AGREEMENT AND PLAN OF MERGER
by and among
TIER TECHNOLOGIES, INC.,
KINGFISH ACQUISITION CORPORATION
and
OFFICIAL PAYMENTS CORPORATION
Dated as of May 30, 2002
TABLE OF CONTENTS
ARTICLE I THE OFFER AND THE MERGER......................................1
Section 1.01 The Offer................................................1
Section 1.02 Company Actions..........................................3
Section 1.03 Directors................................................5
Section 1.04 The Merger...............................................6
Section 1.05 Closing..................................................6
Section 1.06 Effective Time...........................................6
Section 1.07 Directors and Officers...................................7
Section 1.08 Stockholders' Meeting; Proxy Statement...................7
Section 1.09 Merger Without Meeting of Stockholders...................8
ARTICLE II EFFECT OF THE MERGER ON THECAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF
CERTIFICATES..................................................8
Section 2.01 Effect on Capital Stock..................................8
Section 2.02 Exchange of Certificates.................................9
Section 2.03 Dissenting Shares.......................................10
Section 2.04 Company Stock Option Plans..............................11
Section 2.05 Further Assurances......................................12
ARTICLE III REPRESENTATIONS AND WARRANTIES...............................12
Section 3.01 Representations and Warranties of the Company...........12
Section 3.02 Representations and Warranties of Parent................24
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS....................26
Section 4.01 Conduct of Business of the Company......................26
Section 4.02 No Solicitation by the Company..........................29
Section 4.03 Third Party Standstill Agreements.......................31
ARTICLE V ADDITIONAL AGREEMENTS........................................31
Section 5.01 Access to Information; Confidentiality..................32
Section 5.02 Reasonable Best Efforts; Cooperation....................32
Section 5.03 Indemnification, Exculpation and Insurance..............32
Section 5.04 Fees and Expenses.......................................33
Section 5.05 Public Announcements....................................34
Section 5.06 Employee Matters........................................34
Section 5.07 Purchaser Compliance....................................36
Section 5.08 Certain Litigation......................................36
Section 5.09 Consents................................................36
ARTICLE VI CONDITIONS PRECEDENT.........................................37
Section 6.01 Conditions to Each Party's Obligation to Effect the
Merger..................................................37
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER............................37
Section 7.01 Termination.............................................37
Section 7.02 Effect of Termination...................................39
Section 7.03 Amendment...............................................40
Section 7.04 Extension; Waiver.......................................40
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ARTICLE VIII GENERAL PROVISIONS...........................................40
Section 8.01 Nonsurvival of Representations and Warranties...........40
Section 8.02 Notices.................................................40
Section 8.03 Definitions.............................................41
Section 8.04 Interpretation..........................................42
Section 8.05 Counterparts............................................43
Section 8.06 Entire Agreement; No Third-Party Beneficiaries..........43
Section 8.07 Governing Law...........................................43
Section 8.08 Assignment..............................................43
Section 8.09 Consent to Jurisdiction.................................43
Section 8.10 Headings................................................43
Section 8.11 Severability............................................44
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INDEX OF TERMS
affiliate.....................................................................41
Agreement......................................................................1
Certificate of Merger..........................................................6
Certificates...................................................................9
Change in Control.............................................................36
CIBC..........................................................................20
Closing........................................................................6
Closing Date...................................................................6
Code..........................................................................11
Company........................................................................1
Company Acquisition Agreement.................................................30
Company Benefit Plans.........................................................17
Company Board..................................................................3
Company Common Stock...........................................................1
Company Disclosure Schedule...................................................12
Company Employee..............................................................35
Company Filed SEC Documents...................................................16
Company Intellectual Property.................................................20
Company Notice................................................................29
Company Permits...............................................................17
Company SEC Documents.........................................................15
Company Stock Option..........................................................13
Company Stock Option Plans....................................................13
Company Stock Options.........................................................14
Company Stockholder Approval..................................................20
Company Stockholders Meeting...................................................7
Company Subsidiary............................................................13
Company Superior Proposal.....................................................30
Company Takeover Proposal.....................................................30
Confidential Contracts........................................................21
Confidentiality Agreement.....................................................31
Continuing Employees..........................................................34
Contracts.....................................................................22
control.......................................................................41
Control Time..................................................................26
D&O Insurance.................................................................33
defined benefit...............................................................18
DGCL...........................................................................6
Dissenting Shares.............................................................11
Effective Time.................................................................6
Environmental Law.............................................................41
Environmental Permit..........................................................41
ERISA.........................................................................18
ERISA Affiliate...............................................................17
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Exchange Act...................................................................2
Exchange Agent.................................................................9
Governmental Entity...........................................................14
Hazardous Substances..........................................................41
HSR Act.......................................................................15
Intellectual Property.........................................................20
Key Employee..................................................................35
knowledge.....................................................................42
Leased Real Property..........................................................23
Liens.........................................................................13
material adverse change.......................................................41
material adverse effect.......................................................41
Merger.........................................................................6
Merger Consideration...........................................................8
Minimum Condition..............................................................2
Offer..........................................................................1
Offer Documents................................................................3
Offer Price....................................................................2
Offer to Purchase..............................................................2
Original Directors.............................................................5
Parent.........................................................................1
person........................................................................42
Pre-Termination Takeover Proposal Event.......................................34
Proxy Statement................................................................7
Purchase Date..................................................................2
Purchaser......................................................................1
Purchaser Common Stock.........................................................8
Restraints....................................................................37
Schedule 14D-9.................................................................4
Schedule TO....................................................................3
SEC............................................................................2
Securities Act................................................................15
Shares.........................................................................1
Significant Local Clients.....................................................14
Stockholders...................................................................1
subsidiary....................................................................42
Surviving Corporation..........................................................6
Taxes.........................................................................19
Transactions...................................................................4
without limitation............................................................42
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of May 30, 2002
by and among Official Payments Corporation, a Delaware corporation (the
"Company"), Tier Technologies, Inc., a California corporation ("Parent"), and
Kingfish Acquisition Corporation, a Delaware corporation and a wholly owned
subsidiary of Parent ("Purchaser").
WHEREAS, the respective Boards of Directors of Parent, Purchaser and the
Company have approved, and each deem it advisable and in the best interests of
its stockholders to consummate, the acquisition of the Company by Parent upon
the terms and subject to the conditions set forth herein;
WHEREAS, the parties desire to make certain representations, warranties,
covenants and agreements in connection with the Transactions (as defined in
Section 1.02(a)) and also to prescribe various conditions to the Transactions;
and
WHEREAS, as a condition and inducement to Parent's and Purchaser's entering
into this Agreement and incurring the obligations set forth herein, concurrently
with the execution and delivery of this Agreement, Parent and Purchaser are
entering into a stockholders agreement with each of Comerica Incorporated,
Beranson Holdings, Inc. and Michaella Stern (collectively, the "Stockholders"),
pursuant to which, among other things, each Stockholders has agreed to vote such
Shares (as defined in Section 1.01(a)) then owned by the Stockholder in favor of
the Merger, to grant Parent an irrevocable proxy to vote such Shares and to
tender all Shares then owned by such Stockholder to Parent or Purchaser, as
applicable, in accordance with the Offer.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
THE OFFER AND THE MERGER
Section 1.01 The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 7.01 and none of the events set forth in Annex A shall
have occurred and be continuing, as promptly as practicable (but in no event
later than seven business days after the public announcement of the execution
hereof), Purchaser shall commence (within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) a tender offer
(the "Offer") for all of the outstanding shares of Common Stock, par value $.01
per share (the "Shares"), of the Company ("Company Common Stock"), at a price of
$3.00 per Share, which price
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shall be, subject to any required withholding of taxes, net to the seller in
cash (such price, or such higher price per Share as may be paid in the Offer,
being referred to herein as the "Offer Price"). The obligations of Purchaser to
commence the Offer and to accept for payment and to pay for any Shares validly
tendered on or prior to the expiration of the Offer and not withdrawn shall be
subject only to (A) there being validly tendered and not withdrawn immediately
prior to the expiration of the Offer that number of Shares which represents at
least a majority of the Shares outstanding on a fully-diluted basis (the
"Minimum Condition") and (B) the conditions set forth in Annex A hereto. For
purposes of this Agreement, "fully-diluted basis" means giving effect to the
conversion or exercise of all options exercisable or convertible into Shares at
an exercise price of $3.00 or less per Share, whether or not exercised or
converted at the time of determination. The Offer shall be made by means of an
offer to purchase (the "Offer to Purchase") containing the terms set forth in
this Agreement and the conditions set forth in Annex A hereto. Purchaser
reserves the right in its sole discretion to increase the price per share
payable in the Offer (and to extend the Offer in connection with any such
increase so as to comply with the applicable rules and regulations of the SEC)
and to waive any of the conditions to the Offer, except that without the consent
of the Company, Purchaser shall not (i) reduce the number of Shares subject to
the Offer, (ii) reduce the Offer Price, (iii) modify or add to the conditions
set forth in Annex A hereto or otherwise amend the Offer in any manner adverse
to the holders of the Shares, (iv) except as provided for below in this Section
1.01(a), extend the Offer or (v) change the form of consideration payable in the
Offer. Notwithstanding the foregoing, Purchaser may, without the consent of the
Company, (i) extend the Offer from time to time, in its sole discretion, if, at
the initial expiration date of the Offer (which initial expiration date shall be
20 business days following commencement of the Offer) or any extension thereof,
any of the conditions to Purchaser's obligation to purchase Shares set forth in
Annex A shall not be satisfied or waived, until such time as such conditions are
satisfied or waived and (ii) extend the Offer for any period required by any
rule, regulation, interpretation or positions of the Securities and Exchange
Commission (the "SEC") or the staff thereof applicable to the Offer. On the
terms and subject to the conditions of the Offer and this Agreement, Purchaser
shall, and Parent shall cause Purchaser to, pay for all Shares validly tendered
and not withdrawn pursuant to the Offer that Purchaser becomes obligated to
purchase pursuant to the Offer as soon as practicable after the expiration of
the Offer; provided, however, that if, immediately prior to the initial
expiration date of the Offer (as it may be extended), the Shares tendered and
not withdrawn pursuant to the Offer equal less than 100% of the outstanding
Shares on a fully-diluted basis, Purchaser may (x) extend from time to time the
Offer for a period not to exceed fifteen business days, notwithstanding that all
conditions to the Offer are satisfied as of such expiration date of the Offer,
provided that upon such extension Parent and Purchaser shall be deemed to have
waived all of the conditions set forth in Annex A other than the Minimum
Condition; provided, further, that in no event shall Purchaser extend the Offer
beyond the last business day of the month in which the Minimum Condition has
been satisfied and all conditions set forth in Annex A have been satisfied or
waived; or (y) amend the Offer to include a "subsequent offering period" not to
exceed twenty business days to the extent permitted under Rule 14d-11 under the
Exchange Act, if available. The date on which Purchaser shall purchase and pay
for Shares tendered pursuant to the Offer shall hereinafter be
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referred to as the "Purchase Date" On or prior to the date that Purchaser
becomes obligated to accept for payment and pay for Shares pursuant to the
Offer, Parent will provide or cause to be provided to Purchaser the funds
necessary to pay for all Shares that the Purchaser becomes so obligated to
accept for payment and pay for pursuant to the Offer.
(b) As soon as practicable on the date the Offer is commenced, Parent
and Purchaser shall file with the SEC a Tender Offer Statement on Schedule TO
with respect to the Offer (together with all amendments and supplements thereto
and including the exhibits thereto, the "Schedule TO"). The Schedule TO will
include, as exhibits, the Offer to Purchase and a form of letter of transmittal
and summary advertisement (collectively, together with any amendments and
supplements thereto, the "Offer Documents". Parent and Purchaser jointly and
severally represent and warrant to the Company that the Offer Documents will
comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the SEC and on the date first
published, sent or given to the Company's stockholders, shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation is made by Parent or Purchaser with respect to
information furnished by the Company for inclusion in the Offer Documents. The
Company represents and warrants to Parent and Purchaser that the information
supplied in writing by the Company for inclusion in the Offer Documents will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Each of Parent and Purchaser agrees to take all steps necessary to
cause the Offer Documents to be filed with the SEC and to be disseminated to
holders of the Shares, in each case as and to the extent required by applicable
federal securities laws. Each of Parent and Purchaser, on the one hand, and the
Company, on the other hand, agrees to promptly correct any information provided
by it for use in the Offer Documents if and to the extent that it shall have
become false and misleading in any material respect and Parent and Purchaser
further agree to take all steps necessary to cause the Offer Documents as so
corrected to be filed with the SEC and to be disseminated to holders of the
Shares, in each case as and to the extent required by applicable federal
securities laws. The Company and its outside counsel shall be given the
opportunity to review the Schedule TO before it is filed with the SEC. In
addition, Parent and Purchaser will provide the Company and its outside counsel
in writing with any comments, whether written or oral, Parent, Purchaser or
their outside counsel may receive from time to time from the SEC or its staff
with respect to the Offer Documents promptly after the receipt of such comments.
Section 1.02 Company Actions.
