5. When combined with TransPoint's historical loss and the pro forma adjustments, the historical CheckFree Holdings' net income for the year ended June 30, 1999 resulted in a combined net loss. As a result, due to the anti-dilutive effect on earnings per share, the equivalent number of shares for purposes of determining diluted earnings per share, was reduced to agree with the equivalent number of shares for basic earnings per share. The following chart identifies by type of potentially dilutive security, the number of additional shares that could potentially dilute basic earnings per share in the future and the number of shares issued for TransPoint. (IN THOUSANDS) CheckFree Corporation common shares issued for TransPoint.......................................... 17,000 Potentially dilutive securities: Options and warrants................................ (4,085) ------ Net adjustment to dilutive shares outstanding......... 12,915 ====== F-13

18 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION Note A: Management believes that the assumptions used in preparing the Unaudited Pro Forma Condensed Combining Balance Sheet and the Unaudited Pro Forma Condensed Combining Statement of Operations provide a reasonable basis for presenting the significant effects of the acquisition of TransPoint; that the pro forma adjustments give appropriate effect to those assumptions; and that the pro forma adjustments are properly applied in the Unaudited Pro Forma Condensed Combining Balance Sheet and Statement of Operations. Note B: The Unaudited Pro Forma Condensed Combining Balance Sheet of CheckFree Holdings and TransPoint has been prepared as if the mergers were completed as of March 31, 2000, and was accounted for as a purchase. CheckFree Holdings will issue 17,000,000 shares of CheckFree Holdings common stock valued at $79.42 for the net assets of TransPoint. Under the terms of the merger agreement, TransPoint will have $100 million of cash immediately prior to the closing of the mergers. CheckFree Holdings expects to incur approximately $3.3 million of direct acquisition costs. The total purchase price of $1,253,408,000 was allocated to assets acquired and liabilities assumed based on TransPoint's March 31, 2000 balance sheet. The allocation of the TransPoint purchase price among the identifiable tangible and intangible assets is based on preliminary estimates of the fair market value of those assets. Final determination of the allocation of the purchase price will be based on independent appraisals that CheckFree Holdings expects to have completed shortly after the mergers are consummated. TransPoint released the latest version of their electronic billing and payment processing system just one week prior to the announcement of the merger and contribution agreement. As a result, at this time, the value of in-process research and development is nominal and therefore not reflected. However, CheckFree Holdings will reassess the fair market value of the assets and liabilities assumed from TransPoint at the time of closing and CheckFree Holdings expects a portion of the purchase price to be allocated to in-process research and development at that time. Due to uncertainties regarding the specific products or technology enhancements that will be included in the next release and the specific date of the closing, CheckFree Holdings cannot currently provide a reasonable estimate of the expected value of in-process research and development. Note C: CheckFree Holdings' statement of operations for the year ended June 30, 1999, has been combined with the TransPoint statement of operations for the twelve months ended June 30, 1999. CheckFree Holdings' statement of operations for the nine month period ended March 31, 2000 has been combined with the TransPoint statement of operations for the nine months ended March 31, 2000. Actual income statements of CheckFree Holdings and TransPoint will be combined from the effective date of the mergers, with no retroactive restatement. Note D: The unaudited pro forma condensed combining statements of operations for CheckFree Holdings and TransPoint have been prepared as if the mergers were completed as of July 1, 1998, the beginning of the earliest period presented. The unaudited pro forma combined net income (loss) per share is based on the weighted average number of shares of CheckFree Holdings common stock outstanding during the periods, adjusted to give effect to shares assumed to be issued had the mergers taken place as of July 1, 1998. F-14

