UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by the Registrant     þ
 
Filed by a Party other than the Registrant     o
 
Check the appropriate box:

þ		Preliminary Proxy Statement

o		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

o		Definitive Proxy Statement

o		Definitive Additional Materials

o		Soliciting Material Pursuant to § 240.14a-12

CORILLIAN CORPORATION

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

o		No fee required.

þ		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1)

Title of each class of securities to which transaction applies:

Common Stock, no par value, of Corillian Corporation (“Company Common Stock”)

(2)

Aggregate number of securities to which transaction applies:

45,285,682 shares of Company Common Stock and 5,269,353 shares of Company Common Stock issuable upon the exercise of options with an exercise price of less than $5.15 per share. (1)

(3)

Per unit price or other underlying value of transaction 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):

The filing fee was determined based upon the sum of (A) 45,285,682 shares of Company Common Stock multiplied by $5.15 per share and (B) options to purchase 5,269,353 shares of Company Common Stock with exercise prices less than $5.15, multiplied by approximately $2.30 per share (which is the difference between $5.15 and the weighted average exercise price per share). In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the filing fee was determined by multiplying 0.0000307 by the sum of the preceding sentence.

(4)

Proposed maximum aggregate value of transaction:

$245,345,774

(5)

Total fee paid:

$7,532.12

o		Fee paid previously with preliminary materials.

o		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:

(1) Pursuant to the Agreement and Plan of Merger dated as of February 13, 2007, CF Oregon, Inc., a wholly owned subsidiary of CheckFree Corporation, will merge into the Registrant and each outstanding share of Corillian Common Stock will be converted into the right to receive $5.15. Each holder of options to acquire Company Common Stock will be entitled to receive, in consideration of the cancellation of such stock options, an amount (net of applicable taxes) equal to the product of (i) the excess, if any, of $5.15 per share of common stock over the exercise price per share of common stock subject to such stock option, multiplied by (ii) the total number of shares subject to such stock option. As of March 1, 2007, there were 45,285,682 shares of Corillian Common Stock issued and outstanding, and there were 5,269,353 shares of common stock of the Registrant subject to outstanding stock options with a weighted average exercise price of $2.85 per share (excluding stock options with an exercise price equal to or in excess of $5.15 per share). The filing fee was determined by adding (x) the product of (i) the number of shares of Corillian Common Stock that are proposed to be acquired in the merger and (ii) the transaction consideration of $5.15 per share of Company Common Stock, plus (y) the product of (1) the total number of shares of Corillian Common Stock subject to outstanding stock options having an exercise price less than $5.15 per share multiplied by (2) the excess of $5.15 over the weighted average exercise price for such stock options ((x) and (y) together, the “Merger Consideration”). The filing fee was calculated in accordance with Regulation 240.0-11 under the Exchange Act, by multiplying the Merger Consideration by 0.0000307.

 

          , 2007

 

Dear Shareholder:

 

Our board of directors has approved a merger that provides for our acquisition by CheckFree Corporation, a Delaware corporation. If the merger is completed, each share of our common stock issued and outstanding at the effective time of the merger will be converted into the right to receive $5.15 in cash, without interest.

 

You will be asked, at a special meeting of our shareholders, to approve the merger agreement. Our board of directors has unanimously found the merger agreement and the merger to be advisable and in the best interests of Corillian and our shareholders, and has unanimously approved the merger agreement, and recommends that you vote “FOR” the approval of the merger agreement.

 

The special meeting of shareholders will be held on [          ], 2007, at 10:00 a.m., Pacific Time, at our headquarters, 3400 NW John Olsen Place, Hillsboro, Oregon 97124.

 

The proxy statement attached to this letter provides you with information about the proposed merger and the special meeting of shareholders. We encourage you to read the entire proxy statement carefully. You may also obtain more information about us from documents that we have filed with the Securities and Exchange Commission.

 

Your vote is important regardless of the number of shares of our common stock that you own. Because the approval of the merger agreement requires the affirmative vote of the holders of a majority of our outstanding shares of common stock entitled to vote thereon as of the record date for the special meeting, a failure to vote will have the same effect as a vote “against” the merger agreement. Accordingly, you are requested to submit your proxy by promptly completing, signing and dating the enclosed proxy card and returning it in the envelope provided or to submit your proxy by telephone or the internet prior to the special meeting, whether or not you plan to attend the special meeting.

 

Submitting your proxy will not prevent you from voting your shares in person if you choose to attend the special meeting and vote your shares in person.

 

Thank you for your cooperation and continued support.

 

Sincerely,

 

Alex P. Hart
Chief Executive Officer and President

 

Neither the Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the merger, passed upon the merits or fairness of the merger or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.

 

THIS PROXY STATEMENT IS DATED [          ], 2007

AND IS FIRST BEING MAILED TO SHAREHOLDERS ON OR ABOUT [          ], 2007.

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To Be Held [          ], 2007

 

Dear Shareholder:

 

A special meeting of shareholders of Corillian Corporation, an Oregon corporation (“Corillian” or the “Company”), will be held on [          ], 2007, at 10:00 a.m., Pacific Time, at Corillian’s headquarters, 3400 NW John Olsen Place, Hillsboro, Oregon 97124 for the following purposes:

 

1. To consider and vote on a proposal to approve the Agreement and Plan of Merger, dated as of February 13, 2007 (as it may be amended from time to time, the “merger agreement”), among Corillian, CheckFree Corporation (“CheckFree”) and a wholly owned subsidiary of CheckFree, pursuant to which, upon the merger becoming effective, each issued and outstanding share of Corillian common stock, no par value, will be converted into the right to receive $5.15 in cash, without interest;

 

2. To approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the meeting to approve the merger agreement; and

 

3. To transact such other business as may properly come before the special meeting or any adjournment thereof.

 

Only shareholders of record on [          ], 2007, are entitled to notice of and to vote at the special meeting and at any adjournment of the special meeting. All shareholders of record are cordially invited to attend the special meeting in person.

 

The approval of the merger agreement requires the approval of the holders of a majority of the outstanding shares of common stock entitled to vote thereon as of the record date for the special meeting. EVEN IF YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, WE REQUEST THAT YOU COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED, OR SUBMIT YOUR PROXY BY TELEPHONE OR THE INTERNET PRIOR TO THE SPECIAL MEETING, AND THUS ENSURE THAT YOUR SHARES WILL BE REPRESENTED AT THE SPECIAL MEETING IF YOU ARE UNABLE TO ATTEND. If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be voted in favor of the approval of the merger agreement and in favor of the proposal to adjourn the meeting, if necessary or appropriate, to solicit additional proxies. If you fail to return your proxy card or fail to submit your proxy by telephone or the Internet and do not attend the special meeting in person, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and, if a quorum is present, will have the same effect as a vote against the approval of the merger agreement. If you are a shareholder of record and you attend the special meeting and wish to vote in person, you may withdraw your proxy and vote in person.

 

The Corillian board of directors unanimously recommends that shareholders vote FOR the approval of the merger agreement at the special meeting, FOR the proposal to adjourn the meeting, if necessary or appropriate, to solicit additional proxies and FOR the authorization of the proxies to vote on such other matters as may properly come before the special meeting or any adjournment thereof.

 

By Order of the Board of Directors
of Corillian Corporation

 

Erich J. Litch
Secretary

 

Portland, Oregon

[          ], 2007

 

IMPORTANT

 

A proxy card is enclosed herewith. All shareholders are urged to complete and mail the proxy card promptly. The enclosed envelope for return of the proxy card requires no postage. Any shareholder attending the Special Meeting may personally vote on all matters that are considered, in which event the signed proxy will be revoked.

 

IT IS IMPORTANT THAT YOUR STOCK BE VOTED

 

TABLE OF CONTENTS

 

 

The following summary highlights selected information from this proxy statement and may not contain all of the information that may be important to you. Accordingly, we encourage you to read carefully this entire proxy statement, its annexes and the documents referred to in this proxy statement. Each item in this summary includes a page reference directing you to a more complete description of that item. All information contained in this proxy statement was prepared and supplied by Corillian Corporation, except for the descriptions of the businesses of CheckFree Corporation and CF Oregon, Inc. contained in this summary below under the heading “The Parties to the Merger” and elsewhere in this proxy statement under the headings “The Parties to the Merger — CheckFree Corporation” and “The Parties to the Merger — CF Oregon, Inc.,” which descriptions were supplied by CheckFree. In this proxy statement, the terms “Corillian,” “Company,” “we,” “our,” “ours,” and “us” refer to Corillian Corporation and its subsidiaries.

 

The proposed transaction is the acquisition of Corillian by a subsidiary of CheckFree Corporation (“CheckFree”) pursuant to an Agreement and Plan of Merger, dated as of February 13, 2007, among Corillian, CheckFree and CF Oregon, Inc., an Oregon Corporation and wholly owned subsidiary of CheckFree (“Merger Sub”). Once the merger agreement has been approved by our shareholders and the other closing conditions under the merger agreement have been satisfied or waived, Merger Sub will merge with and into Corillian. Corillian will be the surviving corporation in the merger (the “surviving corporation”) and will become a wholly owned subsidiary of CheckFree. Upon completion of the merger, you will receive $5.15 in cash, without interest, for each share of our common stock that you own.

 

Corillian Corporation
3400 NW John Olsen Place
Hillsboro, OR 97124
(503) 629-3300

 

Corillian is a leading provider of solutions that enable banks, credit unions, brokers and other financial service providers to rapidly deploy Internet-based financial services. Corillian’s solutions allow consumers to conduct financial transactions, view personal and market financial information, pay bills and access other financial services on the Internet. Corillian provides a set of applications for Internet banking, online fraud prevention, electronic bill presentment and payment, targeted marketing, data aggregation, alerts and online customer relationship management. Corillian’s solutions integrate into existing database applications and systems and enable its customers to monitor transactions across all systems in real time. Corillian’s solutions are also designed to support multiple lines of business, including small business banking, corporate banking and credit card management, and to scale to support millions of users. Corillian’s current customers include J.P. Morgan Chase, The Huntington National Bank, Capital One, Wachovia Bank and SunTrust Bank.

 

CheckFree Corporation
4411 East Jones Bridge Road
Norcross, Georgia 30092
(678) 375-3000

 

Founded in 1981, CheckFree Corporation provides financial electronic commerce services and products to organizations around the world. CheckFree Electronic Commerce solutions enable thousands of financial services providers and billers to offer the convenience of receiving and paying household bills online, via phone or in person through retail outlets. CheckFree Investment Services provides a broad range of investment management solutions and outsourced services to hundreds of financial services organizations, which manage about $1.5 trillion in assets. CheckFree Software develops, markets and supports payment processing solutions that are used by financial institutions to process more than two-thirds of the 14 billion Automated Clearing House transactions in the United

States, and supports reconciliation, exception management, risk management, transaction process management, corporate actions processing, and compliance within thousands of organizations worldwide.

 

CF Oregon, Inc.
c/o CheckFree Corporation
4411 East Jones Bridge Road
Norcross, Georgia 30092
(678) 375-3000

 

Merger Sub is an Oregon corporation and a wholly owned subsidiary of CheckFree. Merger Sub was formed solely for the purpose of entering into the merger agreement and consummating the transactions contemplated by the merger agreement. It has not conducted any activities to date other than activities incidental to its formation and in connection with the transactions contemplated by the merger agreement.

 

Time, Place and Date (Page 14)

 

The special meeting will be held on [          ], 2007, starting at 10:00 a.m., Pacific Time, at Corillian’s headquarters, 3400 NW John Olsen Place, Hillsboro, Oregon 97124.

 

Purpose (Page 14)

 

You will be asked to consider and vote upon approval of the merger agreement. The merger agreement provides that Merger Sub will be merged with and into Corillian, and each outstanding share of our common stock will be converted into the right to receive $5.15 in cash, without interest.

 

The special meeting may be adjourned for the purpose of soliciting additional proxies, if necessary or appropriate, if there are insufficient votes at the time of the meeting to approve the merger agreement.

 

The persons named in the accompanying proxy card will also have discretionary authority to vote upon other business, if any, that properly comes before the special meeting and any adjournments of the special meeting.

 

Record Date and Quorum (Page 14)

 

You are entitled to vote at the special meeting if you owned shares of our common stock at the close of business on [          ], 2007, the record date for the special meeting. You will have one vote for each share of our common stock that you owned on the record date. As of the record date, there were [          ] shares of our common stock outstanding and entitled to vote.

 

A quorum of the holders of the outstanding shares of our common stock must be present for the special meeting to be held. A quorum is present if the holders of a majority of the outstanding shares of our common stock entitled to vote are present at the meeting, either in person or represented by proxy. Abstentions and broker non-votes are counted as present for the purpose of determining whether a quorum is present. A broker non-vote occurs on an item when a broker is not permitted to vote on that item without instructions from the beneficial owner of the shares and no instructions are given.

 

Required Vote (Page 14)

 

For us to complete the merger, shareholders holding at least a majority of our common stock outstanding and entitled to vote at the close of business on the record date must vote “FOR” the approval of the merger agreement. All of our shareholders are entitled to one vote per share. A failure to vote your shares of Corillian common stock, an abstention or a broker non-vote will have the same effect as a vote against the merger.

 

Share Ownership of Directors and Executive Officers (Page 43)

 

As of March 1, 2007, the current directors and executive officers of Corillian beneficially owned in the aggregate 919,133 shares (excluding options), representing approximately 2.03% of our outstanding common stock.