(a) The Company hereby approves of and consents to the Offer and
represents that the Board of Directors of the Company (the "Company Board") at a
meeting duly called and held, has (i) determined that each of the Agreement, the
Offer and the Merger (as defined in Section 1.04) are fair to, advisable and in
the best interests
3
of the stockholders of the Company, (ii) approved this Agreement and the
transactions contemplated hereby, including the Offer and the Merger
(collectively, the "Transactions"), and (iii) resolved to recommend that the
stockholders of the Company accept the Offer and approve and adopt this
Agreement and the Merger; provided, that such recommendation may be withdrawn,
modified or amended in accordance with the provisions of Section 4.02.
(b) Concurrently with the commencement of the Offer, the Company shall
file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9
(together with all amendments and supplements thereto and including the exhibits
thereto, the "Schedule 14D-9") which shall, subject to the provisions of Section
4.02, contain the recommendation referred to in clause (iii) of Section 1.02(a)
hereof. The Company represents and warrants to Parent and Purchaser that the
Schedule 14D-9 will comply in all material respects with the provisions of
applicable federal securities laws and, on the date filed with the SEC and on
the date first published, sent or given to the Company's stockholders, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by the Company with respect to
information furnished by Parent or Purchaser for inclusion in the Schedule
14D-9. Parent and Purchaser jointly and severally represent and warrant to the
Company that the information supplied in writing by Parent and Purchaser for
inclusion in the Schedule 14D-9 will not contain any untrue statement of
material fact or omit to state such material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which such statement was made, not misleading. The Company
further agrees to take all steps necessary to cause the Schedule 14D-9 to be
filed with the SEC and to be disseminated to holders of the Shares, in each case
as and to the extent required by applicable federal securities laws. Each of the
Company, on the one hand, and Parent and Purchaser, on the other hand, agrees
promptly to correct any information provided by it for use in the Schedule 14D-9
if and to the extent that it shall have become false and misleading in any
material respect and the Company further agrees to take all steps necessary to
cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be
disseminated to holders of the Shares, in each case as and to the extent
required by applicable federal securities laws. Parent and its outside counsel
shall be given the opportunity to review the Schedule 14D-9 before it is filed
with the SEC. In addition, the Company agrees to provide Parent, Purchaser and
their outside counsel with any comments, whether written or oral, that the
Company or its outside counsel may receive from time to time from the SEC or its
staff with respect to the Schedule 14D-9 promptly after the receipt of such
comments.
(c) In connection with the Offer, the Company will promptly furnish or
cause to be furnished to Purchaser mailing labels, security position listings
and any available listing or computer file containing the names and addresses of
all recordholders of the Shares as of a recent date, and shall furnish Purchaser
with such additional information (including, but not limited to, updated lists
of holders of the Shares and their addresses, mailing labels and lists of
security positions) and assistance as Purchaser or its agents may reasonably
request in communicating the Offer to the record
4
and beneficial holders of the Shares. Except for such steps as are necessary to
disseminate the Offer Documents, Parent and Purchaser shall hold in confidence
the information contained in any of such labels and lists and the additional
information referred to in the preceding sentence, will use such information
only in connection with the Offer, and, if this Agreement is terminated, will
upon request of the Company deliver or cause to be delivered to the Company all
copies of such information, labels, listings and files then in its possession or
the possession of its agents or representatives.
Section 1.03 Directors. Promptly upon the purchase of and payment for any
Shares by Parent or Purchaser pursuant to the Offer, Parent shall be entitled to
designate such number of directors, rounded up to the next whole number, on the
Company Board as is equal to the product of (x) the total number of directors on
the Company Board (giving effect to the election of the directors designated by
Parent pursuant to this sentence) and (y) the percentage that the number of
Shares so accepted for payment bears to the total number of Shares then
outstanding. In furtherance thereof, the Company shall, upon request of Parent,
use its reasonable best efforts promptly either to increase the size of the
Company Board or to secure the resignations of such number of its incumbent
directors, or both, as is necessary to enable Parent's designees to be so
elected to the Company Board, and shall take all actions available to the
Company to cause Parent's designees to be so elected. At such time, the Company
shall also cause persons designated by Parent to have appropriate representation
on each committee of the Company Board. The Company shall promptly take all
actions required pursuant to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder in order to fulfill its obligations under this Section
1.03, including mailing to stockholders (as part of the Schedule 14D-9 or
otherwise) the information required by such Section 14(f) and Rule 14f-1 as is
necessary to enable Parent's designees to be elected to the Company Board
(provided that Purchaser shall have provided to the Company on a timely basis
all information required to be included with respect to Purchaser's designees).
Parent shall supply to the Company in writing, and be solely responsible for,
any information with respect to itself and its nominees, officers, directors and
affiliates required by the aforementioned Section 14(f) and Rule 14f-1. In the
event that Parent's designees are elected to the Company Board, until the
Effective Time (as hereinafter defined), the Company Board shall have at least
three directors who are directors on the date hereof (the "Original Directors");
provided that, in such event, if the number of Original Directors shall be
reduced below three for any reason whatsoever, any remaining Original Directors
(or Original Director, if there be only one remaining) shall be entitled to
designate persons to fill such vacancies who shall be deemed to be Original
Directors for purposes of this Agreement or, if no Original Director then
remains, the other directors shall designate three persons to fill such
vacancies who shall not be stockholders, affiliates or associates of Parent or
Purchaser, and such persons shall be deemed to be Original Directors for
purposes of this Agreement. Notwithstanding anything in this Agreement to the
contrary, in the event that Parent's designees are elected to the Company Board
prior to the Effective Time, the affirmative vote of a majority of the Original
Directors shall be required for the Company to (a) amend or terminate this
Agreement or agree or consent to any amendment or termination of this Agreement,
(b) exercise or waive any of the Company's rights, benefits or remedies
hereunder, (c) extend the time for performance of Parent's and Purchaser's
respective
5
obligations hereunder, (d) take any other action by the Company Board under or
in connection with this Agreement, or (e) approve any other action by the
Company which could adversely affect the interests of the stockholders of the
Company (other than Parent, Purchaser and their affiliates (other than the
Company and its Subsidiaries)), with respect to the Transactions.
Section 1.04 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and, in accordance with the Delaware General
Corporation Law (the "DGCL"), the Company and Purchaser shall consummate a
merger (the "Merger") pursuant to which (a) Purchaser shall be merged with and
into the Company and the separate corporate existence of Purchaser shall
thereupon cease, (b) the Company shall be the successor or surviving corporation
in the Merger (sometimes hereinafter referred to as the "Surviving Corporation")
and shall continue to be governed by the laws of the State of Delaware, and (c)
the separate corporate existence of the Company with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger,
except as set forth in this Section 1.04. Pursuant to the Merger, (x) the
Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time (as hereinafter defined), shall be the certificate of
incorporation of the Surviving Corporation until thereafter amended as provided
by law and such certificate of incorporation, and (y) the by-laws of Purchaser,
as in effect immediately prior to the Effective Time, shall be the by-laws of
the Surviving Corporation until thereafter amended as provided by law, by such
certificate of incorporation or by such by-laws. The Merger shall have the
effects set forth in Section 259 of the DGCL.
Section 1.05 Closing. The closing of the Merger (the "Closing") shall take
place at 10:00 a.m. on a date to be specified by the parties (the "Closing
Date"), which shall be no later than the fifth business day after satisfaction
or waiver of all the conditions set forth in Article VI, unless another time or
date is agreed to by the parties hereto. The Closing will be held at the offices
of Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, New
York, 10036 or at such other location as is agreed to by the parties.
Section 1.06 Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on the Closing Date, the parties shall file a certificate
of merger (the "Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and shall make all other filings or recordings required
under the DGCL to effectuate the Merger. The Merger shall become effective at
such time as the Certificate of Merger is duly filed with the Secretary of State
of the State of Delaware or at such other subsequent date or time as is agreed
upon by the parties and specified in the Certificate of Merger, such time being
referred to herein as the "Effective Time."
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Section 1.07 Directors and Officers. The directors of Purchaser and the
officers of the Company at the Effective Time shall, from and after the
Effective Time, be the directors and officers, respectively, of the Surviving
Corporation until their successors shall have been duly elected or appointed or
qualified or until their earlier death, resignation or removal in accordance
with the certificate of incorporation and by-laws of the Surviving Corporation.
Section 1.08 Stockholders' Meeting; Proxy Statement.
(a) If required by applicable law in order to consummate the Merger,
the Company, acting through its Board of Directors, shall, in accordance with
applicable law:
(i) duly call, give notice of, convene and hold a special meeting
of its stockholders (the "Company Stockholders Meeting") as promptly as
practicable following the acceptance for payment and purchase of Shares by
Purchaser pursuant to the Offer for the purpose of considering and taking
action upon the approval of the Merger and the adoption of this Agreement;
(ii) prepare and file with the SEC a preliminary proxy or
information statement relating to the Merger and this Agreement and use all
reasonable efforts to obtain and furnish the information required to be
included by the SEC in the Proxy Statement (as hereinafter defined) and,
after consultation with Parent, to respond promptly to any comments made by
the SEC with respect to the preliminary proxy or information statement and
cause a definitive proxy or information statement, including any amendment
or supplement thereto (the "Proxy Statement"), to be mailed to its
stockholders, provided that no amendment or supplement to the Proxy
Statement will be made by the Company without consultation with Parent and
its outside counsel;
(iii) include in the Proxy Statement the recommendation of the
Company Board that stockholders of the Company vote in favor of the
approval of the Merger and the adoption of this Agreement; and
(iv) use commercially reasonable efforts to solicit from holders
of Shares proxies in favor of the Merger and shall take such other actions
that are reasonably necessary or advisable to secure any vote or consent of
stockholders required by Delaware law, the Company's certificate of
incorporation or bylaws, or applicable law to effect the Merger.
(b) Parent will provide the Company with the information concerning
Parent and Purchaser required to be included in the Proxy Statement. Parent
shall vote, or cause to be voted, all of the Shares then owned by it, Purchaser
or any of its
7
other subsidiaries or affiliates controlled by Parent in favor of the approval
of the Merger and the approval and adoption of this Agreement.
Section 1.09 Merger Without Meeting of Stockholders. Notwithstanding
Section 1.08, in the event that Parent, Purchaser and any other subsidiaries of
Parent shall acquire in the aggregate a number of the outstanding shares of each
class of capital stock of the Company, pursuant to the Offer or otherwise,
sufficient to enable Purchaser or the Company to cause the Merger to become
effective without a meeting of stockholders of the Company, the parties hereto
shall, subject to Article IV, take all necessary and appropriate action to cause
the Merger to become effective as soon as practicable after such acquisition,
without a meeting of stockholders of the Company, in accordance with Section 253
of the DGCL.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 2.01 Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any further action on the part of the holders of any
Shares or holders of common stock, par value $.01 per share, of Purchaser (the
"Purchaser Common Stock"):
(a) Capital Stock of Purchaser. Each issued and outstanding share of
Purchaser Common Stock shall be converted into and become one validly issued,
fully paid and nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock. Each Share held in the Company's
treasury or by any of the Company's subsidiaries, Parent or any of Parent's
subsidiaries shall automatically be cancelled and retired and shall cease to
exist, and no consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Each Share issued and
outstanding immediately prior to the Effective Time (other than Shares to be
cancelled in accordance with Section 2.01(b) and other than any Dissenting
Shares (as hereinafter defined)) shall be converted into the right to receive
the Offer Price, payable to the holder thereof, without interest (the "Merger
Consideration"), upon surrender of the certificate formerly representing such
Share in the manner provided in Section 2.02. As of the Effective Time, all such
Shares shall no longer be outstanding and shall automatically be cancelled and
retired and shall cease to exist, and each holder of a certificate representing
any such Shares shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration therefor, without interest or
dividends, upon the surrender of such certificate in accordance with Section
2.02.
8
Section 2.02 Exchange of Certificates.
(a) Exchange Agent. Parent shall designate a bank or trust company
reasonably satisfactory to the Company to act as agent for the holders of the
Shares in connection with the Merger (the "Exchange Agent") to receive in trust
the funds to which holders of the Shares shall become entitled pursuant to
Section 2.01(c). At the Effective Time, Parent or Purchaser shall deposit, or
cause to be deposited, with the Exchange Agent for the benefit of holders of
Shares the aggregate consideration to which such holders shall be entitled at
the Effective Time pursuant to Section 2.01(c). Such funds shall be invested as
directed by Parent or the Surviving Corporation pending payment thereof by the
Exchange Agent to holders of the Shares.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent shall cause the Exchange Agent to mail to each holder of
record of a certificate or certificates, which immediately prior to the
Effective Time represented outstanding Shares (the "Certificates"), whose Shares
were converted pursuant to Section 2.01 into the right to receive the Merger
Consideration, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions not inconsistent with this Agreement as
Parent and the Company may reasonably specify) and (ii) instructions for use in
surrendering the Certificates in exchange for payment of the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Exchange
Agent and such other documents as may reasonably by required by the Exchange
Agent, together with such letter of transmittal, duly executed, the holder of
such Certificate shall be entitled to receive in exchange therefor the Merger
Consideration for each Share formerly represented by such Certificate, and the
Certificate so surrendered shall forthwith be cancelled. If payment of the
Merger Consideration is to be made to a person other than the person in whose
name the surrendered Certificate is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer and that the person requesting such
payment shall have paid any transfer and other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered holder
of the Certificate surrendered or shall have established to the satisfaction of
the Surviving Corporation that such tax either has been paid or is not
applicable. No interest will be paid or will accrue on the cash payable upon the
surrender of any Certificate. Until surrendered as contemplated by this Section
2.02, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive the Merger Consideration in cash as
contemplated by this Section 2.02.