19 CHECKFREE HOLDINGS CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET WITH BLUEGILL TECHNOLOGIES, INC. AS OF MARCH 31, 2000 HISTORICAL AMOUNTS --------------------- CHECKFREE PRO FORMA HOLDINGS BLUEGILL ADJUSTMENTS TOTAL --------- -------- ----------- -------- (IN THOUSANDS) ASSETS: Current Assets: Cash and cash equivalents.................... $125,043 $15,044 $ -- $140,087 Investments.................................. 26,292 -- -- 26,292 Accounts receivable, net..................... 53,343 1,151 -- 54,494 Prepaid expenses and other assets............ 11,716 189 -- 11,905 Deferred income taxes........................ 9,444 -- -- 9,444 -------- ------- -------- -------- Total current assets................. 225,838 16,384 -- 242,222 Property and equipment, net.................... 84,461 1,453 -- 85,914 Capitalized software, net...................... 23,006 -- 20,600(1) 36,706 (6,900)(2) Goodwill, net.................................. 29,539 -- 193,007(1) 222,546 Other intangible assets, net................... 12,224 -- 29,500(1) 41,724 Investments.................................... 52,869 -- -- 52,869 Deferred income taxes.......................... 34,436 -- -- 34,436 Other noncurrent assets........................ 13,760 2 -- 13,762 -------- ------- -------- -------- Total assets......................... $476,133 $17,839 $236,207 $730,179 ======== ======= ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY: Current liabilities: Accounts payable............................. $ 6,573 $ 1,294 $ -- $ 7,867 Accrued liabilities.......................... 41,032 228 600(1) 42,360 500(3) Deferred income taxes........................ -- -- 9,290(1) 9,290 Current portion of long-term obligations..... 6,533 159 -- 6,692 Deferred revenue............................. 29,638 1,191 -- 30,829 -------- ------- -------- -------- Total current liabilities............ 83,776 2,872 10,390 97,038 Accrued rent and other......................... 6,653 -- -- 6,653 Obligations under capital leases -- less current portion.............................. 820 337 -- 1,157 Convertible subordinated notes................. 172,500 -- -- 172,500 Deferred income taxes.......................... -- -- 7,852(1) 7,852 -------- ------- -------- -------- Total liabilities.................... 263,749 3,209 18,242 285,200 Redeemable preferred stock..................... -- 25,963 (25,963)(1) -- Stockholders' equity: Common stock................................. 531 7 40(1) 578 Additional paid-in capital................... 517,912 1,753 238,195(1) 757,360 (500)(3) Other........................................ (281) (650) 650(1) (281) Accumulated deficit.......................... (305,778) (12,443) 12,443(1) (312,678) (6,900)(2) -------- ------- -------- -------- Total stockholder's equity........... 212,384 (11,333) 243,928 444,979 -------- ------- -------- -------- Total liabilities and stockholders' equity............................. $476,133 $17,839 $236,207 $730,179 ======== ======= ======== ======== See Notes to Unaudited Pro Forma Condensed Combining Financial Information F-15

20 CHECKFREE HOLDINGS CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS WITH BLUEGILL TECHNOLOGIES, INC. FOR THE YEAR ENDED JUNE 30, 1999 HISTORICAL AMOUNTS --------------------- CHECKFREE PRO FORMA HOLDINGS BLUEGILL ADJUSTMENTS TOTAL --------- -------- ----------- -------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenues: Processing and servicing.................... $201,059 $ -- $ -- $201,059 License fees................................ 15,975 2,517 -- 18,492 Maintenance fees............................ 17,746 48 -- 17,794 Other....................................... 15,351 925 -- 16,276 -------- ------- -------- -------- Total revenues...................... 250,131 3,490 -- 253,621 Expenses: Cost of processing, servicing and support... 146,704 969 -- 147,673 Research and development.................... 21,085 1,457 -- 22,542 Sales and marketing......................... 32,354 2,318 -- 34,672 General and administrative.................. 31,466 2,045 -- 33,511 Depreciation and amortization............... 24,630 106 61,826(4) 86,562 In-process research and development......... 2,201 -- -- 2,201 -------- ------- -------- -------- Total expenses...................... 258,440 6,895 61,826 327,161 Net gain on dispositions of assets.......... 4,576 -- -- 4,576 -------- ------- -------- -------- Loss from operations.......................... (3,733) (3,405) (61,826) (68,964) Other: Interest, net............................... 2,181 194 -- 2,375 -------- ------- -------- -------- Loss before income taxes...................... (1,552) (3,211) (61,826) (66,589) Income tax benefit............................ (12,009) -- (9,290)(4) (21,299) -------- ------- -------- -------- Net income (loss)............................. $ 10,457 $(3,211) $(52,536) $(45,290) ======== ======= ======== ======== Basic earnings (loss) per share: Net income (loss) per common share.......... $ 0.20 $ (0.79) ======== ======== Equivalent number of shares................. 52,444 4,714(1) 57,158 ======== ======== ======== Diluted earnings (loss) per share: Net income (loss) per common share.......... $ 0.18 $ (0.79) ======== ======== Equivalent number of shares................. 56,529 629(5) 57,158 ======== ======== ======== See Notes to Unaudited Pro Forma Condensed Combining Financial Information F-16

