-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I+MrZWyddLK0aN62x4PoEJTwrvY1qGkqKvH6MRuHB5RM39T2RBpgY/bqeqIcTcS9 YlWYVneP+1N02CJeTS6+FQ== 0001145443-02-000179.txt : 20020611 0001145443-02-000179.hdr.sgml : 20020611 20020611113811 ACCESSION NUMBER: 0001145443-02-000179 CONFORMED SUBMISSION TYPE: SC TO-T PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 20020611 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: OFFICIAL PAYMENTS CORP CENTRAL INDEX KEY: 0001094998 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 522190781 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-T SEC ACT: 1934 Act SEC FILE NUMBER: 005-57269 FILM NUMBER: 02676186 BUSINESS ADDRESS: STREET 1: THREE LANDMARK SQUARE CITY: STAMFORD STATE: CT ZIP: 06901-2501 BUSINESS PHONE: 2033564200 MAIL ADDRESS: STREET 1: 2333 SAN RAMON VALLEY BOULEVARD STREET 2: SUITE 450 CITY: SAN RAMON STATE: CA ZIP: 94583 FORMER COMPANY: FORMER CONFORMED NAME: US AUDIOTEX CORP DATE OF NAME CHANGE: 19990914 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: TIER TECHNOLOGIES INC CENTRAL INDEX KEY: 0001045150 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 943145844 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC TO-T BUSINESS ADDRESS: STREET 1: 1350 TREAT BLVD STREET 2: SUITE 250 CITY: WALNUT CREEK STATE: CA ZIP: 94596 BUSINESS PHONE: 9259373950 MAIL ADDRESS: STREET 1: 1350 TREAT BLVD STREET 2: STE 250 CITY: WALNUT CREEK STATE: CA ZIP: 94596 SC TO-T 1 schedule_to.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE TO TENDER OFFER STATEMENT UNDER SECTION 14(D)(1) OR 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------------------------------------------ OFFICIAL PAYMENTS CORPORATION (Name of Subject Company (Issuer)) KINGFISH ACQUISITION CORPORATION a wholly-owned subsidiary of Tier Technologies, Inc. and TIER TECHNOLOGIES, INC. (Names of Filing Persons (Offerors)) ------------------------------------------------------------ COMMON STOCK, PAR VALUE $.01 PER SHARE (Title of Class of Securities) ------------------------------------------------------------ 676235 10 4 (CUSIP Number of Class of Securities) ------------------------------------------------------------ JAMES L. BILDNER TIER TECHNOLOGIES, INC. 1350 TREAT BLVD., SUITE 250 WALNUT CREEK, CA 94596 TELEPHONE: (925) 937-3950 FACSIMILE: (925) 937-3752 (Name, address, and telephone numbers of person authorized to receive notices and communications on behalf of filing persons) Copies to: BRUCE R. DEMING, ESQ. JACK G. MARTEL, ESQ. FARELLA BRAUN + MARTEL LLP 235 MONTGOMERY STREET, 30TH FLOOR SAN FRANCISCO, CA 94104 TELEPHONE: (415) 954-4400 FACSIMILE: (415) 954-4480 Calculation of Filing Fee - -------------------------------------------------------------------------------- Transaction valuation $68,858,628* Amount of filing fee $13,772 - -------------------------------------------------------------------------------- * For purposes of calculating the filing fee only. The filing fee calculation assumes the purchase of all outstanding shares of common stock, par value $0.01 per share, of Official Payments Corporation (the "Shares") at a price of $3.00 per Share, without interest. As of June 6, 2002, there were 22,952,876 shares issued and outstanding. Based on the foregoing, the transaction value is equal to the product of 22,952,876 shares and $3.00 per share. Such number does not consider any shares issuable upon exercise of outstanding Company Stock Options. The amount of the filing fee calculated in accordance with Rule 0-11 of the Securities Exchange Act of 1934, as amended, equals 1/50th of one percent of the value of the transaction. [X] Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amounts Previously Paid: An aggregate of $13,887 from three overpayments ($9,634.35; $3,084.19; and $1,168.46; respectively) Forms or Registration No.: Registration No. 333-74192 (Forms S-3, S-3/A and S-3MEF, respectively) Filing Party: Tier Technologies, Inc. Dates Filed: November 29, 2001; December 17, 2001; and December 18, 2001; respectively [ ] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates: [X] third-party tender offer subject to Rule 14d-1. [ ] issuer tender offer subject to Rule 13e-4. [ ] going-private transaction subject to Rule 13e-3. [ ] amendment to Schedule 13D under Rule 13d-2. Check the following box if the filing is a final amendment reporting the results of the tender offer: [ ] SCHEDULE TO This Tender Offer Statement on Schedule TO ("Schedule TO") relates to the offer by Kingfish Acquisition Corporation, a Delaware corporation (the "Purchaser") and a wholly-owned subsidiary of Tier Technologies, Inc., a California corporation ("Parent"), to purchase all of the outstanding shares of common stock, par value $0.01 per share (the "Shares"), of Official Payments Corporation, a Delaware corporation (the "Company"), at a price of $3.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated June 11, 2002 and in the related Letter of Transmittal (which, together with any supplements or amendments, collectively constitute the "Offer"), copies of which are attached as Exhibits (a)(1)(A) and (a)(1)(B) hereto, respectively. The item numbers and responses thereto below are in accordance with the requirements of Schedule TO. Item 1. Summary Term Sheet The information set forth in the Offer to Purchase under "Summary Term Sheet" is incorporated herein by reference. Item 2. Subject Company Information (a) The name of the subject company is Official Payments Corporation, a Delaware corporation. The Company's principal executive offices are located at Three Landmark Square, Stamford, Connecticut 06901 and its phone number is (203) 356-4200. (b) The information set forth in the Offer to Purchase under "Introduction," Section 1 ("Terms of the Offer; Expiration Date") and Section 6 ("Price Range of Shares") is incorporated herein by reference. (c) The information set forth in the Offer to Purchase in Section 6 ("Price Range of Shares") is incorporated herein by reference. Item 3. Identity and Background of Filing Person (a), (b), (c) This Statement is being filed by Purchaser and Parent. Both Purchaser's and Parent's principal executive offices are located at 1350 Treat Boulevard, Suite 250, Walnut Creek, California 94596 and their phone numbers are both (925) 937-3950. The information set forth in the Offer to Purchase under "Introduction," in Section 9 ("Certain Information Concerning Purchaser and Parent") and in Schedule I to the Offer to Purchase is incorporated herein by reference. Item 4. Terms of the Transaction (a)(1)(i-viii, xii), The information set forth in the Offer to Purchase under "Introduction," Section 1 ("Terms of the Offer; Expiration Date"), Section 2 ("Acceptance for Payment and Payment"), Section 3 ("Procedures for Accepting the Offer and Tendering Shares"), Section 4 ("Withdrawal Rights"), Section 5 ("Certain Federal Income Tax Consequences"), Section 11 ("Purpose of the Offer; Plans for the Company"), Section 14 ("Certain Conditions of the Offer") and Section 15 ("Certain Legal Matters; Required Regulatory Approvals") is incorporated herein by reference. (a)(1)(ix) Not applicable. (a)(1)(x) Not applicable. (a)(1)(xi) Not applicable. (a)(2)(i-vii) Not applicable. Item 5. Past Contacts, Transactions, Negotiations and Agreements (a) No transactions, other than those described in paragraph (b), have occurred during the past two years between the filing person and the Company or any of its affiliates that are not natural persons. (b) The information set forth in the Offer to Purchase under "Introduction," Section 9 ("Certain Information Concerning Purchaser and Parent"), Section 10 ("Background of the Offer; Contacts with the Company") and Section 11 ("Purpose of the Offer; Plans for the Company") is incorporated herein by reference. Item 6. Purposes of the Transaction and Plans or Proposals (a) The information set forth in the Offer to Purchase under "Introduction," Section 10 ("Background of the Offer; Contacts with the Company") and Section 11 ("Purpose of the Offer; Plans for the Company") is incorporated herein by reference. (c) The information set forth in the Offer to Purchase under "Introduction," Section 7 ("Effect of the Offer on the Market for the Shares; Stock Exchange Listing; Exchange Act Registration; Margin Regulations"), Section 10 ("Background of the Offer; Contacts with the Company"), Section 11 ("Purpose of the Offer; Plans for the Company") and Section 13 ("Dividends and Distributions") is incorporated herein by reference. Item 7. Source and Amount of Funds or Other Consideration (a) The information set forth in the Offer to Purchase under Section 12 ("Source and Amount of Funds") is incorporated herein by reference. (b) Not applicable. (d) Not applicable. Item 8. Interest in Securities of the Subject Company (a), (b) The information set forth in the Offer to Purchase under "Introduction", Section 9 ("Certain Information Concerning the Purchaser and Parent"), Section 10 ("Background of the Offer; Contacts with the Company") and Section 11 ("Purpose of the Offer; Plans for the Company") is incorporated herein by reference. Item 9. Persons/Assets, Retained, Employed, Compensated or Used (a) The information set forth in the Offer to Purchase under "Introduction" and Section 16 ("Certain Fees and Expenses") is incorporated herein by reference. Item 10. Financial Statements (a), (b) Because the consideration offered consists solely of cash, the offer is not subject to any financing condition, Parent is a public reporting company under Section 13(a) or 15(d) of the Exchange Act of 1934, as amended, and files reports electronically with the Commission's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system and the Offer is for all outstanding Shares, Purchaser believes the financial condition of Parent, Purchaser and their affiliates is not material to a decision by a holder of Shares whether to sell, tender or hold Shares pursuant to the Offer. Item 11. Additional Information (a) The information set forth in the Offer to Purchase under "Introduction," Section 1 ("Terms of the Offer; Expiration Date") Section 11 ("Purpose of the Offer; Plans for the Company") and Section 15 ("Certain Legal Matters; Required Regulatory Approvals") is incorporated herein by reference. (b) The information set forth in the Offer to Purchase and the related Letter of Transmittal, copies of which are filed as Exhibits (a)(1)(A) and (a)(1)(B) hereto, respectively, is incorporated herein by reference Item 12. Exhibits (a)(1)(A) Offer to Purchase, dated February 25, 2000. (a)(1)(B) Letter of Transmittal. (a)(1)(C) Notice of Guaranteed Delivery. (a)(1)(D) Form of letter to clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a)(1)(E) Form of letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(1)(F) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(1)(G) Press release issued by Parent and Purchaser, dated June 11, 2002, announcing the commencement of the Offer. (a)(1)(H) Summary Advertisement, dated June 11, 2002, appearing in the Wall Street Journal. (b) Not applicable. (d)(1) Agreement and Plan of Merger, dated as of May 30, 2002, by and among Parent, Purchaser and the Company. (d)(2) Stockholders Agreement, dated as of May 30, 2002, by and among Parent, Purchaser and the holders of Shares parties thereto. (d)(3) Confidentiality Agreement, dated April 17, 2002, by and between Parent and the Company. (d)(4) Form of Employment Agreement. (g) Not applicable. (h) Not applicable. Item 13. Information Required by Schedule 13E-3 Not applicable. Signature. After due inquiry and to the best of their knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct. KINGFISH ACQUISITION CORPORATION By: /s/ James L. Bildner ------------------------------ Name: James L. Bildner Title: President and Chief Executive Officer Date: June 11, 2002 TIER TECHNOLOGIES, INC. By: /s/ James L. Bildner ------------------------------ Name: James L. Bildner Title: Chairman and Chief Executive Officer Date: June 11, 2002 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION (a)(1)(A) Offer to Purchase, dated June 11, 2002.* (a)(1)(B) Letter of Transmittal.* (a)(1)(C) Notice of Guaranteed Delivery.* (a)(1)(D) Form of letter to clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Nominees.* (a)(1)(E) Form of letter to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees.* (a)(1)(F) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.* (a)(1)(G) Press release issued by Parent and Purchaser, dated June 11, 2002, announcing the commencement of the Offer. (a)(1)(H) Summary Advertisement, dated June 11, 2002, appearing in the Wall Street Journal. (d)(1) Agreement and Plan of Merger, dated as of May 30, 2002, by and among Parent, Purchaser and the Company. (d)(2) Stockholders Agreement, dated as of May 30, 2002, by and among Parent, Purchaser and the holders of Shares parties thereto. (d)(3) Confidentiality Agreement, dated April 17, 2002, by and between Parent and the Company. (d)(4) Form of Employment Agreement. - -------- * Included in materials delivered to stockholders of the Company. EX-99 2 ex-a1f.txt GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 (Section references are to the Internal Revenue Code of 1986, as amended.) Guidelines for Determining the Proper Taxpayer Identification Number ("TIN") to Give the Payer--Social security numbers ("SSNs") have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers ("EINs") have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer. You must enter your TIN in the appropriate box. If you are a resident alien and you do not have and are not eligible to get an SSN, your TIN is your IRS individual taxpayer identification number ("ITIN"). Enter it in the social security number box. If you do not have an ITIN, see How To Get a TIN below. If you are a sole proprietor and you have an EIN, you may enter either your SSN or EIN. However, using your EIN may result in unnecessary notices to the person requesting your TIN.
