IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
ANNETTE ROTI, Civil Action No. 19707
Plaintiff,
vs.
OFFICIAL PAYMENTS
CORPORATION, ANDREW COHAN,
THOMAS R. EVANS, JOHN R.
HAGGERTY, JOHN D. LEWIS, LEE E.
MIKLES, BRUCE S. NELSON, TIER
TECHNOLOGIES, INC. and KINGFISH
ACQUISITION CORPORATION,
Defendants.
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MEMORANDUM OF UNDERSTANDING
WHEREAS, there is now pending a putative class action lawsuit in the
Court of Chancery of the State of Delaware in and for New Castle County (the
"Court") styled Annette Roti v. Official Payments Corporation, et al., C.A. No.
19707 (the "Action"), purportedly brought on behalf of a class comprised of the
common stockholders of Official Payments Corporation ("OPC" or the "Company")
other than Defendants and their affiliates (the "Class") against Defendants OPC,
Andrew Cohan, Thomas R. Evans, John R. Haggerty, John D. Lewis, Lee E. Mikles,
Bruce S. Nelson, Tier Technologies, Inc. ("Parent") and Kingfish Acquisition
Corporation, a wholly-owned subsidiary of Tier ("Purchaser") (collectively
"Defendants").
WHEREAS, Plaintiff's Complaint was filed on June 19, 2002 (hereinafter,
the "Complaint");
WHEREAS, the Complaint challenges a stockholder agreement between
Parent and certain OPC stockholders (the "Stockholder Agreement") and a merger
agreement (the "Merger Agreement) announced on May 31, 2002 between Parent and
OPC, pursuant to which, subject to certain conditions: (i) Parent would conduct
a tender offer (the "Tender Offer") to acquire any and all of the outstanding
shares of Common Stock of OPC for $3.00 per share, and (ii) Purchaser
thereafter will merge with and into OPC, pursuant to which all shares of OPC
common stock not theretofore purchased or as to which appraisal rights have not
properly been demanded will be converted to the right to receive $3.00 in cash
per share, Purchaser will discontinue its separate existence and OPC will become
a wholly-owned subsidiary of Parent (the "Merger");
WHEREAS, the Complaint alleges, among other things, that: (i)
Defendants failed to disclose certain allegedly material information in its
14D-9 statement; and (ii) Defendants Parent and Purchaser are prohibited by 8
Del. C. ss. 203 from affecting a business combination with OPC for three years
without first obtaining the affirmative vote of 66-2/3% of OPC's disinterested
stockholders.
WHEREAS, plaintiff seeks to enjoin consummation of the Tender Offer;
WHEREAS, Defendants OPC, and Parent and Purchaser, submitted letters in
opposition to the Complaint and plaintiff's motion for expedited proceedings;
WHEREAS, plaintiff's counsel and Defendants' counsel engaged in
arm's-length negotiations concerning a possible settlement of the Action;
WHEREAS, Defendants maintain that no supplemental disclosures in
connection with the Tender Offer or Merger are required and maintain that they
have committed no breaches of fiduciary duties or disclosure violations
whatsoever, and maintain that plaintiff's claims under 8 Del. C. ss. 203 do not
have merit;
WHEREAS, counsel for the parties have reached an agreement in principle
providing for the settlement of the Action between and among plaintiff, on
behalf of herself and the putative Class, and Defendants, on the terms and
subject to the conditions set forth below (the "Settlement")
NOW THEREFORE, as a result of the foregoing and the negotiations among
counsel to the parties, the parties to the Action have agreed in principle as
follows:
1. Amendment to the Tender Offer. Defendants maintain that they are not
required to issue any supplemental disclosures and that they have committed no
breaches of fiduciary duties related to price, disclosure or otherwise.
Nevertheless, solely in order to settle and resolve this matter, Defendants
shall amend the 14D-9 Statement by filing with the SEC an amendment to
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the 14D-9 (the "Amendment") and shall deliver the Amendment to stockholders by
regular mail, as soon as practicable, which Amendment shall be substantially in
the form of Exhibit A hereto. The parties, having considered Exhibit A, agree
that the Amendment as filed together with the additional information contained
in the 14D-9 or incorporated therein by reference will fairly, reasonably and
completely disclose all material information necessary and sufficient to enable
OPC shareholders to make an informed decision.