 

Voting and Proxies (Page 15)

 

Any Corillian registered shareholder (meaning a shareholder that holds stock in its own name) entitled to vote may submit a proxy by telephone or the Internet or by returning the enclosed proxy card by mail, or may vote in person by appearing at the special meeting. If your shares are held in “street name” by your broker, you should instruct your broker on how to vote your shares using the instructions provided by your broker. If you do not provide your broker with instructions, your shares will not be voted and that will have the same effect as a vote against the merger. If you hold your shares in “street name” and wish to vote in person by appearing at the special meeting, you must request a legal proxy from your broker.

 

Revocability of Proxy (Page 14)

 

Any Corillian registered shareholder who executes and returns a proxy card (or submits a proxy via telephone or the Internet) may revoke the proxy at any time before it is voted in any one of the following ways:

 

 

Simply attending the special meeting will not constitute revocation of a proxy. If you have instructed your broker to vote your shares, the above-described options for revoking your proxy do not apply and instead you must follow the directions provided by your broker to change your instructions.

 

We are working to complete the merger as soon as possible. In the event of the approval of the merger agreement by Corillian’s shareholders and the satisfaction or waiver of the other closing conditions provided for in the merger agreement and described under “The Merger Agreement-Closing Conditions,” we anticipate completing the merger shortly following the special meeting and, in any case, on or about June 1, 2007.

 

If the merger agreement is approved by our shareholders and the other conditions to closing are satisfied, Merger Sub will be merged with and into Corillian, with Corillian being the surviving corporation. Upon completion of the merger, each share of Corillian common stock will be converted into the right to receive $5.15 per share, without interest. Following completion of the merger, our common stock will no longer be quoted on Nasdaq, will be deregistered under the Securities Exchange Act of 1934, as amended (the “Securities Exchange Act”), and will no longer be publicly traded. Corillian will be a wholly owned subsidiary of CheckFree and our current shareholders will cease to have any ownership interest in Corillian or rights as Corillian shareholders. Therefore, you will not participate in any future earnings or growth of Corillian and will not benefit from any appreciation in value of Corillian.

 

After careful consideration, our board of directors has unanimously:

 

 

In reaching its decision, our board of directors weighed a number of factors. For a list of the material factors considered by our board of directors in reaching its decision to approve and adopt the merger agreement, see “The Merger — Reasons for the Merger.”

 

FTP Securities LLC (“FT Partners”) has delivered its opinion to our board of directors that, as of February 13, 2007, and subject to the assumptions, qualifications and limitations set forth therein, the merger consideration of $5.15 per share is fair, from a financial point of view, to the common shareholders of Corillian other than CheckFree, Merger Sub, any affiliate of CheckFree or Merger Sub, or holders of dissenting shares, if applicable.

 

The opinion of FT Partners was addressed to our board of directors for its benefit and use, is directed only to the consideration to be paid in the merger and does not constitute a recommendation to the board of directors or any of our shareholders as to how to vote with respect to the merger agreement. The opinion of FT Partners does not address any other aspect of the transaction. The full text of the written opinion of FT Partners, dated February 13, 2007, which sets forth the procedures followed, limitations on the review undertaken, matters considered and assumptions made in connection with such opinion, is attached as Annex B to this proxy statement. We recommend that you read the opinion carefully in its entirety.

 

All outstanding Corillian stock options will become fully vested and exercisable at the effective time of the merger and, as of the effective time of the merger, will then terminate and thereafter represent the right to receive an amount in cash, without interest and less applicable tax withholding, equal to the product of:

 

 

No holder of an outstanding stock option that has an exercise price per share that is equal to or greater than $5.15 shall be entitled to any payment with respect to the terminated stock option before or after the effective time of the merger. The aggregate amount that will be paid out with respect to stock options is estimated to be approximately $12.1 million (exclusive of any applicable tax withholding).

 

Our directors and executive officers may have interests in the merger that are different from, or in addition to, yours, including the following:

 

 

 

If you are a U.S. holder of our common stock, the merger will be a taxable transaction to you. For U.S. federal income tax purposes, your receipt of cash in exchange for your shares of our common stock generally will cause you to recognize a gain or loss measured by the difference, if any, between the cash you receive in the merger and your adjusted tax basis in your shares. If you are a non-U.S. holder of our common stock, the merger generally will not be a taxable transaction to you under U.S. federal income tax laws unless you have certain connections to the United States. You should consult your own tax advisor for a full understanding of the specific tax consequences of the merger to you in light of your particular circumstances.

 

Except for the filing of articles of merger in Oregon at or before the effective date of the merger and for the required filing and termination or expiration of the waiting period applicable to the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”), we are unaware of any material federal, state or foreign regulatory requirements or approvals required for the execution of the merger agreement or completion of the merger.

 

As soon as practicable after the effective time of the merger, a paying agent will mail a letter of transmittal and instructions to each registered Corillian shareholder (each shareholder that holds stock in its own name as of the effective time of the merger). The letter of transmittal and instructions will tell such shareholders how to surrender their stock certificates or book-entry shares in exchange for the merger consideration. Such shareholders should not return their stock certificates with the enclosed proxy card, and should not forward their stock certificates to the paying agent without a letter of transmittal. If your shares are held in “street name” by your broker, you will not receive a letter of transmittal and will automatically receive the merger consideration in exchange for your shares of stock through your broker.

 

The merger agreement restricts our ability to solicit or engage in discussions or negotiations with third parties regarding specified transactions involving the Company. Notwithstanding these restrictions, under certain limited circumstances required for our board of directors to comply with its fiduciary duties, our board of directors may respond to an unsolicited written bona fide proposal for an alternative acquisition, change its recommendation of the merger and terminate the merger agreement and enter into an agreement with respect to a superior proposal after paying the termination fee specified in the merger agreement.

 

Before we can complete the merger, a number of conditions must be satisfied. These conditions include:

 

 

 

The completion of the merger is not subject to CheckFree securing financing to fund the payment of cash to our shareholders. Other than the conditions pertaining to our shareholder approval, the expiration or termination of the waiting period under the HSR Act and the absence of governmental orders, either we, on the one hand, or CheckFree and Merger Sub, on the other hand, may elect to waive conditions to their respective performance and complete the merger. None of Corillian, CheckFree or Merger Sub, however, has expressed to the other parties any intention to waive any condition as of the date of this proxy statement.

 

Corillian, CheckFree and Merger Sub may agree in writing to terminate the merger agreement at any time without completing the merger, even after the shareholders of Corillian have approved the merger agreement. The merger agreement may also be terminated at any time prior to the effective time of the merger in certain other circumstances, including:

 

 

 

 

 

 

 

 

We have agreed to pay CheckFree a fee of $5.5 million in cash if:

 

 

Our common stock is quoted on The Nasdaq Global Market (“Nasdaq”) under the symbol “CORI.” On February 13, 2007, which was the last trading day before we announced the merger, the Company’s common stock closed at $3.45 per share, compared to which the merger consideration represents a premium of 49%.

 

On [          ], 2007, which was the last trading day before the date of this proxy statement, the Company’s common stock closed at $ [          ] per share.

 

Oregon law does not provide you with dissenters’ rights in connection with this transaction. Because Corillian common stock is traded on Nasdaq and our articles of incorporation do not provide for dissenters’ rights, holders of Corillian common stock will not have the right to dissent with regard to the merger under Oregon law. Certain provisions of Oregon’s dissenters’ rights laws are attached as Annex C.

 

The following questions and answers address briefly some questions you may have regarding the special meeting and the proposed merger. These questions and answers may not address all questions that may be important to you as a shareholder of Corillian Corporation. Please refer to the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement.

 

 

You are being asked to vote to approve a merger agreement among Corillian Corporation, CheckFree Corporation and a wholly owned subsidiary of CheckFree. The merger agreement provides for the merger of CF Oregon, Inc., a newly formed, wholly owned subsidiary of CheckFree (“Merger Sub”), with and into Corillian, with Corillian surviving the merger as a wholly owned subsidiary of CheckFree. When this merger occurs, Corillian shareholders and certain holders of stock options will be entitled to receive the merger consideration.

 

 

Upon completion of the merger, if you are a shareholder at the effective time of the merger you will receive $5.15 in cash, without interest, for each share of our common stock that you own. For example, if you own 1,000 shares of our common stock, you will receive $5,150 in cash in exchange for your shares of common stock, without interest. You will not own shares in the surviving corporation.

 

 

Each holder of stock options outstanding immediately prior to the effective time of the merger, whether or not such options are vested and exercisable, will be entitled to receive a per share cash amount equal to the excess, if any, of $5.15 over the exercise price for each share subject to such stock option, without interest, less any applicable withholding taxes. Each outstanding option will be cancelled and terminated as of the effective time of the merger, and, other than the cash payment described above, no Corillian option holder will have any additional rights thereafter with respect to any Corillian options.

 

 

Corillian has suspended its 2000 Employee Stock Purchase Plan. The offering period that was in effect as of the effective date of such suspension was shortened so that the last day of such offering period was February 14, 2007. Outstanding rights to purchase Corillian common stock have been exercised in accordance with the employee stock purchase plan. Each share of Corillian common stock purchased under the employee stock purchase plan will, by virtue of the merger, be automatically converted into the right to receive $5.15 in cash, without interest.

 

 

The special meeting will take place at our headquarters, 3400 NW John Olsen Place, Hillsboro, Oregon, 97124, on [          ], 2007, at 10:00 a.m., Pacific Time.

 

 

All shareholders of record on the close of business on [          ], 2007, the record date, will be eligible to vote.

 

 

For us to complete the merger, shareholders holding at least a majority of the outstanding shares of our common stock entitled to vote thereon as of the close of business on the record date must vote “FOR” the approval of the merger agreement. Accordingly, a failure to vote, an abstention or a broker non-vote will have the same effect as a vote against approval of the merger agreement.

 

 

No, no shareholder has entered into a voting agreement with respect to the merger agreement.

 

 

No, under Oregon law, dissenters’ rights will not be available to holders of Corillian common stock in the merger. Please see the section entitled “Dissenters’ Rights” and Annex C for the Oregon Dissenters’ Rights statute.

 

 

Our board of directors recommends that our shareholders vote “FOR” the approval of the merger agreement. You should read “The Merger — Reasons for the Merger” for a discussion of the factors that our board of directors considered in deciding to recommend the approval of the merger agreement.

 

 

Our board of directors received an opinion from our financial advisor, FTP Securities LLC, that, as of February 13, 2007, and subject to the assumptions, qualifications and limitations set forth therein, the merger consideration of $5.15 per share is fair, from a financial point of view, to the common shareholders of Corillian other than CheckFree, Merger Sub, any affiliate of CheckFree or Merger Sub, or holders of dissenting shares, if applicable. Please read “The Merger — Opinion of our Financial Advisor” for information about the opinion of FTP Securities LLC, and Annex B for the complete opinion.

 

 

We urge you to read this proxy statement carefully, including its annexes, and to consider how the merger affects you. If you are a registered shareholder, then you can ensure that your shares are voted at the special meeting by attending the special meeting and voting in person or by submitting your proxy via:

 

 

 

Yes, but only if you provide instructions to your broker on how to vote. You should follow the instructions provided by your broker regarding how to instruct your broker to vote your shares. If you do not follow those instructions, your shares will not be voted, which will have the same effect as voting against the merger. If you hold your shares in “street name” and wish to vote in person by appearing at the special meeting, you must request a legal proxy from your broker.

 

 

Yes, you can change your vote at any time before your proxy is voted at the special meeting. If you are a registered shareholder, you may revoke your proxy (a) by filing with or transmitting to Corillian’s Corporate Secretary at our principal executive offices an instrument or transmission of revocation or (b) by submitting a new proxy by telephone, the Internet or mail, in each case, dated after the date of the proxy being revoked. In addition, your proxy may be revoked by attending the special meeting and voting in person (you must vote in person; simply attending the special meeting will not cause your proxy to be revoked).

 

Please note that if you hold your shares in “street name” and you have instructed a broker to vote your shares, the above-described options for changing your vote do not apply, and instead you must follow the instructions received from your broker to change your vote.

 

 

If your shares are registered differently or are in more than one account, you will receive more than one card. Please complete and return all of the proxy cards or vote instruction cards you receive (or submit your proxy by telephone or the Internet, if available to you) to ensure that all of your shares are voted.

 

 

A quorum of the holders of the outstanding shares of our common stock must be present for the special meeting to be held. A quorum is present if the holders of a majority of the outstanding shares of our common stock entitled to vote are present at the meeting, either in person or represented by proxy. Abstentions and broker non-votes are counted as present for the purpose of determining whether a quorum is present. A broker non-vote occurs on an item when a broker is not permitted to vote on that item without instructions from the beneficial owner of the shares and no instructions are given.

 

 

For the proposal relating to the approval of the merger agreement, you may vote FOR, AGAINST or ABSTAIN. Abstentions and broker non-votes will count for the purpose of determining whether a quorum is present, but, because shareholders holding at least a majority of Corillian common stock outstanding on the record date must vote FOR the approval of the merger agreement for the merger to be approved, an abstention or broker non-vote has the same effect as if you vote AGAINST the approval of the merger agreement.

 

For the proposal to adjourn the meeting, if necessary or appropriate, to solicit additional proxies, you may vote FOR, AGAINST or ABSTAIN. Because a majority of the votes represented at the meeting, whether or not a quorum exists, is required to approve the proposal to adjourn the meeting, if necessary or appropriate, abstentions and broker non-votes will have the same effect as if you vote AGAINST such proposal.

 

 

We will pay the cost of this solicitation, which will be made primarily by mail. Proxies also may be solicited in person, or by telephone, facsimile or similar means, by our directors, officers or employees without additional compensation. In addition, Mellon Investor Services LLC will provide solicitation services to us for a fee of approximately $8,500 plus out-of-pocket expenses. We will, on request, reimburse shareholders who are brokers, banks or other nominees for their reasonable expenses in sending proxy materials to the beneficial owners of the shares they hold of record.