(c) Transfer Books; No Further Ownership Rights in the Shares. All
cash paid upon the surrender of Certificates in accordance with the terms of
this Article II shall be deemed to have been paid in full satisfaction of all
rights pertaining to those Shares theretofore represented by the Certificate. At
the Effective Time, the stock transfer books of the Company shall be closed, and
thereafter there shall be no further registration of transfers of the Shares on
the records of the Company. From and after the Effective Time, the holders of
Certificates evidencing ownership of the Shares
9
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such Shares, except as otherwise provided for herein or
by applicable law. If, after the Effective Time, Certificates are presented to
the Surviving Corporation for any reason, they shall be cancelled and exchanged
as provided in this Article II.
(d) Termination of Fund; No Liability. At any time following six
months after the Effective Time, the Surviving Corporation shall be entitled to
require the Exchange Agent to deliver to it any funds (including any earnings
received with respect thereto) which had been made available to the Exchange
Agent and which have not been disbursed to holders of Certificates, and
thereafter such holders shall be entitled to look only to the Surviving
Corporation (subject to abandoned property, escheat or other similar laws) and
only as general creditors thereof with respect to the Merger Consideration
payable upon due surrender of their Certificates, without any interest or
dividends thereon. Notwithstanding the foregoing, none of the Surviving
Corporation, Parent, Purchaser or the Exchange Agent shall be liable to any
holder of a Certificate for Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
Certificates shall not have been surrendered prior to seven years after the
Effective Time (or immediately prior to such earlier date on which any payment
pursuant to this Article II would otherwise escheat to or become the property of
any Governmental Entity (as hereinafter defined)), the cash payment in respect
of such Certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interests
of any person previously entitled thereto.
(e) Lost, Stolen or Destroyed Certificates. In the event any
Certificates will have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate(s) to be lost,
stolen or destroyed and, if required by Parent, the posting by such person of a
bond in such sum as Parent may reasonably direct as indemnity against any claim
that may be made against it or the Surviving Corporation with respect to such
Certificate(s), the Exchange Agent will issue the Merger Consideration pursuant
to Section 2.02(b) deliverable in respect of the Shares represented by such
lost, stolen or destroyed Certificates.
(f) Withholding Taxes. Parent and Purchaser will be entitled to deduct
and withhold, or cause the Exchange Agent to deduct and withhold, from the Offer
Price or the Merger Consideration payable to a holder of Shares pursuant to the
Offer or the Merger any such amounts as are required under the Internal Revenue
Code of 1986, as amended (the "Code"), or any applicable provision of state,
local or foreign tax law. To the extent that amounts are so withheld by Parent
or Purchaser, such withheld amounts will be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in respect of which
such deduction and withholding was made by Parent or Purchaser.
Section 2.03 Dissenting Shares. Notwithstanding any provision of this
Agreement to the contrary, any Shares as to which the holder thereof has
properly demanded appraisal with respect to the Merger in accordance with
Section 262 of the DGCL, otherwise has complied with all of the provisions of
the DGCL concerning the
10
right of holders of Shares to require appraisal of their Shares, and as of the
Effective Time has neither effectively withdrawn nor lost his right to such
appraisal (the "Dissenting Shares") shall not be converted into or represent a
right to receive cash pursuant to Section 2.01, but the holder thereof shall be
entitled to only such rights as are granted by the DGCL.
(a) Notwithstanding the provisions of Section 2.03(a), if any holder
of Shares who demands appraisal of his Shares under the DGCL effectively
withdraws or loses (through failure to perfect or otherwise) such holder's right
to appraisal, then as of the Effective Time or the occurrence of such event,
whichever later occurs, such holder's Shares shall automatically be converted
into and represent only the right to receive the Merger Consideration as
provided in Section 2.01(c), without interest or dividends, upon surrender of
the Certificate or Certificates representing such Shares pursuant to Section
2.02.
(b) The Company shall give Parent (i) prompt notice of any written
demands for appraisal or payment of the fair value of any Shares, withdrawals of
such demands, and any other instruments served on the Company pursuant to the
DGCL and received by the Company and (ii) the opportunity to participate in and
direct all negotiations and proceedings with respect to demands for appraisal
under the DGCL. Except with the prior written consent of Parent, the Company
shall not voluntarily make any payment with respect to any demands for
appraisal, settle or offer to settle any such demands.
Section 2.04 Company Stock Option Plans
(a) The Company shall take all actions necessary or appropriate to
provide that each outstanding option to purchase shares of Company Common Stock
(a "Company Stock Option") granted under any stock option or stock purchase
plan, program or agreement to which the Company or any of its subsidiaries is a
party which is outstanding immediately prior to the consummation of the Offer,
whether or not then exercisable, shall be cancelled as of the consummation of
the Offer and the holder thereof shall be entitled only to the right to receive
an amount in cash payable at the time of cancellation of such Company Stock
Option equal to the product of (A) the excess, if any, of (x) the Offer Price
over (y) the per share exercise price of such Company Stock Option multiplied by
(B) the number of shares of Company Common Stock subject to such Company Stock
Option. Such cash payment shall be subject to and reduced by all applicable
federal, state and local Taxes to be withheld in respect of such payment. The
surrender of an Option in exchange for the consideration contemplated by this
Section 2.04(a) shall be deemed a release of any and all rights the Option
Holder had or may have had in respect thereof.
(b) The Company shall take all actions necessary to provide that, upon
the consummation of the Offer, (i) the Company Stock Option Plans and any
similar plan or agreement of the Company shall be terminated, (ii) any rights
under any other plan, program, agreement or arrangement to the issuance or grant
of any other interest in respect of the capital stock of the Company or the
Company Subsidiary shall
11
be terminated, and (iii) no holder of any Company Stock Option will have any
right to receive any shares of capital stock of the Company or, if applicable,
the Surviving Corporation, upon exercise of any Company Stock Option. The Board
of Directors of the Company (or an appropriate committee thereof) has adopted
resolutions which provide that, effective as of the consummation of the Offer
(i) the Company Stock Option Plans (and any similar plan or agreement of the
Company which provides for the grant of options to purchase Shares) shall be
terminated; (ii) any rights under the Company Stock Options shall be cancelled
in accordance with the provisions of Section 2.04(a); and (iii) no holder of any
Company Stock Option will have any right to receive any shares of capital stock
of the Company or, if applicable, the Surviving Corporation, upon exercise of
any Company Stock Option.
Section 2.05 Further Assurances. If at any time after the Effective Time
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the constituent corporations, or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either of the constituent corporations, all such deeds, bills of sale,
assignments and assurances and to do, in the name and on behalf of either
constituent corporation, all such other acts and things as may be necessary,
desirable or proper to vest, perfect or confirm the Surviving Corporation's
right, title or interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of such constituent corporation and otherwise
to carry out the purposes of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Company Except as set
forth on the Disclosure Schedule delivered by the Company to Parent concurrently
with the execution of this Agreement (the "Company Disclosure Schedule"), the
Company represents and warrants to Parent as follows:
(a) Organization, Standing and Corporate Power. Each of the Company
and the Company Subsidiary (as defined in Section 3.01(b)) is a corporation or
other legal entity duly organized, validly existing and in good standing (with
respect to jurisdictions which recognize such concept) under the laws of the
jurisdiction in which it is organized and has the requisite corporate or other
power, as the case may be, and authority to carry on its business as now being
conducted, except, for those jurisdictions where the failure to be so organized,
existing or in good standing individually or in the aggregate would not have a
material adverse effect (as defined in Section 8.03) on the Company. Each of the
Company and the Company Subsidiary is duly qualified or
12
licensed to do business and is in good standing (with respect to jurisdictions
which recognize such concept) in each jurisdiction in which the nature of its
business or the ownership, leasing or operation of its properties makes such
qualification or licensing necessary, except for those jurisdictions where the
failure to be so qualified or licensed or to be in good standing would not have,
individually or in the aggregate, a material adverse effect on the Company. The
Company has made available to Parent prior to the execution of this Agreement
complete and correct copies of its certificate of incorporation and by-laws (or
similar organizational documents) of the Company and the Company Subsidiary.
(b) Subsidiaries. As of the date of this Agreement, Official Payments
UK, Ltd. (the "Company Subsidiary") is the only subsidiary of the Company and,
except in connection with activities relating to its organization, has had no
operating activities from the time of organization until the date of this
Agreement. All of the outstanding share capital of the Company Subsidiary (i)
has been validly issued and is fully paid and nonassessable, (ii) is owned
directly by the Company, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens") and (iii) is free of any other restriction (including
any restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests).
(c) Capital Structure. The authorized capital stock of the Company
consists of 150,000,000 shares of Company Common Stock, par value $.01 per
share. As of May 15, 2002: (i) 22,932,876 shares of Company Common Stock were
issued and outstanding and (ii) no shares of Company Common Stock were held by
the Company in its treasury or by the Company Subsidiary. At the close of
business on May 15, 2002: 8,900,000 shares of Company Common Stock were reserved
for issuance in the aggregate pursuant to the Official Payments Corporation 1999
Stock Incentive Plan and the Official Payments Corporation 2000 Stock Incentive
Plan (collectively, the "Company Stock Option Plans"), of which 5,765,172 shares
were subject to outstanding Company Stock Options. Section 3.01(c) of the
Company Disclosure Schedule sets forth a true, correct and complete list, as of
May 15, 2002, of each outstanding option to purchase shares of Company Common
Stock issued under any Company Stock Option Plan (collectively, the "Company
Stock Options"), including the holder, date of grant, exercise price and number
of shares of Company Common Stock subject thereto and whether the option is
vested and exercisable. All outstanding shares of capital stock of the Company
are, and all shares which may be issued will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. Except as set forth in this Section 3.01(c), except for changes since
May 15, 2002 resulting from the issuance of shares of Company Common Stock or
Company Stock Options pursuant to the Company Stock Option Plans as permitted by
Section 4.01(b), (x) there are not issued, reserved for issuance or outstanding
(A) any shares of capital stock or other voting securities of the Company, (B)
any securities of the Company convertible into or exchangeable or exercisable
for shares of capital stock or voting securities of the Company and (C) any
warrants, calls, or options to acquire from the Company, or obligation of the
Company to issue, any capital stock, voting securities or securities convertible
into or exchangeable or exercisable for capital stock or voting
13
securities of the Company, and (y) there are no outstanding obligations of the
Company to repurchase, redeem or otherwise acquire any such securities or to
issue, deliver or sell, or cause to be issued, delivered or sold, any such
securities. The Company is not a party to any voting agreement with respect to
the voting of any such securities. Other than the Company Subsidiary, the
Company does not directly or indirectly beneficially own any securities or other
beneficial ownership interests in any other entity.
(d) Authority; Noncontravention. The Company has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and, subject, in the case of the Merger, to the Company
Stockholder Approval (as defined in Section 3.01(l)), to consummate the
Transactions. The execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the Transactions have been duly
authorized by all necessary corporate action on the part of the Company,
subject, in the case of the Merger, to the Company Stockholder Approval. This
Agreement has been duly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by Parent and Purchaser, constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms. The execution and delivery of this
Agreement does not, and the consummation of the Transactions and compliance with
the provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of a benefit under, require the consent of any third
party, or result in the creation of any Lien upon any of the properties or
assets of the Company under, (i) the certificate of incorporation or by-laws of
the Company, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
lease Contract or other contract, instrument, permit, or license to which the
Company is a party or by which the Company or the Company's properties or assets
is bound or affected or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or the
Company's properties or assets, other than, (A) in the case of clauses (ii) and
(iii), any such conflicts, violations, defaults, rights, losses or Liens that,
individually or in the aggregate, would not (x) have a material adverse effect
on the Company or (y) reasonably be expected to materially impair or delay the
ability of the Company to perform its obligations under this Agreement and (B)
in the case of clause (ii), any consents, violations or rights of termination
that arise in connection with the Company's agreements with municipal or county
Governmental Entities other than those Governmental Entities listed in Section
3.01(p) of the Company Disclosure Schedule (the "Significant Local Clients"). No
consent, approval, order or authorization of, action by, or in respect of, or
registration, declaration or filing with, any federal, state, local or foreign
government, any court, administrative, regulatory or other governmental agency,
commission or authority or any non-governmental U.S. or foreign self-regulatory
agency, commission or authority or any arbitral tribunal (each, a "Governmental
Entity") is required by the Company in connection with the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the Transactions, except for: (1) the filing with the SEC of (A) the Schedule
14D-9 and, if applicable, the Proxy Statement, and (B) such reports under
Section 13(a), 13(d), 15(d) or 16(a) of the Exchange Act, as may be required in
connection with this Agreement and the
14
Transactions; (2) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business and
such filings with Governmental Entities to satisfy the applicable requirements
of state securities or "blue sky" laws; (3) the filing of a pre-merger
notification and report form under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act), and the expiration or termination of the
waiting period thereunder and the filing of comparable pre-merger notifications
in non-U.S. jurisdictions, if applicable, and the expiration of any waiting
periods thereunder; (4) such consents, approvals, orders or authorizations the
failure of which to be made or obtained, individually or in the aggregate, would
not (x) have a material adverse effect on the Company or (y) reasonably be
expected to materially impair or delay the ability of the Company to perform its
obligations under this Agreement; and (5) consents from or notices to any
municipal or county Governmental Entity solely in a contractual capacity as
clients of the Company other than the Significant Local Clients.