21 CHECKFREE HOLDINGS CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS WITH BLUEGILL TECHNOLOGIES, INC. FOR THE NINE MONTHS ENDED MARCH 31, 2000 HISTORICAL AMOUNTS --------------------- CHECKFREE PRO FORMA HOLDINGS BLUEGILL ADJUSTMENTS TOTAL --------- -------- ----------- -------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) REVENUES: Processing and servicing.................... $189,430 $ -- $ -- $189,430 License fees................................ 10,295 4,578 -- 14,873 Maintenance fees............................ 13,571 349 -- 13,920 Other....................................... 8,399 1,180 -- 9,579 -------- ------- -------- -------- Total revenues...................... 221,695 6,107 -- 227,802 Expenses: Cost of processing, servicing and support... 133,684 1,496 -- 135,180 Research and development.................... 24,276 2,142 -- 26,418 Sales and marketing......................... 29,522 5,602 -- 35,124 General and administrative.................. 28,837 4,463 -- 33,300 Depreciation and amortization............... 23,789 272 34,145(4) 58,206 In-process research and development......... -- -- -- -- -------- ------- -------- -------- Total expenses...................... 240,108 13,975 34,145 288,228 Net gain on dispositions of assets.......... -- -- -- -- -------- ------- -------- -------- Loss from operations.......................... (18,413) (7,868) (34,145) (60,426) Other: Interest, net............................... (83) 619 -- 536 -------- ------- -------- -------- Loss before income taxes...................... (18,496) (7,249) (34,145) (59,890) Income tax benefit............................ (6,718) -- (2,078)(4) (8,796) -------- ------- -------- -------- Net income (loss)............................. $(11,778) $(7,249) $(32,067) $(51,094) ======== ======= ======== ======== Basic earnings (loss) per share: Net income (loss) per common share.......... $ (0.23) $ (0.90) ======== ======== Equivalent number of shares................. 52,246 4,714(1) 56,960 ======== ======== ======== Diluted earnings (loss) per share: Net income (loss) per common share.......... $ (0.23) $ (0.90) ======== ======== Equivalent number of shares................. 52,246 4,714(1) 56,960 ======== ======== ======== See Notes to Unaudited Pro Forma Condensed Combining Financial Information F-17

22 CHECKFREE HOLDINGS CORPORATION NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION WITH BLUEGILL TECHNOLOGIES, INC. 1. Adjustment to reflect the issuance of CheckFree Holdings common stock, CheckFree Holdings options and related acquisition expenses as the total purchase price for the net assets of BlueGill, and the elimination of BlueGill's redeemable preferred stock and shareholders' equity. The fair market values of intangible assets are preliminary estimates based on an independent appraisal, and current facts and circumstances. The final value of intangible assets will change with any change in the final purchase price and any resulting change could be material. (IN THOUSANDS) Capitalized software, net.............................. $ 20,600 Goodwill, net.......................................... 193,007 Other intangible assets, net........................... 29,500 BlueGill redeemable preferred stock.................... 25,963 BlueGill common stock.................................. 7 BlueGill additional paid-in capital.................... 1,753 CheckFree Holdings common stock...................... $ 47 CheckFree Holdings additional paid-in capital........ 239,948 BlueGill accumulated deficit......................... 12,443 BlueGill other equity................................ 650 Current deferred income tax liability................ 9,290 Long term deferred income tax liability.............. 7,852 Accrued acquisition expenses......................... 600 -------- -------- Totals............................................ $270,830 $270,830 ======== ======== The following chart indicates the components of the purchase price inherent in the adjusting entry: (IN THOUSANDS) CheckFree Holdings common stock......................... $221,449 Issuance of CheckFree Holdings options.................. 18,546 Direct acquisition costs................................ 