 

 

No. Shortly after the merger is completed, each registered Corillian shareholder as of the effective time of the merger (that is, each shareholder that holds stock in its own name rather than that of his or her broker) will receive a letter of transmittal with instructions informing them how to send in their stock certificates to the paying agent in order to receive the merger consideration. Such shareholders should use the letter of transmittal to exchange stock certificates for the merger consideration to which they are entitled as a result of the merger. DO NOT SEND ANY STOCK CERTIFICATES WITH YOUR PROXY.

 

 

If you have more questions about the merger, or if you need assistance in submitting your proxy or voting your shares or need additional copies of the proxy statement or the enclosed proxy card, you should contact Mellon Investor Services LLC, our proxy solicitation agent, at [          ] (collect) or toll free at [          ]. If your broker holds your shares, you should also call your broker for additional information.

 

You should carefully consider the following factors and the other information in this proxy statement before voting on the proposal to approve the merger agreement.

 

We cannot assure you that the merger will provide greater value to you than you would have received if Corillian continued as an independent public company.

 

Upon completion of the merger, Corillian shareholders will have the right to receive $5.15, without interest, for each share of Corillian common stock they hold at that time. The closing price per share of Corillian common stock on the Nasdaq National Market on February 13, 2007, the last trading day before we entered into the merger agreement with CheckFree, was $3.45. During the 12-month period ending on December 31, 2006, the price of Corillian common stock varied from a low of $2.44 to a high of $4.12 and ended that period at $3.77. We are unable to predict with certainty our future prospects or the market price of our common stock. Therefore, we cannot assure you that the merger will provide greater value to you than you would have received if Corillian continued as an independent public company.

 

The “no solicitation” restrictions and the termination fee provisions in the merger agreement may discourage other companies from trying to acquire Corillian.

 

While the merger agreement is in effect, subject to specified exceptions, we are prohibited from entering into or soliciting, initiating or encouraging any inquiries or proposals that may lead to a proposal or offer for a merger or other business combination transaction with any person other than CheckFree. In addition, in the merger agreement, we agreed to afford CheckFree the right to match unsolicited superior proposals and to pay a termination fee to CheckFree in specified circumstances. These provisions could discourage other parties from trying to acquire Corillian even though those other parties might be willing to offer greater value to our shareholders than CheckFree has agreed to pay under the terms of the merger agreement.

 

Our directors and officers have interests in the merger that may be different from other Corillian shareholders and that may have influenced their decision to support the merger.

 

You should be aware of potential conflicts of interest, and the benefits available to directors and officers of Corillian, when considering our board of directors’ recommendation in favor of the merger. The directors and officers of Corillian have interests in the merger that are in addition to, or different from, their interests as Corillian shareholders. Our board of directors was aware of these conflicts of interest when it approved the merger. These interests include, among others, consideration to be received as holders of Corillian stock options in the merger and potential severance benefits payable to certain officers if they are terminated in connection with the merger.

 

See also the section of this proxy statement entitled “The Merger — Interests of Our Directors and Executive Officers in the Merger” on page 27.

 

If the merger does not occur, we will not benefit from the expenses we have incurred in preparation for the merger.

 

If the merger is not consummated, we will have incurred substantial expenses for which no ultimate benefit will have been received by us. We currently expect to incur significant out-of-pocket expenses for services in connection with the merger, consisting of financial advisor, legal and accounting fees and financial printing and other related charges, many of which may be incurred even if the merger is not completed. Moreover, under specified circumstances we may be required to pay a termination fee of $5,500,000, depending upon the reason for termination, to CheckFree in connection with a termination of the merger agreement.

 

The announced merger with CheckFree may adversely affect the market price of our common stock and our results of operations.

 

If the merger is not completed, the price of our common stock may decline to the extent that the current market price reflects a market assumption that the merger will be completed. In addition, in response to the announcement of the merger, our customers and strategic partners may delay or defer decisions which could have a material adverse effect on our business regardless of whether the merger is ultimately completed. Similarly, current and prospective employees of our company may experience uncertainty about their future roles with the combined

company. These conditions may adversely affect employee morale and our ability to attract and retain key management, sales, marketing and technical personnel. In addition, focus on the merger and related matters have resulted in, and may continue to result in, the diversion of management attention and resources. To the extent that there is uncertainty about the closing of the merger, or if the merger does not close, our business may be harmed if customers, strategic partners or others believe that we cannot effectively compete in the marketplace without the merger or if there is customer and employee uncertainty surrounding the future direction of our company on a stand-alone basis.

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This proxy statement contains forward-looking statements. Any statements regarding CheckFree’s or Corillian’s future plans, objectives, expectations, beliefs, goals or prospects constitute forward-looking statements made within the meaning of Section 21E of the Securities Exchange Act of 1934. You can identify these statements by words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “may,” “will” and “continue” or similar words. You should read statements that contain these words carefully. They discuss our future expectations or state other forward-looking information, and may involve known and unknown risks over which we have no control including, without limitation:

 

 

See “Where You Can Find More Information” on page 45. You should not place undue reliance on forward-looking statements. We cannot guarantee any future results, levels of activity, performance or achievements. The statements made in this proxy statement or incorporated by reference into this proxy statement represent our views as of the date of this proxy statement or as of such earlier date that those statements were made, and it should not be assumed that the statements made or incorporated herein remain accurate as of any future date. Moreover, we assume no obligation to update forward-looking statements or update the reasons actual results could differ materially from those anticipated in forward-looking statements.

 

Corillian is a leading provider of solutions that enable banks, credit unions, brokers and other financial service providers to rapidly deploy Internet-based financial services. Corillian’s solutions allow consumers to conduct financial transactions, view personal and market financial information, pay bills and access other financial services on the Internet. Corillian provides a set of applications for Internet banking, online fraud prevention, electronic bill presentment and payment, targeted marketing, data aggregation, alerts and online customer relationship management. Corillian’s solutions integrate into existing database applications and systems and enable its customers to monitor transactions across all systems in real time. Corillian’s solutions are also designed to support multiple lines of business, including small business banking, corporate banking and credit card management, and to scale to support millions of users. Corillian’s current customers include J.P. Morgan Chase, The Huntington National Bank, Capital One, Wachovia Bank and SunTrust Bank.

 

Corillian was founded in 1997 and is incorporated under the laws of the State of Oregon. Corillian’s principal executive offices are located at 3400 NW John Olsen Place, Hillsboro, Oregon 97124, and its telephone number is (503) 629-3300.

 

Founded in 1981, CheckFree Corporation provides financial electronic commerce services and products to organizations around the world. CheckFree Electronic Commerce solutions enable thousands of financial services providers and billers to offer the convenience of receiving and paying household bills online, via phone or in person through retail outlets. CheckFree Investment Services provides a broad range of investment management solutions and outsourced services to hundreds of financial services organizations, which manage about $1.5 trillion in assets. CheckFree Software develops, markets and supports payment processing solutions that are used by financial institutions to process more than two-thirds of the 14 billion Automated Clearing House transactions in the United States, and supports reconciliation, exception management, risk management, transaction process management, corporate actions processing, and compliance within thousands of organizations worldwide.

 

CheckFree Corporation is incorporated in the State of Delaware with its principal executive offices at 4411 East Jones Bridge Road, Norcross, Georgia 30092. CheckFree’s telephone number is (678) 375-3000.

 

Merger Sub is an Oregon corporation and a wholly owned subsidiary of CheckFree. Merger Sub’s principal executive offices are located c/o CheckFree Corporation, 4411 East Jones Bridge Road, Narcross, Georgia 30092. Merger Sub’s telephone number is (678) 375-3000. Merger Sub was formed solely for the purpose of entering into the merger agreement and consummating the transactions contemplated by the merger agreement. It has not conducted any activities to date other than activities incidental to its formation and in connection with the transactions contemplated by the merger agreement. Under the terms of the merger agreement, Merger Sub will merge with and into us at the effective time. Corillian will survive the merger and Merger Sub will cease to exist.

 

This proxy statement is being furnished to our shareholders as part of the solicitation of proxies by our board of directors for use at the special meeting to be held on [          ], 2007, starting at 10:00 a.m., Pacific Time, at our headquarters, 3400 NW John Olsen Place, Hillsboro, Oregon, 97124, or at any adjournment thereof. The purpose of the special meeting is for our shareholders to consider and vote upon the approval of the merger agreement. Our shareholders must approve the merger agreement for the merger to occur. If our shareholders fail to approve the merger agreement, the merger will not occur. A copy of the merger agreement is attached to this proxy statement as Annex A. This proxy statement and the enclosed form of proxy are first being mailed to our shareholders on or about [          ], 2007.

 

The holders of record of Corillian’s common stock as of the close of business on [          ], 2007, the record date for the special meeting, are entitled to receive notice of, and to vote at, the special meeting. On the record date, there were [          ] shares of Corillian’s common stock outstanding.

 

The holders of a majority of the outstanding shares of Corillian’s common stock on the record date represented in person or by proxy will constitute a quorum for purposes of the special meeting. A quorum is necessary to hold the special meeting. Abstentions and broker non-votes are counted as present for the purpose of determining whether a quorum is present.

 

Completion of the merger requires the approval of the merger agreement by the affirmative vote of the holders of a majority of Corillian’s common stock outstanding on the record date. Each outstanding share of Corillian’s common stock on the record date entitles the holder to one vote at the special meeting. Abstentions and broker non-votes will have the effect of votes against the approval of the merger agreement.

 

As of March 1, 2007, the current directors and executive officers of Corillian beneficially owned (excluding options), in the aggregate, 919,133 shares of Corillian’s common stock, representing approximately 2.03% of our outstanding common stock.

 

If you are a registered shareholder of record and submit a proxy by telephone or the Internet or by returning a signed proxy card by mail, your shares will be voted at the special meeting as you indicate on your proxy card or by such other method. If no instructions are indicated on your proxy card, your shares of Corillian’s common stock will be voted “FOR” the approval of the merger agreement and “FOR” any adjournment of the special meeting, if necessary or appropriate to solicit additional proxies.

 

If your shares are held in “street name” by your broker, you should instruct your broker how to vote your shares using the instructions provided by your broker. If you have not received such voting instructions or require further information regarding such voting instructions, contact your broker and your broker will give you directions on how to vote your shares. If you wish to vote in person by appearing at the special meeting, you must request a legal proxy from your broker. Shares of Corillian common stock held by persons attending the special meeting but not voting, or shares for which we have received proxies with respect to which holders have abstained from voting, will be considered abstentions. Abstentions and broker non-votes, if any, will be treated as shares that are present and entitled to vote at the special meeting for purposes of determining whether a quorum exists but will have the same effect as a vote “AGAINST” the approval of the merger agreement. A broker non-vote occurs on an item when a broker is not permitted to vote on that item without instructions from the beneficial owner of the shares and no instructions are given.

 

You may revoke your proxy at any time before the vote is taken at the special meeting. To revoke your proxy, you must either (a) file with or transmit to our Corporate Secretary at our principal executive offices an instrument

or transmission of revocation, (b) submit a proxy by telephone, the Internet or mail dated after the date of the proxy you wish to revoke or (c) attend the special meeting and vote your shares in person. Attendance at the special meeting will not by itself constitute revocation of a proxy.

 

Please note that if you have instructed your broker to vote your shares, the methods for revoking your proxy described in the paragraph above do not apply and instead you must follow the directions provided by your broker to change these instructions.

 

We do not expect that any matter other than the approval of the merger agreement (and to approve the adjournment of the meeting, if necessary or appropriate to solicit additional proxies) will be brought before the special meeting. If, however, any such other matter is properly presented at the special meeting or any adjournment of the special meeting, the persons appointed as proxies will have discretionary authority to vote the shares represented by duly executed proxies in accordance with their discretion and judgment.

 

Registered shareholders and many shareholders who hold their shares through a broker or bank will have the option to submit their proxies or voting instructions via the Internet or by telephone. There are separate arrangements for using the telephone and the Internet to submit your proxy depending on whether you are a registered shareholder or your shares are held in “street name” by your broker. In addition to submitting the enclosed proxy card by mail, registered Corillian shareholders may submit their proxies by telephone using the toll-free number listed on the enclosed proxy card, or by Internet at the address provided on the enclosed proxy card. If your shares are held in “street name,” you should check the voting instruction card provided by your broker to see which options are available and the procedures to be followed.

 

Although it is not currently expected, the special meeting may be adjourned for the purpose of soliciting additional proxies. Any adjournment may be made without notice by announcement at the special meeting of the new date, time and place of the special meeting. At the adjourned meeting, we may transact any business that might have been transacted at the original special meeting. If the adjournment is for more than 120 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each registered shareholder entitled to vote at the special meeting. Whether or not a quorum exists, holders of a majority of the shares of Corillian’s common stock present in person or represented by proxy and entitled to vote at the special meeting may adjourn the special meeting. Any signed proxies received by us in which no voting instructions are provided on such matter will be voted in favor of an adjournment in these circumstances. Because a majority of the votes represented at the meeting, whether or not a quorum exists, is required to approve the proposal to adjourn the meeting, abstentions and broker non-votes will have the same effect on such proposal as a vote against the proposal. Any adjournment of the special meeting for the purpose of soliciting additional proxies will allow our shareholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting as adjourned.