Give the NAME and SOCIAL Give the NAME and SECURITY NUMBER of-- EMPLOYER IDENTIFI- For this type of account: For this type of account: CATION NUMBER of-- - ----------------------------------------------------------------------------------------------------------------------- 1. Individual The individual 6. Sole Proprietorship The owner (3) 2. Two or more individuals The actual owner of the 7. A valid trust, estate, or Legal entity (4) (joint account) account or, if combined pension trust funds, the first individual on the account (1) 3. Custodian account of a The minor (2) 8. Corporate The corporation minor (Uniform Gift to Minors Act) 4. a. The usual The grantor-trustee (1) 9. Association, club, The organization revocable savings religious, charitable, trust (grantor) is also educational, or other trustee tax-exempt organization b. So-called trust The actual owner (1) 10. Partnership The partnership account that is not a legal or valid trust under state law 5. Sole proprietorship The owner (3) 11. A broker or registered The broker or nominee nominee 12. Account with the The public entity Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments - -----------------------------------------------------------------------------------------------------------------------
(1) List above the signature line and circle the name of the person whose number you furnish (2) List minor's name and furnish the minor's social security number. (3) You must show your individual name, but you may also enter your business or "doing business as" name. You may use your social security number or employer identification number. (4) List the name of the legal trust, estate, or pension trust. (Do not furnish the TIN of the personal representative or trustee unless the legal entity itself is not designated in the account title). Note: If no name above the signature line is listed when more than one name appears in the registration, the number will be considered to be that of the first name appearing in the registration. Purpose of Form. -- A person who is required to file an information return with the IRS must get your correct TIN to report, for example, income paid to you, real estate transactions, mortgage interest you paid, the acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA. Use Form W-9 to give your correct TIN to the person requesting your TIN and, when applicable, (1) to certify the TIN you are giving is correct (or you are waiting for a number to be issued), (2) to certify you are not subject to backup withholding, or (3) to claim exemption from backup withholding if you are an exempt payee. Note: If a requester gives you a form other than a W-9 to request your TIN, you must use the requester's form if it is substantially similar to Form W-9. What Is Backup Withholding? -- Persons making certain payments to you must withhold and pay to the IRS up to 31% of such payments under certain conditions. This is called "backup withholding." Payments that could be subject to backup withholding include interest, dividends, broker and barter exchange transactions, rents, royalties, nonemployee pay, and certain payments from fishing boat operators. Real estate transactions are not subject to backup withholding. If you give the requester your correct TIN, make the proper certifications, and report all your taxable interest and dividends on your tax return, payments you receive will not be subject to backup withholding. Payments you receive will be subject to backup withholding if: 1. You do not furnish your TIN to the requester, or 2. The IRS tells the requester that you furnished an incorrect TIN, or 3. The IRS tells you that you are subject to backup withholding because you did not report all your interest and dividends on your tax return (for reportable interest and dividends only), or 4. You do not certify to the requester that you are not subject to backup withholding under 3 above (for reportable interest and dividend accounts opened after 1983 only), or 5. You do not certify your TIN. Certain payees and payments are exempt from backup withholding and information reporting. See below. How To Get a TIN: If you do not have a TIN, apply for one immediately. To apply for an SSN, get Form SS-5 from your local Social Security Administration office. Get Form W-7 to apply for an ITIN or Form SS-4 to apply for an EIN. You can get Forms W-7 and SS-4 from the IRS by calling 1-800-TAX-FORM (1-800-829-3676). If you do not have a TIN, check the box titled "Applied For" in the space for the TIN, sign and date the form, and give it to the requester. Generally, you will then have 60 days to get a TIN and give it to the requester. If the requester does not receive your TIN within 60 days, backup withholding, if applicable, will begin and continue until you furnish your TIN. Note: Checking the box titled "Applied For" on the form means that you have already applied for a TIN OR that you intend to apply for one soon. As soon as you receive your TIN, complete another Form W-9, include your TIN, sign and date the form, and give it to the requester. Payees Exempt from Backup Withholding Individuals (including sole proprietors) are not exempt from backup withholding. Corporations are exempt from backup withholding for certain payments, such as interest and dividends. If you are exempt from backup withholding, you should still complete this form to avoid possible erroneous backup withholding. Enter your correct TIN in Part I, write "Exempt" in Part II, and sign and date the form. If you are a nonresident alien or a foreign entity not subject to backup withholding, give the requester a completed Form W-8, Certificate of Foreign Status. The following is a list of payees exempt from backup withholding and for which no information reporting is required. For interest and dividends, all listed payees are exempt except the payee listed in item (9). For broker transactions, payees listed in (1) through (13) and a person registered under the Investment Advisers Act of 1940 who regularly acts as a broker are exempt. Payments subject to reporting under sections 6041 and 6041A are generally exempt from backup withholding only if made to payees described in items (1) through (7). However, a corporation (other than certain hospitals or extended care facilities) that provides medical and health care services or bills and collects payments for such services is not exempt from backup withholding or information reporting. Only payees described in items (2) through (6) are exempt from backup withholding for barter exchange transactions and patronage dividends. (1) A corporation. (2) An organization exempt from tax under sect ion 501(a), or an IRA, or a custodial account under section 403(b)(7) if the account satisfies the requirements of section 401(f)(2). (3) The United States or any of its agencies or instrumentalities. (4) A state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities. (5) A foreign government or any of its political subdivisions, agencies, or instrumentalities. (6) An international organization or any of its agencies or instrumentalities. (7) A foreign central bank of issue. (8) A dealer in securities or commodities required to register in the United States, the District of Columbia or a possession of the United States. (9) A futures commission merchant registered with the Commodity Futures Trading Commission. (10) A real estate investment trust. (11) An entity registered at all times during the tax year under the Investment Company Act of 1940. (12) A common trust fund operated by a bank under section 584(a). (13) A financial institution. (14) A middleman known in the investment community as a nominee or listed in the most recent publication of the American Society of Corporate 2 Secretaries, Inc., Nominee List. (15) A trust exempt from tax under section 664 or described in section 4947. Payments Exempt from Backup Withholding Payments of dividends and patronage dividends that generally are exempt from backup withholding include the following: o Payments to nonresident aliens subject to withholding under section 1441. Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident alien partner. o Payments of patronage dividends not paid in money. o Payments made by certain foreign organizations. o Section 404(k) payments made by an ESOP. Payments of interest that generally are exempt from backup withholding include the following: o Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct TIN to the payer. o Payments of tax-exempt interest (including exempt-interest dividends under section 852). o Payments described in section 6049(b)(5) to nonresident aliens. o Payments on tax-free covenant bonds under section 1451. o Payments made by certain foreign organizations. o Mortgage interest paid to you. Other types of payments that generally are exempt from backup withholding include: o Wages o Distributions from a pension, annuity, profit-sharing or stock bonus plan, any IRA, or an owner-employee plan. o Certain surrenders of life insurance contracts. o Gambling winnings if withholding is required under section 3402(q). However, if withholding is not required under section 3402(q), backup withholding applies if the payee fails to furnish a TIN. o Real estate transactions reportable under section 6045(e). o Cancelled debts reportable under section 6050P. o Distributions from a medical savings account and long-term care benefits. o Fish purchases for cash reportable under section 6050R. Payments that are not subject to information reporting also are not subject to backup withholding. For details, see sections 6041, 6041A, 6042, 6044, 6045, 6049, 6050A, and 6050N, and their regulations. Privacy Act Notice.--Section 6109 requires you to give your correct TIN to persons who must file information returns with the IRS to report interest, dividends, and certain other income paid to you, mortgage interest you paid, the acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. The IRS may also provide this information to the Department of Justice for civil and criminal litigation and to cities, states, and the District of Columbia to carry out their tax laws. You must provide your TIN whether or not you are required to file a tax return. Payers must generally withhold up to 31% of taxable interest, dividend, and certain other payments to a payee who does not give a TIN to a payer. Certain penalties may also apply. Penalties (1) Failure to Furnish TIN.--If you fail to furnish your TIN to a requester, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) Civil Penalty for False Information With Respect to Withholding.--If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a penalty of $500. (3) Criminal Penalty for Falsifying Information.--Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. (4) Misuse of TINS.--If the requester discloses or uses TINs in violation of Federal law, the requester may be subject to civil and criminal penalties. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE 3 EX-99 3 ex-a1b.txt OFFICIAL PAYMENTS CORPORATION COMMON SHARES LETTER OF TRANSMITTAL This letter of transmittal must accompany your certificates representing shares of Common Stock of Official Payments Corporation in order to receive cash payment in connection with the offer as described in the Offer to Purchase dated June 11, 2002 by Tier Technologies, Inc. and its wholly-owned subsidiary KingFish Acquisition Corporation. See instructions on the reverse side. I/we the undersigned, surrender to you for payment the share(s) identified below. I/we certify that I/we have complied with all requirements as stated in the instructions on the reverse side, was/were the registered holder(s) of the Official Payments Corporation common shares represented by the enclosed certificates on the effective date of the merger, have full authority to surrender these certificate(s) and give the instructions in this transmittal form and warrant that the shares represented by these certificates are free and clear of all liens, restrictions, adverse claims and encumbrances. Please complete the back if you would like to transfer ownership or request special mailing - -------------------------------------------------------------------------------- (1) Signature: This form must be signed by the registered holder(s) exactly as their name(s) appears on the certificate(s) or by person(s) authorized to sign on behalf of the registered holder(s) by documents transmitted herewith. X ----------------------------------------------------------------------------- Signature of Stockholder Date Daytime Telephone # X ----------------------------------------------------------------------------- Signature of Stockholder Date Daytime Telephone # - -------------------------------------------------------------------------------- Taxpayer ID or Social Security Number DO NOT COMPLETE BELOW IF TIN ABOVE IS CORRECT - -------------------------------------------------------------------------------- (2) SUBSTITUTE FORM W-9 - -------------------------------------------------------------------------------- If the Taxpayer ID Number printed ---> |_||_||_||_||_||_||_||_||_| above is INCORRECT, cross it out and Use for Corrected Taxpayer write in the CORRECT number here. ID Number ONLY - -------------------------------------------------------------------------------- CHECK ONLY ONE BOX BELOW. |_| Under penalties of perjury, I certify that: (1) the number printed above is my correct Taxpayer ID Number (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding because: (A) I am exempt from backup withholding, (B) I have not been notified by the Internal Revenue Service (IRS) that I am subject to back-up withholding as a result of a failure to report all interest or dividends, or (C) the IRS has notified me that I am no longer subject to backup withholding (you must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding); and (3) I am a U.S. person (including a U.S. resident alien); OR |_| I am an EXEMPT PAYEE. (Attach appropriate IRS Form W-8BEN, Certificate of Foreign States (if applicable).) X Signature Date: ----------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (3) List