SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, INFORMATIONPROXY STATEMENT PURSUANT TO SECTIONOFTHE SECURITIES EXCHANGE ACT OFof
the Securities Exchange Act of 1934xþ
Filed by a partyParty other than the Registranto¨
Check the appropriate box:¨ Preliminary Proxy Statement ¨o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) x Definitive Proxy Statement ¨ Definitive Additional Materials ¨ Soliciting Material Pursuant to 240.14a-11(C) or 240.14a-12§240.14a-12 Payment of Filing Fee (Check the appropriate box):xPayment of Filing Fee (Check the appropriate box): o No fee requiredrequired.¨þ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-110-11. (1) Title of each class of securities to which transaction applies: Common Stock, par value $0.01 per share of Carreker Corporation (“Company Common Stock”) (2) Aggregate number of securities to which transaction applies: 25,031,619 shares of Company Common Stock and 1,885,812 shares of Company Common Stock issuable upon the exercise of options with an exercise price of less than $8.05 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) 25,031,619 shares of Company Common Stock multiplied by $8.05 per share and (B) options to purchase 1,885,812 shares of Company Common Stock with exercise prices less than $8.05, multiplied by approximately $2.477807 per share (which is the difference between $8.05 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 0.000107 by the sum of the preceding sentence. (4) Proposed maximum aggregate value of transaction: $206,177,212 (5) Total fee paid: ¨$22,061 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:
Dallas, Texas 75244
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 14, 2005
To
CARREKER CORPORATION
our common stock issued and outstanding at the effective time of the merger will be converted into the right to receive $8.05 in cash.
Your vote is important regardless of the number of shares of our common stock that you own. Because the approval and adoption 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 |
The close of business on April 26, 2005 has been fixed by the Board of Directors as the record date for the Annual Meeting. Only stockholders of record on that date will be entitled to notice of andspecial meeting, a failure to vote atwill have the Annual Meetingsame 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 any adjournment thereof, notwithstandingto submit your proxy by telephone or the transfer of any stock oninternet prior to the booksspecial meeting, whether or not you plan to attend the special meeting.
A Proxy Statement, formBoard of Proxy,Directors and copy
Chief Executive Officer
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING. IF YOU DO NOT EXPECT TO ATTEND IN PERSON, PLEASE SIGN AND DATE THE FORM OF PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. THE FORM OF PROXY IS ENCLOSED IN THE MAILING ENVELOPE IN WHICH document. Any representation to the contrary is a criminal offense.
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May 6, 2005
(972) 458-1981PROXY STATEMENTFor the Annual Meeting of StockholdersTo be Held on June 14, 2005SOLICITATIONNOTICE OF PROXIESSPECIAL MEETING OF STOCKHOLDERSThis Proxy Statement is furnished to(the(“Carreker” or the “Company”), in connection with the solicitation of proxies by the Board of Directors to be voted at the Annual Meeting of Stockholders of the Company towill be held in the North Salon ofon , , 2007, at 10:00 a.m., Central Time, at the DoubleTree Hotel Dallas, 4099 Valley View Lane, Dallas, Texas on Tuesday, June 14, 2005, at 8:00 a.m. Central Time, or at any adjournment thereof,75244 for the purposes set forth infollowing purposes:accompanying NoticeAgreement and Plan of Annual MeetingMerger, dated as of Stockholders.This Proxy Statement and form of Proxy are being mailed to stockholders on or about May 6, 2005. If the enclosed form of Proxy is executed and returned,December 29, 2006 (as it may nevertheless be revoked byamended from time to time, the stockholder at any time by filing with“merger agreement”), among the SecretaryCompany, CheckFree Corporation (“CheckFree”) and CFA Software Corporation, an indirect, wholly-owned subsidiary of CheckFree (“Merger Sub”), pursuant to which, upon the merger becoming effective, each issued and outstanding share of common stock, par value $0.01 per share, of the Company (the “common stock”) (other than shares held by a written revocation or a duly executed proxy bearing a later date. A stockholder who attendsis entitled to and who properly demands and perfects statutory appraisal rights in compliance with all of the required procedures under Delaware law) will be converted into the right to receive $8.05 in cash, without interest;in person may revoke his or her proxy at that timeto approve and vote in person if so desired. All proxies duly signed, dated,adopt the merger agreement; and returned will be voted specified therein, but unless otherwise specified, will be deemed to grant authority to vote:(1)FOR the election of the three nominees listed under “Election of Directors” as nominees of the Company for election as directors;(2)FOR the ratification of the appointment by the Board of Directors of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending January 31, 2006; and(3)AT the discretion of the persons named in the enclosed form of Proxy, on any other matter that may properly come before the meeting or any adjournment thereof.The enclosed Proxy is solicited by and on behalf of the Board of Directors of the Company. The Company is unaware of any additional matters not set forth in the Notice of Annual Meeting of Stockholders that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the Annual Meeting and presented for a votespecial meeting or any adjournment thereof.the stockholders, the persons named in the Proxy will vote in accordance with their best judgment upon such matters, unless otherwise restricted by law.The cost of solicitation of proxies will be borne by the Company. In addition to the use of the mails, proxies may also be solicited by personal interview, facsimile transmission, internet and telephone by directors, officers, employees, and agents of the Company. The Company will also supply brokers, nominees, or other custodians with the numbers of Proxy forms, Proxy Statements, and Annual Reports they may require for forwarding to beneficial owners, and the Company will reimburse such persons for their expense in so doing.1STOCKHOLDERS ENTITLED TO VOTEThe record date for the determination of the stockholderson , 2007, are entitled to notice of and to vote at the Annual Meeting has been established by the Board of Directors as the close of business on April 26, 2005. As of April 26, 2005, the Company had issuedspecial meeting and outstanding and entitled to vote at the Annual Meeting 24,908,333 shares of Common Stock, par value $.01 per share (“Common Stock”). For a descriptionany adjournment of the voting rightsspecial meeting. All stockholders of record are cordially invited to attend the special meeting in person.Common Stock, see “Quorum and Voting” herein.QUORUM AND VOTINGThe presence, in person or by proxy,merger agreement requires the approval of the holders of a majority of the outstanding shares of Common Stock of the Companycommon stock entitled to vote is necessary to constitute a quorum at the meeting. The affirmative vote of a pluralitythereon as of the voting power represented atrecord 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 and adoption 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 entitled to vote is required fordo not attend the election of directors. The affirmative vote of a majority ofspecial meeting in person, the voting power represented at the meeting and entitled to vote is required on all other matters. A holder of shares of Common Stockeffect will be entitled to one vote per share of Common Stock as to each matter properly brought before the meeting. Cumulative voting isthat your shares will not permitted in the election of directors. Abstentions and votes “withheld” are included in the determination of the number of shares present at the meeting for purposes of determining a quorum. Broker non-votes arebe 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 and adoption of the merger agreement. If you are a stockholder of record and you attend the special meeting and wish to vote in person, you may withdraw your proxy and vote in person.particular matter onlyadjournment thereof.
Corporate Secretary
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ANNEXES | ||
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• | filing with or transmitting to our Corporate Secretary at the principal executive offices of the Company, at or before the special meeting, an instrument or transmission of revocation that is dated a later date than the proxy; | |
• | sending a later-dated proxy relating to the same shares to the Company’s Corporate Secretary, at or before the special meeting; | |
• | submitting a later-dated proxy by the Internet or by telephone, at or before the special meeting; or | |
• | attending the special meeting and voting in person by ballot. |
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• | determined that the merger agreement and the merger are advisable and in the best interests of the Company and its stockholders; | |
• | approved the merger; | |
• | approved and adopted the merger agreement; and | |
• | recommended that Carreker’s stockholders vote “FOR” the approval and adoption of the merger agreement. |
• | the number of shares of our common stock subject to each option as of the effective time of the merger, multiplied by | |
• | the excess, if any, of $8.05 over the exercise price per share of common stock subject to such option. |
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ELECTION OF DIRECTORS
• | our directors and executive officers will have their stock options and restricted stock fully cashed out in connection with the merger, as all stock options and restricted stock shall fully vest at the effective time of the merger, and the holders of stock options will receive cash payments for each share of common stock subject to such options equal to the excess, if any, of $8.05 per share over the exercise price per share of their options, without interest and less applicable tax withholding, and the holders of restricted stock will receive $8.05 per share for each share of their restricted stock, without interest and less applicable tax withholding; | |
• | each of our current executive officers (other than John D. Carreker, Jr.) has an employment agreement that provides for certain severance payments and benefits in the event of his or her termination of employment under certain circumstances, including termination following a change of control of the Company, which will occur as a result of the completion of the merger; | |
• | John D. Carreker, Jr.’s employment agreement provides for severance payments consistent with the Company’s standard severance payment policy in the event of his termination under certain circumstances and, in accordance with such policy, the Company is also obligated to pay Mr. Carreker’s medical insurance premiums for a limited period; and | |
• | the merger agreement provides for indemnification for our current and former directors and officers for six years following the effective time of the merger, as well as the purchase of an endorsement under the Company’s current officer and director insurance coverage covering his or her service to the Company as a director or officer with “tail” coverage for six years following the effective time of the merger. |
Three directors will be elected at the meeting as Class I directors for terms expiring at the annual meeting of stockholders to be held in 2008. The directors will continue to serve until their respective successors are duly elected and qualified. Each of the Board of Directors’ nominees currently serves as a director of the Company.
The Board has adopted the general policy that a director who will have served nine or more years consecutively as a director at the end of their current termmerger generally will not be eligiblea 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 nominationa full understanding of the specific tax consequences of the merger to you in light of your particular circumstances.
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• | approval of the merger by our stockholders; | |
• | the absence of governmental orders, not subsequently vacated, that have the effect of making the merger illegal or that otherwise restrict, prevent or prohibit the closing; | |
• | the expiration or termination of any waiting period applicable to the merger under the HSR Act; | |
• | the performance by each of the parties of its covenants under the merger agreement in all material respects; | |
• | the receipt by us and CheckFree of all consents or approvals required under third-party contracts, except those for which the failure to obtain such consent is not likely to have a material adverse effect; | |
• | the accuracy of the parties’ representations and warranties in the merger agreement (several of which must be accurate in all material respects), including the absence of a material adverse effect with respect to us; | |
• | the disposition by us of our equity interests in Carretek LLC and Mastek Carreker Private Limited (the disposition of our interest in Carretek LLC was completed on January 22, 2007); and | |
• | the delivery by us of our audited financial statements as of and for the nine-months ended October 31, 2006. |
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• | by either us or CheckFree if: |
• | the merger has not been consummated by June 30, 2007, provided that this right to terminate is not available to any party whose failure to fulfill any obligation under the merger agreement has been the cause of the failure of the merger to occur on or before such date; | |
• | any governmental entity has taken action permanently restraining, enjoining or otherwise prohibiting the merger, which has become final and non-appealable; or | |
• | the required vote of our stockholders to adopt the merger agreement is not obtained at the meeting of our stockholders where such vote was taken; |
• | by CheckFree if: |
• | our board of directors fails to include in this proxy statement its recommendation that our stockholders vote in favor of the merger and the adoption of the merger agreement, or withdraws, modifies or changes (or announces an intention to take any such option) in a manner material and adverse to CheckFree or Merger Sub its recommendation that our stockholders vote in favor of the merger and the adoption of the merger agreement; | |
• | our board of directors approves or recommends to our stockholders a competing transaction (or announces an intention to take such option); | |
• | we breach or fail to perform, in any material respect, any representation, warranty, covenant or agreement that would result in the failure of a condition to the obligations of CheckFree or Merger Sub to effect the merger being satisfied; |
• | by us if: |
• | we enter into a definitive agreement to effect a superior proposal, and such action was done pursuant to and in compliance with the no solicitation provisions of the merger agreement and concurrently with the payment of the termination fee as specified in the merger agreement; | |
• | any of CheckFree or Merger Sub breaches or fails to perform, in any material respect, any representation, warranty, covenant or agreement that would result in the failure of a condition to our obligation to effect the merger being satisfied; or | |
• | the closing of the merger does not occur within three business days of the satisfaction or waiver of all conditions to the obligations of CheckFree and Merger Sub to close the merger and we have delivered to CheckFree and Merger Sub notice of such satisfaction or waiver. |
• | the merger agreement is terminated by any of CheckFree or Merger Sub because: |
• | our board of directors fails to include in this proxy statement its recommendation that our stockholders vote in favor of the merger and the adoption of the merger agreement, or withdraws, or modifies or changes in a manner material and adverse to CheckFree or Merger Sub its recommendation that our stockholders vote in favor of the merger and adoption of the merger agreement; | |
• | our board of directors approves or recommends a competing transaction; or |
• | the merger agreement is terminated by us because we have entered into a definitive agreement to effect a superior proposal, and such action was done pursuant to and in compliance with the no solicitation provisions of the merger agreement. |
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Q: | What is the merger? | |
A: | Under the terms of the merger agreement, once the closing conditions under the merger agreement have been satisfied or waived, Merger Sub will merge with and into Carreker. Carreker will be the surviving corporation in the merger (the “surviving corporation”) and will become a wholly-owned subsidiary of CheckFree. | |
Q: | What will I receive as a result of the merger? | |
A: | Upon completion of the merger, if you are a stockholder at the effective time of the merger you will receive $8.05 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 $8,050 in cash in exchange for your shares of common stock, without interest. You will not own shares in the surviving corporation. If you properly demand and perfect your statutory appraisal rights, you may receive more, the same or less than the value you would be entitled to receive under the terms of the merger agreement. | |
Q: | Where and when is the special meeting? | |
A: | The special meeting will take place at the DoubleTree Hotel Dallas, 4099 Valley View Lane, Dallas, Texas 75244, on , , 2007, at 10:00 a.m., Central Time. | |
Q: | Who is eligible to vote? | |
A: | All stockholders of record on the close of business on , 2007, the record date, will be eligible to vote. | |
Q: | What vote of our stockholders is required to approve and adopt the merger agreement? | |
A: | For us to complete the merger, stockholders holding at least a majority of the shares of our common stock outstanding at the close of business on the record date must vote “FOR” the approval and adoption 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 and adoption of the merger agreement. | |