 

This solicitation is made by Corillian, and we will pay the cost of this proxy solicitation. In addition to soliciting proxies by mail, our directors, officers and employees may solicit proxies personally and by telephone, facsimile or other electronic means of communication. These persons will not receive additional or special compensation for such solicitation services. We will, upon request, reimburse brokers, banks and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners and obtaining their voting instructions. We have retained Mellon Investor Services LLC to assist it in the solicitation of proxies for the special meeting and will pay them a fee of approximately $8,500 plus reimbursement of out-of-pocket expenses.

 

As part of its ongoing evaluation of Corillian’s business and strategic direction, our board of directors has evaluated from time to time Corillian’s strategic alternatives and prospects. Corillian has, from time to time, had unsolicited inquires related to an acquisition of the company. After several such discussions at the BAI Retail Delivery Conference in November 2005, Corillian’s board of directors decided to further explore opportunities for strategic alternatives. As part of that process, Corillian’s board of directors, on March 10, 2006, engaged FT Partners as its exclusive financial advisor to assist in the evaluation of strategic alternatives, including the sale of Corillian.

 

At Corillian’s request, FT Partners began to contact potential acquirers in the spring of 2006. Participants in discussions with FT Partners and Corillian’s management were required to enter into a confidentiality agreement with Corillian containing customary confidentiality and, in some cases, “standstill” provisions that, among other things, limited the ability of such participants and their representatives to acquire Corillian common stock, make acquisition proposals with respect to Corillian or participate in a proxy solicitation regarding Corillian without the consent of Corillian’s board of directors.

 

Corillian entered into confidentiality agreements with approximately 28 parties throughout the spring and summer of 2006. Of these, approximately 8 participants entered into a confidentiality agreement and received a written management presentation. Corillian’s management met or had telephone conversations with approximately 7 of these parties to further the discussions.

 

On September 7, 2006, FT Partners met with Corillian’s board to provide an update of the process. Corillian had received one proposal for the purchase of the company. Corillian’s board of directors discussed the proposal, its financial terms, alternatives to a sale of the company and the board’s duty to ensure it maximizes the value of any strategic opportunity for Corillian’s shareholders. The board directed FT Partners to continue discussions with the party that submitted the proposal and other interested parties, as well as identify additional potential acquirors. In addition, the board discussed Corillian’s business plan and other strategic alternatives.

 

On November 3, 2006, Corillian’s board of directors met to discuss the company’s strategic alternatives and 2007 operating plan.

 

From November 14th to 16th, 2006, Alex P. Hart, Corillian’s President and Chief Executive Officer attended the 2006 BAI Retail Delivery Conference. Mr. Hart met with a representative of CheckFree at the conference. CheckFree had not been participating in Corillian’s review of strategic alternatives during the preceding months, but expressed interest in being involved.

 

On November 27, 2006, at the request of Corillian, FT Partners notified interested parties to submit by December 7, 2006, non-binding indications of interest with respect to a potential transaction with Corillian.

 

On December 7, 2006, a representative of CheckFree called Mr. Hart to discuss strategic options between CheckFree and Corillian. Mr. Hart informed CheckFree that at least two other companies had expressed serious interest in acquiring Corillian.

 

On December 8, 2006, at Corillian’s request, FT Partners contacted CheckFree, and CheckFree entered into a confidentiality agreement with Corillian. Mr. Hart held another telephone conference with CheckFree to continue the conversation from the previous day.

 

On December 8, 2006, FT Partners met with Corillian’s board to provide an update of the process. FT Partners reviewed the indications of interest received from parties that had been involved in the process to this point, summarized the communications with all parties, and identified parties who had not been actively involved in the process. FT Partners also updated the board with respect to the recent communications with CheckFree. FT Partners reviewed other strategic alternatives, including the status of the other bidders and the prospects of not selling the company, and Corillian’s legal advisors also reviewed the board’s fiduciary duties in considering and reviewing strategic alternatives. The board also discussed Corillian’s financial plan and prospects for 2007 and beyond, including competitive concerns and market risks over the next two years, and the risks, challenges and benefits of remaining an independent company.

On December 13th and 14th, representatives of CheckFree visited Corillian’s headquarters in Hillsboro, Oregon to conduct due diligence on Corillian and meet with management. FT Partners and Corillian’s management also continued to meet with and hold discussions with other interested parties during December 2006.

 

On December 14, 2006, FT Partners met with Corillian’s board to review communications with parties who had submitted an indication of interest, as well as with parties who expressed interest but had not yet submitted a preliminary proposal. Mr. Hart reported on his discussions with CheckFree. The board determined that there was sufficient interest to proceed with three of the parties with whom Corillian had been in contact regarding a strategic transaction. The board directed FT Partners to invite the three parties to conduct a more detailed due diligence review and to present them with a draft merger agreement prepared by Perkins Coie LLP, Corillian’s outside legal counsel.

 

On December 22, 2006, FT Partners held a telephone conference with Corillian’s board to provide an update of the process. FT Partners outlined the timeline and status for each of the parties that expressed an interest in making a bid. The board and FT Partners also discussed market conditions and independent valuation scenarios.

 

On December 26, 2006, at Corillian’s request, FT Partners invited the three parties who had submitted preliminary indications of interest to conduct more detailed due diligence through access to an online data room containing customary due diligence materials concerning Corillian and its subsidiaries. FT Partners also provided instructions to the three parties to submit by January 22, 2007, definitive proposals for a transaction with Corillian. The parties were told that Corillian had requested that their definitive proposals should represent their best and final offers. Participants were also given a form of merger agreement, prepared by Perkins Coie, and instructed to submit comments on the draft by January 16, 2007, in advance of the deadline for definitive proposals.

 

Corillian’s board met on January 10, 2007 to discuss the strategic alternatives process. FT Partners reviewed the status of communications with potential acquirors, and the board reviewed Corillian’s historical financial and stock price performance and future prospects. Following the board meeting, at the board’s request, FT Partners informed the interested parties that the deadline for definitive proposals had been extended to January 31, 2007.

 

Between January 16 and January 31, 2007, Corillian’s financial and legal advisors contacted three parties that had submitted comments to the draft merger agreement to provide feedback on significant contractual issues and encourage such parties to provide revised mark ups with the submission of their definitive proposals.

 

On January 31, 2007, two parties, including CheckFree, submitted definitive proposals for the acquisition of 100% of Corillian’s outstanding common stock. The third party did not submit a bid and stated that it determined it was not confident it would be competitive given their understanding of the Board’s expectations and other buyers’ likely competitiveness, but expressed interest in continuing in the process if Corillian was unsuccessful in consummating a transaction at higher prices.

 

On February 3, 2007, Corillian’s board of directors met to discuss the proposals. With the assistance of Corillian’s legal and financial advisors, the board reviewed the definitive proposals and indications of interest received in connection with the January 31, 2007, deadline from participants in the process. Perkins Coie reviewed with the board the legal issues presented by the proposed merger agreement terms of both parties. The board of directors considered, among other things, the potential value presented by the definitive proposals and indications of interest received from other interested parties in the process, the synergies of the companies and the likelihood of consummating a transaction.

 

The board discussed with Corillian’s financial and legal advisors the various analyses and other matters that had been presented to them and deliberated the alternatives available to Corillian. The board of directors determined, subject to final board approval, that it would be in the best interests of Corillian and its shareholders for Corillian to accept CheckFree’s proposal, provided that the price per share were higher than in the January 31, 2007, proposal and that certain legal issues in the merger agreement could be resolved. If these contingencies were resolved in Corillian’s favor, the board concluded that it would be in the best interests of Corillian and its shareholders for Corillian to seek to enter into a definitive merger agreement with CheckFree for the acquisition by CheckFree of all of Corillian’s common stock. The board then directed FT Partners to negotiate the price per share with CheckFree and Perkins Coie and management to attempt to negotiate a definitive agreement with CheckFree on terms that would be satisfactory to the board of directors.

On February 7, 2007, Corillian and CheckFree signed an exclusivity agreement, which also revised CheckFree’s proposal to provide for an increase in the price at which CheckFree proposed to acquire all of Corillian’s common stock to a price of $5.15 per share. The exclusivity agreement expired on the earliest of February 14, 2007, CheckFree significantly changing the terms of its offer or February 9, 2007 if CheckFree’s board had not approved the transaction by then.

 

From February 4, 2007 through February 13, 2007, Corillian’s management and Perkins Coie, on the one hand, and CheckFree’s management and its legal advisors, on the other hand, negotiated the terms of a definitive merger agreement.

 

After the close of business on February 13, 2007, upon completion of due diligence, the board of directors met to review all of the terms of the transaction and to receive a report from Perkins Coie on the legal aspects of the transaction. Representatives of FT Partners then presented its financial analyses with respect to the proposed merger transaction with CheckFree. Following this presentation, FT Partners delivered its oral opinion, subsequently confirmed in writing, to the effect that, based upon and subject to certain assumptions made, matters considered and limitations set forth in its opinion, the offer by CheckFree of $5.15 per share in cash to be received by holders of Corillian common stock pursuant to the merger agreement was fair, from a financial point of view, to the holders of Corillian common stock, other than CheckFree, Merger Sub, any affiliate of CheckFree or Merger Sub, or holders of dissenting shares, if applicable. See “The Merger — Opinion of our Financial Advisor” beginning on page 20. Corillian’s board then unanimously approved the merger, the merger agreement and the transactions contemplated thereby and recommended that Corillian’s shareholders approve the merger agreement.

 

Later on February 13, 2007, the merger agreement was executed by Corillian, CheckFree and Merger Sub. On February 14, 2007, prior to the opening of the U.S. financial markets, Corillian and CheckFree issued a joint press release announcing the merger.

 

In reaching its decision to approve the merger, approve and adopt the merger agreement and recommend the approval of the merger agreement by our shareholders, our board of directors consulted with management and its financial and legal advisors. The board of directors considered the following material factors and potential benefits of the merger, each of which it believed supported its decision:

 

 

 

 

 

The board of directors also considered and balanced against the potential benefits of the merger the following potentially adverse factors concerning the merger:

 

 

After taking into account all of the factors set forth above, as well as others, the board of directors agreed that the benefits of the merger outweighed the risks and that the merger agreement and the merger are advisable and in the best interests of Corillian and its shareholders. The board of directors did not assign relative weights to the factors considered by it. In addition, the board of directors did not reach any specific conclusion on each factor considered, but conducted an overall analysis of these factors. Individual members of the board of directors may have given different weights to different factors.

 

After careful consideration, our board of directors has unanimously:

 

 

Pursuant to a letter agreement dated March 10, 2006, our board of directors engaged FT Partners to act as our financial advisor. Our board selected FT Partners based on its experience, expertise and reputation. FT Partners provides investment banking services, including merger and acquisition advisory services, to companies. In this capacity, FT Partners is continually engaged in valuing such businesses, and FT Partners maintains an extensive database of mergers and acquisitions transactions for comparative purposes. For the purposes of this description of the FT Partners’ opinion, “Shareholders” means all holders of our common stock other than shares owned by us as treasury stock and any shares owned by CheckFree, Merger Sub or any other direct or indirect wholly owned subsidiary of CheckFree or Corillian, or holders of dissenting shares, if applicable. At the meeting of our board of directors on February 13, 2007, FT Partners rendered its oral opinion, subsequently confirmed in writing, that, as of February 13, 2007, based upon and subject to certain assumptions and limitations described in the FT Partners opinion, the right to receive $5.15 per share in cash (the “merger consideration”), was fair, from a financial point of view, to the Shareholders.

 

FT Partners’ opinion, which describes the assumptions made, matters considered and limitations on the review undertaken by FT Partners, is attached as Annex B to this proxy statement. You are urged to, and should, read the FT Partners opinion carefully and in its entirety. FT Partners’ opinion was directed to our board of directors and addresses only the fairness from a financial point of view of the merger consideration to be received by the Shareholders. The FT Partners opinion does not address any other aspect of the transaction and does not constitute a recommendation to any of our shareholders or any other person as to how to vote or act with respect to the merger. The summary of the FT Partners opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion.

 

In connection with rendering its opinion, FT Partners, among other things:

 

 

 

In rendering its opinion, FT Partners relied, without independent verification, on the accuracy and completeness of all the financial and other information (including without limitation the representations and warranties contained in the merger agreement) that was publicly available or furnished to FT Partners by us or our advisors including, without limitation, our analysis that net present value on a per share basis of our net operating losses ranged from $0.41 to $0.45. With respect to the financial projections examined by FT Partners, FT Partners assumed, with our board of directors’ permission, that they were reasonably prepared and reflected the best available estimates and good faith judgments of our management as to our future performance. FT Partners further relied on the assurances of our management that they are unaware of any facts that would make the information or projections provided to FT Partners incomplete or misleading. FT Partners also assumed, with our board of directors’ permission, that in the course of obtaining the regulatory and third party approvals, consents and releases necessary for the consummation of the merger, no modification, delay, limitation, restriction or condition will be imposed that will have a material adverse effect on the merger and that the merger will be consummated in accordance with applicable laws and regulations and the terms of the merger agreement as set forth in the February 12, 2007, draft thereof, without waiver, amendment or modification of any material term, condition or agreement. FT Partners’ opinion did not address the relative merits of the merger as compared to other business strategies that might be available to us, nor did it address our underlying business decision to proceed with the merger. FT Partners did not make or take into account any independent appraisal or valuation of any of our assets or liabilities, contingent or otherwise, nor did FT Partners evaluate our solvency or fair value under any state or federal laws relating to bankruptcy, insolvency or similar matters. FT Partners expressed no view as to the federal, state or local tax consequences of the merger.

 

For purposes of its opinion, FT Partners assumed that Corillian was not involved in any material transaction other than the merger, other publicly announced transactions and those activities undertaken in the ordinary course of conducting its business. FT Partners’ opinion was necessarily based upon market, economic, financial and other conditions as they existed on the date of its opinion and could be evaluated as of the date of its opinion. FT Partners noted that, although subsequent developments may affect its opinion, FT Partners has no obligation to update, revise or reaffirm its opinion.