only certificate(s) surrendering here ----------------------------------------------------------------------------- Certificate No(s). Number of Common Shares TOTAL CERTIFICATED SHARES - -------------------------------------------------------------------------------- (4) Certificated Shares Presented -------------------------------------------- - -------------------------------------------------------------------------------- /\ DO NOT DETACH-FOLD ONLY AND INSERT IN PROVIDED ENVELOPE /\ - -------------------------------------------------------------------------------- (5) AFFIDAVIT OF LOST, MISSING OR DESTROYED CERTIFICATE(S) AND AGREEMENT OF INDEMNITY THIS AFFIDAVIT IS INVALID IF NOT SIGNED BELOW Complete this Section only if you cannot locate some or all of your Official Payments Corporation common share certificate(s). Please print clearly. - -------------------------------------------------------------------------------- TOTAL SHARES LOST [GRAPHIC] - -------------------------------------------------------------------------------- Please fill in certificate no(s). if known NUMBER OF COMMON SHARES - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Attach separate schedule if needed - -------------------------------------------------------------------------------- Taxpayer ID or Social Security Number By signing this form I/we swear, depose and state that: I/we am/are the lawful owner(s) of the certificate(s) hereinafter referred to as the "securities" described in the enclosed Transmittal Form. The securities have not been endorsed, pledged, cashed, negotiated, transferred, assigned, or otherwise disposed of. I/we have made a diligent search for the securities and have been unable to find it or them and make this Affidavit for the purpose of inducing the sale, exchange, redemption, or cancellation of the securities, as outlined in this Transmittal Form, without the surrender of the original(s), and also to request and induce the Federal Insurance Company to provide suretyship for me to cover the missing securities under its Blanket Bond #8302-00-67. I/we hereby agree to surrender the securities for cancellation should I/we, at any time, find the securities. I/we hereby agree for myself/ourselves, my/our heirs, successors, assigns, and personal representatives, in consideration of the proceeds of the sale, exchange, redemption or cancellation of the securities, and the aforementioned suretyship, to indemnify, protect and hold harmless Federal Insurance Company (the Surety), Mellon Investor Services LLC, Official Payments Corporation, and any other party to the transaction, from and against and any all loss, costs, and damages including court costs and attorney's fees, which they may be subject to or liable for in respect to the sale, exchange, redemption, or cancellation of the securities without requiring surrender of the original securities. The rights accruing to the parties under the preceding sentence shall not be limited or abridged by their negligence, inadvertence, accident, oversight, breach, or failure to inquire into, contest, or litigate any claim, whenever such negligence, inadvertence, accident, oversight, breach or failure may occur or have occurred, I/we agree that this Affidavit and Indemnity Agreement is to become part of Blanket Bond # 8302-00-67 underwritten by the Federal Insurance Company. Any person who, knowingly and with intent to defraud any insurance company or other person, files an application or statement of claim, containing any materially false information, or conceals, for the purpose of misleading, information concerning any fact material thereto, commits a fraudulent insurance act, which is a crime, and shall also be subject to civil penalties as prescribed by law. X Signed by Affiant (shareholder) ______________________________________________ (Deponent) (Indemnitore) (Heirs Individually) on this (date)__________________________________________________________________ Month Day Year Social Security #______________ Date_______________ Notary Public_______________ Lost Securities Premium/Service Fee Calculation - -------------------------------------------------------------------------------- IF THE SHARE VALUE IS UNDER $1,000, THERE IS A $50.00 SERVICE FEE ONLY - -------------------------------------------------------------------------------- 1. Enter the number of shares that are lost:_____ x $3.00 = $______ Share Value* *If the Share Value exceeds $500,000, or if the shareholder is foreign or deceased, do not continue with calculation. Contact Mellon Investor Services at 1-866-323-8166. 2. Enter the Share Value if greater than $1,000:_______ x 3% (.03)=$______ Surety Premium Multiply by 3% (.03) for Surety Premium. 3 Total Amount Due : $_______ Surety Premium + $50.00 Service Fee =$ _______ Total Fee Please make all checks payable to: Mellon Investor Services, 85 Challenger Road, Ridgefield Park, NJ 07660. Any check over $250.00 must be in the form of a certified check, cashier's check, or money order. Please send your signed check or money order, along with the Transmittal Form, to the address on the front of this document
- ------------------------------------------------------------------------------------------- (6) Special Transfer Instructions If you want your check to be issued in a name Signature Guarantee Medallion that is different from the name on your certificate(s), fill in this section with the information for the new name. List multiple names on a separate sheet. - ---------------------------------------------- ----------------------------------------- Name (Please Print First, Middle & Last Names) (Title of Officer Signing this Guarantee) - ---------------------------------------------- ----------------------------------------- Address (Number and Street) (Name of Guarantor - Please Print) - ---------------------------------------------- ----------------------------------------- Address (City, State & Zip Code) (Address of Guarantor Firm) - ---------------------------------------------- ----------------------------------------- (Tax Identification or Social Security Number)
- -------------------------------------------------------------------------------- (7) Special Mailing Instructions Fill in ONLY if mailing to someone other than the undersigned or to the undersigned at an address other than that shown on the front of this card. Mail statement(s) and check(s) to: - -------------------------------------------------------------------------------- Name (Please Print First, Middle & Last Names) - -------------------------------------------------------------------------------- Address (Number and Street) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Address (City, State & Zip Code) - -------------------------------------------------------------------------------- /\ DO NOT DETACH-FOLD ONLY AND INSERT IN PROVIDED ENVELOPE /\ INSTRUCTIONS FOR COMPLETING THE COMMON SHARES TRANSMITTAL FORM (1) Sign and date this Transmittal Form in Box 1 and 2 on the front of the Transmittal Form and return this Transmittal Form and your share certificates in the enclosed envelope. (2) If you are a U.S. taxpayer and the Taxpayer Identification Number or Social Security Number printed above Box 2 is incorrect, you must complete Box 2 with your correct Taxpayer Identification Number or Social Security Number (YOU MUST SIGN). If you are a Non-U.S. taxpayer, check the box "EXEMPT PAYEE" and complete IRS Form W-8BEN. (3) Please indicate your certificate number(s) and share(s) and/or the total certificated shares you hold in Box 3. (4) Please indicate the total number of certificated share(s) of Official Payments Corporation common shares you are presenting in Box 4. (5) If you cannot locate some or all of your share certificates, please complete Box 5, the Affidavit of Lost, Missing or Destroyed Certificate(s) and Agreement of Indemnity, on the front of this Transmittal Form. (6) If you want your check to be issued in a name that is different from the name on your certificate(s), complete the Special Transfer Instructions in Box 6. Signature(s) in Box 6 must be medallion guaranteed. (7) Complete Box 7 only if your check is to be delivered to a person other than the registered holder or to a different address. HOW TO CONTACT MELLON INVESTOR SERVICES By Telephone - 9 a.m. to 7 p.m., New York Time, Monday through Friday, except for bank holidays: From within the U.S., Canada or Puerto Rico: 1-866-323-8166 (TOLL-FREE) WHERE TO FORWARD YOUR TRANSMITTAL MATERIALS By Mail: Mellon Investor Services LLC Attn: Reorganization Dept. P.O. Box 3300 South Hackensack, NJ 07606 By Overnight Courier: Mellon Investor Services LLC Attn: Reorganization Dept. 85 Challenger Road Mail Drop-Reorg Ridgefield Park, NJ 07660 By Hand: Mellon Investor Services LLC Attn: Reorganization Dept. 120 Broadway, 13th Floor New York, NY 10271 EX-99 4 ex-a1a.txt OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF OFFICIAL PAYMENTS CORPORATION AT $3.00 NET PER SHARE BY KINGFISH ACQUISITION CORPORATION A WHOLLY-OWNED SUBSIDIARY OF TIER TECHNOLOGIES, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON TUESDAY, JULY 9, 2002, UNLESS THE OFFER IS EXTENDED. THE BOARD OF DIRECTORS OF OFFICIAL PAYMENTS CORPORATION (THE "COMPANY") HAS UNANIMOUSLY DETERMINED THAT THE MERGER AGREEMENT (AS DEFINED HEREIN) AND THE TRANSACTIONS CONTEMPATED THEREBY, INCLUDING THE OFFER AND THE MERGER (EACH AS DEFINIED HEREIN), ARE ADVISABLE, FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS AND HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER AND UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT THERETO. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED HEREIN) THAT NUMBER OF SHARES WHICH WOULD REPRESENT AT LEAST A MAJORITY OF THE SHARES OF THE COMPANY OUTSTANDING ON A FULLY-DILUTED BASIS (PROVIDED THAT FOR THE PURPOSES OF THE FOREGOING CALCULATION, "FULLY-DILUTED" 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 IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE INTRODUCTION AND SECTIONS 1 AND 14 HEREOF. ------------ TABLE OF CONTENTS
PAGE ----- SUMMARY TERM SHEET ....................................................................... 1 INTRODUCTION ............................................................................. 4 THE OFFER ................................................................................ 6 1. Terms Of The Offer; Expiration Date ................................................. 6 2. Acceptance For Payment And Payment .................................................. 7 3. Procedures For Accepting The Offer And Tendering Shares ............................. 8 4. Withdrawal Rights ................................................................... 11 5. Certain Federal Income Tax Consequences ............................................. 11 6. Price Range Of The Shares ........................................................... 12 7. Effect Of The Offer On The Market For The Shares; Stock Exchange Listing; Exchange Act Registration; Margin Regulations .................................................... 12 8. Certain Information Concerning The Company .......................................... 13 9. Certain Information Concerning Purchaser And Parent ................................. 14 10. Background Of The Offer; Contacts With The Company .................................. 15 11. Purpose Of The Offer; Plans For The Company ......................................... 16 12. Source And Amount Of Funds .......................................................... 27 13. Dividends And Distributions ......................................................... 27 14. Certain Conditions Of The Offer ..................................................... 27 15. Certain Legal Matters; Required Regulatory Approvals ................................ 29 16. Certain Fees And Expenses ........................................................... 30 17. Miscellaneous ....................................................................... 30 SCHEDULE I: Directors and Executive Officers of Parent and Purchaser ANNEX A: Section 262 of the Delaware General Corporation Law