2. Discovery. The parties have agreed to cooperate in such discovery,
if any, as is reasonably necessary to confirm the fairness and adequacy of the
Settlement contemplated herein, including the production of additional relevant
documents and an individual or individuals for interview. Production of
documents will be conducted pursuant to a Confidentiality Agreement, the terms
of which shall be agreed upon by the parties at a future date. The Settlement
shall be subject to completion by plaintiff of confirmatory discovery in the
Action reasonably satisfactory to plaintiff's counsel.
3. Stipulation of Settlement. The parties to the Action will agree upon
and execute a Stipulation of Settlement (the "Stipulation") and such other
documentation as may be required in order to obtain Final Court Approval (as
defined below) of the settlement described herein (the "Settlement Documents").
The Stipulation will expressly provide, inter alia, for certification of a
non-opt out settlement class pursuant to Delaware Court of Chancery Rules
23(b)(1) and (b)(2) of holders of Common Stock and their successors in interest
and transferees, immediate and remote, from May 31, 2002 through and including
the effective date of the Merger; for entry of a judgment dismissing the Action
with prejudice and without costs; for a complete release and settlement of all
past, present or future claims, rights, causes of actions, suits, matters and
issues, known or unknown, liquidated or non-liquidated, contingent or absolute,
state, federal or foreign, pursuant to statute, rule, regulation, common law or
civil law, whether direct, indirect, individual, class, derivative,
representative, legal, equitable or any other type, other than statutory
appraisal rights, against Defendants or any of their families, parent entities,
affiliates, subsidiaries, predecessors, successors or assigns, and each and all
of their respective past, present or future officers, directors, associates,
stockholders, members, managers, controlling persons,
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representatives, employees, attorneys, financial or investment advisors,
consultants, accountants, investment bankers, commercial bankers, engineers,
advisors or agents, heirs, executors, trustees, general or limited partners or
partnerships, personal representatives, estates or administrators, which have
been, or could have been, asserted relating to the Action, the Tender Offer, the
Stockholder Agreement, the Merger, the Merger Agreement, and any related
transaction (collectively the "Transaction"), the actions of Defendants relating
to the Transaction, the related disclosure materials, disclosures, facts and
allegations that are or could (insofar as such transactions, disclosures, facts
and allegations relate to, or occurred in connection with, the subject matter of
the Action) be the subject of the Action or of an action in any federal, state,
arbitration or any other tribunal or forum including any claims arising under
federal, state or common law, including the federal securities laws; that
Defendants have denied and continue to deny that they have committed or
attempted to commit any violations of law or breaches of duty of any kind; that
Defendants are entering into the Stipulation solely because the proposed
Settlement would eliminate the burden, risk and expense of further litigation,
and is in the best interests of OPC and all its shareholders; and that in the
event that any claims related to the Transaction or the subject matter of the
Action (whether direct, derivative or otherwise) are commenced against any
person in any forum, state court, federal court, arbitration or otherwise prior
to Final Court Approval of the Settlement, the parties agree to use their good
faith efforts to obtain the dismissal or stay in contemplation of dismissal of
any such action.
4. Intention of the Parties. It is the intention of the parties to
extinguish all such settled claims and consistent with such settled claims and
consistent with such intentions, the releasing parties waive their rights to the
extent permitted by state law, federal law or principle of common law, which may
have the effect of limiting the release set forth above.
5. Notice and Court Approval. Subject to prior Court approval of the
Stipulation and the form of the Settlement Documents, the parties to the Action
will present the Settlement Documents to the Delaware Court of Chancery for
approval as soon as practicable following appropriate notice of the proposed
Settlement. Plaintiff shall take reasonable steps to file the Stipulation with
the Delaware Court of Chancery no later than July 15, 2002. As used herein,
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"Final Court Approval" of the Stipulation means that the Delaware Court of
Chancery has entered an order approving the Stipulation and that such order is
finally affirmed on appeal or is no longer subject to appeal and the time for
any petition for rearguments, appeal or review, by certiorari or otherwise, has
expired. Plaintiff's counsel intend to apply to the Delaware Court of Chancery
for an award of attorneys' fees and reasonable out-of-pocket disbursements.