 

The following is a brief summary of the material sources of information and valuation methodologies employed by FT Partners in rendering its opinion. These analyses were presented to our board of directors at its meeting on February 13, 2007. This summary includes the financial analyses used by FT Partners and deemed by it to be material, but does not purport to be a complete description of the analyses performed by FT Partners in arriving at its opinion. Except as otherwise expressly noted below, FT Partners did not explicitly assign any relative weights to the various factors and analyses considered. This summary of financial analyses includes information presented in tabular format. In order to fully understand the financial analyses used by FT Partners, the tables must be read together with the text of each corresponding summary. The tables alone do not constitute a complete description of the financial analyses performed.

Corillian Stock Performance Analysis

 

FT Partners reviewed the historical trading performance of our shares. FT Partners observed that the 52-week high closing price for our shares over the twelve-month period ending on February 12, 2007, was $4.05, and that the closing price for our shares on February 12, 2007, was $3.40. FT Partners compared these share prices to the value of the merger consideration to be received by holders of our shares of common stock, $5.15 per share.

 

Equity Research Analyst Stock Price Targets

 

FT Partners reviewed three recent publicly available equity research analyst reports covering us and observed that the range of the research analysts’ twelve-month share price targets was $4.00 to $5.00. FT Partners compared this range to the value of the merger consideration to be received by holders of our shares of common stock, $5.15 per share.

 

Public Company Comparables Analysis

 

Using publicly available equity research analyst estimates and other information, FT Partners compared selected financial data of Corillian with similar data for selected publicly traded companies engaged in businesses that FT Partners judged to be reasonably comparable to our businesses. These companies were:

 

 

 

 

For each of the comparable companies, FT Partners determined various valuation multiples, including the ratio of closing price on February 12, 2007, to earnings per share (“EPS”), enterprise value (“EV”) to earnings before interest, taxes, depreciation and amortization (“EBITDA”), and EV to revenue. To calculate these trading multiples, FT Partners used information for the comparable companies that was available in publicly available SEC filings, select public equity research reports and other publicly available data. Based upon its analysis of the full ranges of multiples calculated for the companies identified above and its consideration of various factors and judgments about current market conditions and the characteristics of such companies, FT Partners determined relevant ranges of multiples for such companies. The following table summarizes the derived median multiple, and the share price for Corillian common stock implied by such median multiple:

 

 

FT Partners observed that the $5.15 per share value of the merger consideration to be received by holders of our common stock was above the per share value implied by the median multiples for the comparable companies.

It should be noted that no company used in the above analysis is identical to us. In evaluating companies identified by FT Partners as comparable to us, FT Partners made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond our control, such as the impact of competition on our business and the industry generally, industry growth and the absence of any material change in our financial condition and prospects or the industry or in the financial markets in general. A complete analysis involves complex considerations and judgments concerning differences in financial and operating characteristics of the comparable companies and other factors that could affect the public trading values of such comparable companies to which they are being compared; mathematical analysis (such as determining the mean or median) is not in itself a meaningful method of using selected company data.

 

Comparable Transactions Analysis

 

Using FactSet Mergerstat and publicly available information, FT Partners examined the following transactions that FT Partners deemed to be relevant to determine the multiple of the value of such transactions at the time of announcement to estimates at the time of announcement of the last twelve month (“LTM”) revenues and LTM EBITDA for the target companies. FactSet Mergerstat, LLC provides an online investment research and database service that tracks global mergers and acquisitions involving business entities excluding the exchange of business assets, private placements, spin-offs, and open-market transactions. The FactSet service is used by many financial institutions. The precedent transactions that FT Partners considered were:

 

All calculations of multiples paid in the selected transactions were based on FactSet Mergerstat and public information available at the time of public announcement. FT Partners’ analysis did not take into account different market and other conditions during the period in which the selected transactions occurred. Based upon its analysis of the full ranges of multiples calculated for the transactions identified above and its consideration of various factors and judgments about current market conditions and the characteristics of such transactions and the companies involved in such transactions (including qualitative factors and judgments involving non-mathematical considerations), FT Partners determined relevant ranges of multiples for such transactions. The following table summarizes the derived relevant ranges of multiples and the ranges of our share prices implied by such multiples:

 

 

FT Partners observed that the $5.15 per share value of the merger consideration to be received by holders of Corillian common stock was above the per share value implied by the median multiples for the comparable transactions.

 

It should be noted that no transaction utilized in the analysis above is identical to the proposed merger. A complete analysis involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved in these transactions and other factors that could affect the transaction multiples or premiums paid in such comparable transactions to which the transaction is being compared; mathematical analysis (such as determining the mean or the median) is not in itself a meaningful method of using selected transaction data.

 

Transaction Premiums Paid Analysis

 

FT Partners reviewed premiums to stock price paid in recent acquisitions that it judged to be reasonably applicable to the merger. These transactions included:

 

FT Partners reviewed the premiums paid in these transactions over the average price of the target stock as reported by FactSet one trading day prior, five trading days prior and thirty trading days prior to announcement of such transactions. Based upon its analysis of the full ranges of multiples calculated for the transactions identified above and its consideration of various factors and judgments about current market conditions, the characteristics of such transactions and the companies involved in such transactions (including qualitative factors and judgments involving non-mathematical considerations), FT Partners determined relevant ranges of multiples for such transactions. The following table summarizes the median premium and the range of premiums (discounts) for these transactions:

 

 

The implied values of our common stock, calculated by using the median premiums shown above, were $4.01, $3.90 and $4.63, respectively, and the premiums (discounts) that these implied values represent relative to the $5.15 per share value of the merger consideration to be received by holders of Corillian common stock were (22.1)%, (24.2)% and (10.0)%, respectively.

 

FT Partners also reviewed premiums to stock price paid in acquisitions where the targets were business services or prepackaged software companies. These transactions included:

 

FT Partners reviewed the premiums paid in these transactions over the average price of the target stock as reported by FactSet one trading day prior, five trading days prior and thirty trading days prior to announcement of such transactions. Based upon its analysis of the full ranges of multiples calculated for the transactions identified above and its consideration of various factors and judgments about current market conditions and the characteristics of such transactions and the companies involved in such transactions (including qualitative factors and judgments involving non-mathematical considerations), FT Partners determined relevant ranges of multiples for such transactions. The following table summarizes the median premium and the range of premiums (discounts) for these transactions:

 

 

The implied values of our common stock, calculated by using the median premiums shown above, were $4.11, $4.13 and $4.74, respectively, and the premiums (discounts) that these implied values represent relative to the $5.15 per share value of the merger consideration to be received by holders of Corillian common stock were (20.1)%, (19.8)% and (7.9)%, respectively.

 

Discounted Cash Flow Valuation

 

FT Partners derived a range of equity values for our common stock based upon the discounted present value of our after-tax cash flows from financial forecasts for the fiscal years ended December 31, 2007 through December 31, 2010, and the terminal value of Corillian at December 31, 2010, using the following three methods:

 

 

FT Partners utilized discount rates ranging from 15% to 25% based on sensitivities to the capital asset pricing model. FT Partners utilized revenue growth rates for 2008 — 2010 of 5%, 10% and 15%, respectively, and EBITDA margins for 2008 — 2010 of 14%, 18% and 22%, respectively.

 

All projected data for the fiscal year ended December 31, 2007, were prepared and furnished by our management. Projected data for fiscal years ended 2008 through 2010 was prepared by FT Partners based upon assumptions derived from the fiscal year ended 2007 and guidance provided by us. All assumptions were reviewed by our management, who agreed they were reasonable in light of our historical operations and forecasted financial performance. FT Partners did not include the net present value of our net operating losses that we determined ranged from $0.41 to $0.45 on a per share basis.

 

This analysis resulted in a range of implied equity values per share for our common stock of $1.45 to $5.18.

 

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. In arriving at its opinion, FT Partners considered the results of all of its analyses as a whole and, except as expressly noted above, did not attribute any particular weight to any analysis or factor considered by it. Furthermore, FT Partners believes that selecting any portion of its analysis, without considering all analyses, would create an incomplete view of the process underlying its opinion.

 

In performing its analyses, FT Partners made numerous assumptions with respect to industry performance and general business and economic conditions and other matters, many of which are beyond our control. The analyses

performed by FT Partners are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than suggested by such analyses. FT Partners made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all such analyses. The foregoing summary does not purport to be a complete description of the analyses performed by FT Partners. Additionally, analyses relating to the value of businesses or securities are not appraisals. Accordingly, such analyses and estimates are inherently subject to substantial uncertainty. The merger consideration and other terms of the merger agreement were determined through negotiations between Corillian and CheckFree, and were approved by our board of directors subsequent to the determinations and recommendation of our board of directors. FT Partners did not recommend any specific consideration to our board of directors or that any specific consideration constituted the only appropriate consideration with respect to the merger agreement and the transactions contemplated thereby, including the merger. In addition, FT Partners’ opinion and presentation to our board of directors was one of many factors taken into consideration by our board of directors in making its decision to approve and adopt the merger agreement and approve the transactions contemplated thereby, including the merger. Consequently, the FT Partners analyses as described above should not be viewed as determinative of the opinion of our board of directors with respect to the value of Corillian or whether our board of directors would have been willing to agree to different consideration.

 

Based upon and subject to the foregoing qualifications and limitations and those set forth below, FT Partners was of the opinion that, as of February 13, 2007, the right to receive $5.15 per share in cash was fair, from a financial point of view, to the Shareholders.

 

FT Partners acted as financial advisor to our board of directors, was entitled to receive a customary fee from us upon delivery of its opinion and will receive an additional customary fee upon the successful conclusion of the merger. In addition, we have agreed to indemnify FT Partners and its affiliates and related parties in connection with its engagement, including liabilities under the federal securities laws, and to reimburse certain of their expenses. FT Partners was not requested to provide, or to identify potential sources of, financing to us or to explore strategic alternatives other than a sale of Corillian. Except as set forth in the preceding sentence, no limitations were imposed on FT Partners by our board of directors with respect to the investigations made or procedures followed by FT Partners in rendering its opinion. In the ordinary course of its business, FT Partners and its affiliates may publish research reports regarding the securities of Corillian or CheckFree or their respective affiliates, may trade or hold such securities for their own accounts and for the accounts of their customers and, accordingly, may at any time hold long or short positions in those securities.

 

In the event that the merger agreement is not approved by our shareholders or if the merger is not completed for any other reason, shareholders will not receive any payment for their shares in connection with the merger. Instead, Corillian will remain an independent public company and our common stock will continue to be listed and traded on Nasdaq. In addition, if the merger is not completed, we expect that our management will continue to operate the business and that our shareholders will continue to be subject to risks and opportunities that are similar to those to which they are currently subject, including, among other things, risks identified under “Special Note Regarding Forward-Looking Information” above. Accordingly, if the merger is not consummated, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares. If the merger agreement is not approved by our shareholders or if the merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to us will be offered or that our business, prospects or results of operations will not be adversely impacted. If the merger agreement is terminated under certain circumstances, we will be obligated to pay CheckFree a termination fee of $5.5 million. See “The Merger Agreement — Termination.”

 

In considering the recommendation of our board of directors with respect to the merger, you should be aware that some of our directors and executive officers have interests in the merger that are different from, or in addition to, the interests of our shareholders generally. These interests may present them with actual or potential conflicts of interest, and these interests, to the extent material, are described below. Our board of directors was aware of these

interests and considered them, among other matters, in approving the merger and approving and adopting the merger agreement.

 

Stock Options

 

As of March 1, 2007, our current executive officers and directors held 2,882,675 shares of our common stock subject to outstanding stock options with an exercise price of less than $5.15 per share, which options were granted under our Amended and Restated 1997 Stock Option Plan, Amended and Restated 2000 Stock Incentive Compensation Plan and 2003 Nonqualified Stock Incentive Compensation Plan (collectively referred to as the “Company Stock Plans”). Each outstanding stock option that remains outstanding at the effective time of the merger, including those held by our executive officers and directors, will become fully vested and exercisable, and will then terminate and thereafter represent the right to receive a cash payment, without interest and less applicable tax withholding, equal to the product of the number of shares of our common stock subject to the option as of the effective time of the merger, multiplied by the excess, if any, of $5.15 over the exercise price per share of common stock subject to such option.

 

Following is a table which sets forth, as of March 1, 2007, the number of outstanding options with exercise prices of less than $5.15 per share held by our executive officers and directors of the Company who have served as such at any time since January 1, 2006, the beginning of our last fiscal year, the weighted average exercise prices of such options, and the consideration that each such option holder will be entitled to receive pursuant to the merger agreement in connection with such options (not taking into account any applicable tax withholding).

 

 

Severance Arrangements

 

Each of our current executive officers has a change of control agreement with us that will remain in effect after the completion of the merger, each of which contain specific change of control severance payment provisions. Under these provisions, if the officer’s employment is terminated under certain circumstances following a change of control (such as the merger), the officer will be entitled to receive a lump sum severance payment as set forth in the officer’s employment agreement. Following is a table showing the amount of this severance payment for each of our executive officers.

 

Indemnification and Insurance

 

Without limiting any additional rights that any officer or director may have under any written indemnification agreement, the merger agreement provides that CheckFree and the surviving corporation will indemnify and hold harmless each person who was a director or officer of Corillian or any of our subsidiaries at any time prior to the effective time of the merger, against all losses, claims, damages, costs and expenses (including reasonable attorneys’ fees and expenses), liabilities, amounts paid in settlement or judgments incurred in connection with any claim arising out of or pertaining to the fact that he or she is or was an officer or director of Corillian or any of our subsidiaries. In this regard, Corillian, and after the merger, CheckFree and the surviving corporation, will also be required to advance expenses as incurred to an indemnified officer or director to the fullest extent permitted by law.