i IMPORTANT Any stockholder desiring to tender all or any portion of his or her Shares (as defined herein) should either (a) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal and mail or deliver it together with the certificate(s) representing the tendered Shares, and any other required documents as required by the Letter of Transmittal, to the Depositary or tender such Shares pursuant to the procedures for book-entry transfer set forth in Section 3 or (b) request his or her broker, dealer, commercial bank, trust company or other nominee to effect the transaction for him or her. A stockholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if he or she desires to tender such Shares. A stockholder who desires to tender his or her Shares and whose certificates representing such Shares are not immediately available or who cannot comply with the procedures for book-entry transfer on a timely basis may tender such Shares by following the procedures for guaranteed delivery set forth in Section 3. Questions and requests for assistance may be directed to the Information Agent at its address and telephone number set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other related materials may be obtained from the Information Agent or from brokers, dealers, commercial banks and trust companies. THE INFORMATION AGENT FOR THE OFFER IS: MELLON INVESTOR SERVICES June 11, 2002 SUMMARY TERM SHEET This summary term sheet is a brief summary of the material provisions of Kingfish Acquisition's offer, and is meant to help you understand the offer. This summary term sheet is not meant to be a substitute for the information contained in the remainder of this Offer to Purchase, and the information contained in this summary is qualified in its entirety by the fuller descriptions and explanations contained in the later pages of this Offer to Purchase. You are urged to carefully read the entire Offer to Purchase and related Letter of Transmittal prior to making any decision regarding your shares. 1. Q. WHO IS OFFERING TO PURCHASE MY SHARES OF COMMON STOCK OF OFFICIAL PAYMENTS? A. Kingfish Acquisition Corporation, a Delaware corporation formed solely to make the offer, is offering to purchase your Official Payments shares. We are a wholly-owned subsidiary of Tier Technologies, Inc. Tier Technologies, a California corporation whose securities are traded on the Nasdaq National Market (symbol: TIER), is a consulting firm that provides business and information technology consulting, systems design and integration, transaction processing, business process outsourcing and business process reengineering for its clients primarily in the state and local government, healthcare, insurance and utilities markets. See "Introduction" and Section 9. 2. Q. WHAT IS KINGFISH ACQUISITION SEEKING TO PURCHASE, AT WHAT PRICE, AND DO I HAVE TO PAY ANY BROKERAGE OR SIMILAR FEES TO TENDER? A. Kingfish Acquisition is offering to purchase all of the outstanding shares of common stock of Official Payments, at a price of $3.00 per share, net to the seller in cash, without interest. If, before expiration of the offer, Kingfish Acquisition increases the offer price, that increased price will be paid to all holders of shares that are purchased in the offer, whether or not such shares were tendered before the increase in the offer price. If you are the record owner of your shares, you will not have to pay any brokerage or similar fees. However, if you own your shares through a broker or other nominee, your broker or nominee may charge you a fee to tender. You should consult your broker or nominee to determine whether any charges will apply. See "Introduction" and Section 9. 3. Q. WHY IS KINGFISH ACQUISITION MAKING THIS OFFER? A. Kingfish Acquisition is making this offer to enable Kingfish Acquisition to acquire control of Official Payments. See "Introduction" and Section 11. 4. Q. HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER? A. You have until 5:00 p.m., New York City time, on July 9, 2002. Under certain circumstances, we may extend the offer. If the offer is extended, we will issue a press release announcing the extension on the first business morning following the date the offer was scheduled to expire. See Section 1. 5. Q. WHAT ARE THE MOST IMPORTANT CONDITIONS TO THE OFFER? A. The most important conditions to the offer are the following: o that stockholders validly tender and do not withdraw before the expiration of the offer at least a majority of the shares of Official Payments outstanding on a fully-diluted basis. For the purposes of determining the number of outstanding shares, options to purchase shares that are outstanding immediately before the consummation of the offer and either (i) are not exercisable at such time or (ii) have an exercise price greater than $3.00 per share will not be taken into account. o that there is no material adverse change with respect to Official Payments prior to the expiration of the offer. o the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. A more complete discussion of the conditions to consummation of the offer may be found in Section 14. 6. Q. DOES KINGFISH ACQUISITION HAVE THE FINANCIAL RESOURCES TO MAKE THE PAYMENT? A. Kingfish Acquisition's parent corporation, Tier Technologies, will provide Kingfish Acquisition with sufficient funds to purchase all shares tendered in the offer. The offer is not conditioned on any financing arrangements. See Section 12. 1 7. Q. IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN THE OFFER? A. Kingfish Acquisition does not think its financial condition is relevant to your decision whether to tender shares and accept the offer because the offer is being made for all outstanding shares solely for cash, the offer is not subject to any financing condition and, after consummation of the offer and upon the merger, Kingfish Acquisition will acquire at the offer price all shares not tendered. See "Introduction" and Sections 1, 11 and 12. 8. Q. HOW DO I ACCEPT THE OFFER AND TENDER MY SHARES? A. To tender your shares, you must completely fill out the enclosed Letter of Transmittal and deliver it, along with your share certificates, to the depositary agent, Mellon Investor Services, prior to the expiration of the offer. If your shares are held in street name (i.e., through a broker, dealer or other nominee), they can be tendered by your nominee through The Depository Trust Company. If you cannot deliver all necessary documents to The Depository Trust Company in time, you might be able to complete and deliver to the depositary, in lieu of the missing documents, the enclosed Notice of Guaranteed Delivery, provided you are able to fully comply with its terms. See Section 3. 9. Q. IF I ACCEPT THE OFFER, WHEN WILL I GET PAID? A. Provided the conditions to the offer are satisfied and Kingfish Acquisition consummates the offer and accepts your shares for payment, you will receive a check equal to the number of shares you tendered multiplied by $3.00 as promptly as practicable following the expiration of the offer. Kingfish Acquisition expects that checks will be mailed out promptly following expiration of the offer. See Section 2. 10. Q. CAN I WITHDRAW MY PREVIOUSLY TENDERED SHARES? A. You may withdraw a portion or all of your tendered shares by delivering written, telegraphic or facsimile notice to the depositary prior to the expiration of the offer. Further, if Kingfish Acquisition has not agreed to accept your shares for payment within 60 days of the commencement of the offer, you can withdraw them at any time after that 60-day period until Kingfish Acquisition does accept your shares for payment. Once shares are accepted for payment, they cannot be withdrawn. See Section 4. 11. Q. WHAT DOES THE BOARD OF DIRECTORS OF OFFICIAL PAYMENTS THINK OF THIS OFFER? A. The Board of Directors of Official Payments has unanimously determined that the merger agreement, and the transactions contemplated thereby, including the offer and the merger, are advisable, fair to, and in the best interests of, the company's stockholders and has approved the merger agreement and the transactions contemplated thereby, including the offer and the merger. The Board further recommends that stockholders of Official Payments accept the offer and tender their shares. See "Introduction." 12. Q. HAVE ANY STOCKHOLDERS ALREADY DECIDED TO TENDER THEIR SHARES? A. Yes. Comerica Incorporated, Beranson Holdings, Inc. and Michaella Stern, the controlling stockholder of Beranson Holdings and widow of Kenneth Stern, Official Payments' founder and former president and director, have each agreed to tender all of their outstanding shares of Official Payments stock in the offer. Their shares represent approximately 14.6 million shares of common stock of Official Payments (representing approximately 55.8% of the outstanding shares on a fully-diluted basis). See "Introduction" and Section 11. 13. Q. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTION? A. The receipt of cash by you in exchange for your shares pursuant to the offer, the merger or upon exercise of appraisal rights is taxable for federal income tax purposes and may be taxable under applicable state, local or foreign tax laws. In general, you will recognize capital gain or loss equal to the difference between your adjusted tax basis in the shares you tender and the amount of cash you receive for those shares. You should consult your tax advisor about the particular effect tendering will have on your shares. See Section 5. 14. Q. WHAT WILL HAPPEN TO OFFICIAL PAYMENTS? A. If the offer is consummated, under a merger agreement among Kingfish Acquisition, Official Payments and Tier Technologies, Kingfish Acquisition will be merged with and into Official Payments, with Official Payments surviving as a wholly-owned subsidiary of Tier Technologies. 2 Further, following the consummation of the offer, under the merger agreement, Official Payments is required to take certain actions so that representatives of Tier Technologies will constitute at least a majority of the members of the Board of Directors of Official Payments. See Section 11. 15. Q. IF I DO NOT TENDER BUT THE TENDER OFFER IS SUCCESSFUL, WHAT WILL HAPPEN TO MY SHARES? A. Even if you do not tender your shares, if the offer is consummated, Tier Technologies acquires control of Official Payments and Kingfish Acquisition merges with Official Payments, all remaining stockholders of Official Payments at the time of the merger, other than those who properly assert appraisal rights, will receive $3.00 per share in cash for each share of Official Payments common stock, without interest. Even if Kingfish Acquisition does not merge with Official Payments, the number of stockholders of Official Payments may be so small that they will no longer be traded on the Nasdaq National Market or any other national exchange. Also, Official Payments may no longer be required to comply with SEC rules governing publicly-held companies. See Section 11. 16. Q. ARE DISSENTERS RIGHTS AVAILABLE IN EITHER THE OFFER OR THE MERGER? A. Dissenters rights are not available in the offer. However, if you choose not to tender, and the offer is consummated, dissenters rights will be available in the merger of Kingfish Acquisition and Official Payments. If you choose to exercise your dissenters rights, and you comply with all of the applicable legal requirements, you will be entitled to payment for your shares based on a fair and independent appraisal of the market value of your shares. This market value may be more or less than $3.00 per share. 17. Q. WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE? A. On May 30, 2002, the last trading day before the public announcement of the execution of the merger agreement, the closing share price of Official Payments on the Nasdaq National Market was $2.00 per share. On June 10, 2002, the last trading day before the commencement of the offer, the closing share price of Official Payments on the Nasdaq National Market was $2.96. Please obtain a recent quotation for your shares prior to deciding whether or not to tender. See Section 6. 18. Q. WHO CAN I CALL WITH QUESTIONS? A. You can call Mellon Investor Services at (866) 323-8166 with any questions you may have. 3 To: All Holders of Shares of Common Stock of Official Payments Corporation: INTRODUCTION Kingfish Acquisition Corporation, a Delaware corporation ("Purchaser") and a wholly-owned subsidiary of Tier Technologies, Inc., a California corporation ("Tier Technologies" or "Parent"), hereby offers to purchase all outstanding shares of common stock, par value $0.01 per share (the "Common Stock"), of Official Payments Corporation, a Delaware corporation ("Official Payments" or the "Company") (the "Shares") at a price of $3.00 per Share, net to the seller in cash, without interest thereon (the "Offer Price"), upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, constitute the "Offer"). The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of May 30, 2002 (the "Merger Agreement"), by and among Parent, Purchaser and the Company. Pursuant to the Merger Agreement and in accordance with the Delaware General Corporation Law, (the "DGCL"), as soon as practicable after the completion of the Offer and satisfaction or waiver, if permissible, of all conditions, including the purchase of Shares pursuant to the Offer and the approval and adoption of the Merger Agreement by the stockholders of the Company (if required by applicable law), Purchaser will be merged with and into the Company (the "Merger"), and the Company will be the surviving corporation in the Merger. At the effective time of the Merger (the "Effective Time"), each Share then outstanding, other than Shares held by (i) the Company or any of its subsidiaries, (ii) Parent, Purchaser or any of Parent's other subsidiaries and (iii) stockholders who have properly exercised their dissenters' rights under the DGCL, will be cancelled and converted automatically into the right to receive the Offer Price, or any higher price per Share paid in the Offer, without interest. The Merger Agreement is more fully described in Section 11. THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") HAS UNANIMOUSLY DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPATED THEREBY, INCLUDING THE OFFER AND THE MERGER, ARE ADVISABLE, FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS AND HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER AND UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT THERETO. CIBC WORLD MARKETS CORP., THE COMPANY'S FINANCIAL ADVISOR ("CIBC"), HAS DELIVERED TO THE COMPANY ITS WRITTEN OPINION, DATED MAY 30, 2002, THAT SUBJECT TO THE ASSUMPTIONS, FACTORS AND LIMITATIONS SET FORTH THEREIN, THE CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF SHARES PURSUANT TO THE OFFER AND THE MERGER IS FAIR FROM A FINANCIAL POINT OF VIEW TO SUCH HOLDERS. A COPY OF THE OPINION OF CIBC IS CONTAINED IN THE COMPANY'S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE 14D-9") FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") IN CONNECTION WITH THE OFFER, A COPY OF WHICH IS BEING FURNISHED TO STOCKHOLDERS CONCURRENTLY HEREWITH. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION 1 BELOW) THAT NUMBER OF SHARES WHICH WOULD REPRESENT AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY-DILUTED BASIS (PROVIDED THAT FOR THE PURPOSES OF THE FOREGOING CALCULATION, "FULLY-DILUTED" 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 "MINIMUM CONDITION"). THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTIONS 1 AND 14. The Company has informed Purchaser that, at the close of business on May 15, 2002, (i) 22,932,876 Shares were issued and outstanding and (ii) 8,900,000 shares of Common Stock were reserved for issuance in connection with the exercise of options to purchase Shares (each, a "Company Stock Option") pursuant to the Company's 1999 Stock Incentive Plan and 2000 Stock Incentive Plan (collectively, the "Company Stock Option Plans"), of which 3,208,850 Shares were subject to outstanding Company Stock Options with an exercise price of $3.00 or less per Share. Accordingly, based on this information, there are 26,141,726 Shares outstanding on a fully-diluted basis (provided that for the purposes of the 4 foregoing calculation, "fully-diluted" means giving effect to the conversion or exercise of all Company Stock 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). Based on the foregoing, Purchaser believes the Minimum Condition will be satisfied if 13,070,864 Shares are validly tendered pursuant to the Offer and not withdrawn. Certain other conditions to the consummation of the Offer are described in Section 14. Purchaser expressly reserves the right to waive any one or more of the conditions to the Offer, other than the Minimum Condition. See Sections 14 and 15. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in the Letter of Transmittal, stock transfer taxes on the purchase of Shares by Purchaser pursuant to the Offer. Stockholders who hold their Shares through a bank or broker should check with such institution as to whether they charge any service fees. Purchaser will pay all charges and expenses of Adams, Harkness & Hill, Inc. as Dealer Manager (the "Dealer Manager") and Mellon Investor Services, as Depository (the "Depository") and as Information Agent (the "Information Agent"), incurred in connection with the Offer. See Section 16. Comerica Incorporated, Beranson Holdings, Inc. ("Beranson") and Michaella Stern, the controlling stockholder of Beranson and widow of Kenneth Stern, founder and former president and director of the Company, have all executed a Stockholders Agreement, pursuant to which each has agreed to tender all Shares she or it owns, and in any event to vote in favor of the Merger Agreement and the Merger and against certain competing proposals to purchase the Company with respect to any Shares they may own as of the record date of a stockholder's meeting at which such matters will be considered. As of the date hereof, these persons own approximately 14.6 million outstanding Shares. See Section 11. Consummation of the Merger is conditioned upon, among other things, the approval and adoption by the requisite vote of stockholders of the Company of the Merger Agreement and the Merger, if required by applicable law and the Company's Certificate of Incorporation. See Section 11. Under the DGCL and pursuant to the Company's Certificate of Incorporation, the affirmative vote of the holders of a majority of outstanding Shares, voting together as a single class, is the only vote of any class or series of the Company's capital stock that would be necessary to approve the Merger Agreement and the Merger at a meeting of the Company's stockholders. If the Minimum Condition is satisfied and Purchaser purchases at least a majority of the Shares on a fully-diluted basis entitled to vote on the approval of the Merger and the Merger Agreement, Purchaser will be able to effect the Merger without the affirmative vote of any other stockholder. Pursuant to the Merger Agreement, Parent has agreed to vote, or cause to be voted, all of the Shares then owned by it, Purchaser or any of its other subsidiaries or affiliates controlled by Parent in favor of the approval of the Merger and the approval and adoption of the Merger Agreement. The Merger Agreement is more fully described in Section 11. Under Section 253 of the DGCL, if a corporation owns at least 90% of the outstanding shares of each class of a subsidiary corporation, the corporation holding such stock may merge such subsidiary into itself, or itself into such subsidiary, without any action or vote on the part of the board of directors or the stockholders of such other corporation (a "Short-Form Merger"). If Purchaser acquires an aggregate of at least 90% of the outstanding Shares pursuant to the Offer or otherwise, then, at the election of Parent, a Short-Form Merger of Purchaser with and into the Company could be effected without any further approval of the Company Board or the stockholders of the Company. Even if Purchaser does not own 90% of the outstanding Shares following consummation of the Offer, Parent could seek to purchase additional Shares in the open market or otherwise in order to reach the applicable 90% threshold and employ such a Short-Form Merger. The per share consideration paid for any Shares so acquired in open market purchases may be greater or less than the Offer Price. Parent presently intends to effect a Short-Form Merger, if permitted to do so under the DGCL, pursuant to which Purchaser will be merged with and into the Company. See Section 11. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 5 THE OFFER 1. TERMS OF THE OFFER; EXPIRATION DATE Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment and thereby purchase all Shares validly tendered and not withdrawn in accordance with the procedures set forth in Section 4 on or prior to the Expiration Date (as hereinafter defined). The term "Expiration Date" means 5:00 p.m., New York City time, on July 9, 2002, unless and until Purchaser, in accordance with the terms of the Offer, but subject to the limitations set forth in the Merger Agreement, extends the period of time for which the Offer is open, in which event the term "Expiration Date" means the time and date at which the Offer, as so extended by Purchaser, will expire. Without the consent of the Company, Purchaser may not (i) reduce the number of Shares subject to the Offer, (ii) reduce the Offer Price, (iii) modify or add to the Offer conditions set forth in the Merger Agreement and described in Section 14 below or otherwise amend the Offer in any manner adverse to the holders of the Shares, (iv) except as provided in the next three sentences, 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 if at the Expiration Date or any extension thereof any of the conditions to Purchaser's obligations to purchase the Shares (set forth in the Merger Agreement and described in Section 14 below) 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 position of the SEC applicable to the Offer. Further, if, immediately prior to the Expiration Date, 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 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, provided that upon such extension Parent and Purchaser shall be deemed to have waived all of the Offer conditions set forth in the Merger Agreement and described in Section 14 below (other than the Minimum Condition) and provided further that Purchaser shall not extend the Offer beyond the last business day of the month in which the Minimum Condition has been satisfied and all conditions to the Offer have been satisfied or waived or (y) amend the Offer to include a Subsequent Offering Period (as defined below) not to exceed twenty business days to the extent permitted under Rule 14d-11 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), if available. Subject to the applicable regulations of the SEC, 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 described below, 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 any of the conditions referred to in Section 14 have not been satisfied or upon the occurrence of any of the events specified in Section 14 and which events continue in effect immediately prior to the expiration of the Offer (except in the case of certain conditions in which case the event must continue in effect for a period of ten days following notice by Parent to Company), in each case, by giving oral or written notice of such delay, termination, waiver or amendment to the Depositary and by making a public announcement thereof. Purchaser acknowledges (i) that Rule 14e-1(c) under the Exchange Act requires Purchaser to pay the consideration offered or return the Shares tendered promptly after the termination or withdrawal of the Offer and (ii) that Purchaser may not delay acceptance for payment of, or payment for any Shares upon the occurrence of any of the conditions specified in Section 14 without extending the period of time during which the Offer is open. If Purchaser extends the Offer or if Purchaser is delayed in its acceptance for payment of or payment (whether before or after its acceptance for payment of Shares) for Shares or it is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of Purchaser, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as described herein under Section 4. However, the ability of Purchaser to delay the payment for Shares that Purchaser has accepted for payment is limited by Rule 14e-1(c) under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of stockholders promptly after the termination or withdrawal of such bidder's offer, unless such bidder elects to offer a subsequent offering period (a "Subsequent Offering Period") under Rule 14d-11 under the Exchange Act and pays for Shares tendered during the Offer and the Subsequent Offering Period in accordance with Rule 14d-11 and the terms of the Merger Agreement. Any such extension, delay, termination, waiver or amendment will be followed as promptly as practicable by public announcement thereof, and such announcement in the case of an extension will be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Without limiting the manner 6 in which Purchaser may choose to make any public announcement, subject to applicable law (including Rules 14d-4(d) and 14e-1(e) under the Exchange Act, which require that material changes be promptly disseminated to holders of Shares in a manner reasonably designed to inform such holders of such change), Purchaser currently intends to make announcements by issuing a press release to the Business Wire news service. If Purchaser makes a material change in the terms of the Offer, or if it waives a material condition to the Offer, Purchaser will extend the Offer and disseminate additional tender offer materials to the extent required by Rules 14d-4(d) and 14e-1 under the Exchange Act. The minimum period during which an Offer must remain open following material changes in the terms of the Offer, other than a change in price or a change in percentage of securities sought or a change in any dealer's soliciting fee, will depend upon the facts and circumstances, including the materiality, of the changes. With respect to a change in price or, subject to certain limitations, a change in the percentage of securities sought or a change in any dealer's soliciting fee, a minimum ten business day period from the date of such change is generally required to allow for adequate dissemination to stockholders. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or a Federal holiday and consists of the time period from 12:01 a.m. through 5:00 p.m., New York City time. Pursuant to Rule 14d-11 under the Exchange Act, Purchaser may, subject to certain conditions, include a Subsequent Offering Period following the expiration of the Offer on the Expiration Date. Rule 14d-11 provides that Purchaser may include a Subsequent Offering Period so long as, among other things, (1) the Offer remained open for a minimum of 20 business days and has expired, (2) the Offer was for all outstanding Shares, (3) Purchaser accepts and promptly pays for all Shares tendered during the Offer, (4) Purchaser announces the results of the Offer, including the approximate number and percentage of Shares deposited, no later than 9:00 a.m., New York City time, on the next business day after the Expiration Date and immediately begins the Subsequent Offering Period, (5) Purchaser immediately accepts and promptly pays for Shares as they are tendered during the Subsequent Offering Period and (6) Purchaser pays the Offer Price for all Shares tendered in the Subsequent Offering Period. Purchaser will be able to include a Subsequent Offering Period if it satisfies the conditions above. In a public release, the SEC expressed the view that the inclusion of a Subsequent Offering Period would constitute a material change to the terms of the Offer requiring Purchaser to disseminate new information to stockholders in a manner reasonably calculated to inform them of such change sufficiently in advance of the Expiration Date (generally five business days). In the event Purchaser elects to include a Subsequent Offering Period, it will notify stockholders of the Company consistent with the requirements of the SEC. A Subsequent Offering Period, if one is included, is not an extension of the Offer. A Subsequent Offering Period would be an additional period of time, following the expiration of the Offer, in which stockholders may tender Shares not tendered during the Offer. Purchaser does not currently intend to include a Subsequent Offering Period in the Offer, although it reserves the right to do so in its sole discretion. Pursuant to Rule 14d-7 under the Exchange Act, no withdrawal rights will apply to Shares tendered in a Subsequent Offering Period and no withdrawal rights apply during the Subsequent Offering Period with respect to Shares tendered in the Offer and accepted for payment. The same consideration, the Offer Price, will be paid to stockholders tendering Shares in the Offer or in a Subsequent Offering Period, if one is included. The Company has provided Purchaser with the Company's stockholder lists and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Shares and will be furnished to brokers, dealers, banks and similar persons whose names, or the names of whose nominees, appear on the stockholder lists or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares, or who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of the Offer as so extended or amended), Purchaser will purchase, by accepting for payment, and will pay for all Shares validly tendered and not withdrawn (as permitted by Section 4) prior to the Expiration Date promptly after the Expiration Date. Parent filed on June 5, 2002 with the Federal Trade Commission (the "FTC") and the Antitrust Division of the Department of Justice (the "Antitrust Division") a Premerger Notification and Report Form under the HSR Act with respect to the Offer. Unless the FTC and the Antitrust Division grant Parent's request for expedited review, the waiting period under the HSR Act applicable to the Offer will expire at 11:59 p.m., New York City time, on June 20, 2002, unless 7 prior to the expiration or termination of