Q: | Have any of our stockholders agreed to vote in favor of the approval and adoption of the merger agreement? | |
A: | No. However, each of our current directors and executive officers has indicated that he or she intends to vote in favor of the approval and adoption of the merger agreement. | |
Q: | Am I entitled to appraisal rights? | |
A: | Yes. Under the DGCL, holders of our common stock who do not vote in favor of approving and adopting the merger agreement will have the right to seek appraisal of the fair value of their shares as determined by the Delaware Court of Chancery if the merger is completed, but only if they submit a written demand for an appraisal prior to the vote on the approval and adoption of the merger agreement, they continuously hold their Carreker common stock from the date they make a demand for appraisal through the effective date of the merger, and they comply with the Delaware law procedures explained in this proxy statement. This amount could be more, the same or less than the value you would be entitled to receive under the terms of the merger agreement. |
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Q: | How does the Company’s board of directors recommend that I vote? | |
A: | Our board of directors recommends that our stockholders vote “FOR” the approval and adoption 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 and adoption of the merger agreement. | |
Q: | What is the opinion of the Company’s financial advisor? | |
A: | Our board of directors received an opinion from our financial advisor, Bear, Stearns & Co. Inc., that, as of December 27, 2006, the merger consideration of $8.05 per share is fair, from a financial point of view, to the common stockholders of Carreker. Please read “The Merger — Opinion of Bear Stearns” for information about the opinion of Bear, Stearns & Co. Inc., and Annex B for the complete opinion. | |
Q: | What do I need to do now? | |
A: | 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 stockholder, 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: | |
•telephone, using the toll-free number listed on the enclosed proxy card (if you are a registered stockholder, meaning if you hold your stock in your name) or vote instruction card (if your shares are held in “street name,” meaning that your shares are held in the name of a broker, bank or other nominee and your bank, broker or nominee makes telephone voting available); | ||
•the Internet, at the address provided on the enclosed proxy card (if you are a registered stockholder) or vote instruction card (if your shares are held in “street name” and your bank, broker or nominee makes Internet voting available); or | ||
•mail, by completing, signing, dating and mailing each proxy card or vote instruction card and returning it in the envelope provided. | ||
Q: | If my shares are held in “street name” by my broker, will my broker vote my shares for me? | |
A: | 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. | |
Q: | Can I change my vote? | |
A: | Yes, you can change your vote at any time before your proxy is voted at the special meeting. If you are a registered stockholder, you may revoke your proxy (a) by filing with or transmitting to the Company’s Corporate Secretary at the Company’s 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. | ||
Q: | What does it mean if I get more than one proxy card or vote instruction card? | |
A: | 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. |
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Q: | What is a quorum? | |
A: | 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. | |
Q: | How are votes counted? | |
A: | For the proposal relating to the approval and adoption 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 stockholders holding at least a majority of Company common stock outstanding on the record date must vote FOR the approval and adoption 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 and adoption 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 only a majority of the votes actually cast is required to approve the proposal to adjourn the meeting, if necessary or appropriate, abstentions and broker non-votes will have no effect on such proposal. | ||
Q | Who will bear the cost of this solicitation? | |
A: | 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, Georgeson Inc. will provide solicitation services to us for a fee of approximately $7,500 plusout-of-pocket expenses. We will, on request, reimburse stockholders 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. | |
Q: | Should I send in my stock certificates now? | |
A: | No. Shortly after the merger is completed, each registered Carreker stockholder as of the effective time of the merger (that is, each stockholder 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 stockholders 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. | |
Q: | Who can help answer my other questions? | |
A: | 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 Georgeson Inc., our proxy solicitation agent, at(212) 440-9800 (collect) or toll free at(866) 425-8173. If your broker holds your shares, you should also call your broker for additional information. |
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The GovernanceCompany, the expected completion and Nominating Committee annually assesses independence, attendance, performance and compositiontiming of the Boardmerger and other information relating to the merger. There are forward-looking statements throughout this proxy statement, including, among others, under the headings “Summary,” “The Merger,” “The Merger — Opinion of DirectorsBear Stearns” and its Committees. in statements containing the words “believes,” “plans,” “expects,” “anticipates,” “intends,” “estimates” or other similar expressions. You should be aware that forward-looking statements involve known and unknown risks and uncertainties. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that the actual results or developments we anticipate will be realized, or even if realized, that they will have the expected effects on the business or operations of the Company. In addition to other factors and matters contained in this document, we believe the following factors could cause actual results to differ materially from those discussed in the forward-looking statements:
• | Considerations Relating to the Merger Agreement and the Merger: |
• | the failure to satisfy the conditions to consummation of the merger, including the receipt of the required Carreker stockholder and regulatory approval; | |
• | the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; | |
• | the failure of the merger to close for any other reason; | |
• | the outcome of legal proceedings that may be instituted against us and others in connection with the merger agreement; | |
• | the amount of the costs, fees, expenses and charges related to the merger; |
• | Political and General Economic Conditions: |
• | current political and general economic conditions or changes in such conditions; | |
• | the effects of war, terrorism or catastrophic events; | |
• | political, social, economic, or other events resulting in the short or long term disruption of the Company’s business; |
• | changes in the banking industry’s demand for our solutions; | |
• | our ability to develop and license new technologies and services that meet the changing needs of our customers; | |
• | our ability to respond to a decline in check volumes or technological changes in industry standards; | |
• | our failure to meet market expectations due to our relatively fixed costs and fluctuating quarterly operating results; | |
• | our mix of products and services; | |
• | our relative lack of long-term customer agreements; | |
• | our dependence on our key personnel and our ability to attract and retain additional personnel; | |
• | our inability to fully benefit from strategic alliances and acquisitions; | |
• | our dependence on a relatively small number of key customers; | |
• | increased competition; |
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• | our ability to adequately protect our proprietary technology or prevent its unauthorized use; | |
• | infringement claims by third parties; | |
• | our ability to obtain satisfactory technology licenses from third parties; | |
• | claims or litigation that may adversely effect our financial results or our reputation; | |
• | defects or errors in our software and solutions; | |
• | information and data security requirements of our customers; | |
• | our significant international operations and the associated international business risks; | |
• | changes in government regulations, taxes, laws and legal matters; | |
• | impairment of our intangible assets; | |
• | our ability to accurately predict our revenue from certain sources; |
• | fluctuations in our stock price unrelated to our performance; and | |
• | anti-takeover provisions of our governing documents and Delaware law. |
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Shares represented by proxies returned duly executed will be voted, unless otherwise specified, in favor of the three nominees for the Board of Directors named below. If any nominee named below should be unable to serve, the persons named in the enclosed Proxy will vote the shares covered thereby for such substitute nominee (or nominees) as the Board of Directors may select.
NOMINEES FOR DIRECTORS (THREE YEAR TERMS)
THE PARTIES TO THE JOHN D. CARREKER, JR., age 62, has served as Chairman of the Board and Chief Executive Officer of the Company since the Company’s formation in 1978. John D. Carreker, Jr. and James D. Carreker are brothers. John D. Carreker III is the son of John D. Carreker, Jr.JAMES R. ERWIN, age 61, has served as a director of the Company since May 2001 and Lead Director since June 2002. Mr. Erwin is currently Managing Director and Partner of Erwin Graves & Associates, L.P., a management consulting company. Mr. Erwin has served as Vice Chairman-Texas and Senior Client Executive-Southwest of Bank of America, N.A., from October 1998 to May 2000, was Vice Chairman for Texas and Corporate Finance Executive-West for NationsBank Corp. from January 1994 to October 1998, and was Executive Vice President, Manager of Operations and Technology for NationsBank Corp. from October 1991 to January 1994. Mr. Erwin has served as a director of Trammell Crow Company, a diversified real estate service company, since December 1997. Mr. Erwin served as a director of Texas Capital Bancshares, Inc., a bank holding company, from May 2001 to May 2005.DONALD L. HOUSE, age 63, has served as a director of the Company since March 30, 1998. From January 1993 until December 1997, Mr. House served as Chairman of the Board of Directors of SQL Financials International, Inc. (now known as Clarus Corporation), a developer of electronic commerce application software. Mr. House continues to serve as a director of Clarus Corporation where he is Chairman of its audit committee. Mr. House is a private venture capital investor and business advisor to emerging growth stage high technology companies and serves on the boards of several private companies.BOARD OF DIRECTORS RECOMMENDS A VOTE FORAPPROVAL OF EACH OF THE DIRECTOR NOMINEES.MERGERCONTINUING DIRECTORSCarreker CorporationJAMES D. CARREKER, age 57,served as a director of the Company since 1984. Mr. Carreker presently serves as Chairman of the Board of Directorsdesigned, developed, sold and Chief Executive Officer of The Bombay Company, Inc., a home furnishings retailer. Mr. Carreker served as Chairman of the Board of Directors of Wyndham International, Inc., a hotel managementdelivered payments-related software and leasing company, from March 1999 to October 2000. Mr. Carreker served as Chief Executive Officer of Wyndham International, and from January 1998 to June 1999, Mr. Carreker also served as a director of Patriot American Hospitality, Inc. Patriot was a hotel real estate investment trust until it became a wholly owned subsidiary of Wyndham International in June 1999. Mr. Carreker served as President and Chief Executive Officer of Wyndham Hotel Corporation, a national hotel company, from May 1996, and as a director of Wyndham from February 1996, until the merger of Wyndham with Patriot in January 1998. Mr. Carreker also served as President and Chief Executive Officer of Trammell Crow Company, a national real estate company, as well as President of Burdines Department Stores, located in Florida. Since October 2002, Mr. Carreker has served as a director of CBRL Group, a restaurant holding company. His term expires in 2007. John D. Carreker, Jr. and James D. Carreker are brothers.3J. COLEY CLARK, age 59, has served as a director of the Company since September 2004. Mr. Clark is currently President and Chief Executive Officer and a director of BancTec, Inc., a process, capture and archive hardware and software provider to the banking, insurance and telecommunications industries. Beginning in 1996, Mr. Clark served as Senior Vice President and a member of the Global Operations Council of EDS, a global technology service organization. Mr. Clark retired from EDS in 2004 after 32 years with the company. Mr. Clark also serves as a director of FundsXpress, an internet banking provider. His term expires in 2006.KEITH W. HUGHES, age 58, has served as a director of the Company since July 2003. Mr. Hughes is currently a self-employed consultant to domestic and international financial services institutions. He previously served as Vice Chairman of Citigroup Inc., a diversified global financial services holding company, from November 2000 to April 2001. Mr. Hughes was named to that position in 2000 when Citigroup acquired Associates First Capital Corporation, a leading finance company, where he had served as Chairman and Chief Executive Officer since February 1995. Mr. Hughes joined Associates First Capital Corporation in 1981 and held several other executive positions during his tenure there, including President from August 1991 to February 1995. He currently serves as an advisory director to Majesco Software, Inc., an applications management software company and subsidiary of Mastek Ltd. In addition, Mr. Hughes serves as a director of Certegy, Inc., a provider of credit and debit card processing and check risk management servicesconsulting solutions to financial institutions and merchants, asfinancial service providers. Our products and services address a directorbroad spectrum of Texas Industries Inc., a major producerpayment activities and are designed to help our clients enhance the performance of cement, concretetheir payments businesses; improve operational efficiency in payments processing; enhance revenue and structural steel,profitability from payments-oriented products and as a directorservices; reduce losses associated with fraudulent payment transactions; facilitate compliance with risk-related laws and regulations; and/or maximize clients’ customer income streams by aligning their customer interactions and products with customer needs. Carreker provides products and services to more than 250 clients in the United States, Canada, the United Kingdom, Ireland, continental Europe, Australia, New Zealand, South Africa, South America, Mexico, and the Caribbean. Clients include the full range of Pilgrim’s Pride Corporation, a major producer of poultry. His term expires in 2007.RICHARD R. LEE, JR., age 58, has served as a directorcommunity, regional and large banks, among them more than 75 of the Company since 1984. Mr. Lee has served as President of Lee Financial Corporation, a financial advisory firm, since 1975. Mr. Lee is a Chartered Financial Analyst and a Certified Financial Planner. His term expires in 2006.DAVID K. SIAS, age 67, has served as a director of the Company since October 1993 and served as a consultant to the Company from November of that year until July 2001. Mr. Sias has been a partner of eVentures International, LLC, a venture capital group that specializes in start-up firmslargest 100 banks in the software arena,United States. Headquartered in Dallas, Texas since 1999. From 1993 until 1997, Mr. Sias was a director1978, Carreker Corporation has offices in Charlotte, Memphis, London and advisor to ADS Associates, a privately held software company. Prior to that time, Mr. Sias was with Bankers Trust Company, New York for over thirty years where he led severalSydney. As of the bank’s major businesses, including its International Division as well as its Global Operating and Information Systems. His term expires in 2007.RONALD G. STEINHART, age 64, has served as a director of the Company since April 2001. Mr. Steinhart served as Chairman and Chief Executive Officer, Commercial Banking Group of Bank One Corporation from December 1996 until his retirement in January 2000. Mr. Steinhart joined Bank One in connection with the merger of Team Bank, which he founded in 1988. Mr. Steinhart serves as a director of United Auto Group, Inc., an automotive retailer, Trustee of Prentiss Properties Trust, a real estate investment trust, and Trustee of MFS/Compass, a group of funds managed by MFS Investment Management. His term expires in 2007.GREGORY B. TOMLINSON, age 65, has served as a director of the Company since September 2004. Mr. Tomlinson, a certified public accountant, is a retired (effective 2002) partner of KPMG LLP, an international public accounting firm. During Mr. Tomlinson’s forty-year career with KPMG, he served in various technical and administrative positions, including Risk Management Partner for the Southwest Area, Partner in charge of the Firm’s Information, Communications and Entertainment practice in the Southwest Area, and immediately prior to his retirement, as Asia Pacific Risk Management Partner, resident in Tokyo. His term expires in 2006.CORPORATE GOVERNANCEThe Board of Directors has determined that Messrs. Clark, Erwin, House, Hughes, Sias, Steinhart and Tomlinson are “independent” as defined by applicable NASDAQ rules. In addition, the Board of Directors has determined that a majority of its members are “independent” as defined by the Company’s director independence standards. The Board of Directors held22, 2007, Carreker employed a total of nine meetings492 employees.fiscal year ended January 31, 2005.4Average attendanceState of Delaware with its principal executive offices at