(e) Reports; Financial Statements. The Company has timely filed all
required reports, schedules, forms, statements and other documents (including
exhibits and all other information incorporated therein) with the SEC since
January 1, 2000 (the "Company SEC Documents"). As of their respective dates or
if amended, as of the date of the last such amendment, the Company SEC Documents
complied in all material respects with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such Company SEC Documents, and none of the Company SEC Documents when filed
or if amended, as of the date of the last such amendment (as supplemented by
subsequently filed Company SEC Documents) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Company SEC Documents comply as to
form, as of their respective dates of filing with the SEC or if amended, as of
the date of the last such amendment, in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present in
all material respects the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal recurring year-end audit adjustments).
Except (A) as reasonably reflected in such financial statements or in the notes
thereto, (B) for liabilities incurred in connection with this Agreement or the
Transactions, a reasonable estimate of which has been disclosed to Parent by
Company, or (C) for liabilities incurred in the ordinary course of business
since the respective dates of such financial statements, neither the Company nor
any of its subsidiaries has any undisclosed liabilities or obligations of any
nature, whether accrued, absolute or contingent, required by GAAP to
15
be reflected on a balance sheet or disclosed in the notes thereto, which would
have, individually or in the aggregate, a material adverse effect on the
Company.
(f) Information Supplied. In addition to the representations and
warranties of the Company contained in Sections 1.01(b) and 1.02(b), the Proxy
Statement, if any, will, at the date it is first mailed to the Company's
stockholders or at the time of the Company Stockholders Meeting, not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading, except
that no representation or warranty is made by the Company with respect to
information that Parent or Purchaser supplied to them for inclusion therein or
for incorporation by reference therein. The Proxy Statement will comply as to
form in all material respects with the requirements of the Exchange Act and the
rules and regulations thereunder.
(g) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement or the Transactions, as permitted
under Section 4.01 hereof or as set forth in the Company Disclosure Schedule,
since December 31, 2001, the Company has conducted its business only in the
ordinary course, and there has not been (1) any material adverse change in the
Company, (2) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of the
Company's capital stock, (3) any split, combination or reclassification of any
of the Company's capital stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for shares of the Company's capital stock, except for issuances of Company
Common Stock under the Company Stock Option Plans, (4) (A) any granting by the
Company to any director or executive officer of the Company of any increase in
compensation, bonus or other benefits, except for normal increases in the
ordinary course of business or in connection with the hiring or promotion of any
such executive officer or increases required under any employment agreements in
effect as of the date of the most recent audited financial statements included
in the Company SEC Documents filed and publicly available prior to the date of
this Agreement (as amended to the date of this Agreement, the "Company Filed SEC
Documents"), (B) any granting by the Company to any such director or executive
officer of any increase in severance or termination pay, except in the ordinary
course of business or in connection with the hiring or promotion of any such
executive officer, or (C) any entry by the Company into, or any amendment of,
any employment, deferred compensation, consulting, severance, termination or
indemnification agreement with any such director or executive officer, other
than in the ordinary course of business or in connection with the hiring or
promotion of any such executive officer, (5) any change in accounting methods,
principles or practices by the Company materially affecting its assets,
liabilities or business, (6) any tax election that individually or in the
aggregate would reasonably be expected to have a material adverse effect on the
Company or any of its tax attributes or any settlement or compromise of any
material income tax liability, (7) any incurrence of a material liability or
obligation, whether direct, indirect, or contingent, outside of the ordinary
course of business or as otherwise reflected in the most recent interim
financial statements included in the
16
Company Filed SEC Documents or the April 2002 interim financial statements
delivered by the Company to Purchaser or (8) any agreement to do any of the
foregoing.
(h) Compliance with Applicable Laws; Litigation. The Company holds all
permits, licenses, variances, exemptions, orders, registrations and approvals of
all Governmental Entities which are required for the operation of the business
of the Company as currently conducted (collectively, the "Company Permits"),
except where the failure to have any such Company Permits would not have,
individually or in the aggregate, a material adverse effect on the Company. The
Company is in compliance with the terms of the Company Permits and all
applicable statutes, laws, ordinances, rules and regulations, except where the
failure so to comply would not have, individually or in the aggregate, a
material adverse effect on the Company. As of the date of this Agreement, no
action, demand, suspension, requirement or investigation by any Governmental
Entity and no suit, action or proceeding by any person, in each case with
respect to the Company or any of the Company's assets, properties or business,
or to the knowledge of the Company, against or involving any of the present or
former directors, officers, employees, consultants or agents of the Company with
respect to the Company, is pending or, to the knowledge (as defined in Section
8.03) of the Company, threatened, other than, in each case, those the outcome of
which, individually or in the aggregate, would not (i) have a material adverse
effect on the Company or (ii) reasonably be expected to materially impair or
delay the ability of the Company to perform its obligations under this
Agreement.
(i) Benefit Plans. Section 3.01(i) of the Company Disclosure Schedule
contains a true and complete list of all employee benefit plans, material
policies and practices (whether or not subject to ERISA) applicable to the
Company and the Company Subsidiary, including each bonus, pension, profit
sharing, deferred compensation, incentive compensation, commission, stock
ownership, stock purchase, stock option, phantom stock, stock appreciation right
or other stock-based compensation, retirement, vacation, severance, disability,
death benefit, hospitalization, medical, life insurance or other insurance plan,
or other benefit plan, and each employment, retention, consulting, change in
control, termination or severance agreement providing benefits to any current or
former employee, officer or director of the Company, in each case that is
maintained, sponsored or contributed to by the Company, any subsidiary, or any
trade or business, whether or not incorporated (an "ERISA Affiliate"), which
together with the Company would be deemed to be a single employer within the
meaning of Section 4001(b) of ERISA (collectively, the "Company Benefit Plans").
Except as set forth in Section 3.01(i) of the Company Disclosure Schedule, no
current or former employee, officer, consultant or director of the Company or
the Company Subsidiary will be entitled to any additional compensation or
benefits or any acceleration of the time of payment or vesting or any other
enhancement of any compensation or benefits under any Company Benefit Plan as a
result of the Transactions.
(j) ERISA Compliance.
(i) With respect to the Company Benefit Plans, no event has
occurred and, to the knowledge of the Company, there exists
17
no condition or set of circumstances, in connection with which the Company
or the Company Subsidiary could be subject to any liability under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the
Code, or any other applicable law that would have, individually or in the
aggregate, a material adverse effect on the Company.
(ii) Each Company Benefit Plan has been operated and administered
in accordance with its terms, except for any failures that would not have,
individually or in the aggregate, a material adverse effect on the Company.
The Company Benefit Plans are in compliance with the applicable provisions
of ERISA, the Code and all other applicable laws, except for any failures
to be in such compliance that would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the Company.
Each Company Benefit Plan that is intended to be qualified under Section
401(a) or 501(c)(9) of the Code has received a favorable determination
letter from the IRS to such effect and no such letter has been revoked. To
the knowledge of the Company, no fact or event has occurred since the date
of any determination letter from the IRS which is reasonably likely to
affect adversely such favorable determination or the operation of the
Benefit Plan, except for any occurrence that would not have, individually
or in the aggregate, a material adverse effect on the Company.
(iii) Except as any of the following either would not have,
individually or in the aggregate, a material adverse effect on the Company,
(x) none of the Company, the Company Subsidiary or any ERISA Affiliate has
incurred any liability under Title IV of ERISA or other applicable law that
has not been paid and no condition exists that presents a risk to the
Company, or the Company Subsidiary, or ERISA Affiliate of the Company of
incurring any such liability (other than liability for benefits or premiums
to the Pension Benefit Guaranty Corporation arising in the ordinary
course), (y) no Company Benefit Plan has incurred an "accumulated funding
deficiency" (within the meaning of Section 302 of ERISA or Section 412 of
the Code) whether or not waived and (z) to the knowledge of the Company,
there are not any facts or circumstances that would materially change the
funded status of any Company Benefit Plan that is a "defined benefit" plan
(as defined in Section 3(35) of ERISA) since the date of the most recent
actuarial report for such plan. No Company Benefit Plan is a "multiemployer
plan" within the meaning of Section 3(37) of ERISA.
(iv) Except for disallowances which would not reasonably be
expected to have a material adverse effect on the Company, the deduction of
any amount payable or benefit provided pursuant to the terms of the Benefit
Plans, or any other arrangement, obligation or agreement, whether written
or oral, or otherwise will not be subject to disallowance under Section
280G or 162(m) of the Code. No person is
18
entitled to receive any "gross-up" payment from the Company or the Company
Subsidiary, the Surviving Corporation or any other person in the event that
the excise tax of Section 4999(a) of the Code is imposed on such person.
(k) Taxes.
(i) Each of the Company and the Company Subsidiary has timely
filed (after giving effect to any extensions of time to file which were
obtained and have not expired) all material Tax (as defined below) returns
and Tax reports required to be filed by it and all such returns and reports
are complete and correct in all material respects, except to the extent
that such failures to file or to be complete or correct would not have,
individually or in the aggregate, a material adverse effect on the Company.
The Company and the Company Subsidiary has paid all Taxes shown as due on
such returns and all material Taxes for which no return was filed, and the
most recent financial statements contained in the Company Filed SEC
Documents reflect an adequate reserve in accordance with GAAP for all Taxes
payable by the Company or the Company Subsidiary for all taxable periods
and portions thereof accrued through the date of such financial statements.
(ii) No deficiencies for any Taxes have been proposed, asserted
or assessed against the Company or the Company Subsidiary that are not
adequately reserved for, except for deficiencies that individually or in
the aggregate would not have a material adverse effect on the Company. No
examination or audit of any Tax Return of the Company by any Governmental
Entity is currently in progress and the Company has not received any
written notice that any such exam or audit is pending or threatened.
(iii) Neither the Company, the Company Subsidiary nor, to the
knowledge of the Company, any affiliated, consolidated, combined or unitary
group of which the Company is now or ever was a member, has waived any
statute of limitations or agreed to any extension of time within which to
file any Tax return, which such statute of limitations has not expired or
Tax return has not since been timely filed, except for waivers and
extensions that individually or in the aggregate would not have a material
adverse effect on the Company.
(iv) As used in this Agreement, "Taxes" shall include all
federal, state, local or foreign income, property, sales, gross receipts,
alternative or minimum, excise, use, occupation, service, transfer,
payroll, franchise, withholding and other taxes or similar governmental
charges, fees, levies or other assessments including any interest,
penalties or additions with respect thereto.
19
(l) Voting Requirements. Subject to the provisions of Section 253 of
the DGCL, the affirmative vote of the holders of a majority of the outstanding
shares of Company Common Stock at the Company Stockholders Meeting called to
adopt this Agreement (the "Company Stockholder Approval") is the only vote of
the holders of any class or series of the Company's capital stock necessary to
approve and adopt this Agreement and the transactions contemplated hereby.
(m) State Takeover Statutes. The Board of Directors of the Company has
approved this Agreement, the Stockholders Agreement and the consummation of the
Transactions and, assuming the accuracy of Parent's representation and warranty
contained in Section 3.02(d), such approval constitutes approval of the Merger,
the Offer and the other Transactions by the Board of Directors of the Company
under the provisions of Section 203 of the DGCL such that Section 203 of the
DGCL does not apply to the Merger, the Offer and the other Transactions. To the
knowledge of the Company, no other state takeover statute is applicable to the
Merger and the Transactions.
(n) Brokers. Except for CIBC World Markets Corp. ("CIBC"), no broker,
investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the Transactions based upon arrangements made by or on behalf of
the Company.
(o) Intellectual Property.
(i) The Company owns or has the valid right to use all U.S. and
foreign patents, trademarks, service marks, trade names, trade dress,
corporate names, domain names, copyrights, trade secrets, know-how and
other confidential or proprietary technical and business information,
inventions (patentable or unpatentable), processes, formulae and software
of any kind (including any and all documentation, information, materials,
licenses, other agreements or rights, or registrations or applications for
registration, relating to any of the foregoing), as well as all goodwill
symbolized by any of the foregoing (collectively, "Intellectual Property")
necessary to carry on the business of the Company substantially as
currently conducted (collectively, the "Company Intellectual Property"),
except as would not have, individually or in the aggregate, a material
adverse effect on the Company.
(ii) Except as would not have, individually or in the aggregate,
a material adverse effect on the Company: (i) the activities, products and
services of the Company do not infringe upon, to the knowledge of the
Company, the Intellectual Property of any other person or entity, or breach
the terms of any agreement with respect to the Company's right to use any
Company Intellectual Property; (ii) as of the date hereof, there are not
claims or suits pending or for which notice has been provided or, to the
knowledge of the Company, threatened (A) alleging that the Company's
activities, products or services infringe
20
upon or constitute the unauthorized use of any other person or entity's
Intellectual Property or (B) challenging the Company's ownership of, right
to use, or the validity or enforceability of any license or other agreement
relating to, any Company Intellectual Property; and (iii) to the knowledge
of the Company, there are no material infringements by third parties of any
Company Intellectual Property owned by the Company.