the waiting period the FTC or the Antitrust Division extends the waiting period by requesting additional information from Parent or the Company. If such a request is made, the waiting period applicable to the Offer will expire on the tenth calendar day after the date of substantial compliance by Parent or the Company, as applicable, with such request. Thereafter, the waiting period may only be extended by court order. The waiting period under the HSR Act may be terminated by the FTC and the Antitrust Division prior to its expiration. For information with respect to approvals required to be obtained prior to the consummation of the Offer, including under the HSR Act and other approvals, see Section 15. In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of: (i) certificates representing such Shares or timely confirmation (a "Book-Entry Confirmation") of the book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility"), pursuant to the procedures set forth in Section 3, (ii) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined below) in connection with a book- entry transfer and (iii) any other documents required by the Letter of Transmittal. The term "Agent's Message" means a message, transmitted by a Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares which are the subject of such Book-Entry Confirmation, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that Purchaser may enforce such agreement against such participant. For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not withdrawn as, if and when Purchaser gives oral or written notice to the Depositary of Purchaser's acceptance of such Shares for payment pursuant to the Offer. In all cases, upon the terms and subject to the conditions of the Offer, payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from Purchaser and transmitting payment to validly tendering stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID BY PURCHASER BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT. If any tendered Shares are not purchased pursuant to the Offer for any reason, or if certificates representing Shares are submitted representing more Shares than are tendered, certificates representing unpurchased or untendered Shares will be returned, without expense to the tendering stockholder (or, in the case of Shares delivered by book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility pursuant to the procedures set forth in Section 3, such Shares will be credited to an account maintained within such Book-Entry Transfer Facility), as promptly as practicable following the expiration, termination or withdrawal of the Offer. IF, PRIOR TO THE EXPIRATION DATE, PURCHASER INCREASES THE CONSIDERATION OFFERED TO HOLDERS OF SHARES PURSUANT TO THE OFFER, SUCH INCREASED CONSIDERATION WILL BE PAID TO ALL HOLDERS OF SHARES THAT ARE PURCHASED PURSUANT TO THE OFFER, WHETHER OR NOT SUCH SHARES WERE TENDERED PRIOR TO SUCH INCREASE IN CONSIDERATION. Purchaser reserves the right to transfer or assign to one or more of Purchaser's subsidiaries or affiliates, in whole or from time to time in part, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve Purchaser of its obligations under the Offer or prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES. Valid Tender of Shares Except as set forth below, in order for Shares to be validly tendered pursuant to the Offer, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message in connection with a book-entry delivery of Shares, and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to 8 Purchase on or prior to the Expiration Date and either (i) certificates representing tendered Shares must be received by the Depositary, or such Shares must be tendered pursuant to the procedure for book-entry transfer set forth below and a Book-Entry Confirmation must be received by the Depositary, in each case on or prior to the Expiration Date, or (ii) the guaranteed delivery procedures set forth below must be complied with. THE METHOD OF DELIVERY OF CERTIFICATES REPRESENTING TENDERED SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. Book-Entry Transfer The Depositary will make a request to establish accounts with respect to the Shares at the Book-Entry Transfer Facility for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the system of the Book-Entry Transfer Facility may make book-entry delivery of Shares by causing such Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at such Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, and any other required documents must, in any case, be transmitted to and received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase on or prior to the Expiration Date, or the guaranteed delivery procedure set forth below must be complied with. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Signature Guarantees No signature guarantee is required on the Letter of Transmittal (i) if the Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this Section, includes any participant in the Book-Entry Transfer Facility's systems whose name appears on a security position listing as the owner of the Shares) of Shares tendered therewith and such registered holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (ii) if such Shares are tendered for the account of a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a participant in the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (each, an "Eligible Institution" and, collectively, "Eligible Institutions"). In all other cases, all signatures on Letters of Transmittal must be guaranteed by an Eligible Institution. If the certificates for Shares are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made, or certificates for Shares not tendered or not accepted for payment are to be returned, to a person other than the registered holder of the certificates surrendered, then the tendered certificates for such Shares must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name or names of the registered holders or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed as aforesaid. Guaranteed Delivery If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's certificates for Shares are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such stockholder's tender may be effected if all the following conditions are met: (i) such tender is made by or through an Eligible Institution; 9 (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by Purchaser, is received by the Depositary, as provided below, prior to the Expiration Date; and (iii) the certificates for (or a Book-Entry Confirmation with respect to) such Shares, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other required documents, are received by the Depositary within three (3) trading days after the date of execution of such Notice of Guaranteed Delivery. A "trading day" is any day on which the Nasdaq National Market ("Nasdaq") is open for business. The Notice of Guaranteed Delivery may be delivered by hand to the Depositary or transmitted by telegram, facsimile transmission or mailed to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of certificates for, or of Book-Entry Confirmation with respect to, such Shares, a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message), and any other documents required by the Letter of Transmittal. Accordingly, payment might not be made to all tendering stockholders at the same time, and will depend upon when certificates representing, or Book-Entry Confirmations of, such Shares are received into the Depositary's account at a Book-Entry Transfer Facility. Backup Federal Tax Withholding Under the federal income tax laws, payments in connection with the Offer and the Merger may be subject to "backup withholding" at a rate of 31% unless a stockholder that holds Shares (i) provides a correct taxpayer identification number (which, for an individual stockholder, is the stockholder's social security number) and any other required information, or (ii) is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact, and otherwise complies with applicable requirements of the backup withholding rules. A stockholder that does not provide a correct taxpayer identification number may be subject to penalties imposed by the Internal Revenue Service. To prevent backup federal income tax withholding on payments with respect to the purchase price of Shares purchased pursuant to the Offer, each stockholder should provide the Depositary with his or her correct taxpayer identification number and certify that he or she is not subject to backup federal income tax withholding by completing the Substitute Form W-9 included in the Letter of Transmittal. Determination of Validity All questions as to the form of documents and validity, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by Purchaser, in its sole discretion, whose determination will be final and binding on all parties. Purchaser reserves the absolute right to reject any or all tenders determined by it not to be in proper form or the acceptance of or payment for which may, in the opinion of Purchaser's counsel, be unlawful. Purchaser also reserves the absolute right to waive any of the conditions of the Offer or any defect or irregularity in any tender of Shares of any particular stockholder whether or not similar defects or irregularities are waived in the case of other stockholders. Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. No tender of Shares will be deemed to have been validly made until all defects and irregularities with respect to such tender have been cured or waived. None of Purchaser, Parent or any of their affiliates or assigns, if any, the Depositary, the Dealer Manager, the Information Agent or any other person will be under any duty to give any notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. Purchaser's acceptance for payment of Shares tendered pursuant to any of the procedures described above will constitute a binding agreement between the tendering stockholder and Purchaser upon the terms and subject to the conditions of the Offer. 10 4. WITHDRAWAL RIGHTS Except as otherwise provided in this Section 4, tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time on or prior to the Expiration Date and, unless theretofore accepted for payment as provided herein, may also be withdrawn at any time after August 10, 2002 (or such later date as may apply in case the Offer is extended). If, for any reason whatsoever, acceptance for payment of any Shares tendered pursuant to the Offer is delayed, or Purchaser is unable to accept for payment or pay for Shares tendered pursuant to the Offer, then, without prejudice to Purchaser's rights set forth herein, the Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares and such Shares may not be withdrawn except to the extent that the tendering stockholder is entitled to and duly exercises withdrawal rights as described in this Section 4. Any such delay will be by an extension of the Offer to the extent required by law. To be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been delivered pursuant to the procedures for book-entry transfer as set forth in Section 3, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures. Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn will be deemed not validly tendered for purposes of the Offer, but may be retendered at any subsequent time prior to the Expiration Date by following any of the procedures described in Section 3. No withdrawal rights will apply to Shares tendered during any Subsequent Offering Period and no withdrawal rights apply during any such Subsequent Offering Period with respect to shares tendered in the Offer and accepted for payment. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by Purchaser, in its sole discretion, whose determination will be final and binding. None of Purchaser, Parent or any of their affiliates or assigns, if any, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give any notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash in exchange for Shares pursuant to the Offer, the Merger or upon the exercise of appraisal rights will be taxable for federal income tax purposes and may also be taxable under applicable state, local or foreign tax laws. A stockholder who receives cash will generally recognize gain or loss for federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received by the stockholder and the stockholder's adjusted tax basis in the Shares exchanged therefor. Gain or loss must be determined separately for each block of Shares exchanged (for example, Shares acquired at the same cost in a single transaction). Such gain or loss will be capital gain or loss (provided that the Shares are held as capital assets) and any such capital gain or loss will be long term if, as of the date of the exchange, the Shares were held for more than one year. The foregoing discussion may not be applicable to certain types of stockholders, including stockholders who acquired Shares pursuant to the exercise of options or otherwise as compensation, individuals who are not citizens or residents of the United States and foreign corporations, Shares held as part of a straddle, hedge, conversion transaction, synthetic security or other integrated investment, or entities that are otherwise subject to special tax treatment under the Internal Revenue Code of 1986, as amended (such as dealers in securities or foreign currency, insurance companies, regulated investment companies, tax-exempt entities, financial institutions, and investors in pass-through entities). THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY. EACH STOCKHOLDER IS URGED TO CONSULT HIS OR HER TAX ADVISOR WITH 11 RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE OFFER AND THE MERGER, INCLUDING FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES. 6. PRICE RANGE OF THE SHARES According to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (the "2001 Annual Report"), the Shares are listed and traded principally on Nasdaq under the symbol "OPAY." The following table sets forth, for the periods indicated, the reported high and low sales prices for the Shares on Nasdaq, all as reported in published financial sources.