 

The merger agreement also provides that the indemnification or advancement of expenses provisions in our charter and bylaws and indemnification agreements will continue in force and effect.

 

In addition, the merger agreement provides that prior to the effective time of the merger, CheckFree will cause to be maintained our existing directors and officers insurance policy for a period of six years from the effective time of the merger or, at our option, we may obtain, prior to the effective time of the merger, a six-year run-off program for our existing directors and officers insurance policy.

 

The following is a general discussion of the material U.S. federal income tax consequences of the merger to holders of our common stock. We base this summary on the provisions of the Code, applicable current and proposed U.S. Treasury Regulations, judicial authority, and administrative rulings and practice, all of which are subject to change, possibly on a retroactive basis.

 

For purposes of this discussion, we use the term “U.S. holder” to mean:

 

 

A “non-U.S. holder” is a person (other than an entity taxed as a partnership for federal income tax purposes) that is not a U.S. holder.

 

This discussion assumes that a holder holds the shares of our common stock as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all aspects of U.S. federal income tax law that may be relevant to a holder in light of its particular circumstances, or that may apply to a holder that is subject to special treatment under the U.S. federal income tax laws (including, for example, insurance companies, dealers in securities or foreign currencies, traders in securities who elect the mark-to-market method of accounting for their securities, shareholders subject to the alternative minimum tax, persons that have a functional currency other than the U.S. dollar, tax-exempt organizations, regulated investment companies, real estate investment trusts, financial institutions, mutual funds, entities treated as partnerships or other pass through entities for U.S. federal income tax purposes, controlled foreign corporations, passive foreign investment companies, certain expatriates, corporations that accumulate earnings to avoid U.S. federal income tax, corporations subject to anti- inversion rules, shareholders who hold shares of our common stock as part of a hedge, straddle, constructive sale or conversion transaction, or shareholders who acquired their shares of our common stock through the exercise of employee stock options or other compensation arrangements). In addition, the discussion does not address any tax considerations under state, local or foreign laws or U.S. federal laws other than those pertaining to the U.S. federal income tax that may apply to holders. Holders are urged to consult their own

tax advisors to determine the particular tax consequences, including the application and effect of any state, local or foreign income and other tax laws, of the receipt of cash in exchange for our common stock pursuant to the merger.

 

If a partnership (including any entity treated as a partnership for U.S. federal income tax purposes) holds our common stock, the tax treatment of a partner will generally depend on the status of the partners and the activities of the partnership. If you are a partner of a partnership holding our common stock, you should consult your tax advisors.

 

U.S. Holders

 

The receipt of cash in the merger by U.S. holders of our common stock will be a taxable transaction for U.S. federal income tax purposes. In general, for U.S. federal income tax purposes, a U.S. holder of our common stock will recognize gain or loss equal to the difference between:

 

 

If the holding period in our common stock surrendered in the merger is greater than one year as of the date of the merger, the gain or loss will be long-term capital gain or loss. The deductibility of a capital loss recognized on the exchange is subject to limitations under the Code. If a U.S. holder acquired different blocks of our common stock at different times and different prices, such holder must determine its adjusted tax basis and holding period separately with respect to each block of our common stock.

 

Under the Code, a U.S. holder of our common stock may be subject, under certain circumstances, to information reporting on the cash received in the merger unless such U.S. holder is a corporation or other exempt recipient. Backup withholding will also apply (currently at a rate of 28%) with respect to the amount of cash received, unless a U.S. holder provides proof of an applicable exemption or a correct taxpayer identification number, and otherwise complies with the applicable requirements of the backup withholding rules. Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be refunded or credited against a U.S. holder’s U.S. federal income tax liability, if any, provided that such U.S. holder furnishes the required information to the Internal Revenue Service in a timely manner.

 

Non-U.S. Holders

 

Any gain realized on the receipt of cash in the merger by a non-U.S. holder generally will not be subject to U.S. federal income tax unless:

 

 

An individual non-U.S. holder described in the first bullet point immediately above will be subject to tax on the net gain derived from the merger under regular graduated U.S. federal income tax rates. If a non-U.S. holder that is a foreign corporation falls under the first bullet point immediately above, it will be subject to tax on its net gain in the same manner as if it were a United States person as defined under the Code and, in addition, may be subject to the branch profits tax equal to 30% of its effectively connected earnings and profits (reduced by any increase in its investment in its U.S. business) or at such lower rate as may be specified by an applicable income tax treaty. An individual non-U.S. holder described in the second bullet point immediately above will be subject to a flat 30% tax

on the gain derived from the merger, which may be offset by U.S. source capital losses, even though the individual is not considered a resident of the United States.

 

We believe we are not, have not been and do not anticipate becoming a “United States real property holding corporation” for U.S. federal income tax purposes.

 

Information reporting and, under certain circumstances, backup withholding (currently at a rate of 28%) will apply to the cash received in the merger, unless the beneficial owner certifies under penalty of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that the beneficial owner is a U.S. person as defined under the Code) or such owner otherwise establishes an exemption. Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be refunded or credited against a non-U.S. holder’s U.S. federal income tax liability, if any, provided that such non-U.S. holder furnishes the required information to the Internal Revenue Service in a timely manner.

 

Except for the filing of articles of merger in Oregon at or before the effective date of the merger, and for the pre-merger notification filing required by the HSR Act, we are unaware of any material federal, state or foreign regulatory requirements or approvals required for the execution of the merger agreement or completion of the merger. Certain transactions such as the merger are reviewed by the Antitrust Division of the Department of Justice (the “Antitrust Division”) or the Federal Trade Commission (the “FTC”) to determine whether such transactions comply with applicable antitrust laws. Under the provisions of the HSR Act, the merger may not be consummated until certain information has been furnished to the Antitrust Division and the FTC and a 30-day waiting period, subject to possible extension by the Antitrust Division or the FTC, has been satisfied. The expiration or early termination of the HSR Act waiting period would not preclude the Antitrust Division or the FTC from challenging the merger on antitrust grounds. Neither Corillian nor CheckFree believes that the merger will violate federal antitrust laws. If the merger is not consummated within 12 months after the expiration or early termination of the initial HSR Act waiting period, Corillian and CheckFree would be required to submit new information to the Antitrust Division and the FTC and a new HSR Act waiting period would have to expire or be earlier terminated before the merger could be consummated.

 

We expect that the merger will be accounted for by CheckFree using the purchase method of accounting, in accordance with generally accepted accounting principles.

 

The description of the merger agreement in this proxy statement does not purport to be complete and is qualified in its entirety by reference to the full text of the merger agreement, which is attached as Annex A. The merger agreement is included to provide investors and security holders with information regarding its terms. It is not intended to provide any other factual information about Corillian or the other parties thereto. In particular, the assertions embodied in Corillian’s representations and warranties contained in the merger agreement are qualified by information in the disclosure schedule provided by Corillian to CheckFree in connection with the signing of the merger agreement. This disclosure schedule contains information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the merger agreement. Moreover, certain representations and warranties in the merger agreement were used for the purpose of allocating risk between Corillian and CheckFree rather than establishing matters as facts. Accordingly, investors and securityholders should not rely on the representations and warranties in the merger agreement as characterizations of the actual state of facts about Corillian or CheckFree.

 

The effective time of the merger will occur at the time that we file articles of merger with the Secretary of State of the State of Oregon (or such later time as provided in the articles of merger).

 

At the effective time of the merger, Merger Sub will merge with and into Corillian. Corillian will survive the merger and continue to exist after the merger as a wholly owned subsidiary of CheckFree. All of Corillian’s and Merger Sub’s properties (including real, personal and mixed properties), rights, privileges, powers and franchises (both public and private), and all of their debts, liabilities, obligations, restrictions, disabilities and duties, will become those of the surviving corporation.

 

Corillian Common Stock

 

At the effective time of the merger, each share of our common stock issued and outstanding immediately prior to the effective time of the merger will automatically be canceled and will cease to exist and will be converted into the right to receive $5.15 in cash, without interest, other than shares of Corillian common stock held in the treasury of Corillian or owned by CheckFree, Merger Sub or any wholly owned direct or indirect subsidiary of Corillian or CheckFree immediately prior to the effective time of the merger, which shares will be canceled without conversion or consideration.

 

After the effective time of the merger, each of our outstanding stock certificates or book-entry shares representing shares of common stock converted in the merger will represent only the right to receive the merger consideration without any interest. The merger consideration paid upon surrender of each certificate will be paid in full satisfaction of all rights pertaining to the shares of our common stock represented by that certificate or book-entry share.

 

Corillian Stock Options

 

All outstanding Corillian stock options will become fully vested and exercisable at the effective time of the merger and, as of the effective time of the merger, will then terminate and thereafter represent only the right to receive an amount in cash, without interest and less applicable tax withholding, equal to the product of:

 

 

No holder of an outstanding Company stock option that has an exercise price per share that is equal to or greater than $5.15 shall be entitled to any payment with respect to the terminated stock option before or after the effective time of the merger.

 

Prior to the effective time of the merger, CheckFree will deposit in trust an amount of cash sufficient to pay the merger consideration to each holder of shares of our common stock with [          ] or another entity (the “paying agent”). Promptly after the effective time of the merger, the paying agent will mail a letter of transmittal and instructions to each of our registered shareholders (each shareholder that holds stock in its own name as of the effective time of the merger). The letter of transmittal and instructions will tell such shareholders how to surrender their common stock certificates or shares they may hold represented by book entry in exchange for the merger consideration. If your shares are held in “street name” by your broker, you will not receive a letter of transmittal and will automatically receive the merger consideration in exchange for your shares of stock through your broker.

 

You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the paying agent without a letter of transmittal.

 

Registered shareholders will not be entitled to receive the merger consideration until they surrender their stock certificate or certificates (or book-entry shares) to the paying agent, together with a duly completed and executed letter of transmittal and any other documents as may be required by the letter of transmittal. The merger consideration may be paid to a person other than the person in whose name the corresponding certificate is registered if the certificate is properly endorsed or is otherwise in the proper form for transfer. In addition, the person who surrenders such certificate must either pay any transfer or other applicable taxes or establish to the satisfaction of the surviving corporation that such taxes have been paid or are not applicable.

 

No interest will be paid or will accrue on the cash payable upon surrender of the certificates (or book-entry shares). The paying agent will be entitled to deduct and withhold, and pay to the appropriate taxing authorities, any applicable taxes from the merger consideration. Any sum which is withheld and paid to a taxing authority by the paying agent will be deemed to have been paid to the person with regard to whom it is withheld.

 

At the effective time of the merger, our stock transfer books will be closed, and there will be no further registration of transfers of outstanding shares of our common stock. If, after the effective time of the merger, certificates are presented to the surviving corporation for transfer, they will be canceled and exchanged for the merger consideration.

 

None of the paying agent, CheckFree or the surviving corporation will be liable to any person for any cash delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. Any portion of the merger consideration deposited with the paying agent that remains undistributed to the holders of our common stock for one year after the effective time of the merger, will be delivered, upon demand, to the surviving corporation. Any portion of the merger consideration that remains unclaimed as of a date that is immediately prior to such time as such amounts would otherwise escheat to or become property of any governmental authority will, to the extent permitted by applicable law, become the property of the surviving corporation. Shareholders who have not received the merger consideration prior to the delivery of such funds to the surviving corporation may look only to the surviving corporation for the payment of the merger consideration.

 

If you have lost a certificate, or if it has been stolen or destroyed, then before you will be entitled to receive the merger consideration, you will have to make an affidavit of the fact, in a form reasonably satisfactory to CheckFree and the paying agent.

 

We make various representations and warranties in the merger agreement that are subject, in some cases, to specified exceptions and qualifications. Our representations and warranties relate to, among other things:

 

 

 

For the purposes of the merger agreement, a “material adverse effect” with respect to us means any material adverse change in, or material adverse effect on, our business, financial condition or continuing operations or of our subsidiaries, taken as a whole.

 

A “material adverse effect” will not have occurred, however, as a result of any event, circumstance, change or effect resulting from:

 

 

 

You should be aware that these representations and warranties are made by us to CheckFree and Merger Sub, may be subject to important limitations and qualifications set forth in the merger agreement and the disclosure schedules thereto and do not purport to be accurate as of the date of this proxy statement. See the introduction to this section, “Where You Can Find Additional Information.”

 

The merger agreement also contains various representations and warranties made by CheckFree and Merger Sub that are subject, in some cases, to specified exceptions and qualifications. The representations and warranties relate to, among other things:

 

 

The representations and warranties of each of the parties to the merger agreement will expire upon the effective time of the merger.

 

For the period between February 13, 2007 and the completion of the merger, we and our subsidiaries have agreed that we will, except as otherwise contemplated by the merger agreement:

 

 

Without the limitation of the foregoing, under the merger agreement we have agreed that we will not, except as otherwise contemplated by the merger agreement or unless CheckFree gives its prior written consent:

 

 

 

We have agreed that we, our subsidiaries and our respective directors, officers and employees will not, and we are required to direct our accountants, counsel, investment bankers and other representatives not to, directly or indirectly:

 

 

An acquisition proposal is:

 

 

Despite the foregoing restrictions, we are permitted to furnish information to, and enter into discussions with, a person who has made an unsolicited, written, bona fide proposal or offer regarding an acquisition proposal, so long as our board of directors has:

 

 

In either case, we must first have obtained from such person an executed confidentiality agreement on terms no less favorable to us than those contained in the confidentiality agreement executed in connection with the merger described in this proxy statement, and we must provide prompt notice to CheckFree of our intent to furnish information or enter into discussions with such person.