those meetings was 96% and each director attended at least 75% of the meetings held by the Board of Directors and by committees of the Board on which he served. The Board of Directors’ standing committees are an Audit Committee, a Compensation Committee, and a Governance and Nominating Committee. The charter for each of the Company’s committees can be found on the Company’s website atwww.carreker.com.AUDIT COMMITTEE. The Audit Committee operates pursuant to a written charter adopted by the Board of Directors. The Audit Committee is responsible for (i) recommending to the Board of Directors the selection of the Company’s outside auditors, (ii) pre-approving all audit and permissible non-audit services and fees, (iii) reviewing the audit scope and risk assessment process, (iv) reviewing the independence and performance of the outside auditors, (v) reviewing internal controls of the Company, (vi) overseeing compliance with the Company’s Code of Ethics, and (vii) reviewing and discussing with management and the outside auditors the annual audited financial statements included in the Company’s Form 10-K as well as the interim financial statements. The current members of the Audit Committee are Messrs. House, Sias and Tomlinson. Mr. House serves as Chairman. Each member of the Audit Committee is “independent,” as defined by the applicable rules of the Securities and Exchange Commission (“SEC”), and the Board of Directors has determined that each member of the Audit Committee is “independent” as defined by the applicable NASDAQ rules and under the standards of independence established by the Board of Directors.The Board of Directors has determined that each Audit Committee member is “financially literate” and that the Audit Committee provides adequate and appropriate oversight of the Company’s audit practices. The Board of Directors has determined that Gregory B. Tomlinson is an “audit committee financial expert” as defined under the applicable NASDAQ and SEC rules. The Audit Committee met thirteen times during the fiscal year ended January 31, 2005.COMPENSATION COMMITTEE. The Compensation Committee is responsible for executive compensation policies, approving compensation payable to executive officers of the Company, and reviewing and granting stock options and awards. The current members of the Compensation Committee are Messrs. Clark, Erwin, Hughes and Steinhart. Mr. Steinhart serves as Chairman. Each member of the Compensation Committee is “independent”, as defined by the applicable NASDAQ rules and under the Company’s director independence standards. The Compensation Committee met five times during the fiscal year ended January 31, 2005.GOVERNANCE AND NOMINATING COMMITTEE. The Corporate Governance and Nominating Committee has the responsibility for identifying potential candidates for Board membership and for making a recommendation to the Board of Directors of a slate of director candidates to stand for election at the annual meeting of the Company’s stockholders. The Governance and Nominating Committee also has responsibility for maintaining oversight of the Board of Directors’ operations and effectiveness, recommending directors for appointment to committees, and making recommendations to the Board of Directors as to determinations of Director independence. The current members of the Governance and Nominating Committee are Messrs. Erwin, Sias and Steinhart. Mr. Erwin serves as Chairman. Each member of the Governance and Nominating Committee is “independent”, as defined under applicable NASDAQ rules and by the Company’s director independence standards. The Governance and Nominating Committee met four times during the fiscal year ended January 31, 2005.In evaluating prospective nominees, the Governance and Nominating Committee seeks individuals that have the following minimum qualifications, qualities and skills: (i) significant business or public experience that is relevant and beneficial to the Board of Directors and the Company, (ii) willing and able to make a sufficient time commitment to the affairs of the Company in order to effectively perform the duties of a director, including regular attendance at Board of Directors meetings and committee meetings, (iii) committed to the long-term growth and profitability of the Company, (iv) character and integrity, (v) inquiring minds who are willing to speak their minds and challenge and stimulate management and (vi) represent the interests of the Company as a whole and not only the interests of a particular stockholder or group.5The Governance and Nominating Committee will consider nominees proposed by stockholders. Director candidates recommended by stockholders are evaluated by the Governance and Nominating Committee based on the same criteria applied by the Governance and Nominating Committee to director candidates identified by that Committee. Any stockholder who wishes to recommend a director candidate for consideration by the Governance and Nominating Committee may do so by submitting the candidate’s name and qualifications in writing to the following address: 4055 Valley View Lane, Suite 1000, Dallas, Texas 75244, Attention: Corporate Secretary. The submission must be received75244. Carreker’s telephone number is(972) 458-1981.such address4411 East Jones Bridge Road, Norcross, Georgia 30092. CheckFree’s telephone number is(678) 375-3000.lessconducted any activities to date other than 120 calendar days before the date that the Company’s proxy statement was releasedactivities incidental to stockholdersits 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. The Company will survive the merger and Merger Sub will cease to exist.
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• | the value of the consideration to be received by the Company’s stockholders in the merger, as well as the fact that the stockholders will receive the consideration in cash, which provides certainty of value to the stockholders; |
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• | the $8.05 per share to be paid as the consideration in the merger represents a premium of 6.3% to the closing price on December 26, 2006, a premium of 8.3% to the average closing price for the thirty trading days ended December 26, 2006, and a premium of 23.8% to the closing price on June 9, 2006, the last trading day prior to our announcement on June 12, 2006 that the board was exploring various strategic alternatives; | |
• | the merger is the result of an active sale process in which we, directly or indirectly through Bear Stearns, had contact with approximately 28 interested parties; | |
• | the board’s belief that the merger is more favorable to the Company’s stockholders than any other alternative reasonably available to us and the stockholders, including the alternative of remaining a stand-alone, independent company and the proposals made by the other bidders in the sale process, as well as the risks and uncertainties associated with those alternatives; | |
• | the financial presentation (including the assumptions and methodologies underlying the analyses in connection therewith) and the fairness opinion that as of December 27, 2006, the merger consideration of $8.05 in cash per share to be received in the merger is fair to the stockholders from a financial point of view; | |
• | the current financial market conditions, and historical market prices, volatility and trading information with respect to our common stock, including the possibility that if we remain a publicly owned corporation, in the event of a decline in the market price of our common stock or the stock market in general, the price that might be received by holders of our common stock in the open market or in a future transaction might be less than the per share cash price to be paid in the merger; | |
• | historical and current information concerning our business, financial performance and condition, operations, technology, management and competitive position, and current industry, economic and market conditions, including our prospects if we were to remain an independent company having limited scale and resources; | |
• | the increased regulation and costs associated with being a publicly held company, including the burdens imposed by the Sarbanes-Oxley Act of 2002 and the Securities Exchange Act, and the fact that those burdens would be eliminated following consummation of the merger; | |
• | the financial and other terms and conditions of the merger agreement, the fact that they were the product of arm’s-length negotiations between the parties, and the fact that the negotiation committee (which is comprised solely of independent directors) unanimously recommended the approval and adoption of the merger agreement; | |
• | the negotiation committee received advice from Bear Stearns, as financial advisor, and Locke Liddell, as legal advisor, each of which has extensive experience in transactions similar to the merger; | |
• | the terms of the merger agreement, including without limitation: | |
• | the limited number and nature of the conditions to CheckFree and Merger Sub’s obligation to consummate the merger and the limited risk of non-satisfaction of such conditions (including, in particular, the absence of any financing condition); | |
• | the provisions of the merger agreement that allow the board, under certain limited circumstances if required to comply with its fiduciary duties under applicable law, to change its recommendation that our stockholders vote in favor of the approval and adoption of the merger agreement; | |
• | the provisions of the merger agreement that allow the Company, under certain limited circumstances if required by the board to comply with its fiduciary duties under applicable law, to furnish information to and enter into discussions with third parties; | |
• | the provisions of the merger agreement that provide the board the ability to terminate the merger agreement in order to accept a financially superior proposal (subject to certain conditions contained in the merger agreement, including the payment to CheckFree of a $7.5 million termination fee); |
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• | the provisions of the merger agreement providing that the Company would be entitled to receive a $7.5 million termination fee in the event it terminated the merger agreement in certain circumstances, and be entitled to have its expenses reimbursed, up to a limit of $1,000,000, in the event it terminated the merger agreement in other circumstances; | |
• | the conclusion of the board that both the $7.5 million termination fee (and the circumstances when such fee is payable) and the requirement to reimburse CheckFree and Merger Sub for certain expenses, up to a limit of $1.0 million, in the event that the merger agreement is terminated under certain circumstances, were reasonable in light of the benefits of the merger, the sale process conducted by the Company with the assistance of Bear Stearns and commercial practice; | |
• | our remedies for the breach by CheckFree or Merger Sub of the merger agreement, which are limited in terms of monetary damages to fixed amounts of cash payments depending on the circumstances of such breach, all as further described under “The Merger Agreement — Fees and Expenses;” | |
• | the fact that the completion of the merger requires the approval and adoption of the holders of a majority of our common stock outstanding on the record date; and | |
• | the availability of appraisal rights to the Company’s stockholders who comply with all of the required procedures under Delaware law, which allows such holders to seek appraisal of the fair value of their shares as determined by the Delaware Court of Chancery. |
• | the risk that the merger might not be completed in a timely manner or at all; | |
• | the restrictions that the merger agreement imposes on actively soliciting competing bids, and the fact that the Company would be obligated to pay a termination fee to CheckFree under certain circumstances; | |
• | the fact that upon completion of the merger the Company will no longer exist as an independent, publicly traded company and our stockholders will no longer participate in any of our future earnings or growth and will not benefit from any appreciation in the value of the Company; | |
• | the fact that gains from an all-cash transaction would be taxable to our stockholders for U.S. federal income tax purposes; | |
• | the restrictions on the conduct of our business prior to the completion of the merger, requiring us to conduct our business only in the ordinary course, subject to specific limitations, which may delay or prevent us from undertaking business opportunities that may arise pending completion of the merger; | |
• | the interests of our officers and directors in the merger; | |
• | the restrictions on the Company’s ability to solicit or engage in discussions or negotiations with a third party regarding specified transactions and the requirement that the Company pay CheckFree a $7.5 million termination fee in order for the board of directors to accept a superior proposal; | |
• | the risk of diverting the Company’s management focus and resources from other strategic opportunities and from operational matters while working to implement the merger; and | |
• | the possibility of management and employee disruption associated with the merger. |
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• | determined that the merger agreement and the merger are advisable and in the best interests of the Company and its stockholders; | |
• | approved the merger; | |
• | approved and adopted the merger agreement; and | |
• | recommended that Carreker’s stockholders vote “FOR” the approval and adoption of the merger agreement. |
• | was provided to our board of directors for its benefit and use; | |
• | did not constitute a recommendation to the board of directors or any stockholder of Carreker as to how to vote in connection with the merger or otherwise; and | |
• | did not address our underlying business decision to pursue the merger, the relative merits of the merger as compared to any alternative business strategies that might exist for us, the financing of the merger or the effects of any other transaction in which we might engage. |
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• | reviewed a draft of the Agreement, dated December 22, 2006; | |
• | reviewed our Annual Reports to stockholders and Annual Reports onForm 10-K for the fiscal years ended January 31, 2004, 2005 and 2006, our Quarterly Reports onForm 10-Q for the periods ended April 30, 2006, July 31, 2006 and October 31, 2006 and our Current Reports onForm 8-K filed since January 31, 2006; | |
• | reviewed certain operating and financial information relating to our business and prospects, including projections for the quarter ending January 31, 2007 and three fiscal years ending January 31, 2010 set forth in the Company’s revised contingency reorganization plan (the “Projections”), all as prepared, revised and provided to Bear Stearns by our management; | |
• | met with certain members of our senior management to discuss our businesses, operations, historical and projected financial results and future prospects; | |
• | reviewed the historical prices, trading multiples and trading volumes of the shares of Carreker common stock; | |
• | reviewed publicly available financial data, stock market performance data and trading multiples of companies which Bear Stearns deemed generally comparable to Carreker; | |
• | reviewed the terms of recent mergers and acquisitions involving companies which Bear Stearns deemed generally comparable to Carreker; | |
• | performed discounted cash flow analyses based on the Projections; and | |
• | conducted such other studies, analyses, inquiries and investigations as Bear Stearns deemed appropriate. |
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Stock Price as of December 22, 2006 of $7.60 | 5.9 | % | ||
52-Week High of $7.89 | 2.0 | % | ||
52-Week Low of $4.73 | 70.2 | % | ||
30-Day Average Stock Price of $7.41 | 8.7 | % | ||
90-Day Average Stock Price of $6.97 | 15.4 | % |
To date, the Governance and Nominating Committee has not received a candidate recommendation from any stockholder (or group of stockholders) that beneficially owns more than five percentanalysis:
Unaffected Stock Price as of June 1, 2006 of $5.58 | 44.3 | % | ||
30-Day Average Unaffected Stock Price of $5.74 | 40.2 | % | ||
90-Day Average Unaffected Stock Price of $5.95 | 35.3 | % |
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Revenue | EBITDA | |||||||||||||||||||||||
LTM | FYE JAN. 2007 | FYE JAN. 2008 | LTM | FYE JAN. 2007 | FYE JAN. 2008 | |||||||||||||||||||
Statistic | $ | 114.4 | $ | 118.0 | $ | 132.2 | $ | 12.0 | $ | 13.4 | $ | 14.8 | ||||||||||||
Implied Multiple at the Unaffected Stock Price | 0.90x | 0.87x | 0.78x | 8.6x | 7.7x | 6.7x | ||||||||||||||||||
Implied Multiple at the Current Market Price | 1.37x | 1.33x | 1.18x | 13.1x | 11.7x | 10.6x | ||||||||||||||||||
Implied Multiple at the Transaction Price | 1.47x | 1.43x | 1.28x | 14.0x | 12.6x | 11.4x |
• | Bottomline Technology | |
• | Corillian | |
• | Efunds | |
• | Fundtech | |
• | S1 | |
• | Transaction Systems Architects |
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Enterprise Value/ | ||||||||
CY 2006E | CY 2007E | CY 2006E | CY 2007E | |||||
EBITDA | EBITDA | P/E | P/E | |||||
Mean | 15.5x | 13.2x | 21.4x | 20.7x | ||||
Median | 14.5x | 11.7x | 21.8x | 19.1x | ||||
Harmonic Mean | 14.3x | 12.2x | 21.4x | 19.8x |
• | Open Solutions/Investor Group | |
• | Bisys Information Services/Open Solutions | |
• | Certegy/Fidelity National Information | |
• | InterCept/Fidelity National Financial | |
• | Sanchez Computer Associates/Fidelity National Financial |
Transaction Value/LTM EBITDA | Transaction Value/Forward EBITDA | |||||||||
Mean | Median | Harmonic Mean | Mean | Median | Harmonic Mean | |||||
15.6x | 13.0x | 12.4x | 9.3x | 9.7x | 9.1x |
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addition to, the interests of our stockholders generally. These interests may present them with actual or potential conflicts of interest, and these interests, to the extent material, are described below. The Company’s employees are requiredboard of directors was aware of these interests and considered them, among other matters, in approving the merger and approving and adopting the merger agreement.