(iii) The consummation of the Merger and the other Transactions
will not result in the loss by the Company of any rights to Company
Intellectual Property, except as would not have, individually or in the
aggregate, a material adverse effect on the Company.
(p) Certain Contracts.
(i) Except for (x) agreements with municipal or county
Governmental Entities other than the Significant Local Clients and (y) the
agreements (the "Confidential Contracts") listed in Section 3.01(p) of the
Company Disclosure Schedule (the terms of which agreements are subject to
nondisclosure restrictions), the Company has made available to Parent
copies of each contract and agreement to which the Company or the Company
Subsidiary is a party that is material or by which any of its properties or
assets are bound that are material to the business, properties or assets of
the Company, including, without limitation, to the extent any of the
following are material to the business, properties or assets of the
Company: (i) employment, personal services, consulting, severance, golden
parachute or director, officer or employee indemnification agreements; (ii)
agreements with federal or state government clients to provide payment
services to citizens (the "Federal and State Clients"); (iii) partnership
or joint venture agreements; (iv) real property leases; (v) non-competition
agreements; (vi) contracts granting a right of first refusal or first
negotiation with respect to any material assets or line of business of the
Company; (vii) agreements for the acquisition, sale or lease of material
properties or assets of the Company (by merger, purchase or sale of assets
or stock or otherwise) entered into since January 1, 2000; (viii)
agreements with credit card organizations or banks relating to the
Company's acceptance of credit cards and the processing of credit card
transactions; or (ix) any commitments or agreements to enter into any of
the foregoing (collectively, with any such contracts entered into in
accordance with Section 4.01 hereof, the "Contracts").
(ii) (A) There is no default under any Contract or Confidential
Contract by the Company or, to the knowledge of the Company, by any other
party thereto, and no event has occurred that with the lapse of time or the
giving of notice or both would constitute a default thereunder by the
Company, or to the knowledge of the Company, any other party, in any such
case in which such default or event could reasonably be expected to have a
material adverse effect on the Company;
21
(B) no party to any such Contract or Confidential Contract has given notice
to the Company of or made a claim against the Company with respect to any
breach or default thereunder, in any such case in which such breach or
default could reasonably be expected to have a material adverse effect on
the Company; and (C) all of the Contracts and Confidential Contracts are
valid, binding and enforceable in accordance with their terms, except (1)
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or conveyance or other laws
or regulations affecting the enforcement of creditors' rights generally or
by equitable principles relating to enforceability (regardless of whether
considered in a proceeding at law or in equity) or (2) in such case where
it would not reasonably be expected to have a material adverse effect on
the Company. With respect to the Federal and State Clients and Contracts
with credit card organizations or banks relating to the Company's
acceptance of credit cards and the processing of credit card transactions,
to the knowledge of the Company, the Company has not received any notice
that any such entity intends to terminate or materially alter or limit its
business relationship with the Company. Convenience fees earned by the
Company in connection with processing payments for the Federal and State
Clients and the Significant Local Clients represent (1) twenty-five of the
top thirty clients of the Company and (2) in the aggregate, in excess of
80% of the Company's annual net revenues, in each case as determined by
reference to the Company's annual net revenues for the fiscal year ended
December 31, 2001. To the knowledge of the Company, its course of dealings
with Sacramento County, CA, Monterey County, CA, Sonoma County, CA and Los
Angeles Water and Power have been in the ordinary course, consistent with
other similar governmental entities.
(q) Transactions with Affiliates. As of the date hereof, (i) there are
no outstanding amounts payable to or receivable from, or advances by the Company
or Company Subsidiary to, and the Company is not otherwise a creditor or debtor
to, any stockholder, officer, director, employee or affiliate of the Company,
and (ii) neither the Company nor the Company Subsidiary is a party to any
transaction agreement, arrangement or understanding with any stockholder,
officer, director, employee or affiliate of the Company. To the knowledge of the
Company, no stockholder, officer, director, employee or affiliate of the Company
or the Company Subsidiary has any contract or arrangement with any customer or
supplier of the Company or the Company Subsidiary that affects in any material
manner the business, financial condition or results of operation of the Company.
(r) Labor Relations. The Company is not a party to any collective
bargaining or other labor union contract applicable to persons employed by the
Company and no collective bargaining agreement is being negotiated by the
Company. As of the date of this Agreement, there is no labor dispute, strike or
work stoppage against the Company pending or, to the knowledge of the Company,
threatened which may interfere with the respective business activities of the
Company, except where such
22
dispute, strike or work stoppage would not have, individually or in the
aggregate, a material adverse effect on the Company. As of the date of this
Agreement, to the knowledge of the Company, none of the Company or any of its
representatives or employees has committed any unfair labor practice in
connection with the operation of the respective businesses of the Company, and
there is no charge or complaint against the Company by the National Labor
Relations Board or any comparable governmental agency pending or threatened in
writing.
(s) Title to and Sufficiency of Assets.
(i) As of the date hereof, the Company and the Company Subsidiary
own, and as of the Effective Time the Company and the Company Subsidiary
will own, good and marketable title to all of their assets (excluding, for
purposes of this sentence, assets held under leases), free and clear of any
and all Liens, except as set forth in the Company SEC Documents filed with
the SEC prior to the date hereof and except where the failure to own such
title would not, individually or in the aggregate, have a material adverse
effect on the Company. Such assets, together with all assets held by the
Company and the Company Subsidiary under leases, licenses or contracts,
including all tangible and intangible personal property and rights
necessary or required for the operation of the businesses of the Company as
presently conducted, except for such assets, leases, licenses or contracts,
the failure to have would not, individually or in the aggregate, have a
material adverse effect on the Company.
(ii) Neither the Company nor the Company Subsidiary owns any real
property. Section 3.01(s) of the Company Disclosure Schedule sets forth a
list of all real property leased or subleased on behalf of the Company (the
"Leased Real Property"). With respect to the Leased Real Property, the
Company has not entered into any written sublease, license, option, right,
concession or other agreement or arrangement granting to any portion
thereof or interest therein, except as disclosed in Section 3.01(s) of the
Company Disclosure Schedule.
(t) Environmental Matters. The Company and the Company Subsidiary are
and have been in compliance with all applicable environmental Laws, have
obtained all Environmental Permits and are in compliance with their
requirements, and have resolved all past non-compliance with Environmental Laws
and Environmental Permits without any pending, on-going or future obligation,
cost or liability, except where such non-compliance, failure to obtain an
Environmental Permit or obligation, cost or liability would not, individually or
in the aggregate, have a material adverse effect on the Company. To the
knowledge of the Company, there are no circumstances that are reasonably likely
to prevent or interfere with such compliance in the future except where such
non-compliance would not, individually or in the aggregate, have a material
adverse effect on the Company. To the knowledge of the Company, there are no
past or present actions or activities, including, without limitation, the
release, emission, discharge or disposal of any Hazardous Substances at any site
presently or previously owned by the
23
Company or the Company Subsidiary in the conduct of their business that could
reasonably likely form the basis of any claim against the Company or the Company
Subsidiary under Environmental Laws, except for such claims as would not,
individually or in the aggregate, have a material adverse effect on the Company.
(u) Insurance. The Company and the Company Subsidiary carry or are
entitled to the benefits of insurance as the Company believes are in such
character and amount at least equivalent to that carried by persons engaged in
similar businesses and subject to the same or similar perils or hazards, except
for any such failures to maintain insurance policies that, individually or in
the aggregate, would not have a material adverse effect on the Company. The
Company has made, or caused to been made, any and all payments required to
maintain such policies in full force and effect, except where the failure to
make any such payments, in the aggregate, would not have a material adverse
effect on the Company.
(v) Opinion of Financial Advisor. The Company has received the opinion
of CIBC World Markets Corp., dated the date hereof, to the effect that, as of
such date, the Offer Price is fair from a financial point of view to the
stockholders of the Company; it being understood and acknowledged by Parent and
Purchaser that such opinion has been rendered for the benefit of the Company
Board and is not intended to, and may not, be relied upon by Parent, Purchaser,
their affiliates or their respective stockholders.
Section 3.02 Representations and Warranties of Parent. Parent represents
and warrants to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent and
Purchaser is a corporation or other legal entity duly organized, validly
existing and in good standing (with respect to jurisdictions which recognize
such concept) under the laws of the jurisdiction in which it is organized and
has the requisite corporate or other power, as the case may be, and authority to
carry on its business as now being conducted, except, as to Purchaser, for those
jurisdictions where the failure to be so organized, existing or in good standing
would not have, individually or in the aggregate, a material adverse effect on
Parent. Each of Parent and Purchaser is duly qualified or licensed to do
business and is in good standing (with respect to jurisdictions which recognize
such concept) in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such qualification or
licensing necessary, except for those jurisdictions where the failure to be so
qualified or licensed or to be in good standing would not have, individually or
in the aggregate, a material adverse effect on Parent. Parent has made available
to the Company prior to the execution of this Agreement complete and correct
copies of its and the Purchaser's certificate of incorporation and by-laws (or
similar organizational documents).
(b) Authority; Noncontravention. Each of Parent and Purchaser has all
requisite corporate power and authority to execute, deliver and perform its
obligation under this Agreement and to consummate the Transactions. The
execution, delivery and performance of this Agreement by Parent and Purchaser
and the
24
consummation by Parent and Purchaser of the Transactions have been duly
authorized by all necessary corporate action on the part of Parent and
Purchaser. This Agreement has been duly executed and delivered by Parent and
Purchaser and, assuming the due authorization, execution and delivery by the
Company, constitutes a legal, valid and binding obligation of Parent and
Purchaser, enforceable against Parent and Purchaser in accordance with its
terms. The execution and delivery of this Agreement does not, and the
consummation of the Transactions and compliance with the provisions of this
Agreement will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or loss of
a benefit under, or result in the creation of any Lien upon any of the
properties or assets of Parent or any of its subsidiaries under, (i) the
certificate of incorporation or by-laws (or similar organizational documents) of
Parent or Purchaser, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other contract, instrument, permit or license to which
Parent or any of its subsidiaries is a party or by which Parent, any of Parent's
subsidiaries or any of their respective properties or assets is bound or
affected, or (iii) subject to the governmental filings and other matters
referred to in the following sentence, any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Parent or any of its
subsidiaries or their respective properties or assets, other than, in the case
of clauses (ii) and (iii), any such conflicts, violations, defaults, rights,
losses or Liens that individually or in the aggregate would not (x) have a
material adverse effect on Parent or (y) reasonably be expected to materially
impair or delay the ability of Parent to perform its obligations under this
Agreement. No consent, approval, order or authorization of, action by, or in
respect of, or registration, declaration or filing with, any Governmental Entity
is required by Parent, Purchaser or any of their subsidiaries in connection with
the execution and delivery of this Agreement by Parent or Purchaser or the
consummation by Parent or Purchaser of the transactions contemplated hereby,
except for: (1) the filing with the SEC of (A) the Offer Documents, and (B) such
reports under Section 13(a), 13(d), 15(d) or 16(a) of the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated
hereby; (2) the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware and appropriate documents with the relevant authorities
of other states in which Parent is qualified to do business and such filings
with Governmental Entities to satisfy the applicable requirements of state
securities or "blue sky" laws; (3) the filing of a pre-merger notification and
report form by Parent under the HSR Act and the expiration or termination of the
waiting period thereunder and the filing of comparable pre-merger notifications
in non-U.S. jurisdictions, if applicable, and the expiration of any mandatory
waiting periods thereunder; and (4) such consents, approvals, orders or
authorizations the failure of which to be made or obtained individually or in
the aggregate would not (x) have a material adverse effect on Parent or (y)
reasonably be expected to materially impair or delay the ability of Parent or
Purchaser to perform its obligations under this Agreement.
(c) Information Supplied. In addition to the representations and
warranties of Parent and Purchaser contained in Sections 1.01(b) and 1.02(b),
none of the information supplied or to be supplied by Parent or Purchaser
specifically for inclusion or incorporation by reference in the Proxy Statement
will, at the date it is first mailed to the Company's stockholders or at the
time of the Company Stockholders
25
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
(d) Ownership of Company Common Stock. Neither Parent, Purchaser nor
any of their subsidiaries beneficially owns (as defined in Rule 13d-3 under the
Exchange Act) any Shares.
(e) Sufficient Funds. Parent has, and will make available to
Purchaser, sufficient funds to purchase all of the Shares outstanding at the
Offer Price.
(f) Brokers. Except for Adams, Harkness & Hill, Inc., no broker,
investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the Transactions based upon arrangements made by or on behalf of
Parent or Purchaser.