 

For purposes of the merger agreement, a “superior proposal” means an acquisition proposal that our board of directors determines, after consulting with its financial advisor to be more favorable from a financial point of view to our shareholders than the merger described in this proxy statement.

 

Additionally, under the merger agreement, we may not withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to CheckFree or Merger Sub, the approval or recommendation by our board of directors of the merger agreement or the merger (or approve or recommend, or propose publicly to approve or recommend any acquisition proposal). Despite the foregoing restrictions, if our board of directors determines, in its good faith judgment at any time prior to the approval of the merger by our shareholders after consulting with counsel that the failure to make a change in our board of directors recommendation to our shareholders of the merger may be inconsistent with its fiduciary duties, our board of directors may make a change in recommendation and/or recommend a superior proposal, provided that:

 

 

We also have agreed:

 

 

We have agreed to:

 

 

Each party to the merger agreement has agreed to (and to cause its affiliates and representatives to): (a) comply with the confidentiality agreement between us and CheckFree as if a party to that agreement and (b) hold in strict confidence all nonpublic documents and information furnished or made available by one party to the other(s) and their respective affiliates and representatives.

 

Under the merger agreement, we have agreed:

 

 

CheckFree has agreed that on and after the effective time of the merger, CheckFree will, and will cause the surviving corporation to, honor in accordance with their terms certain specified change of control and severance agreements and certain severance guidelines of Corillian for employees terminated within one year following the effective time. Also, following the closing of the merger, CheckFree has agreed to cause the surviving corporation to provide our employees and those of our subsidiaries who remain employed by CheckFree with employee benefits no less favorable than those maintained by CheckFree for similarly situated employees of CheckFree or its subsidiaries.

 

With respect to our employees and those of our subsidiaries who remain employed by CheckFree, the surviving corporation or their subsidiaries after the effective time of the merger, CheckFree will, and will cause the surviving corporation to, treat, and cause the applicable benefit plans to treat, those employees’ period of service to us and our subsidiaries before the effective time of the merger as service rendered to CheckFree or the surviving corporation for purposes of eligibility to participate, vesting and for other appropriate benefits. Each of these employees will be required to submit to a drug test and background check in accordance with CheckFree’s policies.

 

Conditions to Each Party’s Obligations to Effect the Merger

 

The obligations of the parties to complete the merger are subject to the satisfaction or waiver of the following mutual conditions:

 

 

Conditions to Obligations of CheckFree and Merger Sub

 

The obligations of CheckFree and Merger Sub to effect the merger are subject to the satisfaction or waiver of the following additional conditions:

 

 

Conditions to Obligations of the Company

 

Our obligation to effect the merger is subject to the satisfaction or waiver of the following additional conditions:

 

 

The completion of the merger is not subject to CheckFree securing financing to fund the payment of cash to our shareholders. Other than the conditions pertaining to our shareholder approval, the expiration or termination of the waiting period under the HSR Act and the absence of governmental orders, either we, on the one hand, or CheckFree and Merger Sub, on the other hand, may elect to waive conditions to their respective performance and complete the merger. None of Corillian, CheckFree or Merger Sub, however, has expressed to the other parties any intention to waive any condition as of the date of this proxy statement.

 

The merger agreement may be terminated and the merger may be abandoned at any time prior to the effective time of the merger:

 

 

 

 

 

 

 

 

We have agreed to pay CheckFree a fee of $5.5 million in cash if:

 

 

The merger agreement may be amended by the parties thereto at any time before or after approval of the merger agreement by our shareholders, but, after any such approval, no amendment will be made that would reduce the amount or change the type of consideration into which each share shall be converted upon consummation of the merger.

 

Until the effective time of the merger, the parties may, to the extent legally allowed:

 

 

Our common stock is quoted on Nasdaq under the symbol “CORI.” The following table sets forth the high and low sales prices per share of our common stock on Nasdaq for the periods indicated.

 

 

 

 

The closing sale price of our common stock on Nasdaq on February 13, 2007, which was the last trading day before we announced the merger, was $3.45 per share, compared to which the merger consideration represents a premium of 49%.

 

On          , 2007, the last trading day before the date of this proxy statement, the closing price for the Company’s common stock on Nasdaq was $[          ] per share. You are encouraged to obtain current market quotations for the Company’s common stock in connection with voting your shares.

 

As of          , 2007, there were [          ] holders of record of Corillian common stock.

 

We have never declared or paid cash dividends on our common stock. We intend to retain any future earnings for use in our business and do not intend to pay cash dividends in the foreseeable future. The payment of future dividends, if any, will be at the discretion of our board of directors and will depend, among other things, upon future earnings, operations, capital requirements, restrictions in financing agreements, our general financial condition and general business conditions. In addition, the payment of dividends is prohibited by the terms of the merger agreement, except with CheckFree’s prior written consent.

 

The following table and the notes thereto set forth certain information regarding the beneficial ownership of Corillian’s common stock as of March 1, 2007, by:

 

 

We have determined beneficial ownership in accordance with the rules of the SEC. The number of shares beneficially owned by a person includes shares of common stock of the Company that are subject to stock options that are either currently exercisable or exercisable within 60 days following March 1, 2007 (including all shares subject to stock options that will be exercisable at the effective time of the merger). These shares are also deemed outstanding for the purpose of computing the percentage of outstanding shares owned by the person. However, these shares are not deemed outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, to our knowledge, each shareholder has sole voting and dispositive power with respect to the securities beneficially owned by that shareholder, and no such securities have been pledged to a third party. Unless a footnote indicates otherwise, the address of each person listed below is c/o Corillian Corporation, 3400 NW John Olsen Place, Hillsboro, Oregon, 97124. As of March 1, 2007, there were 45,285,682 shares of Corillian common stock outstanding.

 

 

 

 

 

Under Oregon law, a shareholder of a class or series of shares that are registered on a national securities exchange or quoted on the National Association of Securities Dealers, Inc. Automated Quotation System as a National Market System on the record date of the meeting of shareholders at which the transaction is to be approved or on the date that a copy or summary of the plan of merger is mailed to the shareholders under Oregon law, do not have dissenters’ rights unless the company’s articles of incorporation otherwise provide for dissenters’ rights. Corillian’s common stock is traded on the Nasdaq Global Market and its Articles of Incorporation do not provide for dissenters’ rights. Therefore, holders of Corillian common stock will not be entitled to dissenters’ rights under Oregon law. For additional information on dissenters’ rights under Oregon law, please refer to ORS 60.554 and the other applicable provisions of the Oregon law attached as Annex C. You are encouraged to read these provisions in their entirety.

 

Corillian may ask its shareholders to vote on a proposal to adjourn the special meeting, if necessary or appropriate, in order to allow for the solicitation of additional proxies if there are insufficient votes at the time of the meeting to approve the merger agreement. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ADJOURNMENT PROPOSAL.

 

Corillian files annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any reports, proxy statements or other information that we file with the SEC at the following location of the SEC:

Public Reference Room

100 F Street, N.E.

Washington, D.C. 20549

 

Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. You may also obtain copies of this information by mail from the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates. Our public filings are also available to the public from document retrieval services and the Internet website maintained by the SEC at www.sec.gov.

 

Any person, including any beneficial owner, to whom this proxy statement is delivered may request copies of reports, proxy statements or other information concerning us, including any information incorporated into this proxy statement by reference, without charge, by written or telephonic request directed to us at Corillian Corporation, 3400 NW John Olsen Place, Hillsboro, Oregon, 97214, (503) 6289-3300, Attention: Corporate Secretary. If you would like to request documents, please do so by [          ], 2007, in order to receive them before the special meeting.

 

No persons have been authorized to give any information or to make any representations other than those contained in this proxy statement and, if given or made, such information or representations must not be relied upon as having been authorized by us or any other person. This proxy statement is dated [          ], 2007. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date, and the mailing of this proxy statement to shareholders shall not create any implication to the contrary.

 

If the merger is not completed, you will continue to be entitled to attend and participate in our shareholder meetings and we will hold a 2007 annual meeting of shareholders, in which case shareholder proposals will be eligible for consideration for inclusion in the proxy statement and form of proxy for our 2007 annual meeting of shareholders in accordance with Rule 14a-8 under the Exchange Act. To be eligible for inclusion in the proxy statement and form of proxy for the 2007 annual meeting pursuant to Rule 14a-8, proposals of shareholders must have been received by us no later than December 16, 2006 and must have complied with Rule 14a-8.

According to our bylaws, for business to be properly brought before the 2007 annual meeting of shareholders by a shareholder, the shareholder must have given timely notice thereof in writing to the Corporate Secretary. To be timely, a shareholder’s notice must be delivered to or mailed and received at our principal executive offices not less than 60 days nor more than 90 days prior to the date of the 2007 annual meeting of shareholders; provided, that in the event that less than 70 days’ notice of the date of the 2007 annual meeting of shareholders is given to the shareholders, notice by the shareholder, to be timely, must be so received not later than the close of business on the seventh day following the day on which such notice of the date of the meeting was mailed.

 

If we receive proper notice of a shareholder proposal pursuant to our bylaws, and such notice is not received a reasonable time prior to mailing by us of our proxy materials for our 2007 annual meeting of shareholders, we believe that our proxy holders would be allowed to use the discretionary authority granted by the proxy card to vote against the proposal at the meeting without including any disclosure of the proposal in the proxy statement relating to such meeting.

 

The SEC has adopted rules that permit companies and intermediaries, such as brokers, to satisfy delivery requirements for proxy statements with respect to two or more shareholders sharing the same address by delivering a single proxy statement addressed to those shareholders. This process, known as “householding,” potentially means extra convenience for shareholders and cost savings for companies. In connection with this proxy solicitation, a number of brokers with customers who are our shareholders will be “householding” our proxy materials unless contrary instructions have been received from the customers. We will promptly deliver, upon oral or written request, a separate copy of the proxy statement to any shareholder sharing an address to which only one copy was mailed. Requests for additional copies should be directed to Corillian Corporation, 3400 NW John Olsen Place, Hillsboro, Oregon, 97214, (503) 6289-3300, Attention: Corporate Secretary.

 

Once a shareholder has received notice from his or her broker that the broker will be “householding” communications to the shareholder’s address, “householding” will continue until the shareholder is notified otherwise or until the shareholder revokes his or her consent. If, at any time, a shareholder no longer wishes to participate in “householding” and would prefer to receive separate copies of the proxy statement, the shareholder should so notify his or her broker. Any shareholder who currently receives multiple copies of the proxy statement at his or her address and would like to request “householding” of communications should contact his or her broker or, if shares are registered in the shareholder’s name, our Corporate Secretary at the address or telephone number provided above.

 

By Order of the Board of Directors,

 

Erich J. Litch
Corporate Secretary
[          ], 2007

 

EXECUTION VERSION

 

AGREEMENT AND PLAN OF MERGER

 

by and among

 

CHECKFREE CORPORATION,

 

CF OREGON, INC.,

 

and

 

CORILLIAN CORPORATION

 

February 13, 2007

 

 

The merger agreement has been included to provide you with information regarding its terms. It is not intended to provide any other factual information about CheckFree or Corillian. Such information can be found elsewhere in this proxy statement and in the public filings each of CheckFree and Corillian makes with the Securities and Exchange Commission, which are available without charge at www.sec.gov.

 

The merger agreement contains representations and warranties CheckFree and Corillian made to each other. The assertions embodied in those representations and warranties are qualified by information in confidential disclosure schedules delivered by Corillian to CheckFree in connection with signing the merger agreement. While neither CheckFree nor Corillian believe that the disclosure schedules contain information that the securities laws require to be publicly disclosed, the disclosure schedules do contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the attached merger agreement. Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of facts, since they are modified by the underlying disclosure schedules. These disclosure schedules contain information that has been included in Corillian’s prior public disclosures, as well as potential additional non-public information. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the merger agreement, which subsequent information may or may not be fully reflected in Corillian’s public disclosures.

 

TABLE OF CONTENTS

 

EXECUTION VERSION

 

AGREEMENT AND PLAN OF MERGER

 

AGREEMENT AND PLAN OF MERGER, dated as of February 13, 2007 (this “Agreement”), by and among Corillian Corporation, an Oregon corporation (the “Company”), CheckFree Corporation, a Delaware corporation (“Parent”), and CF Oregon, Inc., an Oregon corporation and wholly-owned subsidiary of Parent (“Sub”).

 

WHEREAS, the respective boards of directors of Parent, Sub and the Company have approved, and have determined that it is in the best interests of their respective shareholders to consummate, the acquisition of the Company pursuant to the merger of Sub into Company with Company as the Surviving Corporation, upon the terms and subject to the conditions set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

 

ARTICLE I

 

DEFINITIONS AND TERMS

 

Section 1.1  Definitions.  As used in this Agreement, the following terms have the meanings set forth below:

 

“Acquisition Proposal” means any proposal made by any Person or Persons other than Parent, Sub or any Affiliate thereof to acquire, other than in the transactions contemplated by this Agreement, (i) beneficial ownership (as defined under Section 13(d) of the Exchange Act) of twenty percent (20%) or more of the Common Stock pursuant to a merger, consolidation or other business combination, sale of shares of capital stock, tender offer or exchange offer or similar transaction involving the Company or (ii) twenty percent (20%) or more of the assets of the Company and its Subsidiaries, taken as a whole.

 

“Affiliate” has the meaning set forth in Rule l2b-2 of the Exchange Act.

 

“Agreement” has the meaning set forth in the Preamble.