DIRECTOR COMPENSATION. Employee directors do not receive compensation for their services as directors. Non-employee directors receive an annual retainer of $12,000, payable quarterly, a fee of $2,000less than $8.05 per board meeting attended, and a fee of $650 per committee meeting attended. The chairman of the Audit Committee receives an additional annual retainer of $6,000; the chairman of the Compensation Committee receives $2,000; the chairman of the Governance and Nominating Committee receives $2,000; and the Lead Director receives $6,000, all payable in quarterly installments. Under the Company’sshare, which options were granted under our Third Amended 1994 Long Term Incentive Plan non-employeeand our Director Stock Option Plan (collectively referred to as the “Company Stock Plans”) to our current executive officers and directors. Each outstanding stock option that remains outstanding at the effective time of the merger shall become fully vested and exercisable, and shall 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 $8.05 over the exercise price per share of common stock subject to such option. |
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Number of Options | ||||||||||||
with an Exercise | Weighted Average | |||||||||||
Price less | Exercise Price of | Resulting | ||||||||||
than $8.05 per Share | Such Options | Consideration | ||||||||||
John D. Carreker, Jr. | 122,500 | $ | 4.92 | $ | 383,550 | |||||||
John D. Carreker, III | 121,500 | $ | 5.26 | $ | 339,070 | |||||||
John S. Davis | 20,000 | $ | 6.07 | $ | 39,600 | |||||||
Suzette L. Massie | 92,800 | $ | 7.15 | $ | 83,380 | |||||||
Lisa K. Peterson | 108,550 | $ | 6.35 | $ | 184,043 | |||||||
Blake A. Williams | 91,500 | $ | 5.74 | $ | 211,150 | |||||||
James D. Carreker | 46,440 | $ | 5.71 | $ | 108,899 | |||||||
J. Coley Clark | 24,769 | $ | 6.61 | $ | 35,559 | |||||||
Webb Edwards | 8,086 | $ | 5.09 | $ | 23,935 | |||||||
James R. Erwin | 42,302 | $ | 5.79 | $ | 95,590 | |||||||
William C. Hammett, Jr. | 11,976 | $ | 6.79 | $ | 15,090 | |||||||
Donald L. House | 63,569 | $ | 5.19 | $ | 181,785 | |||||||
Richard R. Lee, Jr. | 32,932 | $ | 5.10 | $ | 97,109 | |||||||
Bryant R. Riley | 2,994 | $ | 6.79 | $ | 3,772 | |||||||
David K. Sias | 42,302 | $ | 5.79 | $ | 95,590 | |||||||
Gregory B. Tomlinson | 24,769 | $ | 6.61 | $ | 35,559 | |||||||
Jeffrey D. Watkins | 25,339 | $ | 6.42 | $ | 41,415 |
Number of Shares of | Resulting | |||||||
Restricted Stock | Consideration | |||||||
John D. Carreker, Jr. | 24,900 | $ | 200,445 | |||||
John D. Carreker, III | 79,734 | $ | 641,859 | |||||
John S. Davis | 15,000 | $ | 120,750 | |||||
Suzette L. Massie | 44,200 | $ | 355,810 | |||||
Lisa K. Peterson | 51,850 | $ | 417,393 | |||||
Blake A. Williams | 79,734 | $ | 641,859 |
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Severance Payment Amount | ||
John D. Carreker, III | two times (2x) current annual base salary and maximum targeted bonus (currently, an annual amount of $463,500) | |
John S. Davis | one times (1x) current annual base salary and maximum targeted bonus (currently, an annual amount of $315,000) | |
Suzette L. Massie | two times (2x) current annual base salary and maximum targeted bonus (currently, an annual amount of $463,500) | |
Lisa K. Peterson | one and a half times (1.5x) current annual base salary and maximum targeted bonus (currently, an annual amount of $463,500) | |
Blake A. Williams | two times (2x) current annual base salary and maximum targeted bonus (currently, an annual amount of $463,500) |
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• | a citizen or individual resident of the U.S. for U.S. federal income tax purposes; | |
• | a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the U.S. or any state or the District of Columbia; | |
• | a trust if it (1) is subject to the primary supervision of a court within the U.S. and one or more United States persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a United States person; or | |
• | an estate the income of which is subject to U.S. federal income tax regardless of its source. |
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• | the amount of cash received in exchange for such common stock; and | |
• | the U.S. holder’s adjusted tax basis in such common stock. |
• | the gain is effectively connected with a trade or business of thenon-U.S. holder in the U.S. (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment of thenon-U.S. holder); | |
• | thenon-U.S. holder is an individual who is present in the U.S. for 183 days or more in the taxable year of that disposition, and certain other conditions are met; or | |
• | we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes and thenon-U.S. holder owned more than 5% of the Company’s common stock at any time during the five years preceding the merger. |
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• | held in the treasury of the Company or owned by CheckFree, Merger Sub or any wholly-owned direct or indirect subsidiary of the Company or CheckFree immediately prior to the effective time of the merger, which shares will be canceled without conversion or consideration; and | |
• | held by a stockholder who properly demands statutory appraisal rights. |
• | the number of shares of our common stock subject to each option as of the effective time of the merger, multiplied by | |
• | the excess, if any, of $8.05 over the exercise price per share of common stock subject to such option. |
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STOCKHOLDER COMMUNICATIONS WITH THE BOARD. Stockholders and others who wish to communicatemerger consideration deposited with the Boardpaying agent that remains undistributed to the holders of Directorsour common stock for one year after the effective time of the merger, will be delivered, upon demand, to the surviving corporation. Stockholders who have not received the merger consideration prior to the delivery of such funds to the surviving corporation may look only to CheckFree or the surviving corporation for the payment of the merger consideration. 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 CheckFree free and clear of any claims or interest of any person previously entitled to the merger consideration.
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• | our and our subsidiaries’ organization, good standing and qualification to do business; | |
• | our and our subsidiaries’ certificate of incorporation and bylaws and equivalent organizational documents, as well as any joint venture agreements; | |
• | our capitalization, including in particular the number of shares of our common stock and stock options; | |
• | our corporate power and authority to enter into the merger agreement and to consummate the transactions contemplated by the merger agreement (including that our board of directors has approved, adopted and declared advisable the merger agreement, the merger and the transactions contemplated thereby and that such approval and adoption was made in accordance with the DGCL, including, without limitation, Section 203 thereof); | |
• | the absence of violations of or conflicts with our and our subsidiaries’ governing documents or applicable law as a result of entering into the merger agreement and consummating the merger; | |
• | the required consents and approvals of governmental entities in connection with the transactions contemplated by the merger agreement; | |
• | possession of permits to operate the business and compliance with applicable legal requirements and certain agreements; | |
• | our SEC filings since January 31, 2004, including the financial statements contained therein; | |
• | the absence of undisclosed liabilities; | |
• | our evaluation of our disclosure controls and procedures and the absence of significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting; | |
• | stock option grant practices; | |
• | the absence of a “material adverse effect” and certain other changes or events related to us or our subsidiaries since October 31, 2006; | |
• | legal proceedings and governmental orders; | |
• | employment and labor matters affecting us or our subsidiaries, including matters relating to our and our subsidiaries’ employee benefit plans; | |
• | intellectual property; | |
• | taxes; | |
• | environmental matters; | |
• | material contracts; | |
• | insurance; | |
• | our and our subsidiaries’ title to assets; | |
• | accuracy and compliance as to form with applicable securities law of this proxy statement; | |
• | the receipt by us of a fairness opinion from Bear Stearns; and | |
• | the absence of undisclosed broker’s fees. |
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• | our strategic alternatives process or the merger, including its announcement or consummation; | |
• | changes in general economic conditions that do not have a materially disproportionate effect (relative to other industry participants) on us or our subsidiaries; | |
• | general changes in the industries in which we and our subsidiaries operate, except those events, circumstances, changes or effects that adversely affect us and our subsidiaries to a greater extent than they affect other entities operating in such industries; | |
• | changes in the trading price of the shares of our common stock between the date hereof and the effective time of the merger (it being understood that any fact or development giving rise to or contributing to such change in the trading price of the shares of our common stock may be the cause of a material adverse effect); or | |
• | changes in applicable law or generally accepted accounting principles. |
• | their organization, valid existence and good standing; | |
• | their corporate power and authority to enter into the merger agreement and to consummate the transactions contemplated by the merger agreement; | |
• | the absence of any violation of or conflict with their governing documents, applicable law or certain agreements as a result of entering into the merger agreement and consummating the merger; | |
• | the required consents and approvals of governmental entities in connection with the transactions contemplated by the merger agreement; | |
• | the possession by CheckFree of sufficient funds to permit it and Merger Sub to consummate the merger; | |
• | the accuracy of information supplied for this proxy statement; | |
• | CheckFree’s SEC filings since June 30, 2004, including the financial statements contained therein; | |
• | legal proceedings and governmental orders; and | |
• | the absence of undisclosed broker’s fees. |
• | conduct our business in the ordinary course of business consistent with past practice and, subject to the foregoing, refrain from taking any action that will have the effect of reducing our aggregate cash, cash |
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equivalents and marketable securities or our net working capital (current assets less current liabilities); and |
• | use reasonable commercial efforts to preserve intact our business organization, keep available the services of our current officers, employees and consultants, and preserve our current relationships with customers, suppliers and other persons with whom we have significant business relations. |
• | amend or otherwise change our certificate of incorporation or bylaws or equivalent organizational documents; | |
• | issue, sell, pledge, dispose of, grant or encumber, or otherwise subject to any lien (or authorize any of the foregoing) (a) any shares of any class of our capital stock or the capital stock of any subsidiary, (b) any equity or equity-based compensatory awards or any options, warrants, convertible securities or other rights to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest) in us or any subsidiary (except for the issuance of shares of common stock issuable pursuant to employee stock options outstanding on the date of the merger agreement and granted under our stock plans in effect on the date of the merger agreement) or (c) any of our assets or the assets of any of our subsidiaries (except for the disposition of assets in the ordinary course of business and in a manner consistent with past practice); | |
• | declare, set aside, make or pay any dividend or other distribution (payable in cash, stock, property or otherwise) with respect to any of our capital stock or other equity interest; | |
• | reclassify, combine, split, subdivide or redeem, or purchase or otherwise acquire, directly or indirectly, any of our capital stock or other equity interest; | |
• | acquire (or enter into an agreement to acquire) any corporation, partnership, other business organization or any division thereof or any significant amount of assets, except pursuant to transactions between us and our subsidiaries or between any of our subsidiaries; | |
• | incur (or enter into an agreement to incur) any funded indebtedness or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for, the obligations of any person, or make any loans or advances other than in the ordinary course of business and consistent with past practice; | |
• | enter into any contract or agreement other than in the ordinary course of business and consistent with past practice; | |
• | authorize or make (or enter into an agreement to authorize or make) any commitment with respect to any individual or aggregate capital expenditures of the Company and its subsidiaries in excess of certain thresholds; | |
• | hire any additional employees, except to fill certain designated positions or any vacancies existing on or after December 29, 2006; | |
• | make any offers to any executive officer of an employment position; | |
• | increase the compensation payable or to become payable or the benefits provided to our directors, employees or officers, except for increases in the ordinary course of business and consistent with past practice; | |
• | grant any new or additional retention, severance or termination pay to, or enter into any new or additional employment, bonus, change of control or severance agreement with, any of our directors, officers or other employees or those of our subsidiaries; | |
• | establish, adopt, enter into, terminate or amend any employee benefits plan; |
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• | loan or advance money or other property to any of our current or former directors, officers or employees or those of our subsidiaries; | |
• | effectuate a “plant closing” or “mass layoff,” as those terms are defined in the WARN Act; | |
• | change in any material respect our methods of financial accounting, except in response to changes in generally accepted accounting principles or applicable law after December 29, 2006; | |