(g) No Prior Activities. Purchaser was formed solely for the purpose
of engaging in the transactions contemplated by this Agreement, has no
subsidiaries and has undertaken no business activities other than in connection
with entering into this Agreement and engaging in the transactions contemplated
by this Agreement.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.01 Conduct of Business of the Company. Except as set forth in
Section 4.01 of the Company Disclosure Schedule, except as otherwise expressly
permitted, required or contemplated by this Agreement or except as consented to
in writing by Parent (provided that with respect to clauses (l), (m), (n) and
(o) of this Section 4.01 such consent not to be unreasonably withheld or
delayed) during the period from the date of this Agreement to the earlier of the
Effective Time and the appointment or election of Parent's designees to the
Company Board pursuant to Section 1.03 (such earlier time, the "Control Time"),
the Company shall carry on its business in the ordinary course consistent with
past practice and in compliance in all material respects with all applicable
laws and regulations and, to the extent consistent therewith, use reasonable
best efforts to preserve intact its current business organization, to keep
available the services of its current officers and other current key employees
and to maintain satisfactory relationships with those Governmental Entities,
vendors, merchants and other persons having significant business dealings with
the Company. Without limiting the generality of the foregoing (but subject to
the above exceptions), during the period from the date of this Agreement to the
Control Time, the Company shall not and shall not permit the Company Subsidiary
to:
(a) (x) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, (y) split, combine or
reclassify
26
any of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, except for issuances of Company Common Stock upon the exercise of
Company Stock Options under the Company Stock Option Plans or in connection with
other awards under the Company Stock Option Plans outstanding as of the date
hereof in accordance with their present terms or issued pursuant to Section
4.01(b) or (z) except pursuant to agreements entered into with respect to the
Company Stock Option Plans, purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its subsidiaries or any other securities
thereof or any rights, warrants or options to acquire any such shares or other
securities;
(b) issue, deliver, sell, pledge or otherwise encumber or subject to
any Lien any shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to acquire, any
such shares, voting securities or convertible securities (other than: (i)
Company Stock Options granted under clause (y) below or; (ii) the issuance of
Company Common Stock upon (A) the exercise of Company Stock Options or (B) in
connection with other awards under the Company Stock Option Plans, which in the
case of either (A) or (B) are (x) outstanding as of the date hereof in
accordance with their present terms or (y) granted after the date hereof with
the written consent of Parent);
(c) amend its certificate of incorporation or by-laws;
(d) acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or
any person;
(e) sell, lease, license, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any of its properties or assets (including
securitizations), other than in the ordinary course of business consistent with
past practice;
(f) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise become responsible for
the obligations of any person, or make any loans, advances or capital
contributions to, or investments in, any person other than a wholly owned
subsidiary, except in the ordinary course of business consistent with past
practice;
(g) take, or agree to commit to take, any action that would or is
reasonably likely to result in any representation or warranty becoming untrue or
any of the conditions to the Offer set forth in Annex A or any of the conditions
to the Merger set forth in Article VI not being satisfied, or that would
materially impair the ability of the Company, Parent, Purchaser or the holders
of Shares to consummate the Offer or the Merger in accordance with the terms
hereof or materially delay such consummation;
(h) alter (through merger, liquidation, reorganization, restructuring
or in any other fashion) the corporate structure or ownership of the Company or
the Company Subsidiary;
27
(i) increase the compensation payable or to become payable to the
Company's or Company's Subsidiary directors, officers or employees or grant any
severance or termination pay to, or enter into any employment or severance
agreement with, any director, officer or employee of the Company or the Company
Subsidiary (except with respect to the payment of severance pay to
non-Continuing Employees to the extent permitted by Section 5.06(a)); or
establish, adopt, enter into, or, except as may be required to comply with
applicable law or as permitted under Section 2.04, amend in any material respect
or take action to enhance in any material respect or accelerate any rights or
benefits under, any labor, collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer or
employee, except in any such case as related to employees in the ordinary course
of business and to the extent such action or amendment does not (and is not
expected to) to result in increased expenses, costs or liabilities in excess of
$50,000 in the aggregate;
(j) knowingly violate or knowingly fail to perform, in any material
respect, any obligation or duty imposed upon the Company or the Company
Subsidiary by any applicable federal, state or local law, rule, regulation,
guideline or ordinance;
(k) make any change to accounting policies, practices or procedures
(other than actions required to be taken as a result of a change in law or
GAAP);
(l) prepare or file any material Tax Return inconsistent with past
practice or, on any such Tax Return, take any material position, make any
material election, or adopt any material method that is inconsistent with
positions taken, elections made or methods used in preparing or filing similar
Tax Returns in prior periods;
(m) settle or compromise any claims or litigation, including any
federal, state, local or foreign income tax dispute, where (i) the consideration
paid by the Company, in the aggregate, has a fair market value in excess of
$100,000 or (ii) there are potential criminal liabilities;
(n) other than in the ordinary course of business consistent with past
practice, enter into, terminate or materially amend any agreement or contract to
which the Company is a party (provided, however, that nothing in this Section
4.01 shall prevent the Company from renewing any existing contract with any
Governmental Entities), (i) having a remaining term in excess of six months and
(ii) which involves or is expected to involve future receipt or payment of
$100,000 or more during the term thereof, or waive, release or assign any
material rights or claims under any such agreement or contract; or purchase any
real property, or make or agree to make any new capital expenditure or
expenditures which in the aggregate exceed $100,000;
(o) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise) in excess
28
of $100,000, other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice and in accordance with their
terms, of any such claims, liabilities or obligations (in each case not related
to pending litigation) reflected or disclosed in the most recent consolidated
financial statements (or the notes thereto) of the Company included in the
Company SEC Documents or incurred since the date of such financial statements in
the ordinary course of business consistent with past practice; or
(p) authorize, recommend, propose, commit or agree to take, or
announce an intention to take, any of the foregoing actions.
Section 4.02 No Solicitation by the Company.
(a) The Company and the Company Subsidiary and each of their
respective affiliates, directors, officers, employees, agents and
representatives (including without limitation any investment banker, financial
advisor, attorney, accountant or other representative retained by it or any of
its subsidiaries) shall immediately cease any discussions or negotiations with
any other parties that may be ongoing with respect to the possibility or
consideration of any Company Takeover Proposal (as defined below). From the date
of this Agreement through the Effective Time, the Company shall not, nor shall
it permit any of its subsidiaries to, nor shall it authorize or permit any of
its or its subsidiaries' directors, officers or employees or any investment
banker, financial advisor, attorney, accountant or other representative retained
by it or any of its subsidiaries to, directly or indirectly through another
person, (i) solicit, initiate or encourage (including by way of furnishing
information or assistance), or take any other action designed to facilitate or
that is likely to result in, any inquiries or the making of any proposal which
constitutes, or is reasonably likely to lead to, any Company Takeover Proposal
(as defined below), (ii) enter into any agreement with respect to any proposal
for a Company Takeover Proposal, or (iii) participate in any discussions or
negotiations regarding any Company Takeover Proposal; provided, however, that
if, at any time, the Board of Directors of the Company determines in good faith,
after consultation with outside counsel, that it would be inconsistent with the
Board's fiduciary duties to the Company and its stockholders or otherwise breach
or violate applicable law (based on the advice of outside counsel), the Company
may, in response to a bona fide, written Company Takeover Proposal not solicited
in violation of this Section 4.02(a) that the Board of Directors of the Company
believes in good faith would result in a Company Superior Proposal (as defined
in Section 4.02(b)), subject to providing 48 hour prior written notice of its
decision to take such action to Parent and identifying the person making the
proposal and all the material terms and conditions of such proposal (the
"Company Notice") and compliance with Section 4.02(c), following delivery of the
Company Notice (i) furnish information with respect to the Company to any person
making such a Company Takeover Proposal pursuant to a customary confidentiality
agreement (as determined by the Company after consultation with its outside
counsel) on terms no more favorable to such person than the terms contained in
the Confidentiality Agreement between Company and Parent (provided that such
confidentiality agreement may omit a standstill provision if the Company Notice
contains a release of Parent from any standstill obligation, if such standstill
provision has not
29
previously been released), and (ii) participate in discussions or negotiations
regarding such a Company Takeover Proposal. Any violation of the foregoing
restrictions by any of the Company's representatives, whether or not such
representative is so authorized and whether or not such representative is
purporting to act on behalf of the Company or otherwise, shall be deemed to be a
breach of this Agreement by the Company. For purposes of this Agreement,
"Company Takeover Proposal" means any inquiry, proposal or offer from any person
relating to any (v) direct or indirect acquisition or purchase of a business
that constitutes a substantial portion of the net revenues, net income or assets
of the Company, (w) direct or indirect acquisition or purchase of a substantial
interest in any class of equity securities of the Company, (x) tender offer or
exchange offer that if consummated would result in any person beneficially
owning a substantial interest in any class of equity securities of the Company,
(y) merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company, other than the
transactions contemplated by this Agreement or (z) any other transaction the
consummation of which could reasonably be expected to impede, interfere with,
prevent or materially delay the Merger or Offer or which could reasonably be
expected to dilute or adversely affect materially the benefits to Parent of the
transactions contemplated by this Agreement or the Stockholder Agreement.
(b) Except as expressly permitted by this Section 4.02, neither the
Board of Directors of the Company nor any committee thereof shall (i) after
receipt of a Company Takeover Proposal, withdraw or modify, or propose publicly
to withdraw or modify, in a manner adverse to Parent, the approval or
recommendation by such Board of Directors or such committee of the Merger or
this Agreement, (ii) approve or recommend, or propose publicly to approve or
recommend, any Company Takeover Proposal or (iii) cause the Company to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement (each, a "Company Acquisition Agreement") related to any
Company Takeover Proposal. Notwithstanding the foregoing, in the event that the
Board of Directors of the Company determines in good faith, based on the advice
of outside legal counsel and after consultation with a nationally recognized
investment banking firm serving as financial advisor to the Company, that the
value of the consideration provided in such proposal, at the time of such
determination by the Board of Directors, exceeds the Merger Consideration and
that the Company Takeover Proposal is a Company Superior Proposal, the Board of
Directors of the Company may (subject to this and the following sentences) (x)
withdraw or adversely modify its approval or recommendation of the Transactions
or the matters to be considered at the Company Stockholders Meeting, (y) approve
or recommend such Company Superior Proposal and/or (z) terminate this Agreement
and, if it so chooses, enter into a Company Acquisition Agreement with respect
to such Company Superior Proposal, but only after the third full business day
following Parent's receipt of written notice advising Parent that the Board of
Directors of the Company is prepared to terminate this Agreement and only if,
during such three-day period, the Company and its advisors shall have negotiated
in good faith with Parent to make such adjustments in the terms and conditions
of this Agreement as would enable Parent to proceed with the transactions
contemplated herein on terms and conditions substantially equivalent to the
Company Superior Proposal; it being understood and agreed that should Parent not
seek to proceed with the transactions contemplated herein on such adjusted
terms, the
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Company may solicit additional Company Takeover Proposals. For purposes of this
Agreement, a "Company Superior Proposal" means any bona fide written proposal
made by a third party to acquire, directly or indirectly, including pursuant to
a tender offer, exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the shares of Company Common Stock then outstanding or
all or substantially all the assets of the Company and otherwise on terms which
the Board of Directors of the Company determines in its good faith judgment to
be more favorable to the Company's stockholders than the Offer and Merger and
for which financing, to the extent required, is then committed or which, in the
good faith judgment of the Board of Directors of the Company, is highly likely
to be obtained by such third party.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.02, the Company shall promptly, and in
any event within 24 hours, advise Parent orally and in writing of any Company
Takeover Proposal (or any inquiry which could lead to a Company Takeover
Proposal) and keep Parent informed, on a current basis, of the continuing status
thereof and shall contemporaneously provide to Parent all materials provided to
or made available to any third party pursuant to this Article IV which were not
previously provided to Parent.
(d) Nothing contained in this Section 4.02 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders if, in the good faith judgment of the Board of Directors
of the Company, after consultation with outside counsel, failure so to disclose
would be inconsistent with its obligations under applicable law.
Section 4.03 Third Party Standstill Agreements. Except as permitted in
connection with a Company Takeover Proposal under Section 4.02, during the
period from the date of this Agreement through the Effective Time, the Company
shall not terminate, amend, modify or waive any provision of any standstill
agreement to which the Company is a party (other than, to the extent mutually
agreed between Parent and the Company, any such agreement involving Parent).
Except as permitted in connection with a Company Takeover Proposal under Section
4.02, during such period, the Company agrees to enforce, to the fullest extent
permitted under applicable law, the provisions of any such agreements,
including, but not limited to, obtaining injunctions to prevent any breaches of
such agreements and to enforce specifically the terms and provisions thereof in
any court of the United States or any state thereof having jurisdiction.
ARTICLE V
ADDITIONAL AGREEMENTS
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Section 5.01 Access to Information; Confidentiality. To the extent
permitted by applicable law and subject to the Agreement dated April 17, 2002,
between Parent and the Company (the "Confidentiality Agreement"), the Company
shall afford to Parent and to the officers, employees, accountants, counsel,
financial advisors and other representatives of Parent, reasonable access, and
permit them to make such inspections and copies as they may reasonably require,
during normal business hours during the period prior to the Effective Time to
the Company's properties, books, contracts, commitments, personnel and records
and, during such period, the Company shall furnish promptly to Parent all other
information concerning its business, properties and personnel as Parent may
reasonably request, and reasonably make available to Parent all personnel of the
Company knowledgeable about matters relevant to such inspections. No review
pursuant to this Section 5.01 shall have an effect for the purpose of
determining the accuracy of any representation or warranty given by the Company.
Parent will hold, and will cause its respective officers, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any nonpublic information in accordance with the terms of
the Confidentiality Agreement.