Subject to the terms and conditions of this Memorandum of Understanding and the
contemplated Stipulation, Plaintiffs' counsel will apply for an award of fees
and expenses in an aggregate amount not exceeding $175,000, which Defendants
will not oppose, to be paid by Defendants to Prickett, Jones & Elliot, if
approved by the Court, within 10 days after the later of (i) the effective date
of the Merger; and (ii) Final Court Approval. Approval of such fee application
shall not be a condition to settlement. No such fees or expenses shall be
payable in the absence of Final Court Approval.
6. Return of Documents. Within 15 days after Final Court Approval,
plaintiff's counsel, consistent with the terms of a Confidentiality Agreement,
the terms of which shall be agreed upon by the parties at a future date, shall
return to the producing party all discovery material produced in the Action by
any defendant or third party, and shall not retain any copies or extracts
thereof.
7. Termination. This Memorandum of Understanding and the Settlement
Documents are not intended to create any obligation for Parent or Purchaser to
consummate the Transaction and shall not modify in any way Parent or Purchaser's
rights or obligations under any of the Transaction documents. This Memorandum of
Understanding and the Settlement Documents shall be null and void and of no
force and effect if: (a) the Merger Agreement is terminated and the Tender Offer
or Merger are abandoned; or (b) the Settlement does not obtain Final Court
Approval for any reason. In such event, this Memorandum of Understanding shall
not be deemed to prejudice in any way the positions of the parties with respect
to the Action, shall be the subject of Rule 408 of the Delaware Rules of
Evidence, and shall not entitle any party to recovery of any costs or expenses
incurred in connection with the implementation of the Memorandum of
Understanding.
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8. Interim Stay of The Actions. The parties to the Action agree that,
except as expressly provided herein, the Action shall be stayed pending
submission of the proposed Settlement to the Court for its consideration.
Plaintiff's counsel agrees that the Defendants' time to move, answer or
otherwise respond to the Complaint and to respond to any discovery propounded is
extended without date. No defendant waives any defense based on lack of personal
jurisdiction, insufficiency of process or insufficiency of service of process by
reason of entry into this Memorandum of Understanding or execution of the
Settlement Documents and presentation thereof to the Court. Counsel shall enter
into such additional documentation if any as shall be required to effectuate the
foregoing agreements.
9. Counterparts. This Memorandum of Understanding may be executed in
counterparts by any of the signatories hereto, including by telecopier, and as
so executed shall constitute one agreement.
10. Governing Law. This Memorandum of Understanding and the Settlement
contemplated by it shall be governed by, and construed in accordance with, the
laws of the State of Delaware, without regard to Delaware's conflict of law
rules.
11. Amendments. This Memorandum of Understanding may be modified or
amended only by a writing signed by all the signatories hereto.
12. Successors. This Memorandum of Understanding shall be binding upon
and inure to the benefit of the parties and their respective agents, executors,
heirs, successors and assigns.
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IN WITNESS WHEREOF, the parties have executed this Memorandum effective
as of June 26, 2002:
OF COUNSEL: /s/ Ronald A. Brown, Jr.
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Ronald A. Brown, Jr.
Susman & Watkins Prickett, Jones & Elliott
Two First National Plaza, Suite 600 1310 King Street, P.O. Box 1328
Chicago, Illinois 60603 Wilmington, Delaware 19899
Attorney for Plaintiff
OF COUNSEL: /s/ Karen P. Kimmey
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Karen P. Kimmey
The Bayard Firm Farella Braun & Martel, LLP
222 Delaware Avenue, Suite 900 Russ Building, 30th Floor
Wilmington, Delaware 19899 235 Montgomery Street
San Francisco, California 94104
Attorney for Defendants Tier Technologies,
Inc. and Kingfish Acquisition Corporation
/s/ Edward P. Welch
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Edward P. Welch
Edward B. Micheletti
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899-0636
Attorney for Defendants Official Payments
Corporation, Andrew Cohan, Thomas R.
Evans, Lee E. Mikles, Bruce S. Nelson,
John R. Haggerty and John D. Lewis
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