• | make, revoke or change any material tax election or material method of tax accounting, file any amended tax return (unless required by applicable law), enter into any closing agreement relating to a material amount of tax, settle or compromise any material liability with respect to taxes or consent to any material claim or assessment relating to taxes or any waiver of the statute of limitations for any such claim or assessment; | |
• | pay, discharge or satisfy any claim, liability or obligation in excess of certain thresholds, except in the ordinary course of business and consistent with past practice; | |
• | pay accounts payable, utilize cash, draw down on lines of credit, delay or accelerate capital expenditures, incur expenditures on research and development, other than in the ordinary course of business and consistent with past practice; | |
• | except with respect to amendments or modifications of material contracts with customers that are in the ordinary course of business and consistent with past practice, amend or modify in any material respect, or consent to the termination of, any material contract, or amend, waive or modify in any material respect, or consent to the termination of, our or any of our subsidiary’s rights thereunder; | |
• | (a) abandon, sell, assign, or grant any security interest in or to any item of intellectual property owned by or licensed to us, (b) grant to any third party any license, sublicense or covenant not to sue with respect to any of intellectual property owned by or licensed to us, other than in the ordinary course of business consistent with past practice, (c) develop, create or invent any intellectual property jointly with any third party (other than such joint development, creation or invention with a third party that is under contract, in progress or currently contemplated as of December 29, 2006), (d) disclose, or allow to be disclosed, any confidential intellectual property owned by us, unless it is subject to a confidentiality or non-disclosure covenant protecting against the further disclosure thereof, or (e) fail to perform or cause to be performed all applicable filings, recordings and other acts, and pay or caused to be paid all required fees and taxes, to maintain and protect its interest in each item of our owned or licensed intellectual property; | |
• | fail to make in a timely manner any filings with the SEC; | |
• | enter into any contract or agreement with any of our directors or executive officers or those of our subsidiaries or affiliates (or any of their respective affiliates, including any immediate family member of such person); or | |
• | announce an intention, enter into any formal or informal agreement or otherwise make a commitment, to do any of the foregoing. |
• | solicit, initiate or encourage (including by way of furnishing nonpublic information), or take any other action for the purpose of facilitating, any inquiries or the making of any proposal or offer (including, without limitation, any proposal or offer to our stockholders) that constitutes, or may reasonably be expected to lead to, any competing transaction; |
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• | enter into or maintain or continue discussions or negotiations with any person or entity for the purpose of facilitating such inquiries or to obtain a proposal or offer for a competing transaction; | |
• | agree to, approve, endorse or recommend any competing transaction or enter into any letter of intent or other contract, agreement or commitment providing for or otherwise relating to any competing transaction; or | |
• | authorize or permit any of our or our subsidiaries’ representatives to take any such action. |
• | any merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or other similar transaction involving us or any subsidiary; | |
• | any sale, lease, exchange, transfer or other disposition of all or substantially all of our assets or the assets of any subsidiary; | |
• | any sale, exchange, transfer or other disposition in which we or any of our subsidiaries participates and which results in any person beneficially owning more than 50% of any class of our equity securities or the equity securities of any subsidiary; or | |
• | any tender offer or exchange offer that, if consummated, would result in any person beneficially owning more than 50% of any class of our equity securities or the equity securities of any subsidiary. |
• | determined, in its good faith judgment (after consulting with our financial advisor), that such proposal or offer constitutes or would be reasonably expected to lead to a superior proposal; | |
• | determined, in its good faith judgment after consulting with our outside legal counsel (who may be our regularly engaged outside legal counsel), that, in light of such proposal or offer, the failure to furnish such information or enter into discussions would be inconsistent with its fiduciary duties to our stockholders under applicable law; | |
• | provided written notice to CheckFree of our intent to furnish information or enter into discussions with such person prior to taking any such action; and | |
• | 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 (such confidentiality agreement and any related agreements may not include any provision calling for any exclusive right to negotiate with such party). |
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• | after providing written notice to CheckFree advising CheckFree that our board of directors has received a superior proposal (specifying the material terms and conditions of the superior proposal and identifying the person making such superior proposal); | |
• | if CheckFree does not, prior to three business days after CheckFree’s receipt of the notice of superior proposal, make an offer that our board of directors determines in its good faith judgment (after consulting with its financial advisor) to be at least as favorable to our stockholders as such superior proposal; and | |
• | in the event we terminate the merger agreement to accept a superior proposal, if we promptly pay to CheckFree a fee of $7.5 million (as further described below under “Fees and Expenses”). |
• | to terminate immediately any discussions or negotiations regarding acquisition proposals that were being conducted before the merger agreement was signed; | |
• | to not release any third party from, or waive any provision of, any confidentiality or standstill agreement to which it is a party; and | |
• | to notify CheckFree promptly (and within one business day) of our receipt of an acquisition proposal, including the material terms and conditions of the acquisition proposal and the identity of the third party making the proposal. |
• | to duly call, give notice of, convene and hold a meeting of our stockholders as promptly as practicable following the date hereof (but no sooner than 20 business days following the date that this proxy statement is mailed to our stockholders) for the purpose of considering and taking action on the merger agreement and the merger; and | |
• | to include in this proxy statement, and not subsequently withdraw or modify in any manner adverse to Merger Sub or CheckFree, the recommendation of our board of directors that our stockholders approve and adopt the merger agreement and the merger and to use our reasonable commercial efforts to obtain such approval and adoption. |
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• | CheckFree and Merger Sub have represented that they do not own beneficially or of record any of our shares. |
It is a policy
• | our stockholders must have approved the merger; | |
• | the waiting periods applicable to consummation of the merger under the HSR Act must have expired or been terminated; and | |
• | there must not be any governmental orders or actions that seek to make the merger illegal or otherwise restrict, prevent or prohibit the consummation of the merger. |
• | the accuracy of our representations and warranties set forth in the merger agreement (several of which must be accurate in all material respects); | |
• | the performance, in all material respects, by us of our obligations under the merger agreement; | |
• | all consents required under contracts to which we are a party in connection with the merger must have been obtained, except those that the failure to obtain is not likely to have a material adverse effect; | |
• | the disposition by us of our equity interests in Carretek LLC and Mastek Carreker Private Limited (the disposition of our interest in Carretek LLC was completed on January 22, 2007); and | |
• | the delivery by the Company of its audited financial statements as of and for the nine-months ended October 31, 2006. |
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6
• | the accuracy of the representations and warranties of CheckFree and Merger Sub set forth in the merger agreement (several of which must be accurate in all material respects); | |
• | the performance, in all material respects, by each of CheckFree and Merger Sub of its obligations under the merger agreement in all material respects; and | |
• | all consents of required under contracts to which CheckFree and Merger Sub is a party in connection with the merger must have been obtained, except those that the failure to obtain is not likely to have a material adverse effect. |
• | by mutual written consent of us and CheckFree and Merger Sub; | |
• | by either us or CheckFree if: |
• | the merger has not been consummated by June 30, 2007, provided that this right to terminate is not available to any party whose failure to fulfill any obligation under the merger agreement has been the cause of the failure of the merger to occur on or before such date; | |
• | any governmental entity has taken action permanently restraining, enjoining or otherwise prohibiting the merger, which has become final and non-appealable; or | |
• | the required vote of our stockholders to adopt the merger agreement is not obtained at the meeting of our stockholders where such vote was taken; |
• | by CheckFree if: |
• | our board of directors fails to include in this proxy statement its recommendation that our stockholders vote in favor of the merger and the adoption of the merger agreement, or withdraws, modifies or changes (or announces an intention to take any such option) in a manner material and adverse to CheckFree or Merger Sub its recommendation that our stockholders vote in favor of the merger and the adoption of the merger agreement; | |
• | our board of directors approves or recommends to our stockholders a competing transaction (or announces an intention to take such option); or | |
• | we breach or fail to perform, in any material respect, any representation, warranty, covenant or agreement that would result in the failure of a condition to the obligations of CheckFree or Merger Sub to effect the merger being satisfied; |
• | by us if: |
• | we enter into a definitive agreement to effect a superior proposal, and such action was done pursuant to and in compliance with the no solicitation provisions of the merger agreement and concurrently with the payment of the termination fee as specified in the merger agreement; |
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• | any of CheckFree or Merger Sub breaches or fails to perform, in any material respect, any representation, warranty, covenant or agreement that would result in the failure of a condition to our obligation to effect the merger being satisfied; or | |
• | the closing of the merger does not occur within three business days of the satisfaction or waiver of all conditions to the obligations of CheckFree and Merger Sub to close the merger and we have delivered to CheckFree and Merger Sub notice of such satisfaction or waiver. |
• | the merger agreement is terminated by any of CheckFree or Merger Sub because: | |
• | our board of directors fails to include in this proxy statement its recommendation that our stockholders vote in favor of the merger and the adoption of the merger agreement, or withdraws, modifies or changes in a manner material and adverse to CheckFree or Merger Sub its recommendation that our stockholders vote in favor of the merger and adoption of the merger agreement; | |
• | our board of directors approves or recommends a competing transaction; or | |
• | the merger agreement is terminated by us because we have entered into a definitive agreement to effect a superior proposal, and such action was done pursuant to and in compliance with the no solicitation provisions of the merger agreement. |
• | extend the time for the performance of any of the obligations or other acts of the other parties in the merger agreement; | |
• | waive any inaccuracies in the representations and warranties contained in the merger agreement; and | |
• | waive compliance with any of the agreements or conditions contained in the merger agreement. |
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Fiscal Year Ended | ||||||||
January 31, 2005 | High | Low | ||||||
Quarter ended April 30, 2004 | $ | 15.01 | $ | 7.28 | ||||
Quarter ended July 31, 2004 | $ | 10.20 | $ | 6.49 | ||||
Quarter ended October 31, 2004 | $ | 10.56 | $ | 7.28 | ||||
Quarter ended January 31, 2005 | $ | 8.88 | $ | 7.40 |
Fiscal Year Ended | ||||||||
January 31, 2006 | High | Low | ||||||
Quarter ended April 30, 2005 | $ | 7.92 | $ | 4.16 | ||||
Quarter ended July 31, 2005 | $ | 6.14 | $ | 4.47 | ||||
Quarter ended October 31, 2005 | $ | 7.18 | $ | 5.49 | ||||
Quarter ended January 31, 2006 | $ | 5.65 | $ | 4.75 |
Fiscal Year Ended | ||||||||
January 31, 2007 | High | Low | ||||||
Quarter ended April 30, 2006 | $ | 6.55 | $ | 5.38 | ||||
Quarter ended July 31, 2006 | $ | 7.25 | $ | 5.26 | ||||
Quarter ended October 31, 2006 | $ | 7.32 | $ | 6.14 | ||||
Quarter ended January 31, 2007 (through January 22, 2007) | $ | 7.93 | $ | 6.98 |
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• | each current director of the Company; | |
• | the principal executive officer of the Company; | |
• | the principal financial officer of the Company; | |
• | the other executive officers of the Company; | |
• | all executive officers and directors of the Company as a group; and | |
• | each other person known to the Company to own beneficially more than five percent of the Company’s outstanding common stock. |
The information for the five percent owners is derived from Schedule 13Gs filed with the SEC or through discussions with the owner. Except asthird party. Unless a footnote indicates otherwise, noted, the address forof each ownerperson listed below is c/o Carreker Corporation, 4055 Valley View Lane, Suite 1000, Dallas, Texas 75244. As of January 18, 2007, there were 25,031,619 shares of common stock of the Company outstanding.