600 -------- Total estimated purchase price................ $240,595 ======== The purchase price reflects the issuance of 4,713,736 shares of CheckFree Holdings common stock at $46.98 per share which is the average end of day price of CheckFree Holdings stock for the three trading days preceding and the three days following the closing of the acquisition of BlueGill. Under the terms of the merger agreement, CheckFree Holdings also issued 634,145 CheckFree Holdings options to replace BlueGill options, of which 286,264 are already vested. The value of the CheckFree Holdings option grant is based on a Black-Scholes valuation model assuming a $46.98 stock price, an average strike price of $2.18, an average life of 2.9 years, a risk-free interest rate of 6.47% and volatility of 83.4%. F-18

23 The following table provides the allocation of the purchase price inherent in the adjusting entry: (IN THOUSANDS) In-process research and development (Note B).................................. $ 6,900 Current technology and products: Print/extraction (estimated life of 3 years)....... 4,600 Data management engine (estimated life of 4 years)....... 5,700 API or application protocol interfaces (estimated life of 2 years)....... 1,000 Web applications (estimated life of 5 years)....... 2,400 -------- Sub-total IPR&D and current technology and products...................... 20,600 Goodwill (estimated life of 5 years)....... 193,007 Other intangible assets: Workforce in place (estimated life of 3 years)....... 2,600 Customer list (estimated life of 5 years)....... 10,600 Tradename (estimated life of 1 year)........ 15,100 Covenants not to compete (estimated life of 1 year)........ 1,200 -------- Sub-total other intangible assets........................................ 29,500 Deferred income taxes......................................................... (17,142) Net assets of BlueGill: Cash and cash equivalents................................................... 15,044 Property and equipment...................................................... 1,452 Other, net.................................................................. (1,866) -------- Sub-total net assets..................................................... 14,630 -------- Total Purchase Price..................................................... $240,595 ======== The useful lives of the various intangible assets identified are based on management's estimates. Under the caption of current technology and products, lives are based on assumptions regarding the time expected for the indicated technology or product to become obsolete, which are driven primarily by planned future development work designed to replace the existing technology or product. The useful life assigned to goodwill is based upon currently acceptable lives for these assets. The useful life on workforce in place is based on CheckFree Holdings' estimate of the average tenure expected from the BlueGill employee base. The useful life CheckFree Holdings assigned to the customer base is based on CheckFree Holdings' estimate of the future revenue base from the existing customers. Although the BlueGill tradename is widely known at this time, CheckFree Holdings currently has no plans to continue to utilize the name once the technologies of BlueGill and CheckFree Holdings are consolidated in to a single product offering, which CheckFree Holdings expects to take place within one year of the merger. CheckFree Holdings assigned a one-year life to the covenants not to compete to coincide with the contractual life of the related agreements. CheckFree Holdings will amortize these intangible assets on a straight-line basis over their estimated useful lives. 2. Adjustment to write off the balance of in-process research and development. As the amount is not deductible for federal or state income tax purposes, there is no related income tax benefit resulting from the charge. Refer to Note B for an explanation of in process research and development. (IN THOUSANDS) Accumulated deficit................................ $6,900 Capitalized software, net........................ $6,900 3. Adjustment to accrue the cost of registering CheckFree Holdings shares to be issued for BlueGill. (IN THOUSANDS) Additional paid-in capital............................ $500 Accrued liabilities................................. $500 F-19