Section 5.02 Reasonable Best Efforts; Cooperation. Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
agrees to use reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the Offer, the
Merger and the other Transactions, including (i) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from Governmental
Entities and the making of all necessary registrations and filings and the
taking of all steps as may be necessary to obtain an approval or waiver from, or
to avoid an action or proceeding by, any Governmental Entity, (ii) the obtaining
of all necessary consents, approvals or waivers from third parties, (iii) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
Transactions, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed, and (iv)
the execution and delivery of any additional instruments necessary to consummate
the Transactions and to fully carry out the purposes of this Agreement. Nothing
set forth in this Section 5.02 will limit or affect actions permitted to be
taken pursuant to Section 4.02.
Section 5.03 Indemnification, Exculpation and Insurance.
(a) From and after the Effective Time, Parent shall, or shall cause
the Surviving Corporation to, indemnify and hold harmless from liabilities for
acts or omissions occurring at or prior to the Effective Time those classes of
persons currently entitled to indemnification from the Company and the Company
Subsidiary (and any other subsidiary formed after the date hereof with the
written consent of Parent) as provided in their respective certificates of
incorporation or by-laws (or comparable organizational documents) and to cause
the Surviving Corporation in the Merger to assume, without further action, as of
the Effective Time any indemnification agreements of the Company in effect as of
the date hereof; provided, however, that (i) those persons
32
entitled to recovery pursuant to the terms of those insurance policies issued to
Imperial Bancorp and Comerica Incorporated as set forth in Section 5.03(c) of
the Company Disclosure Schedule (including any endorsements and/or replacements
thereto, the "Insurance Policies") shall not be entitled to duplication of
recovery under the Insurance Policies, on the one hand, and from Parent or the
Surviving Corporation, on the other, and (ii) Parent and the Surviving
Corporation shall be subrogated to the rights of those persons entitled to
recover pursuant to the Insurance Policies; provided, that the timing and amount
of any recovery under the Insurance Policies shall not affect Parent's or the
Surviving Corporation's obligations pursuant to this Section 5.03. The parties
agree to use commercially reasonable efforts to ensure that there is no
duplication of recovery under the Insurance Policies and this Section 5.03.
Subject to clauses (i) and (ii) of the preceding sentence, Parent also agrees
to, or shall cause the Surviving Corporation to, advance expenses to any such
person promptly upon receipt of an undertaking from such person that such
expenses shall be repaid should it be ultimately determined that such person is
not entitled to indemnification. In addition, from and after the Effective Time,
directors and officers of the Company who become directors or officers of Parent
or any of its subsidiaries will be entitled to indemnification under Parent's or
any of its subsidiaries' certificate of incorporation and by-laws (or comparable
organizational documents), as the same may be amended from time to time in
accordance with their terms and applicable law, and to all other indemnity
rights and protections as are afforded to other directors and officers of Parent
or any of its subsidiaries.
(b) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) except for any disposition of assets by the Surviving
Corporation required by applicable law in connection with the Merger, transfers
or conveys all or substantially all of its properties and assets to any person,
then, and in each such case, proper provision will be made so that the
successors and assigns of the Surviving Corporation assume the obligations set
forth in this Section 5.03.
(c) Pursuant to the Executive Liability and Indemnification Polices
Maintenance Agreement between Company and Comerica Incorporated, dated as the
date hereof, the parties hereby acknowledge that the Company's directors and
officers shall be insured for any acts of omissions occurring prior to the
Effective Time pursuant to the Insurance Policies. Parent shall, or shall cause
the Surviving Corporation, to make all deductible payments relating to claims
under such Insurance Policies.
(d) The provisions of this Section 5.03 (i) are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her heirs
and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
Section 5.04 Fees and Expenses.
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(a) Except as provided in this Section 5.04, all fees and expenses
incurred in connection with the Transactions, this Agreement and the other
transactions contemplated hereby shall be paid by the party incurring such fees
or expenses, whether or not the Merger is consummated.
(b) In the event that this Agreement is terminated by the Company
pursuant to Section 7.01(c)(ii), then simultaneously with any such termination,
the Company shall pay Parent a fee of $1.75 million, by wire transfer of same
day funds.
(c) In the event that (A) a Pre-Termination Takeover Proposal Event
(as defined below) shall occur and thereafter this Agreement is terminated by
either Parent or the Company pursuant to Section 7.01(b)(i) solely as a result
of the failure of the Minimum Condition having been satisfied and (B) within 12
months following the date of such termination the Company enters into a Company
Acquisition Agreement with the party (or an affiliate thereof) who initiated the
Pre-Termination Takeover Proposal Event, then the Company shall, upon the date
the transactions set forth in such Company Acquisition Agreement are
consummated, pay Parent a fee equal to $1.75 million by wire transfer of same
day funds. A "Pre-Termination Takeover Proposal Event" shall be deemed to occur
if a Company Takeover Proposal shall have been publicly made directly to the
Company's stockholders generally or any person shall have publicly announced an
intention (whether or not conditional) to make a Company Takeover Proposal.
(d) In the event that this Agreement is terminated by the Parent
pursuant to Section 7.01(d)(iv), then simultaneously with any such termination,
the Company shall pay Parent a fee of $1.75 million, by wire transfer of same
day funds.
Section 5.05 Public Announcements. Parent and the Company will consult with
each other before issuing, and provide each other the opportunity to review,
comment upon and concur with, any press release or other public statements with
respect to the Transactions, and shall not issue any such press release or make
any such public statement prior to such consultation, except as either party may
determine is required by applicable law, court process or by obligations
pursuant to any listing agreement with any national securities exchange or the
Nasdaq Stock Market. The parties agree that the initial press release to be
issued with respect to the transactions contemplated by this Agreement shall be
in the form heretofore agreed to by the parties.
Section 5.06 Employee Matters
(a) Parent hereby agrees that individuals identified as continuing
employees ("Continuing Employees") in Section 5.06(a)(1) of the Company
Disclosure Schedule and who are employed by the Company as of the Closing shall
continue to be employed by the Surviving Corporation immediately following the
Closing. Upon request of Parent, Company shall terminate the employment or
services of all individuals not identified as a Continuing Employee as soon as
practicable following the earlier to occur of (i) the consummation of the Offer
or (ii) Parent's waiver of the conditions to the Offer set forth in Annex A upon
an extension of the Offer. Each
34
such terminated employee shall receive the severance pay as determined pursuant
to Section 5.06(c) of the Company Disclosure Schedule with respect to such
employee. Each Continuing Employee identified as a transition employee in
Section 5.06(a)(1) of the Company Disclosure Schedule (a "Transition Employee")
shall receive the severance pay as determined pursuant to Section 5.06(c) of the
Company Disclosure Schedule with respect to such employee upon the earlier to
occur of (i) termination of the Transition Employee's employment by Parent or
the Surviving Corporation (other than a termination for cause as defined in
Section 5.06(c) of the Company Disclosure Schedule), or (ii) the completion of
the respective Transition Employee's transition period set forth in Section
5.06(a)(1) of the Company Disclosure Schedule. Prior to the consummation of the
Offer, the Company shall assist Parent in causing, and Parent shall reasonably
endeavor to cause, each Continuing Employee who is identified in Section
5.06(a)(1) of the Company Disclosure Schedule as key employee ("Key Employee")
to enter an employment agreement substantially in the form as set forth
5.06(a)(2) of the Company Disclosure Schedule which shall provide for base
salary equal to or exceeding the respective employee's salary on the date hereof
(which base salary the Company represents has not been increased since April 15,
2002). Except as modified or amended with the consent of a Continuing Employee,
or actions taken in furtherance thereof, Parent hereby agrees, and agrees to
cause the Surviving Corporation, to comply with the terms and make required
payments when due under (and not to attempt to invalidate), each of the
contracts and agreements identified in Section 3.01(i) of the Company Disclosure
Schedule. Neither this Section 5.06 nor any other provision of this Agreement
shall limit the ability or right of the Company to terminate the employment of
any of its employees after the Closing (subject to any rights of any such
employee pursuant to a written contract or agreement).
(b) From and after the Closing, for purposes of all employee benefit
plans, programs and arrangements maintained by or contributed to by Parent,
Parent shall use commercially reasonable efforts, or shall cause the Surviving
Corporation to use commercially reasonable efforts, to cause each such plan,
program or arrangement, to the extent permitted by applicable law, to treat the
prior service with the Company and its affiliates of each person who is an
employee of the Company or its subsidiaries immediately prior to the Closing (a
"Company Employee") (to the same extent such service is recognized under
analogous plans, programs or arrangements of the Company or its affiliates prior
to the Closing) as service rendered to Parent or its subsidiaries, as the case
may be, for purposes of eligibility to participate in and vesting thereunder
(but not benefit accrual under defined benefit pension plans); provided,
however, that such crediting of service shall not operate to duplicate any
benefit or the funding of such benefit. To the extent that following the
Closing, a Continuing Employee participates in a Parent Benefit Plan, Parent
shall use commercially reasonable efforts to cause each Parent Benefit Plan to
waive any preexisting condition which was waived under the terms of any Company
Benefit Plan immediately prior to the Closing or waiting period limitation which
would otherwise be applicable to a Company Employee on or after the Closing.
Parent shall recognize any accrued but unused vacation time of the Company
Employees as of the Closing Date to the extent accrued in Company's books and
records, and Parent shall cause the Company and its subsidiaries to provide such
paid vacation.
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(c) For a period of eleven months following the Effective Time Parent
shall provide, or shall cause the Surviving Corporation, the Company or their
affiliates to provide to each Company Employee who is a Continuing Employee with
each such entity with employee benefits that are no less favorable in the
aggregate than those provided to comparable employees of the Parent. Parent
shall, or shall cause the Surviving Corporation, to provide severance pay to any
Continuing Employee whose employment is terminated by Parent or the Surviving
Corporation (other than a termination for cause as defined in Section 5.06(c) of
the Company Disclosure Schedule), or any of their respective subsidiaries,
during the period beginning on the Closing Date and ending eleven months
following the Effective Time. In connection with the preceding sentence, the
amount of severance payable to any such terminated Company Employee shall be as
determined pursuant to Section 5.06(c) of the Company Disclosure Schedule with
respect to such employee.
(d) Parent acknowledges that for purposes of all the applicable
Company Benefit Plans identified on Schedule 3.01 of the Company Disclosure
Schedule, the execution of this Agreement and the consummation of the
transactions contemplated by this Agreement will constitute a "Change in
Control" of the Company (as that term is defined in such plans, agreements and
arrangements). Parent and the Company further acknowledge that all plans set
forth in the subsection entitled "Employee Benefit Plans" on Section 3.01(i) of
the Company Disclosure Schedule will be terminated at the Effective Time or as
soon as practicable thereafter and shall each use commercially reasonable
efforts to cause such termination.
(e) Other than filing the appropriate Tax returns with applicable Governmental
Entities, prior to consummation of the Offer the Company shall have taken all
legally required steps to cause the termination of the U.S. Audiotex LLC
Employee Pension Plan and to cause all account funds pursuant to such plan to be
distributed to participants prior to the consummation of the Effective Time.
Section 5.07 Purchaser Compliance. Parent shall cause Purchaser to comply
with all of its obligations under or related to this Agreement.
Section 5.08 Certain Litigation. The Company agrees that it shall not
settle any litigation commenced after the date hereof against the Company or any
of its directors by any stockholder of the Company relating to the Merger, the
Offer, this Agreement or the Stockholder Agreement without the prior written
consent of Parent, which consent may not be unreasonably withheld. Except as
permitted in Section 4.02, the Company shall not voluntarily cooperate with any
third party that may hereafter seek to restrain or prohibit or otherwise oppose
the Merger or the Transactions and shall cooperate with Parent and Purchaser to
resist any such effort to restrain or prohibit or otherwise oppose the Merger.
Section 5.09 Consents. The Company shall use all commercially reasonable
efforts to obtain the consents set forth in Section 5.09 of the Company
Disclosure Schedule and each consent shall be reasonably acceptable to Parent
36
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. If required by applicable law, the Company
Stockholder Approval shall have been obtained.
(b) No Injunctions or Restraints. No judgment, order, decree, statute,
law, ordinance, rule, regulation or permanent injunction, entered, enacted,
promulgated, enforced or issued by any court or other Governmental Entity of
competent jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect preventing the consummation of the Offer, the
Merger or the material transactions contemplated thereby; provided, however,
that each of the parties shall have used its reasonable best efforts to prevent
the entry of any such Restraints and to appeal as promptly as possible any such
Restraints that may be entered.
(c) Purchase of Shares in the Offer. Parent, Purchaser or their
affiliates shall have accepted for payment and paid for all of the Shares
tendered pursuant to the Offer, except that this condition shall not apply if
Parent, Purchaser or their affiliates shall have failed to purchase Shares
pursuant to the Offer in breach of their obligations under this Agreement.