Number of Shares | Percentage of Shares | |||||||
Name and Address of Beneficial Owner | Beneficially Owned (1) | Beneficially Owned | ||||||
5% Beneficial Owners | ||||||||
Prescott Group Capital Management, L.L.C.(2) | 1,819,604 | 7.27 | % | |||||
1924 South Utica, Suite #1120 | ||||||||
Tulsa, OK 74104 | ||||||||
Kennedy Capital Management, Inc.(3) | 1,659,759 | 6.63 | % | |||||
10829 Olive Boulevard | ||||||||
St. Louis, MO 63141 | ||||||||
Directors and Officers | ||||||||
John D. Carreker, Jr.(4) | 2,827,674 | 11.19 | % | |||||
Jeffrey D. Watkins(5) | 1,844,943 | 7.36 | % | |||||
John D. Carreker III | 431,117 | 1.71 | % | |||||
David K. Sias(6) | 305,771 | 1.22 | % | |||||
Blake A. Williams | 247,984 | * | ||||||
Lisa K. Peterson | 192,500 | * | ||||||
Suzette Massie | 145,000 | * | ||||||
James D. Carreker | 134,362 | * | ||||||
Donald L. House | 115,226 | * | ||||||
James R. Erwin | 72,398 | * | ||||||
John S. Davis | 35,000 | * |
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Shares of Common Stock Beneficially Owned and Percentage of Outstanding Shares as of April 26, 2005 | |||||
Name | Number | Percent | |||
5% Beneficial Owners | |||||
J. & W. Seligman & Co. Incorporated (1) 100 Park Avenue New York, NY 10017 | 2,710,710 | 10.88 | % | ||
BlackRock Capital Management (2) 1 Financial Center Boston, MA 02111 | 1,599,990 | 6.42 | % | ||
Directors and Officers | |||||
John D. Carreker, Jr. (3) | 2,806,549 | 11.21 | % | ||
David K. Sias (4) | 283,966 | 1.14 | % | ||
Robert M. Olson, Jr. (5) | 232,649 | * | % | ||
Richard R. Lee, Jr. (6) | 177,405 | * | % | ||
John D. Carreker III (7) | 159,742 | * | % | ||
James D. Carreker (8) | 112,947 | * | % | ||
Michael J. Inman (9) | 105,790 | * | % | ||
Blake A. Williams (10) | 92,950 | * | % | ||
Donald L. House (11) | 88,421 | * | % | ||
James R. Erwin (12) | 45,593 | * | % | ||
Ronald G. Steinhart (13) | 43,593 | * | % | ||
Keith W. Hughes (14) | 28,638 | * | % | ||
J. Coley Clark (15) | 4,412 | * | % | ||
Gregory B. Tomlinson (16) | 4,412 | * | % | ||
Michael D. Hansen | 9,920 | * | % | ||
Directors and executive officers as a group (18 persons) (17) | 4,289,153 | 17.15 |
Number of Shares | Percentage of Shares | |||||||
Name and Address of Beneficial Owner | Beneficially Owned (1) | Beneficially Owned | ||||||
Gregory B. Tomlinson | 34,593 | * | ||||||
J. Coley Clark | 33,593 | * | ||||||
William C. Hammett, Jr. | 11,976 | * | ||||||
Directors and executive officers as a group (14 persons) | 6,432,137 | 24.44 | % |
* | Represents beneficial ownership of less than 1%. | |
(1) | The number of shares shown includes outstanding shares of common stock owned as of January 18, 2007 by the person indicated and shares underlying options owned by such person on January 18, 2007 that are exercisable within 60 days of that date as follows (including all shares subject to stock options that will be exercisable at the effective time of the merger). At the effective time of the merger, each outstanding stock option, whether or not vested or exercisable, will become fully exercisable and thereafter represent the right to receive an amount in cash, with interest and less applicable tax withholding, equal to the number of shares of our common stock subject to each option as of the effective time of the merger, multiplied by the excess, if any, of $8.05 over the exercise price per share of common stock subject to such option. However, information is provided regarding the total number of shares underlying options for the following persons: John D. Carreker, Jr. (241,000 shares, 122,500 of which have an exercise price lower than $8.05), Jeffrey D. Watkins (25,339 shares, 25,339 of which have an exercise price lower than $8.05), John D. Carreker III (213,500 shares, 121,500 of which have an exercise price lower than $8.05), David K. Sias (70,098 shares, 42,302 of which have an exercise price lower than $8.05), Blake A. Williams (166,450 shares, 91,500 of which have an exercise price lower than $8.05), Lisa K. Peterson (127,050 shares, 108,550 of which have an exercise price lower than $8.05), James D. Carreker (74,930 shares, 46,440 of which have an exercise price lower than $8.05), Donald L. House (115,226 shares, 63,569 of which have an exercise price lower than $8.05), Suzette Massie (92,800 shares, 92,800 of which have an exercise price lower than $8.05), James R. Erwin (62,398 shares, 42,302 of which have an exercise price lower than $8.05), John S. Davis (20,000 shares, 20,000 of which have an exercise price lower than $8.05), Gregory B. Tomlinson (33,593 shares, 24,769 of which have an exercise price lower than $8.05), J. Coley Clark (33,593 shares, 24,769 of which have an exercise price lower than $8.05), William C. Hammett, Jr. (11,976 shares, 11,976 of which have an exercise price lower than $8.05) and all directors and executive officers as a group (1,287,953 shares, 838,316 of which have an exercise price lower than $8.05). The number of shares shown also includes all shares of restricted stock held by the indicated individuals as follows: John D. Carreker, Jr. (24,900 shares), John D. Carreker III (79,734 shares), Blake A. Williams (79,734 shares), Lisa K. Peterson (51,850 shares), Suzette L. Massie (44,200 shares) and John S. Davis (15,000 shares). | |
(2) | Prescott Group Capital Management, L.L.C. is an Oklahoma limited liability company. As of January 18, 2007 Prescott Group Capital Management, L.L.C., together with Prescott Group Aggressive Small Cap, L.P., an Oklahoma limited partnership, Prescott Group Aggressive Small Cap II, L.P., an Oklahoma limited partnership, Prescott Group Mid Cap, L.P., an Oklahoma limited partnership, Prescott Group Aggressive Mid Cap, L.P., an Oklahoma limited partnership (together with Prescott Group Aggressive Small Cap, L.P., Prescott Group Aggressive Small Cap II, L.P., and Prescott Group Mid Cap, L.P., the “Prescott Group Funds”), and Mr. Phil Frohlich, the principal of Prescott Group Capital Management, L.L.C. (together, the “Reporting Persons”), held 1,826,909 shares of our common stock. The Reporting Persons may be considered a “group” under Section 13(d)(3) of the Act and may be deemed to be the beneficial owners of all the shares of common stock held by the Prescott Group Funds. Mr. Frohlich serves as the managing member of Prescott Group Capital Management, L.L.C. and as such Mr. Frohlich may direct the vote and disposition of the 1,819,604 shares held by the Prescott Group Funds and the 7,305 shares held by him individually. Prescott Group Capital Management, L.L.C. has advised us that 1,737,637 shares held by the Prescott Group Funds are held in accounts which are currently pledged as security for margin purposes. | |
Mr. Jeffrey D. Watkins, a director of the Company, is the President of Prescott Group Capital Management, L.L.C. and may be deemed to have voting and investment control over the shares beneficially |
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owned by it. Mr. Watkins disclaims beneficial ownership with respect to such shares, except to the extent of any indirect pecuniary interest he may have by virtue of any ownership of the Prescott Group Funds. | ||
(3) | Kennedy Capital Management, Inc. is an investment |
|
7
|
Includes | ||
(5) | Please see Note 2 above for additional information relating to |
| ||
(6) | Includes 6,000 shares held by Patricia L. Sias, the wife of Mr. Sias, as to which Mr. Sias disclaims beneficial |
• | You must deliver to Carreker a written demand for appraisal of your shares before the vote with respect to the merger agreement is taken. This written demand for appraisal must be in addition to and | |
• | You must not vote in favor of the approval and adoption of the merger agreement. A vote in favor of the approval and adoption of the merger agreement, by proxy, over the Internet, by telephone or in person, will constitute a waiver of your appraisal rights in respect of the shares | |
• | You must continuously hold your Carreker common stock |
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8
PERFORMANCE GRAPH
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this proxy statement to stockholders shall not create any implication to the contrary.
Assumes Initial Investment of $100
1/31/00 | 1/31/01 | 1/31/02 | 1/31/03 | 1/31/04 | 1/31/05 | |||||||
Carreker Corporation (CANI) | 100 | 272.19 | 55.63 | 30.30 | 158.38 | 79.34 | ||||||
Standard and Poor’s 600 SmallCap Index | 100 | 120.33 | 124.00 | 101.33 | 149.85 | 174.61 | ||||||
Services Peer Group | 100 | 80.12 | 86.19 | 47.16 | 73.13 | 59.28 | ||||||
Technology Peer Group | 100 | 66.72 | 66.49 | 83.94 | 111.05 | 132.11 |
Note: The Stock performance shown above
9
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee,stockholders, in which case stockholder proposals will be eligible for consideration for inclusion in the proxy statement and form of proxy for our 2007 annual meeting of stockholders in accordance with itsRule 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 toRule 14a-8, proposals of stockholders must have been received by us no later than , 2007 and must have complied withRule 14a-8.
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The Compensation Committee’s executive compensation policies are designed to provide competitive levels of compensation that integrate pay with the Company’s annual and long term performance goals, reward above-average corporate performance, recognize individual initiative and achievements, and assist the Company in attracting and retaining qualified executives. Total executive compensation is generally set at levels that the Compensation Committee believes to be consistent with others in the Company’s industry, although actual compensation levels in any particular year may be above or below those of the Company’s competitors, depending upon the Company’s performance. The objectives of the Company’s executive compensation program are as follows:
To achieve these compensation objectives, the Company uses a combination of short-term and long-term compensation elements, all of which are based upon the performance of the individual and/or the performance of the Company or the appropriate business unit. The Compensation Committee is mindful of grants or awards made to the Company’s executive officers under the Company’s LTIP. The Compensation Committee endorses the position that stock ownership by management and stock based performance compensation arrangements are beneficial in aligning management’s and stockholders’ interests in the enhancement of stockholder value.
The three principal components of the Company’s compensation program are base salary, incentive cash bonuses, and long-term compensation.
BASE SALARY. Base compensation of executive officers is set based on offering competitive salaries in comparison to market salaries. The Company utilizes survey data developed for comparable executive positions in other similar companies in the same industry to establish a minimum, medium, and maximum salary and bonus level for each executive position. These ranges may be adjusted from industry averages for factors such as local market conditions or unique aspects, responsibilities, or qualifications of the position not believed to be normally associated with the position in other similarly sized companies. Base salary ranges are reviewed annually. A range of percentage increases and a maximum merit increase is established for various performance levels. The base salary position within the range is set after an annual subjective review by the Compensation Committee of performance in areas of the executive’s responsibilities. This review includes an evaluation of work performance, achievement of specific goals, position requirements, and financial performance of the applicable business unit in relation to expected performance based on the annual plan. Increases in base salary of
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executive officers are consistent with the Company’s overall guidelines for other employee salary percentage increases for defined performance levels. These guidelines are revised annually to reflect economic, industry, and company factors. Salary increases are not necessarily granted each year.
LONG TERM COMPENSATION. Under the Company’s LTIP, which has previously been approved by the stockholders, the Company may award incentive and non-qualified stock options and restricted stock to the executive officers and key employees of the Company and its subsidiaries. Restricted stock are shares of Common Stock, subject to any applicable vesting criteria or period. Consistent with prevailing practices in the marketplace, the Committee currently intends to make a long-term incentive award for each fiscal year.
The long-term incentive awards from the LTIP made during 2004 to the Company executives included the following:
The stock option and restricted stock grants made to the Company’s executives were designed to create a direct link between stockholder and executive interests by focusing executive attention on increasing stockholder value. In each case, the number of stock options and shares of restricted stock awarded is individually determined for each executive officer based on a subjective evaluation by the Committee of the individual’s responsibility level and contribution to the Company and the Company’s overall compensation objectives. The amount and nature of prior equity incentive awards are generally considered in determining new Plan awards for executive officers.
CARREKER 401(k) PLAN. The Company’s 401(k) plan (the “401K Plan”) provides for participation in employer contributions by all eligible employees, including the executive officers. Employees are eligible to begin participation in the 401K Plan on the first day of the month after ninety days of service. The Company also has the discretion of making an annual lump sum profit sharing contribution for all eligible employees. This contribution would be made as a percentage of each employee’s base salary. Company contributions vest at a rate of 25% for each year a participant earns a year of service. All Company contributions are subject to limitations imposed by the Internal Revenue Code. For the fiscal year ending January 31, 2006, the Company will match 50% of the first 6% of the employee’s compensation.
EMPLOYMENT AGREEMENTS. The Company enters into executive employment agreements with certain officers and employees, including some of the executive officers, from time to time. The Compensation Committee believes the agreements serve to protect the Company and its stockholders as well as these officers and employees in the event of a threatened or actual change in control of the Company. The agreements are designed to reinforce the officers’ and employees’ dedication to the Company’s best interests before and after
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such a transaction, and would reduce the likelihood that these officers and employees would leave the Company prematurely. In structuring and deciding upon the level of benefits, the Compensation Committee and Board of Directors utilized, among other things, an analysis of competitive practices within the Company’s peer group based on public filings.
FISCAL YEAR ENDED JANUARY 31, 2005 CHIEF EXECUTIVE COMPENSATION. The Chief Executive Officer, Mr. John D. Carreker, Jr., participated during the fiscal year ended January 31, 2005, in the same compensation programs as the other executive officers with each component of his compensation determined by the Board of Directors according to the same criteria described above. Mr. Carreker’s base salary was generally determined in the same manner as other executive officers and was based on the factors listed above. Mr. Carreker’s incentive compensation was determined using the same guidelines described in the Incentive Bonus Plan section of this report.
Section 162(m) of the Internal Revenue Code limits the deductibility of compensation paid to specified executive officers to $1,000,000 per officer in any one year. Compensation which qualifies as performance-based compensation does not have to be taken into account for the purposes of this limitation. The Compensation Committee does not expect the cash compensation to be paid to any executive officer will exceed the $1,000,000 limit per officer in the foreseeable future. As a result, the Compensation Committee has decided at this time to take no action to limit or restructure any elements of the cash compensation paid to any of the Company’s executive officers. Should the compensation level of any executive officer approach $1,000,000, the Compensation Committee will reevaluate this decision.
Submitted by:
The Compensation Committee of
Board of Directors
Ronald G. Steinhart (Chairman)
J. Coley Clark
James R. Erwin
Keith W. Hughes
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EXECUTIVE COMPENSATION AND OTHER MATTERS
The following information sets forth certain compensation provided to the Company’s Chief Executive Officer and its five most highly compensated executive officers (collectively, the “Named Executive Officers”) during the fiscal year ended January 31, 2005 (“Fiscal 2004”), as well as the two preceding fiscal years.