24 4. Adjustment to reflect additional amortization expense and the related income tax benefit associated with the intangible assets acquired from BlueGill. (IN THOUSANDS) YEAR ENDED JUNE 30, 1999 Depreciation and amortization............................... $61,826 Current deferred income tax liability....................... 9,290 Capitalized software, net................................. $ 3,938 Goodwill, net............................................. 38,601 Other intangible assets, net.............................. 19,287 Income tax benefit........................................ 9,290 ------- ------- Total.................................................. $71,116 $71,116 ======= ======= NINE MONTHS ENDED MARCH 31, 2000 Depreciation and amortization............................... $34,145 Current deferred income tax liability....................... 2,078 Capitalized software, net................................. $ 2,954 Goodwill, net............................................. 28,951 Other intangible assets, net.............................. 2,240 Income tax benefit........................................ 2,078 ------- ------- Total.................................................. $36,223 $36,223 ======= ======= Goodwill amortization is non-deductible for federal and state income tax purposes. A blended effective income tax rate of 40% was applied to the deductible amortization to determine the related income tax benefit in the entries above. 5. When combined with BlueGill's historical loss and the pro forma adjustments, the historical CheckFree Holdings' net income for the year ended June 30, 1999 resulted in a combined net loss. As a result, due to the anti-dilutive effect on earnings per share, the equivalent number of shares for purposes of determining diluted earnings per share, was reduced to agree with the equivalent number of shares for basic earnings per share. The following chart identifies by type of potentially dilutive security, the number of additional shares that could potentially dilute basic earnings per share in the future and the number of shares issued for BlueGill. CheckFree Holdings common shares issued for BlueGill........ 4,714 Potentially dilutive securities: Options and warrants...................................... (4,085) Other..................................................... -- ------ Total potentially dilutive securities.................. (4,085) ------ Net adjustment to dilutive shares outstanding............... 629 ====== F-20

25 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION Note A: Management believes that the assumptions used in preparing the Unaudited Pro Forma Condensed Combining Balance Sheet and the Unaudited Pro Forma Condensed Combining Statement of Operations provide a reasonable basis for presenting the significant effects of the acquisition of BlueGill; that the pro forma adjustments give appropriate effect to those assumptions; and that the pro forma adjustments are properly applied in the Unaudited Pro Forma Condensed Combining Balance Sheet and Statement of Operations. Note B: The unaudited pro forma condensed balance sheet of CheckFree Holdings and BlueGill has been prepared as if the merger was completed as of March 31, 2000, and was accounted for as a purchase. CheckFree Holdings issued 4,713,736 shares of its common stock with a fair market value of $46.98 per share and 634,145 options, 286,264 of which are already vested. The total purchase price of $240,595,000 was allocated to assets acquired and liabilities assumed based on BlueGill's March 31, 2000 balance sheet. The allocation of the BlueGill purchase price among the identifiable tangible and intangible assets and purchased in process research and development is based on preliminary estimates of the fair market value of those assets. Final determination of the allocation of the purchase price will be based on independent appraisals that CheckFree Holdings expects to have completed shortly after the merger is consummated. BlueGill currently has five general technologies and application suites under development that meet the specific requirements of SFAS No. 2 for qualification as in-process research and development or IPRD. Critical elements of SFAS No. 2's definition of IPRD are that: - the product has not yet demonstrated its technological feasibility; and - the product does not have an alternative future use. These in-process technologies and applications include print and extraction technology, the Data Management Engine technology, API technology, web applications and OFX payment technology. Their descriptions are found below. Print and extraction technology. Print and extraction technology allows for the extraction and print parsing of a biller's legacy billing information through to BlueGill's products. The following features of the print/extraction technology are under development: - SmartXpress 3.0.0 that comprises updates to accommodate core changes to BlueGill's DME 2.2.0; - Record Data Loader, which is an input