(d) Frustration of Closing Conditions. None of Parent, Purchaser or
the Company may rely on the failure of any condition set forth in Section 6.01
to be satisfied if such failure was caused by such party's failure to use
reasonable best efforts to consummate the Offer, the Merger and the other
Transactions, as required by and subject to Section 5.02.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Company Stockholder
Approval:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Offer shall have expired in accordance with the terms
of this Agreement without any Shares being purchased
37
therein; provided, however, that the right to terminate this Agreement
under this Section 7.01(b)(i) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of Parent or Purchaser, as the case may be,
to purchase the Shares pursuant to the Offer on or prior to such date or if
the failure of a condition to this Agreement results from facts or
circumstances that constitute a breach of any representation or warranty
under this Agreement by such party;
(ii) if the Offer shall not have been consummated by September 1,
2002 or such date as the Offer shall have been extended pursuant to Section
1.01(a); provided, however, that the right to terminate this Agreement
pursuant to this Section 7.01(b)(ii) shall not be available to any party
whose failure to perform any of its obligations under this Agreement
results in the failure of the Offer to be consummated by such time or if
the failure of a condition to this Agreement results from facts or
circumstances that constitute a breach of any representation or warranty
under this Agreement by such party; or
(iii) if any Restraint having any of the effects set forth in
Section 6.01(b) shall be in effect and shall have become final and
nonappealable; provided, that the party seeking to terminate this Agreement
pursuant to this Section 7.01(b)(iii) shall have used reasonable best
efforts to prevent the entry of and to remove such Restraint;
(c) by the Company:
(i) if at any time prior to the consummation of the Offer Parent
or Purchaser shall have breached or failed to perform in any material
respect any of their respective material representations, warranties,
covenants or other agreements contained in this Agreement, which breach or
failure to perform (A) would give rise to the failure of a condition set
forth in Section 6.3 and (B) cannot be or has not been cured within 10 days
after the giving of written notice to Parent or Purchaser, as applicable,
except, in any case, for such breaches or failures to perform which are
not, in the Company's opinion, reasonably likely to adversely affect
Parent's or Purchaser's ability to complete the Offer or the Merger;
(ii) if the Board of Directors of the Company shall have
exercised its termination rights set forth in Section 4.02(b); provided
that, in order for the termination of this Agreement pursuant to this
paragraph (ii) to be deemed effective, the Company shall have complied with
all provisions of (A) Section 4.02, including the notice provisions therein
and (B) Section 5.04(b), including the timing of such payment; or
38
(iii) if Parent, Purchaser or any of their affiliates shall have
failed to commence the Offer in accordance with Section 1.01(a); provided,
that the Company may not terminate this Agreement pursuant to this Section
7.01(c)(iii) if the cause of such failure was due to any action or failure
to act on the part of the Company;
(d) by Parent or Purchaser:
(i) if prior to the purchase of Shares pursuant to the Offer, the
Company shall have breached or failed to perform any of its
representations, warranties, covenants or other agreements contained in
this Agreement (except where the breach of such representations or
warranties results from changes specifically permitted by the Agreement or
from any transaction expressly consented to in writing by Parent) which (A)
would give rise to the failure of a condition set forth in Annex A hereto
and (B) cannot be or has not been cured within 10 days after the giving of
written notice to the Company;
(ii) if, due to an occurrence not involving a breach by Parent or
Purchaser of their respective obligations hereunder, which makes it
impossible to satisfy any of the conditions set forth in Annex A hereto,
Parent, Purchaser, or any of their affiliates shall have failed to commence
the Offer in accordance with Section 1.01(a);
(iii) if either Parent or Purchaser is entitled to terminate the
Offer as a result of the occurrence of an event set forth in paragraph (b)
of Annex A hereto; or
(iv) if (A) the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a manner adverse to
Parent its approval or recommendation of the Offer, the Merger or this
Agreement, or approved or recommended any Company Takeover Proposal
(whether or not in compliance with Section 5.04(b)) or (B) the Board of
Directors of the Company thereof shall have resolved to take any of the
foregoing actions.
Section 7.02 Effect of Termination. In the event of termination of this
Agreement by either the Company, Parent or Purchaser as provided in Section
7.01, this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Parent, Purchaser or the Company, other
than the provisions of the last sentence of Section 5.01, Section 5.04, this
Section 7.02 and Article VIII, which provisions survive such termination,
provided, however, that nothing herein shall relieve any party from any
liability for any willful breach by such party of any of its representations or
warranties, or for any material breach of its covenants or agreements, in each
case as set forth in this Agreement.
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Section 7.03 Amendment. This Agreement may be amended by the parties at any
time before or after the Company Stockholder Approval; provided, however, that
after any such approval, there shall not be made any amendment that by law
requires further approval by the stockholders of the Company or Parent without
the further approval of such stockholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties and
approved by the Original Directors if required by Section 1.03.
Section 7.04 Extension; Waiver. At any time prior to the Effective Time, a
party may (a) extend the time for the performance of any of the obligations or
other acts of the other party, (b) waive any inaccuracies in the representations
and warranties of the other party contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of Section
7.03, waive compliance by the other party with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party and approved by the Original Directors
if required by Section 1.03. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.01 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
Section 8.02 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Purchaser, to:
Tier Technologies, Inc.
1350 Treat Blvd., Suite 250
Walnut Creek, CA 94596
Telecopy No.: (925) 937-3902
Attention: James L. Bildner
with a copy to:
40
Farella Braun + Martel LLP
235 Montgomery St.
San Francisco, CA 94104
Telecopy No.: (415) 954-4480
Attention: Bruce R. Deming, Esq.
(b) if to the Company, to
Official Payments Corporation
3 Landmark Square
Stamford, CT 06901
Telecopy No.: (203) 969-0305
Attention: General Counsel
with copies to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Telecopy No.: (212) 735-2000
Attention: Eric J. Friedman, Esq.
Section 8.03 Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person, where "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the ownership
of voting securities, by contract, as trustee or executor, or otherwise;
(b) "Environmental Law" means any foreign, federal, state or local
law, past, present or future and as amended, and any judicial or administrative
interpretation thereof, including any judicial or administrative order, consent
decree or judgment, or common law, relating to pollution or protection of the
environment, health or safety or natural resources, including those relating to
the use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Substances;
(c) "Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any applicable
Environmental Law;
(d) "Hazardous Substances" means (i) petroleum and petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials and polychlorinated biphenyls, and (ii) any other chemicals, materials
or substances regulated as toxic or hazardous or as a pollutant, contaminant or
waste or for which liability or standards of care are imposed under any
applicable Environmental Law;
41
(e) "material adverse change" or "material adverse effect" means, when
used in connection with the Company or Parent, any change, effect, event,
occurrence or state of facts that is, or would reasonably be expected to be,
materially adverse to the business, properties, assets (whether tangible or
intangible), condition (financial or otherwise), operations or results of
operations of such party and its subsidiaries taken as a whole, or a material
adverse effect on the ability of such party to perform its obligations under
this Agreement or on the ability of the party to consummate the Offer, the
Merger and the other Transactions without material deviation from the time frame
such actions would otherwise be consummated in the absence of such effect;
provided that material adverse effect shall not include any change, effect,
event or occurrence relating to (i) the economy or securities markets of the
United States or any other region in general, (ii) this Agreement or the
transactions expressly contemplated hereby or the announcement thereof, or (iii)
the industry in which the Company or Parent, as the case may be, operates in
general, and not specifically relating to the Company or Parent or their
respective subsidiaries, and the terms "material" and "materially" have
correlative meanings;
(f) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity;
(g) a "subsidiary" of any person means another person, an amount of
the voting securities or other voting ownership or partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting securities or interests,
50% or more of the equity interests of which) is owned directly or indirectly by
such first person.
(h) "knowledge" of any person which is not an individual means the
actual knowledge of such person's executive officers after due inquiry.
Section 8.04 Interpretation. When a reference is made in this Agreement to
an Article, Section or Exhibit, such reference shall be to an Article or Section
of, or an Exhibit to, this Agreement unless otherwise indicated. The table of
contents, index of terms and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. All
terms defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined therein. The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such term. Any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent
42
and (in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns.
Section 8.05 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same Agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 8.06 Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein), and the
Confidentiality Agreement (a) constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter of this Agreement and (b) except for the
provisions of Article II and Section 5.03, are not intended to confer upon any
person other than the parties any rights or remedies.
Section 8.07 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF
LAWS THEREOF.
Section 8.08 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by either of the parties hereto without
the prior written consent of the other party except that Purchaser may assign,
in its sole discretion, any or all of its rights, interests and obligations
hereunder to Parent or to any direct or indirect wholly owned subsidiary of
Parent; provided, that Parent shall be obligated to cause such subsidiary to
comply with its obligations under or related to this Agreement. Any assignment
in violation of the preceding sentence shall be void. Subject to the preceding
two sentences, this Agreement will be binding upon, inure to the benefit of, and
be enforceable by, the parties and their respective successors and assigns.
Section 8.09 Consent to Jurisdiction. Each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any federal court
located in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
and (c) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
federal court sitting in the State of Delaware or a Delaware state court.
Section 8.010 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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Section 8.011 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
[remainder of page intentionally left blank]
44
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
Tier Technologies, Inc.
By: /s/ James L. Bildner
-------------------------------
Name: James L. Bildner
Title: Chairman & CEO
Kingfish Acquisition Corporation
By: /s/ James L. Bildner
-------------------------------
Name: James L. Bildner
Title: CEO
Official Payments Corporation
By: /s/ Thomas R. Evans
-------------------------------
Name: Thomas R. Evans
Title: Chairman & CEO
45
ANNEX A
Certain Conditions of the Offer. Notwithstanding any other provisions of
the Offer, Purchaser shall not be required to accept for payment or, subject to
any applicable rules and regulations of the SEC, including Rule 14e-1(c) under
the Exchange Act (relating to Purchaser's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), pay for,
and may delay the acceptance for payment of or, subject to the restriction
referred to above, the payment for, any tendered Shares, and may terminate or
amend the Offer as to any Shares not then paid for, if (i) any applicable
waiting period under the HSR Act has not expired or terminated, (ii) the Minimum
Condition has not been satisfied, or (iii) at any time on or after the date of
this Agreement and (except in the case of clause (a), (b) or (g)) continuing in
effect for a period of 10 days following notice by the Parent to the Company,
any of the following events shall occur (other than as a result of any action or
inaction of Parent or any of its subsidiaries which constitutes a breach of this
Agreement):
(a) there shall be any statute, rule, regulation, judgment, order or
injunction issued, enacted, entered, enforced, promulgated or deemed applicable
to the Offer or the Merger or any other action shall be taken by any
Governmental Entity (other than actions taken by any Governmental Entity
pursuant to any state or federal antitrust law, including without limitation the
HSR Act) (i) prohibiting or imposing any material limitations on Parent's or
Purchaser's ownership or operation (or that of any of their respective
subsidiaries or affiliates) of their or the Company's businesses or assets, (ii)
restraining or prohibiting the making or consummation of the Offer, the Merger
or the performance of any of the other transactions contemplated by this
Agreement, (iii) imposing material limitations on the ability of Purchaser, or
rendering Purchaser unable, to accept for payment, pay for or purchase some or
all of the Shares pursuant to the Offer, and the Merger, (iv) imposing material
limitations on the ability of Purchaser or Parent effectively to exercise full
rights of ownership of the Shares, including, without limitation, the right to
vote the Shares purchased by it on all matters properly presented to the
Company's stockholders or (v) otherwise is reasonably likely to materially
adversely affect the Purchaser or the Company taken as a whole;
(b) the Company shall have entered into any Company Acquisition
Agreement with respect to any Company Superior Proposal in accordance with
Section 4.02(b) of this Agreement, the Board of Directors of the Company has
withdrawn or modified the approval or recommendation by such Board of the Merger
in accordance with 4.02(b) of this Agreement or the Company or its directors or
representatives have taken any other action, whether or not in accordance with
the Agreement, that permits Parent to terminate this Agreement in accordance
with Section 7.01;
(c) any of the representations and warranties of the Company set forth
in this Agreement that are qualified as to materiality or material adverse
effect shall not be true and correct and any such representations and warranties
that are not so qualified shall not be true and correct in any material respect,
in each case as of the scheduled expiration of the Offer, except where the
failure of such representations and
A-1
warranties to be so true and correct results directly from changes specifically
permitted by this Agreement or from any transaction expressly consented to in
writing by Parent;
(d) the Company shall have breached or failed to perform in any
material respect any material obligation or to comply in any material respect
with any material agreement or covenant of the Company to be performed or
complied with by it under this Agreement at or immediately prior to consummation
of the Offer;
(e) any third party shall not have given its written consent as
required under the applicable contract in identified in Section 5.09 of the
Company Disclosure Schedule;
(f) twenty percent or more of the Key Employees shall not have entered
into written employment agreements with the Company as provided in Section
5.06(a) of this Agreement;
(g) there shall have occurred any change, event, condition, fact or set of
facts, or development which has had or would reasonably be expected to have a
material adverse change with respect to the Company; or
(h) this Agreement shall have been terminated in accordance with its terms;
which in the reasonable judgment of Parent or Purchaser, in any such case, and
regardless of the circumstances (including any action or inaction by Parent or
Purchaser) giving rise to such condition makes it inadvisable to proceed with
the Merger, the Offer and/or with such acceptance for payment of or payment for
Shares.
The foregoing conditions are for the sole benefit of Parent and Purchaser,
may be waived by Parent or Purchaser, in whole or in part, at any time and from
time to time in the sole discretion of Parent or Purchaser. The failure by
Parent or Purchaser at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time.
Terms used, but not defined, in this Annex A shall have the meanings given
to them in the Agreement.
A-2