SUMMARY COMPENSATION TABLE
(FISCAL YEAR ENDED JANUARY 31, 2005)
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ARTICLE I | THE MERGER | A-1 | |||||||
Section 1.1 | The Merger | A-1 | |||||||
Section 1.2 | Closing; Effective Time | A-1 | |||||||
Section 1.3 | Effect of the Merger | A-1 | |||||||
Section 1.4 | Certificate of Incorporation; By-laws | A-1 | |||||||
Section 1.5 | Directors and Officers | A-1 | |||||||
ARTICLE II | EFFECT OF THE MERGER ON THE STOCK OF THE CONSTITUENT ENTITIES; EXCHANGE OF CERTIFICATES | A-2 | |||||||
Section 2.1 | Conversion of Securities | A-2 | |||||||
Section 2.2 | Treatment of Options and Other Equity Awards | A-2 | |||||||
Section 2.3 | Dissenting Shares | A-3 | |||||||
Section 2.4 | Surrender of Shares; Stock Transfer Books | A-3 | |||||||
ARTICLE III | REPRESENTATIONS AND WARRANTIES OF THE COMPANY | A-4 | |||||||
Section 3.1 | Organization and Qualification; Subsidiaries | A-4 | |||||||
Section 3.2 | Certificate of Incorporation and By-laws | A-4 | |||||||
Section 3.3 | Capitalization | A-5 | |||||||
Section 3.4 | Authority Relative to the Merger | A-5 | |||||||
Section 3.5 | No Conflict; Required Filings and Consents | A-6 | |||||||
Section 3.6 | Permits; Compliance | A-6 | |||||||
Section 3.7 | SEC Filings; Financial Statements | A-7 | |||||||
Section 3.8 | Absence of Certain Changes or Events | A-8 | |||||||
Section 3.9 | Absence of Litigation | A-8 | |||||||
Section 3.10 | Employee Benefit Plans | A-8 | |||||||
Section 3.11 | Labor and Employment Matters | A-11 | |||||||
Section 3.12 | Intellectual Property | A-12 | |||||||
Section 3.13 | Taxes | A-15 | |||||||
Section 3.14 | Environmental Matters | A-16 | |||||||
Section 3.15 | Material Contract | A-17 | |||||||
Section 3.16 | Insurance | A-17 | |||||||
Section 3.17 | Title to Assets | A-17 | |||||||
Section 3.18 | Proxy Statement | A-17 | |||||||
Section 3.19 | Opinion of Financial Advisor | A-18 | |||||||
Section 3.20 | Brokers | A-18 | |||||||
ARTICLE IV | REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB | A-18 | |||||||
Section 4.1 | Corporate Organization | A-18 | |||||||
Section 4.2 | Authority Relative to the Merger | A-18 | |||||||
Section 4.3 | No Conflict; Required Filings and Consents | A-18 | |||||||
Section 4.4 | Financing | A-19 | |||||||
Section 4.5 | Proxy Statement | A-19 | |||||||
Section 4.6 | No Vote/Approval Required | A-19 | |||||||
Section 4.7 | SEC Filings; Financial Statements | A-19 | |||||||
Section 4.8 | Litigation | A-19 |
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Section 4.9 | Brokers | A-19 | ||||||||||||||
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Section 6.2 | Proxy Statement; SEC Filings | A-22 | ||||||||||||||
Section 6.3 | A-22 | |||||||||||||||
Section 6.4 | | A-23 |
Section 6.5 | Employee Benefits Matters | A-24 | ||||
Section 6.6 | Directors’ and Officers’ Indemnification and Insurance | A-25 | ||||
Section 6.7 | Notification of Certain Matters | A-26 | ||||
Section 6.8 | Further Action; Reasonable Commercial Efforts | A-26 | ||||
Section 6.9 | Public Announcements | A-27 | ||||
Section 6.10 | Investigation and Agreement by Parent and Merger Sub; No Other Representations or Warranties | A-27 | ||||
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ARTICLE VII | CONDITIONS TO THE MERGER | A-28 | ||||
Section 7.1 | Conditions to Each Party’s Obligation to Effect the | A-28 | ||||
Section 7.2 | Conditions to | A-28 | ||||
Section 7.3 | Conditions to Obligation of the | A-29 | ||||
ARTICLE VIII | TERMINATION, AMENDMENT AND WAIVER | A-29 | ||||
Section 8.1 | Termination | A-29 | ||||
Section 8.2 | Effect of | A-30 | ||||
Section 8.3 | Fees and Expenses | A-30 | ||||
Section 8.4 | Amendment | A-31 | ||||
Section 8.5 | Waiver | A-31 | ||||
ARTICLE IX | GENERAL PROVISIONS | A-32 | ||||
Section 9.1 | Non-Survival of Representations, Warranties and Agreements | A-32 | ||||
Section 9.2 | Notices | A-32 | ||||
Section 9.3 | Certain Definitions | A-32 | ||||
Section 9.4 | Severability | A-37 | ||||
Section 9.5 | Entire Agreement; Assignment | A-38 | ||||
Section 9.6 | Parties in | A-38 | ||||
Section 9.7 | Specific Performance | A-38 | ||||
Section 9.8 | Governing Law | A-38 | ||||
Section 9.9 | Headings | A-38 | ||||
Section 9.10 | Counterparts | A-38 | ||||
Section 9.11 | Company Disclosure Schedule | A-38 |
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OPTION GRANTS IN LAST FISCAL YEAR
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Name | Number of Underlying | % of Options in Fiscal | Exercise Per | Expiration Date (4) | Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation For Option Term (5)($) | ||||||||||
5% | 10% | ||||||||||||||
John D. Carreker, Jr. | 18,500 | 2.31 | 10.03 | 6/11/10 | 63,106 | 143,167 | |||||||||
Blake A. Williams | 18,500 | 2.31 | 10.03 | 6/11/10 | 63,106 | 143,167 | |||||||||
Michael D. Hansen | 18,500 | 2.31 | 10.03 | 1/31/05 | (6) | N/A | (6) | N/A | (6) | ||||||
John D. Carreker III | 18,500 | 2.31 | 10.03 | 6/11/10 | 63,106 | 143,167 | |||||||||
Robert M. Olson | 18,500 | 2.31 | 10.03 | 6/11/10 | 63,106 | 143,167 | |||||||||
Michael J. Inman | 10,000 | 1.25 | 10.03 | 6/11/10 | 34,112 | 77,388 |
AGGREGATE OPTION EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth, for eachexcess, if any, of the identified Named Executive Officers, information concerningMerger Consideration over the numberexercise price per share of shares received duringsuch Company Stock Option (with the fiscal year ended January 31, 2005, uponaggregate amount of such payment to the holder to be rounded to the nearest cent), less applicable withholding taxes, if any, required to be withheld with respect to such payment. No holder of a Company Stock Option that has an exercise price per Share that is equal to or greater than the Merger Consideration shall be entitled to any payment with respect to such cancelled Company Stock Option before or after the Effective Time.
Name | Shares Acquired on Exercise (#) | Value Realized ($)(1) | Number of Securities Underlying Unexercised Options at Fiscal Year-End (#) | Value of Unexercised In-the-Money Options at Fiscal Year-End ($)(2) | ||||||||
Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||
John D. Carreker, Jr. | — | — | 112,500 | 106,000 | 63,000 | 220,000 | ||||||
Blake A. Williams | 7,500 | 75,225 | 48,950 | 51,000 | 0 | 69,200 | ||||||
Michael D. Hansen (3) | — | — | 157,250 | 90,750 | 62,370 | 187,970 | ||||||
John D. Carreker III | — | — | 93,250 | 55,750 | 52,875 | 90,520 | ||||||
Robert M. Olson | — | — | 191,591 | 41,000 | 31,500 | 62,900 | ||||||
Michael J. Inman | — | — | 65,800 | 35,000 | 30,041 | 56,600 |
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EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information as of January 31, 2005, regarding compensation plans under whichthe Effective Time, the outstanding shares of the Company’s Common Stock mayCompany shall have been increased, decreased, changed into or exchanged for a different number or kind of shares of securities as a result of a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse
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Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights ($) | Number of securities remaining available for future issuance under equity compensation plans (excluding outstanding options) | |||||||||
Equity compensation plans approved by security holders | 1994 Plan Director Plan | 3,971,478 193,094 | 1994 Plan Director Plan | 9.06 7.74 | 1994 Plan Director Plan | 1,496,233 2,220 | ||||||
Total | 4,164,572 | Total | 9.00 | Total | 1,498,453 | |||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
Total | — | Total | — | Total | — | |||||||
Total | 4,164,572 | 9.00 | 1,498,453 | |||||||||
CERTAIN TRANSACTIONS AND BUSINESS RELATIONSHIPS
Duringmade to the fiscal year ended January 31, 2005, Brenton E. Carreker, Managing Principal Tier III Sales, sonMerger Consideration.
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EMPLOYMENT AGREEMENTS
The Company is a party to an employment agreement with John D. Carreker, Jr. which has been renewed through January 31, 2006. The agreement provides that, for Fiscal 2005, Mr. Carreker will receive a base annual salary of not less than $450,000 and will be eligible to receive bonuses as determined by the Board of Directors in its sole discretion. The agreement may be terminated at any time by the Board of Directors, with or without cause. Upon termination of the agreement by Mr. Carreker due to a breachother corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Merger (other than the approval and adoption of this Agreement by the holders of a majority of the then outstanding shares of Company Common Stock and the filing and recordation of appropriate merger documents as required by the DGCL). This Agreement has been duly and validly executed and delivered by the Company without cause, Mr. Carreker will be entitled to receive, onand, assuming the Company’s regular payroll datesdue authorization, execution and less required withholdings, his salary atdelivery by the current rate forother parties thereto,
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Company, enforceable against the Company in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and subject to the effect of general principles of equity (regardless of whether considered in a proceeding at law or in equity). The Board of Directors of the Company (the “Company Board”), at a meeting duly called and held, has (i) approved, adopted and declared advisable this Agreement and the Merger (such approval and adoption having been made in accordance with the DGCL), (ii) approved the execution, delivery and performance of this Agreement and the consummation by the Company of the transactions contemplated hereby, including the Merger; (iii) determined that this Agreement and the transactions contemplated hereby are in the best interests of the Company and the holders of the Shares, and (iv) resolved, subject to Section 16(a)6.4(c), to recommend that the holders of Shares approve and adopt this Agreement and the Merger. No state anti-takeover statute is applicable to the Merger.
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COMPENSATION AND OTHER COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
SEC.
REPORT OF THE AUDIT COMMITTEE
In accordance with its written charter, adopted by the Board of Directors, the Audit Committee assists the Board of Directors in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing, and financial reporting practices of the Company.
The Audit Committee meets with the Company’s management and Ernst & Young LLP, the Company’s independent registered public accounting firm (“independent accounting firm”), prior to the Company’s public announcements of financial results. In its oversight role, the Audit Committee relies on the work and assurances of the Company’s management, which has responsibility for financial reporting and the system of internal controls, including internal controls over financial reporting and on the independent accounting firm, who,that could adversely affect in their reports, express opinions on the conformity ofany material respect the Company’s annualability to record, process,
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The Audit Committee meets with(ii) any fraud, whether or not material, that involves management periodically to consider the adequacy of the Company’s internal controls and the objectivity of its financial reporting. The Audit Committee discusses these matters with the Company’s independent accounting firm and with appropriate Company financial personnel and the internal auditor. The Audit Committee regularly meets privately with both the independent accounting firm and the internal auditor, each of whom has unrestricted access to the Audit Committee. The Audit Committee also appoints the independent accounting firm and periodically reviews their performance and independence from management. In addition, the Audit Committee reviews the Company’s financing plans and reports recommendations to the full Board of Directors for approval and to authorize action.
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For the fiscal year ended January 31, 2005, the Audit Committee reviewed the Company’s audited financial statements, management’s assessment of the effectiveness of the internal controls over financial reporting, and Ernst & Young LLP’s audit of the financial statements and the effectiveness ofor other employees who have a significant role in the Company’s internal controls over financial reporting. The Audit Committee met with bothCompany has made available to Parent a summary of any such disclosure by management and Ernst & Young LLP to discuss such matters and related reports. Management has represented to the Audit CommitteeCompany’s auditors and audit committee since the Latest Balance Sheet.
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no procedure relating to collective redundancy dismissals for economic reasons. The directors who served on the Audit Committee at the conclusionCompany has complied in all material respects with statutory and regulatory provisions relating to employee representative bodies and union sections for its French Employees. As of the fiscal year ended January 31, 2005, were all “independent”date of this Agreement, no significant industrial dispute that would be reasonably expected to materially and adversely affect the business of the Company and its Subsidiaries has occurred concerning the French Employees in the course of the last two (2) years and, as of Closing, no such matter has occurred and remains uncured.
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The Audit Committee has received fromits Subsidiaries are in compliance in all material respects with all applicable Laws relating to the employment of labor, including those related to wages, hours, immigration and discussed with Ernst & Young LLP the written disclosurenaturalization, collective bargaining and the letterpayment and withholding of taxes and other sums as required by Independence Standards Board Standard No. 1 (Independence Discussionsthe appropriate Governmental Authority and have withheld and paid to the appropriate Governmental Authority or are holding for payment not yet due to such Governmental Authority all amounts required to be withheld from employees of the Company or any Subsidiary and are not liable for any arrears of wages, taxes, penalties or other sums for failure to comply with Audit Committees). These items relateany of the foregoing. Neither the Company nor any Subsidiary is a party to, that firm’s independenceor otherwise bound by, any consent decree with, or citation by, any Governmental Authority relating to employees or employment practices. Except as disclosed in Section 3.11(c) of the Company Disclosure Schedule, there is no charge or proceeding with respect to a violation of any occupational safety or health standards asserted or pending with respect to the Company. Except as disclosed in Section 3.11(c) of the Company Disclosure Schedule, there is no charge of discrimination in employment or employment practices, for any reason, including, without limitation, age, gender, race, religion or other legally protected category, which was asserted since January 1, 2006 or which, if asserted prior to January 1, 2006, remains unresolved or pending before the United States Equal Employment Opportunity Commission, or any other Governmental Authority in any jurisdiction in which the Company or any Subsidiary has employed or employ any person.
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Based
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Submitted by:
The Audit Committeeissuance of
Board Shares issuable pursuant to Company Stock Options outstanding on the date of Directors
Donald L. House, Chairman
David K. Sias
Gregory B. Tomlinson
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PROPOSAL TWO
Upon recommendationthis Agreement and granted under Company Stock Plans in effect on the date of this Agreement) or (iii) any assets of the Audit Committee,Company or any Subsidiary, except in the Boardordinary course of Directors has selected Ernst & Young LLPbusiness and in a manner consistent with past practice;
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF
ERNST & YOUNG LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR
THE FISCAL YEAR ENDED JANUARY 31, 2006.