module that allows for Record Data Type management by converting flat file data into XML-s for storage in the DME; and - Internationalization Language, which allows for the management of Asian languages (e.g. Japan, China, Korea, Hong Kong, and Taiwan) through Double Byte Character Set (DBCS) and Unicode development. Data Management Engine technology. The DME technology allows for archiving of transactions and linkage of data to the necessary environment within the BlueGill network. The DME is the main translator of input data to output data. The following features are under development: - Xerox Metacode Support, which is Xerox print support on the AIX, Solaris and HP-UX platforms; - AFP to PDF performance, which provides three times improvement in throughput of data through the DME; and - MVS Port (OS/390), which ports the source code to the MVS platform. APIs. The API technology encompasses knowledge engineering procedures and expert system analysis, design and development. The API technology works in between the print/extraction and parsing modules and F-21

26 the web applications or templates. The API "surrounds" the DME as its interface to these other technologies. The following features are under development: - BlueGill Engine 3.0.0. -- Pure JAVA Front End Interface, which provides a pure JAVA version of the public API set; - BlueGill Engine 4.0.0 -- Pure JAVA Back End Interface, which provides a pure JAVA version of the data base engine; and - CheckFree Holdings E-Bill 3.1 Format Support, which provides batch mode support for the CheckFree Holdings E-Bill 3.1 format. Web Applications. The web application technologies help in the design of industry specific templates for electronic billing and statement presentation. The following features are under development: - i-Insurance Template for the insurance industry billing statement templates; and - Market Direct 2.0, which provides one-to-one marketing capabilities with end users. Payments or OFX. The payments or OFX technology will allow for bill publishing services to be integrated with the i-Series products and bill consolidators. The following features are under development: - OFX Bill Publisher Server, which is the core OFX engine integrated with the i-Series engine support and Bill Publisher component to link to consolidators; - Payment Infrastructure, which is the underpinnings for interfacing with various payment solutions (e.g. ACH, PaymenTech, Cybercash); and - International CSP Model, which is an international version of the domestic CSP model. There are risks and uncertainties associated with the completion of these in-process technologies. These risks include: - Not Technologically Feasible. The acquired IPRD had not demonstrated technological or commercial feasibility as of the transaction date for BlueGill. Significant risks exist because BlueGill is unsure of the obstacles it will encounter in the form of market acceptance, time and cost necessary to produce a technologically feasible product. SFAS No. 2 does not specifically require an analysis of the development effort expended relative to an acquisition date. It is reasonable to assume, however, that an IPRD project would require a significant amount of time and cost in order to modify for CheckFree Holdings' use in the marketplace. Should the proposed technology fail to become viable, it is unlikely that CheckFree Holdings would be able to realize any value from the sale of the technology to another party. - No Alternative Future Use. The acquired IPRD consists of BlueGill's work to date on its products. The products are very specific to the tasks and markets for which it is intended. As is typically the case with software, there are no alternative uses for the in-process work in the event that the product does not become feasible for CheckFree Holdings. The development effort for the acquired IPRD does not possess an alternative future use for CheckFree Holdings under the terms of SFAS No. 2. - If the BlueGill project underway fails, there will be a very limited life to the existing product because the continuing pace of technological developments in the marketplace will have rendered them non-competitive. In the event of a failure, the technology acquired, as embodied in either current or in-process products, will have no alternative use and would be written off as a loss by CheckFree Holdings. - As of the valuation date, all of the IPRD technologies were subject to numerous technological, timing, cost and market risks. In addition to these risks already mentioned, another major risk associated with the technologies pertains to the language it's written in. According to BlueGill's management, all of F-22