Fiscal Quarters: High Low - ---------------- ---- --- 2002 Second (through June 10, 2002) ......... $ 3.25 $ 1.93 First .................................. 3.35 2.20 2001 Fourth ................................. 3.95 1.50 Third .................................. 5.30 1.73 Second ................................. 7.13 4.35 First .................................. 9.88 4.38 2000 Fourth ................................. 10.00 4.00 Third .................................. 10.72 3.81 Second ................................. 42.50 4.00 First .................................. 55.00 32.00
On May 30, 2002, the last full day of trading prior to the public announcement of the execution of the Merger Agreement, the reported closing price on Nasdaq for the Shares was $2.00 per Share. On June 10, 2002, the last full day of trading prior to the commencement of the Offer, according to published sources, the reported closing price on Nasdaq for the Shares was $2.96 per Share. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. The Company represented in the Merger Agreement that at the close of business on May 15, 2002, there were 22,932,876 shares outstanding. 7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK EXCHANGE LISTING; EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS. Effect of the Offer on the Market for the Shares The purchase of Shares pursuant to the Offer will reduce the number of Shares that trade publicly and, depending upon the number of Shares so purchased, could adversely affect the liquidity and market value of the remaining Shares held by the public. Stock Exchange Listing According to Nasdaq's published guidelines, Nasdaq would consider delisting the Shares if, among other things, the number of record holders of at least 100 shares should fall below 400, the number of publicly held Shares (exclusive of holdings of officers, directors, their immediate families and other concentrated holdings of 10% or more ("Nasdaq Excluded Holdings")) should fall below 750,000 or the aggregate market value of publicly held Shares (exclusive of Nasdaq Excluded Holdings) should fall below $5,000,000. Depending upon the number of Shares acquired pursuant to the Offer, the Shares may no longer meet the requirements for continued listing on Nasdaq or any other exchanges upon which the Shares are listed. If as a result of the purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet Nasdaq's requirements for continued listing and/or trading and such trading of the Shares was discontinued, the market for the Shares could be adversely affected. If the Shares were no longer listed or traded on Nasdaq, it is possible that the Shares would trade on another securities exchange or in the over-the-counter market and that price quotations would be reported by such exchange, or other sources. Such trading and the availability of such quotations would, however, depend upon the number of stockholders and/or 12 the aggregate market value of the Shares remaining at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act as described below and other factors. Exchange Act Registration The Shares are currently registered under the Exchange Act. The purchase of the Shares pursuant to the Offer may result in the Shares becoming eligible for deregistration under the Exchange Act. Registration of the Shares may be terminated upon application by the Company to the SEC if the Shares are not listed on a "national securities exchange" and there are fewer than 300 record holders of Shares. Termination of registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to its stockholders and the SEC and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) and the requirements of furnishing a proxy statement in connection with stockholders' meetings pursuant to Section 14(a), no longer applicable to the Company. If the Shares are no longer registered under the Exchange Act, the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions would no longer be applicable to the Company. Furthermore, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended, may be impaired or eliminated. Purchaser currently intends to seek delisting of the Shares from Nasdaq and the termination of the registration of the Shares under the Exchange Act as soon after the completion of the Offer as the requirements for such delisting and termination are met. If the Nasdaq listing and the Exchange Act registration of Shares are not terminated prior to the Merger, then it is anticipated that the Shares will be delisted from Nasdaq and the registration of the Shares under the Exchange Act will be terminated following the consummation of the Merger. See Section 11. Margin Regulations The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which have the effect, among other things, of allowing brokers to extend credit on the collateral of such Shares for the purpose of buying, carrying or trading in securities ("Purpose Loans"). Depending upon factors such as the number of record holders of the Shares and the number and market value of publicly held Shares, following the purchase of Shares pursuant to the Offer the Shares might no longer constitute "margin securities" for purposes of the Federal Reserve Board's margin regulations and, therefore, could no longer be used as collateral for Purpose Loans made by brokers. In addition, if registration of the Shares under the Exchange Act were terminated, the Shares would no longer constitute "margin securities." 8. CERTAIN INFORMATION CONCERNING THE COMPANY According to the 2001 Annual Report, the Company's predecessor business (U.S. Audiotex, LLC) commenced operations in June 1996 and was merged into the Company in September 1999, following the Company's incorporation in Delaware in August 1999. In October 1999, the Company changed its name from U.S. Audiotex Corporation to Official Payments Corporation. The Company is a leading provider of electronic payment options to government entities. The Company's systems enable consumers to use their credit cards and "pin-less" debit cards to pay through the Internet or by telephone, federal and state income taxes, sales and use taxes, real estate and personal property taxes, tuition payments, utility payments, motor vehicle fees, fines for traffic violations and parking citations and other government-imposed taxes and fees. The principal executive offices of the Company are located at Three Landmark Square, Stamford, Connecticut 06901-2501 and its telephone number is (203) 356-4200. The Company is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is required to file periodic reports, proxy statements and other information with the SEC relating to its business, financial condition and other matters. Such reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the SEC's regional offices located at 233 Broadway, New York, New York 10279 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Information regarding the public reference facilities may be obtained from the SEC by telephoning 1-800-SEC-0330. The Company's filings are also available to the public on the SEC's Internet 13 site (http://www.sec.gov). Copies of such materials may also be obtained by mail from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. 9. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT Parent is a vertically focused provider of end-to-end business solutions to national, multinational and public sector clients. Parent formulates, evaluates and implements solutions that allow clients to rapidly channel emerging technologies into their business operations. Parent combines its understanding of enterprise-wide systems with domain knowledge in four primary vertical markets--state and local government, healthcare, insurance and utilities. Parent focuses on markets that are driven by forces that make demand for its services non-discretionary and are likely to provide Parent with recurring long-term revenue streams. Parent's ability to understand the specific industry environment in which its clients operate allows it to reuse and transfer its knowledge throughout Parent and to achieve significant improvements in cost, quality and deployment on client projects. Parent provides business solutions through four primary delivery offerings--systems design and integration, transaction processing, business process outsourcing and business process reengineering. Several of Parent's engagements involve providing a combination of these delivery offerings as part of the overall project. Parent was incorporated under the laws of the State of California in October 1991 and has its principal executive offices at 1350 Treat Boulevard, Suite 250, Walnut Creek, CA 94596 and its telephone number is (925) 937-3950. Parent is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is required to file periodic reports, proxy statements and other information with the SEC relating to its business, financial condition and other matters. Such reports, proxy statements and other information may be obtained in the same manner as described in Section 8 above. Purchaser was incorporated in May 2002 under the laws of the State of Delaware for the purpose of acquiring the Company. Purchaser is a wholly-owned subsidiary of Parent. Purchaser has not, and is not expected to, engage in any business other than in connection with its organization, the Offer and the Merger. Its principal executive offices and telephone number are that of Parent. Purchaser is not subject to the informational filing requirements of the Exchange Act, and, accordingly, does not file reports or other information with the SEC relating to its business, financial condition and other matters. Purchaser believes the financial condition of Parent, Purchaser and their affiliates is not material to a decision by a holder of Shares whether to sell, tender or hold Shares pursuant to the Offer. The consideration offered consists solely of cash, the Offer is not subject to any financing condition, Parent is a public reporting company under Section 13(a) or 15(d) of the Exchange Act and files reports electronically with the SEC's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system and the offer is for all of the outstanding Shares. However, consolidated financial statements (including notes thereto) of Parent are contained in Parent's Annual Report on Form 10-K for the year ended September 30, 2001 and in Parent's Quarterly Reports on Form 10-Q for the periods ended December 31, 2001 and March 31, 2002. Such reports and other documents may be examined and copies may be obtained from the offices of the SEC in the manner described in Section 8 above. The name, business address and telephone number, citizenship, present principal occupation and employment history of each of the directors and executive officers of Parent and Purchaser are set forth in Schedule I of this Offer to Purchase. Except as set forth elsewhere in this Offer to Purchase, (i) neither Parent, Purchaser nor, to the best knowledge of Parent and Purchaser, any of the persons listed in Schedule I hereto or any associate or majority-owned subsidiary of Parent or any of the persons so listed, beneficially owns or has a right to acquire any Shares or any other equity securities of the Company and (ii) neither Parent, Purchaser nor, to the knowledge of either Parent or Purchaser, any of the persons or entities referred to in clause (i) above or any of their executive officers, directors or subsidiaries has effected any transaction in the Shares or any other equity securities of the Company during the past 60 days. Except as set forth in this Offer to Purchase, none of Parent, Purchaser nor, to the best knowledge of Parent and Purchaser, any of the persons listed on Schedule I hereto, has had any business relationship or transaction with the Company or any of its executive officers, directors or affiliates that is required to be reported under the rules and regulations of the SEC applicable to the Offer. Except as set forth in this Offer to Purchase, there have been no contracts, negotiations or transactions between Parent or any of its subsidiaries or, to the best knowledge of Parent, any of the persons listed in Schedule I to this Offer to Purchase, on the one hand, and the Company or its affiliates, on the other hand, 14 concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets. None of the persons listed in Schedule I have, during the past five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). None of the persons listed in Schedule I have, during the past five years, been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction of settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. 