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ACCOUNTING FEES AND SERVICES
For the fiscal years ended January 31, 2005 and January 31, 2004, fees billed for services provided by Ernst & Young LLP were as follows:
Year Ended January 31, | ||||||
2005 | 2004 | |||||
Audit Fees (1) | $ | 1,187,836 | $ | 1,838,223 | ||
Audit-Related Fees | — | 41,423 | ||||
Tax Fees (2) | 147,158 | 116,415 | ||||
All Other Fees | 1,700 | 70,544 |
The Audit Committee has adopted policies and procedures requiring pre-approval of all services to be performed by the Company’s independent accounting firm. These services may include audit services, audit-related services, tax services, and other services. Pre-approval is generally provided for up to one year. Any pre-approval is detailed as to the particular service or category of services anddisclosed, any confidential Owned Intellectual Property, unless such Owned Intellectual Property is subject to a budget. Theconfidentiality or non-disclosure covenant protecting against disclosure thereof, or (v) fail to perform or cause to be performed all applicable filings, recordings and other acts, and pay or caused to be paid all required fees and taxes, to maintain and protect its interest in each item of the Owned Intellectual Property and the Licensed Intellectual Property, except for those items shown in Section 3.12(a)(i) or Section 3.12(a)(ii) of the Company Disclosure Schedule as abandoned;
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The Audit Committee has considered whetherSubsidiaries to): (i) provide to Parent and Parent’s Representatives access, during normal business hours and upon reasonable notice by Parent, to the provision of audit-relatedofficers, employees, agents, properties, offices and other non-audit services by Ernst & Young LLP is compatiblefacilities of the Company and its Subsidiaries and to the books and records thereof, (ii) furnish to Parent all monthly and quarterly statements of revenue and expense, earnings, sales, trial balances and such other similar statements as are regularly and customarily provided to senior management of the Company promptly following delivery to such senior management and (iii) furnish promptly to Parent such information concerning the business, properties, contracts, assets, liabilities, personnel and other aspects of such party and its Subsidiaries as Parent or its Representatives may reasonably request.
LEGAL PROCEEDINGS
As disclosedthe Confidentiality Agreement as if a party thereto and (ii) hold in strict confidence as Evaluation Material (as defined in the Company’s annual report on Form 10-K forConfidentiality Agreement) all nonpublic documents and information furnished or made available by one party to the year ended January 31, 2005, on June 15, 2004, by mutual agreement betweenother(s) and their respective affiliates and Representatives.
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if to Parent or Merger Sub: | CheckFree Corporation 4411 East Jones Bridge Road Norcross, Georgia 30092 Facsimile No.:(678) 375-1150 Attention: Laura E. Binion | |
with a copy to: | Porter Wright Morris & Arthur LLP Huntington Center 41 South High Street Columbus, Ohio43215-6194 Facsimile No.:(614) 227-2100 Attention: Robert J. Tannous | |
if to the Company: | Carreker Corporation 4055 Valley View Lane, Suite 1000 Dallas, TX 75244 Facsimile No.:(972) 292-9577 Attention: John D. Carreker, Jr. | |
with a copy to: | Locke Liddell & Sapp LLP 2200 Ross Avenue, Suite 2200 Dallas, Texas 75201 Facsimile No.:(214) 740-8800 Attention: John B. McKnight |
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On June 2, 2003,Products and Services and all Intellectual Property related thereto (other than those identified in Section 3.12(a)(ii) of the Company Disclosure Schedules).
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Defined Term | Location | |
Action | Section 3.9 | |
Agreement | Preamble | |
Certificate of Merger | Section 1.2 | |
Certificates | Section 2.4(b) | |
Change in the Company Recommendation | Section 6.4(c) | |
Claim | Section 6.6(b) | |
Company | Preamble | |
Company Board | Section 3.4 | |
Company Common Stock | Section 3.3(a) | |
Company Disclosure Schedule | Section 3.1(b) | |
Company Employees | Section 6.5(b) | |
Company Permits | Section 3.6(a) | |
Company Preferred Stock | Section 3.3(a) | |
Company Restricted Stock Award | Section 2.2(c) | |
Company SEC Reports | Section 3.7(a) | |
Company Stock Awards | Section 3.3(a) | |
Company Stock Option | Section 2.2(a) | |
Company Stock Plans | Section 2.2(a) | |
Competing Transaction | Section 6.4(d) | |
Confidentiality Agreement | Section 6.3(a) | |
DGCL | Recitals | |
Dissenting Shares | Section 2.3(a) | |
Drop Dead Date | Section 8.1(b)(iii) | |
Effective Time | Section 1.2 | |
Environmental Permits | Section 3.14 |
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Defined Term | Location | |
ERISA | Section 3.10(a) | |
Exchange Act | Section 3.5(b) | |
Exchange Agent | Section 2.4(a) | |
Exchange Fund | Section 2.4(a) | |
Expenses | Section 8.3(a) | |
Fairness Opinion | Section 3.17 | |
Fee | Section 8.3(b) | |
GAAP | Section 3.7(b) | |
Governmental Authority | Section 3.5(b) | |
HSR Act | Section 3.5(b) | |
Indemnified Party(ies) | Section 6.6(a) | |
IRS | Section 3.10(d) | |
Latest Balance Sheet | Section 3.7(c) | |
Law | Section 3.5(a) | |
Merger | Recitals | |
Merger Consideration | Recitals | |
Multiemployer Plan | Section 3.10(b) | |
Multiple Employer Plan | Section 3.10(b) | |
Non-U.S. Benefit Plan | Section 3.10(h) | |
Notice of Superior Proposal | Section 6.4(c) | |
Order | Section 3.9 | |
Parent | Preamble | |
Parent SEC Reports | Section 4.8(a) | |
Plans | Section 3.10(a) | |
Proxy Statement | Section 3.17 | |
Merger Sub | Preamble | |
SEC | Section 3.7(a) | |
Securities Act | Section 3.5(b) | |
Shares | Recitals | |
Stockholders | Recitals | |
Stockholders’ Meeting | Section 6.1(a) | |
Subsidiary | Section 3.1(a) | |
Superior Proposal | Section 6.4(e) | |
Surviving Corporation | Section 1.1 | |
WARN Act | Section 3.10(g) |
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By: | /s/ Mark A. Johnson |
Title: | Vice Chairman |
By: | /s/ Mark A. Johnson |
Title: | Executive Vice President |
By: | /s/ John D. Carreker, Jr. |
Title: | Chairman and CEO |
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• | reviewed a draft of the Agreement, dated December 22, 2006; | |
• | reviewed Carreker’s Annual Reports to stockholders and Annual Reports onForm 10-K for the fiscal years ended January 31, 2004, 2005 and 2006, its Quarterly Reports onForm 10-Q for the periods ended April 30, 2006, July 31, 2006 and October 31, 2006 and its Current Reports onForm 8-K filed since January 31, 2006; | |
• | reviewed certain operating and financial information relating to Carreker’s business and prospects, including projections for the quarter ending January 31, 2007 and three years ended January 31, 2010 set forth in the Company’s Revised Contingency Reorganization Plan (the “Projections”), all as prepared, revised and provided to us by Carreker’s management; | |
• | met with certain members of Carreker’s senior management to discuss Carreker’s businesses, operations, historical and projected financial results and future prospects; | |
• | reviewed the historical prices, trading multiples and trading volumes of the shares of Carreker Common Stock; | |
• | reviewed publicly available financial data, stock market performance data and trading multiples of companies which we deemed generally comparable to Carreker; | |
• | reviewed the terms of recent mergers and acquisitions involving companies which we deemed generally comparable to Carreker; | |
• | performed discounted cash flow analyses based on the Projections; and | |
• | conducted such other studies, analyses, inquiries and investigations as we deemed appropriate. |
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By: | /s/ Davies B. Beller |
B-3
C-1
On April 16, 2003surviving or resulting corporation the United States District Court forappraisal of such holder’s shares. Such demand will be sufficient if it reasonably informs the Northern Districtcorporation of Texas, Dallas Division, issued an order consolidatingthe identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder’s shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a numbersecond notice before the effective date of purportedthe merger or consolidation notifying each of the holders of any class action lawsuits againstor series of stock of such constituent corporation that are entitled to appraisal rights of the Company, John D. Carreker Jr.effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and Terry L. Gage into a Consolidated Action styled In re Carreker Corporation Securities Litigation, Civil Action No. 303CV0250-M. Also, on March 3, 2003, Claude Alton Coulter filed a purported class action lawsuit (Civil Action No. 503-CV-5-Q) againstwho has demanded appraisal of such holder’s shares in accordance with this subsection. An affidavit of the Company, John D. Carreker Jr. and Terry L. Gagesecretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the United States District Court for the Eastern Districtabsence of Texas, Texarkana Division. These complaints, filed on behalf of purchasersfraud, be prima facie evidence of the Company’s common stock between May 20, 1998 and Decemberfacts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 2002, inclusive, allege violations of Section 10(b)days prior to the date the notice is given, provided, that if the notice is given on or after the effective date of the Securities Exchange Actmerger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date,
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STOCKHOLDER PROPOSALS
Stockholder proposalswithdraw such stockholder’s demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) hereof, upon written request, shall be presented atentitled to receive from the 2006 Annual Meetingcorporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of Stockholders,shares not voted in favor of the merger or consolidation with respect to which demands for inclusion inappraisal have been received and the Company’s Proxy Statement and formaggregate number of Proxy relatingholders of such shares. Such written statement shall be mailed to that meeting, must bethe stockholder within 10 days after such stockholder’s written request for such a statement is received by the Company at its officessurviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) hereof, whichever is later.
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Any holder of Common Stock of the Company desiring to bring business before the 2006 Annual Meeting of Stockholders in a form other than a stockholder proposal in accordance with the preceding paragraph must give written notice that is received by the Company, addressed to the Secretary of the Company, 4055 Valley View Lane, Suite 1000, Dallas, Texas 75244, no later than January 6, 2006.
All suggestions from stockholders concerning the Company’s business are welcome and will be carefully considered by the Company’s management. To ensure that your suggestions receive appropriate review, the Governance and Nominating Committee from time to time reviews correspondence from stockholders and management’s responses. Stockholders are thereby given access at the Board level without having to resort to formal stockholder proposals. Generally, the Board of Directors prefers you present your views in this manner rather than through the process of formal stockholder proposals. Please see page 6 for information on contacting the Board of Directors.
OTHER MATTERS
At the date of this Proxy Statement, management was not aware that any matters not referred to in this Proxy Statement would be presented for action at the meeting. If any other matters should come before the meeting, the persons named in the accompanying form of Proxy will have discretionary authority to vote all proxies in accordance with their best judgment, unless otherwise restricted by law.
19
HOUSEHOLDING INFORMATION
Unless the Company has received contrary instructions, the Company may send a single copy of its annual report, proxy statement, and notice of annual meeting to any household at which two or more stockholders reside if the Company believes the stockholders are members of the same family. Each stockholder in the household will continue to receive a separate proxy card. This process, known as “householding,” reduces the volume of duplicate information received at any one household and helps to reduce the Company’s expenses. If stockholders prefer to receive multiple sets of the Company’s annual disclosure documents at the same address this year or in future years, the stockholders should follow the instructions described below. Similarly, if an address is shared with another stockholder and together both of the stockholders would like to receive only a single set of the Company’s annual disclosure documents, the stockholders should follow these instructions:
If the shares are registered in the name of the stockholder, the stockholder should contact the Company at its executive offices at 4055 Valley View Lane, Suite 1000, Dallas, Texas 75244, Attention: Corporate Secretary, to inform the Company of their request. If a bank, broker, or other nominee holds the shares, the stockholder should contact the bank, broker, or other nominee directly.
ANNUAL REPORT ON FORM 10-K
UPON WRITTEN REQUEST OF ANY BENEFICIAL STOCKHOLDER OR STOCKHOLDER OF RECORD, A COPY OF THE COMPANY’S ANNUAL REPORT AND FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 31, 2005 (INCLUDING THE EXHIBITS, FINANCIAL STATEMENTS, AND THE SCHEDULES THERETO) REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 13A-1 UNDER THE SECURITIES EXCHANGE ACT OF 1934, MAY BE OBTAINED, WITHOUT CHARGE, FROM LISA PETERSON, CHIEF FINANCIAL OFFICER, 4055 VALLEY VIEW LANE, SUITE 1000, DALLAS, TEXAS 75244.
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Dated: May 6, 2005
20
CARREKER CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS FOR THE 2005 ANNUALA
SPECIAL MEETING OF STOCKHOLDERS ON JUNE 14, 2005
___________, 2007
PROXY VOTING INSTRUCTIONS | ||
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES AS DIRECTORS, FOR THE PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING JANUARY 31, 2006, AND IN ACCORDANCE WITH THE DISCRETION OF THE PERSONS DESIGNATED ABOVE WITH RESPECT TO ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING.
Address Change/Comments (Markright to receive $8.05 in cash, without interest.
[ ] FOR | [ ] AGAINST | [ ] ABSTAIN |
FOLD AND DETACH HERE
Please Mark Here for Address Changespecial meeting, if necessary or Comments
SEE REVERSE SIDE
Item 1. Electionappropriate, to solicit additional proxies if there are insufficient votes at the time of Directors
FOR the nominees listed (except as markedmeeting to approve and adopt the contrary)
WITHHOLD AUTHORITY to vote for all nominees listed
Nominees:
01 John D. Carreker, Jr., 02 James R. Erwin and
03 Donald L. House
INSTRUCTION: To withhold authority to vote for individual nominees, write their name(s) below.
Item 2. Proposal to ratify the appointment of Ernst & Young, LLP as the Company’s Independent Registered Public Accounting Firm for the fiscal year ending January 31, 2006.
FOR AGAINST ABSTAIN
Item 3.merger agreement;
[ ] FOR | [ ] AGAINST | [ ] ABSTAIN |
substitutes (if both are present and acting at said meeting or any adjournment(s) or postponement(s) thereof, or, if only one shall be present and acting, then that one) shall have and may exercise all of the powers of said attorneys-in-fact hereunder.
Note:
FOLD AND DETACH HERE
Vote by Internet or Telephone or Mail
24 Hours If the stockholder is a Day, 7 Dayscorporation, please provide the full corporate name and sign as an authorized officer, giving full title as such. If stockholder is a Week
Internetpartnership, please provide the partnership name and telephone voting is available through 11:59 PM Eastern Time the day prior to annual meeting day.
Your Internet or telephone vote authorizes the named proxies to vote your shares in the same mannersign as if you marked, signed and returned your proxy card.an authorized person.)
Internet
http://www.proxyvoting.com/cani Use the internet to vote your proxy. Have your proxy card in hand when you access the web site.
OR
Telephone
1-866-540-5760 Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call.
OR
Mail
Mark, sign and date your proxy card and return it in the enclosed postage-paid envelope.
If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy card.