27 the base code may go to the JAVA computer language, causing large sections of the codes to be re-written. The following table represents information regarding the status of the various in-process research and development projects acquired: ESTIMATED EXPECTED STAGE OF ESTIMATED COST TO COMPLETION COMPLETION DATE COMPLETE VALUATION ---------- ----------------- -------- --------- (IN THOUSANDS) Print/Extraction................... 38% December 2000 $ 748 $1,900 Data Management Engine............. 19% November 2000 110 1,300 APIs............................... 46% November 2000 703 2,300 Web Applications................... 50% July 2000 183 1,400 Payments/OFX....................... 10% December 2000 333 0 ------ ------ Total.................... $2,077 $6,900 ====== ====== The method used to allocate the purchase consideration to IPRD was the modified income approach. Under the income approach, fair value reflects the present value of the projected free cash flows that will be generated by the IPRD projects and that is attributable to the acquired technology, if successfully completed. The modified income approach takes the income approach, modified to include the following factors: - analysis of the stage of completion of each project; - exclusion of value related to research and development yet-to-be completed as part of the on-going IPRD projects; and - the contribution of existing technologies and applications. The projected revenue used in the income approach are based upon the incremental revenues associated with a portion of the project related to BlueGill's technology likely to be generated upon completion of the project and the beginning of commercial sales, as estimated by management. The projections assume that the projects will be successful and the project's development and commercialization are as set forth by management. The discount rate used in this analysis is an after tax rate of 25%. Note C: CheckFree Holdings' statement of operations for the year ended June 30, 1999, has been combined with the BlueGill statement of operations for the twelve months ended June 30, 1999. CheckFree Holdings' statement of operations for the nine-month period ended March 31, 2000 has been combined with the BlueGill statement of operations for the nine-month period ended March 31, 2000. Actual income statements of CheckFree Holdings and BlueGill will be combined from the effective date of the merger, with no retroactive restatement. Note D: The unaudited pro forma condensed combining statement of operations for CheckFree Holdings and BlueGill have been prepared as if the merger was completed as of July 1, 1998, the beginning of the earliest period presented. The unaudited pro forma combined net income (loss) per share is based on the weighted average number of shares of CheckFree Holdings common stock outstanding during the periods, adjusted to give effect to shares assumed to be issued had the merger taken place as of July 1, 1998. Note E: The unaudited pro forma condensed combining statement of operations do not include a charge for the value of the estimated $6.9 million (no income tax effect) of purchased research and development arising from the merger, which will be expensed at acquisition, as this expense will not have a continuing impact. F-23

28 EXHIBIT INDEX ------------- EXHIBIT NO. DESCRIPTION 2(a) Agreement and Plan of Merger, dated as of December 20, 1999, among CheckFree Holdings Corporation, CheckFree Acquisition Corporation IV, and BlueGill Technologies, Inc. (Reference is made to Appendix A to Registration Statement on Form S-4, as amended (Registration No. 333-32644), filed with the Securities Exchange Commission on March 16, 2000, and incorporated herein by reference). 2(b) Amendment to Agreement and Plan of Merger, dated April 27, 2000, among CheckFree Holdings Corporation, CheckFree Acquisition Corporation IV, and BlueGill Technologies, Inc. (Reference is made to Exhibit 2(b) to Current Report on Form 8-K dated April 28, 2000, filed with the Securities and Exchange Commission on May 15, 2000, and incorporated herein by reference). 23 Consent of Arthur Andersen LLP.

1 Exhibit 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Form 8-K/A NO. 1 of our report dated February 28, 2000, included in CheckFree Holdings Corporation's Current Report on Form 8-K/A No. 1 dated March 16, 2000, which is a part of the Registration Statement File No. 0-26802. It should be noted that we have not audited any financial statements of the company subsequent to December 31, 1999 or performed any audit procedures subsequent to the date of our report. /s/ Arthur Andersen LLP ----------------------- Arthur Andersen LLP Ann Arbor, Michigan, July 7, 2000.