 

“Articles of Merger” has the meaning set forth in Section 2.2.

 

“Benefit Agreements” has the meaning set forth in Section 4.9(a).

 

“Benefit Plans” has the meaning set forth in Section 4.9(a).

 

“Book-Entry Shares” has the meaning set forth in Section 3.1(d).

 

“Business Day” means a day other than a Saturday, a Sunday or another day on which commercial banking institutions in New York, New York are authorized or required by Law to be closed.

 

“Capitalization Date” has the meaning set forth in Section 4.2(a).

 

“Certificates” has the meaning set forth in Section 3.1(d).

 

“Change of Recommendation” has the meaning set forth in Section 6.3(e).

 

“Cleanup” means all actions required, under applicable Environmental Laws, to clean up, remove, treat or remediate Hazardous Materials.

 

“Closing” has the meaning set forth in Section 2.3.

 

“Closing Date” has the meaning set forth in Section 2.3.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Common Stock” has the meaning set forth in Section 3.1(a).

 

“Company” has the meaning set forth in the Preamble.

 

“Company Disclosure Schedule” means the disclosure schedule delivered by the Company to Parent immediately prior to execution of this Agreement.

 

“Company Material Adverse Effect” means any material adverse change in, or material adverse effect on, the business, financial condition or continuing operations of the Company and its Subsidiaries, taken as a whole; provided, however, that the effects of changes that are generally applicable to (i) the industries and markets in which the Company and its Subsidiaries operate (so long as the Company and its Subsidiaries are not disproportionately affected thereby), (ii) the United States economy (so long as the Company and its Subsidiaries are not disproportionately affected thereby) or (iii) the United States securities markets shall be excluded from the determination of Company Material Adverse Effect; and provided further that any adverse effect on the Company and its Subsidiaries resulting from (A) the execution of this Agreement, the announcement of this Agreement or the pendency or consummation of the transactions contemplated hereby, (B) changes in GAAP or the accounting rules and regulations of the SEC, or (C) any action provided for by this Agreement or taken at the request of Parent or Sub, shall also be excluded from the determination of Company Material Adverse Effect.

 

“Company Option Plans” means the Company’s Amended and Restated 1997 Stock Option Plan, Hatcher Associates, Inc. Amended and Restated 1998 Stock Incentive Plan, Amended and Restated 2000 Stock Incentive Compensation Plan, the ESPP, and 2003 Nonqualified Stock Incentive Compensation Plan.

 

“Company Permits” has the meaning set forth in Section 4.11(b).

 

“Company Products” has the meaning set forth in Section 4.12(f).

 

“Company Recommendation” has the meaning set forth in Section 6.7.

 

“Company SEC Reports” has the meaning set forth in Section 4.5.

 

“Company Special Meeting” has the meaning set forth in Section 6.7.

 

“Confidentiality Agreement” has the meaning set forth in Section 6.2.

 

“Consideration Fund” has the meaning set forth in Section 3.2(a).

 

“Contract” means any note, bond, mortgage, indenture, lease, license, contract, agreement or other consensual obligation.

 

“Dissenting Shares” has the meaning set forth in Section 3.3(a).

 

“Effective Time” has the meaning set forth in Section 2.2.

 

“Employees” has the meaning set forth in Section 6.4(a).

 

“Environmental Claim” means any claim, notice, directive, action, cause of action, investigation, suit, demand, abatement order or other order by a Governmental Entity alleging liability arising out of, based on, or resulting from (a) the Release of any Hazardous Materials at any location or (b) circumstances forming the basis of any violation of any Environmental Law.

 

“Environmental Laws” means all applicable and legally enforceable Laws relating to pollution or protection of the environment, including Laws relating to Releases of Hazardous Materials and the manufacture, processing, distribution, use, treatment, storage, Release, transport or handling of Hazardous Materials, and including the Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq.), the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 (42 U.S.C. § 6901 et seq.), the Safe Drinking Water Act (42 U.S.C. § 300f et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Oil Pollution Act of 1990 (33 U.S.C. § 2701 et seq.), Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. § 9601 et seq.), the Emergency Planning and Community Right to Know Act (42 U.S.C. §§11001 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. §§ 5101 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. §§ 136 et seq.),the Endangered Species Act of 1973 (16 U.S.C. § 1531 et seq.), and other similar state and local Laws, in effect as of the date hereof.

 

“ERISA” has the meaning set forth in Section 4.9(a).

 

“ERISA Affiliate” has the meaning set forth in Section 4.9(a).

 

ESPP means the Company’s 2000 Employee Stock Purchase Plan, as amended and restated on May 8, 2001.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“FTP” has the meaning set forth in Section 4.18.

 

“GAAP” has the meaning set forth in Section 4.5.

 

“Governmental Entity” has the meaning set forth in Section 4.4.

 

“Hazardous Materials” means all substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. § 300.5, or defined as such by, or regulated as such under, any Environmental Law.

 

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

“Indemnified Parties” has the meaning set forth in Section 6.6(a).

 

“Intellectual Property” means all rights in patents, patent applications, trademarks (whether registered or not), trademark applications, service mark registrations and service mark applications, trade names, trade dress, logos, slogans, tag lines, uniform resource locators, Internet domain names, Internet domain name applications, corporate names, copyright applications, registered copyrighted works and commercially significant unregistered copyrightable works (including proprietary software, books, written materials, prerecorded video or audio tapes, and other copyrightable works), technology, software, trade secrets, know-how, technical documentation, specifications, data, designs and other intellectual property and proprietary rights, other than off-the-shelf computer programs

 

“Insured Parties” has the meaning set forth in Section 6.6(b).

 

“IRS” means the U.S. Internal Revenue Service.

 

“knowledge” means such facts and other information that as of the date of determination, after reasonable inquiry, are actually known to the chief executive officer, president, chief financial officer, general counsel or other senior executive officers of the referenced party.

 

“Law” means any federal, state, local or foreign law, statute, ordinance, regulation, judgment, order, decree, injunction, arbitration award, franchise, license, agency requirement or permit of any Governmental Entity.

 

“License-In Agreements” has the meaning set forth in Section 4.12(b).

 

“Material Contract” has the meaning set forth in Section 4.8(a).

 

“Merger” has the meaning set forth in Section 2.1.

 

“Merger Consideration” has the meaning set forth in Section 3.1(a).

 

“OBCA” means the Oregon business corporation act, as amended.

 

“Option Consideration” means the aggregate amount required to make the payments set forth in Section 3.4(a).

 

“Parent” has the meaning set forth in the Preamble.

 

“Parent Plans” has the meaning set forth in Section 6.4(c).

 

“Paying Agent” has the meaning set forth in Section 3.2(a).

 

“Person” means any natural person or any corporation, partnership, limited liability company, association, trust or other entity or organization, including, without limitation, any Governmental Entity.

 

“Proxy Statement” has the meaning set forth in Section 6.7.

 

“Qualifying Transaction” means any acquisition of (i) fifty percent (50%) or more of the Common Stock pursuant to a merger, consolidation or other business combination, sale of shares of capital stock, tender offer or

exchange offer or similar transaction involving the Company or (ii) fifty percent (50%) or more of the assets of the Company and its Subsidiaries, taken as a whole.

 

“Release” means any release, spill, emission, discharge, leaking, pumping, injection, deposit, disposal, dispersal, leaching or migration of Hazardous Materials, including the movement of Hazardous Materials through or in the air, soil, surface water, groundwater or real property.

 

“Representatives” has the meaning set forth in Section 6.2.

 

“SEC” means the United States Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Stock Options” has the meaning set forth in Section 3.4(a).

 

“Sub” has the meaning set forth in the Preamble.

 

“Subsidiary” means, as to any Person, any corporation, partnership, limited liability company, association or other business entity (i) of which such Person directly or indirectly owns securities or other equity interests representing more than fifty percent (50%) of the aggregate voting power, (ii) of which such Person possesses more than fifty percent (50%) of the right to elect directors or Persons holding similar positions, or (iii) that such Person controls directly or indirectly through one or more intermediaries.

 

“Superior Proposal” means any Acquisition Proposal that the Company’s board of directors determines, after consultation with its financial advisor, to be more favorable from a financial point of view to the Company and its shareholders than the transactions contemplated hereby.

 

“Surviving Corporation” has the meaning set forth in Section 2.1.

 

“Tax Return” means any report, return, document, declaration, claim for refund, information statement or other information or filing required to be supplied to any taxing authority or jurisdiction (foreign or domestic) with respect to Taxes, including information returns or reports with respect to backup withholding and other payments to third parties.

 

“Taxes” means any and all taxes, charges, fees, levies or other assessments, including income, gross receipts, excise, real or personal property, sales, withholding, social security, occupation, use, service, service use, value added, license, net worth, payroll, withholding, workman’s compensation, unemployment insurance, franchise, transfer and recording taxes, fees and charges, imposed by the United States Internal Revenue Service or any taxing authority (whether domestic or foreign including any state, local or foreign government or any subdivision or taxing agency thereof (including a United States possession)), whether computed on a separate, consolidated, unitary, combined or any other basis; and such term shall include any interest, penalties or additional amounts attributable to, or imposed upon, or with respect to, any such taxes, charges, fees, levies or other assessments.

 

“Termination Date” has the meaning set forth in Section 8.1(b)(i).

 

“United States” means the United States of America.

 

Section 1.2  Other Definitional Provisions; Interpretation.

 

(a) The words “hereof,” “herein” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, and references to articles, sections, paragraphs, exhibits and schedules are to the articles, sections and paragraphs of, and exhibits and schedules to, this Agreement, unless otherwise specified.

 

(b) Whenever “include,” “includes” or “including” is used in this Agreement, such word shall be deemed to be followed by the phrase “without limitation.”

 

(c) Words describing the singular number shall be deemed to include the plural and vice versa, words denoting any gender shall be deemed to include all genders and words denoting natural persons shall be deemed to include business entities and vice versa.

 

(d) When used in reference to information or documents, the phrase “made available” means that the information or documents referred to have been made available if requested by the party to which such information or documents are to be made available.

 

(e) Terms defined in the text of this Agreement as having a particular meaning have such meaning throughout this Agreement, except as otherwise indicated in this Agreement.

 

ARTICLE II

 

THE MERGER

 

Section 2.1  The Merger.  Subject to the terms and conditions of this Agreement and in accordance with the OBCA, at the Effective Time, the Company and Sub shall consummate a merger (the “Merger”) pursuant to which (i) Sub shall merge with and into the Company and the separate corporate existence of Sub shall thereupon cease, (ii) the Company shall be the surviving corporation (the “Surviving Corporation”) in the Merger and (iii) the separate corporate existence of the Company with all its rights, privileges, immunities, powers and franchises shall continue unaffected by the Merger. The Merger shall have the effects set forth in the OBCA.

 

Section 2.2  Effective Time.  Parent, Sub and the Company shall cause articles of merger (the “Articles of Merger”) to be delivered on the Closing Date (or on such other date as Parent and the Company may agree in writing) to the Secretary of State of the State of Oregon for filing as provided in the OBCA, and shall make all other deliveries, filings or recordings required by the OBCA in connection with the Merger. The Merger shall become effective on the date on which the Articles of Merger are filed by the Secretary of State of the State of Oregon, or on such other later date as is agreed upon by the parties and specified in the Articles of Merger, and at the time specified in the Articles of Merger or, if not specified therein, by the OBCA, and such time on such date of effectiveness is hereinafter referred to as the “Effective Time.”

 

Section 2.3  Closing.  The closing of the Merger (the “Closing”) will take place at 10:00 A.M., Pacific Time, on a date to be specified by the parties, which shall be no later than two (2) Business Days after satisfaction or waiver of all of the conditions set forth in Article VII hereof (other than conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions at the Closing), at the offices of Perkins Coie LLP, 1120 NW Couch Street, 10th Floor, Portland, Oregon, unless another time, date or place is agreed to in writing by the parties hereto (such date on which the Closing is to take place being the “Closing Date”).

 

Section 2.4  Articles of Incorporation and Bylaws of the Surviving Corporation.  The articles of incorporation of the Sub, as in effect immediately prior to the Effective Time, shall at the Effective Time be the articles of incorporation of Surviving Corporation, until thereafter amended as provided by Law and such articles of incorporation. The bylaws of Sub, as in effect immediately prior to the Effective Time, shall be the bylaws of the Surviving Corporation, except as to the name of the Surviving Corporation, which shall be Corillian Corporation, until thereafter amended as provided by Law, the articles of incorporation of the Surviving Corporation and such bylaws.

 

Section 2.5  Directors and Officers of the Surviving Corporation.  The directors of Sub at the Effective Time shall, from and after the Effective Time, be the initial directors of the Surviving Corporation until their successors shall have been duly elected or appointed or qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation’s articles of incorporation and bylaws. The officers of Sub at the Effective Time shall, from and after the Effective Time, be the initial officers of the Surviving Corporation until their successors shall have been duly elected or appointed or qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation’s articles of incorporation and bylaws.

 

ARTICLE III

 

CONVERSION OF SHARES

 

Section 3.1  Conversion of Shares.

 

(a) At the Effective Time, each share of the Company’s common stock, no par value (the “Common Stock”), issued and outstanding immediately prior to the Effective Time (other than shares of Common Stock to be cancelled pursuant to Section 3.1(c) and Dissenting Shares) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive $5.15 in cash (the “Merger Consideration”) without any interest thereon.

 

(b) Each share of common stock, no par value, of Sub issued and outstanding immediately prior to the Effective Time shall, at the Effective Time, by virtue of the Merger and without any action on the part of Parent, be converted into one fully paid and nonassessable share of the common stock, no par value, of the Surviving Corporation.