10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY On April 17, 2002, a representative of Adams, Harkness & Hill, Inc. ("AH&H"), the financial advisor to Parent, and, separately, James L. Bildner, Chairman & Chief Executive Officer of Parent, contacted Thomas R. Evans, Chairman & Chief Executive Officer of the Company, regarding a potential business combination involving the Company. Parent entered into a Confidentiality Agreement with the Company on the same day and received confidential financial and operating information from the Company. The Confidentiality Agreement is more fully described in Section 11. Following the discussion that ensued, AH&H and Mr. Evans agreed to set April 25, 2002 as a date in which senior management of Parent would visit the Company at its corporate headquarters. Over the ensuing two weeks, Messrs. Evans and Bildner had follow-up phone conversations regarding a possible transaction and information about the Company and began negotiating the preliminary terms of a possible business transaction. On April 25, 2002, Mr. Bildner and James R. Weaver, President of Parent, visited the Company's corporate headquarters in Stamford, Connecticut. By letter, dated May 2, 2002, Mr. Bildner submitted a proposed, non-binding expression of interest (the "Letter") to the Company, setting out the basic terms of a tender offer by Parent. Shortly thereafter, the parties' legal and financial advisors began negotiations by telephone regarding the terms of the Letter between Parent and the Company. On May 6, 2002, Mr. Bildner signed the Letter on behalf of Parent and, on May 7, 2002, Mr. Evans countersigned the Letter on behalf of the Company. At that time, the Company agreed in writing not to solicit, negotiate or discuss a business combination proposal relating to the Company with any person other than Parent until May 24, 2002. On May 7-9 and 14-15, 2002, representatives of Parent, including attorneys from Farella Braun + Martel LLP ("FBM"), Parent's outside counsel, and representatives of AH&H commenced preliminary due diligence at the Company's corporate offices in Stamford, Connecticut and San Ramon, California. During this due diligence period, Parent's representatives reviewed certain of the Company's financial, operational and legal documents and met with representatives of the Company. Following Parent's due diligence, on May 21, 2002, Parent proposed an acquisition of the Company in a transaction in which the Company's stockholders would receive $3.00 of cash consideration per outstanding share, and in which the holders of the Company options to purchase the Company Common Stock would receive $3.00 per share less the exercise price for such outstanding options (representing aggregate consideration of approximately $74.1 million). Over the ten days following Parent's proposal, the senior officers of Parent and the Company and their legal and financial advisors negotiated the terms of the Merger Agreement and the related transaction documents. As a condition to entering into the Merger Agreement, Parent requested that certain stockholders of the Company enter into a stockholder's agreement, whereby each such person would agree to tender their shares of the Company Common Stock in the tender offer, and also agreed to vote such shares in favor of the merger and against any competing transaction. In addition, during this ten-day period, Parent discussed the future terms of employment for certain key employees of the Company and an extension of the non-solicitation restrictions through midday on May 30, 2002. At a meeting on May 22, 2002, the Company Board authorized Company management to continue discussions with Parent and approved an extension of the non-solicitation restrictions through midday on May 30, 2002. On May 29, 2002, the board of directors of Parent held a special meeting to consider the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger. At such meeting, Parent's board approved the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger. On May 30, 2002, the Company's board of directors held a special meeting to consider the Merger Agreement and the transactions contemplated thereby. At such meeting, the board unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including, the Offer and the Merger, are advisable, fair to, and in the best interests of, the Company's stockholders, (ii) approved and adopted the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, and approved the Stockholders Agreement, and (iii) determined 15 to recommend that the Company's stockholders accept the Offer and tender their Shares to Purchaser pursuant thereto and, if required under applicable law, vote in favor of the Merger and approval and adoption of the Merger Agreement. The Merger Agreement and Stockholder's Agreement were finalized and executed on May 30, 2002. On the morning of May 31, 2002, before the opening of trading on the Nasdaq, Parent and the Company issued a joint press release announcing that they had executed the Merger Agreement. 11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY. The purpose of the Offer is to enable Parent and Purchaser to acquire control of, and the entire equity interest in, the Company. The Offer is being made pursuant to the Merger Agreement and is intended to increase the likelihood that the Merger will be effected. The purpose of the Merger is to acquire all of the outstanding Shares not purchased pursuant to the Offer. Purchaser intends to consummate the Merger as soon as possible following the consummation of the Offer. As provided in the Merger Agreement, upon consummation of the Merger, the directors of Purchaser and the officers of the Company will be the directors and officers, respectively, of the Surviving Corporation. Parent anticipates that, with the exception of Michael Presto, Chief Operating Officer of the Company, the current executive officers of the Company will not continue employment with the Company following consummation of the Merger. Thomas R. Evans, Chairman and Chief Executive Officer of the Company, who will be leaving his position at the Company following the Effective Time, has agreed to serve on Parent's board of directors if elected or appointed. Stockholders of the Company who tender and sell their Shares in the Offer will cease to have any equity interest in the Company and any right to participate in its earnings and future growth. If the Merger is consummated, non-tendering stockholders will no longer have an equity interest in the Company and instead will have only the right to receive cash consideration pursuant to the Merger Agreement or to exercise statutory appraisal rights under Section 262 of the DGCL. Similarly, after selling their Shares in the Offer or the subsequent Merger, stockholders of the Company will not bear the risk of any decrease in the value of the Company. Under Section 253 of the DGCL, if a corporation owns at least 90% of the outstanding shares of each class of a subsidiary corporation, the corporation holding such stock may merge such subsidiary into itself, or itself into such subsidiary pursuant to a Short-Form Merger, without any action or vote on the part of the board of directors or the stockholders of such other corporation. In the event that Purchaser acquires in the aggregate at least 90% of the outstanding Shares pursuant to the Offer or otherwise, then, at the election of Parent, a Short-Form Merger of Purchaser with and into the Company could be effected without any further approval of the Company Board or the stockholders of the Company. Even if Purchaser does not own 90% of the outstanding Shares following consummation of the Offer, Parent could seek to purchase additional Shares in the open market or otherwise in order to reach the applicable 90% threshold and employ such a Short-Form Merger. The per share consideration paid for any Shares so acquired in open market purchases may be greater or less than the Offer Price. Parent presently intends to effect a Short-Form Merger, if permitted to do so under the DGCL, pursuant to which Purchaser will be merged with and into the Company. Except as described above or elsewhere in this Offer to Purchase, Purchaser and Parent have no present plans that would relate to or result in an extraordinary corporate transaction involving the Company or any of their respective subsidiaries (such as a merger, reorganization, liquidation, relocation of any operations or sale or other transfer of a material amount of assets), any sale or transfer of a material amount of assets of the Company or any of its subsidiaries, any material change in the Company's capitalization or dividend policy or any other material change in the Company's corporate structure or business. Merger Agreement The following is a summary of material provisions of the Merger Agreement. This summary is not a complete description of the terms and conditions of the Merger Agreement and is qualified in its entirety by reference to the full text of the Merger Agreement filed with the SEC as an exhibit to the Schedule TO and is incorporated herein by reference. Capitalized terms not otherwise defined below will have the meanings set forth in the Merger Agreement. The Merger Agreement may be examined, and copies obtained, as set forth in Section 8 of this Offer to Purchase. The Merger. Upon the terms and subject to the conditions set forth in the Merger Agreement, and, in accordance with the DGCL, at the Effective Time, Purchaser will be merged with and into the Company and the separate corporate existence of Purchaser will thereupon cease and the Company will continue as the surviving corporation. 16 Further pursuant to the Merger Agreement, following the Merger, (x) the Certificate of Incorporation of the Company as in effect immediately prior to the Effective Time will 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, will 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. Representations and Warranties. In the Merger Agreement, the Company has made customary representations and warranties to Parent and Purchaser with respect to, among other things, organization, standing and corporate power; subsidiaries; capital structure; authority to enter into the Merger Agreement; the absence of conflicts between the Merger Agreement and the Company's Certificate of Incorporation, by-laws, applicable laws and certain agreements to which the Company or its assets may be subject; required consents; filings with the SEC; financial statements; disclosures in certain proxy statement documents; the absence of certain changes or events; compliance of the Company with applicable laws; litigation; benefit plans; employment matters; taxes; stockholder votes; applicability of state takeover statutes; brokers; intellectual property; material contracts; transactions with affiliates; labor relations; title to and sufficiency of assets; environmental matters; insurance and the opinion of CIBC. In the Merger Agreement, Parent and Purchaser have made customary representations and warranties to the Company with respect to, among other things, organization, standing and corporate power; authority to enter into the Merger Agreement; the absence of conflicts between the Merger Agreement and the Certificate of Incorporation and by-laws of each of Parent and Purchaser, applicable laws and certain agreements to which the Company or its assets may be subject; required consents; disclosures in certain proxy statement documents; ownership of Shares; sufficiency of funds; brokers; and the absence of prior activities by Purchaser. Conditions to the Merger. The Merger Agreement provides that 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: (i) if required by applicable law, the Company Stockholder Approval will have been obtained; (ii) 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, enjoining or prohibiting the consummation of the Merger; 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; and (iii) 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 will not apply if Parent, Purchaser or their affiliates shall have failed to purchase Shares pursuant to the Offer in breach of their obligations under the Merger Agreement; provided, however, that none of Parent, Purchaser or the Company may rely on the failure of any condition set forth in this paragraph 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, subject to the provisions of the Merger Agreement. The Company Board. The Merger Agreement provides that promptly upon the purchase of and payment for any Shares by Parent or Purchaser pursuant to the Offer, Parent will be entitled to designate such number of directors, rounded up to the nearest whole number, on the Company Board as is equal to the product of the total number of directors on the Company Board (giving effect to the directors designated by Parent pursuant to this sentence) multiplied by 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 will, upon request of Parent, use its reasonable best efforts promptly either to increase the size of the Company Board or 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 will take all actions to cause Parent's designees to be so elected. At such time, the Company will also cause persons designated by Parent to have appropriate representation on each committee of the Company Board. The Merger Agreement further provides that in the event that Parent's designees are elected to the Company Board, until the Effective Time, the Company Board will have at least three directors who were directors on May 30, 2002 (the "Original Directors"); provided that, in such event, if the number of Original Directors will be reduced below three for any reason whatsoever, any remaining Original Directors (or Original Director, if there be only one remaining) will be entitled to designate persons to fill such vacancies who will be deemed to be Original Directors for purposes of the Merger Agreement or, if no Original Director then remains, the other directors will designate three persons to fill such vacancies who will not be stockholders, affiliates or associates of Parent or Purchaser, and such persons shall be deemed to be Original Directors for purposes of the Merger Agreement. Notwithstanding anything in the Merger Agreement to the contrary, in the event that Parent's designees are elected to the Company Board prior to the Effective Time, the affirmative 17 vote of a majority of the Original Directors will be required for the Company to (i) amend or terminate the Merger Agreement or agree or consent to any amendment or termination of the Merger Agreement, (ii) exercise or waive any of the Company's rights, benefits or remedies under the Merger Agreement, (iii) extend the time for performance of Parent's and Purchaser's respective obligations under the Merger Agreement (iv) take any other action by the Company Board under or in connection with the Merger Agreement other than the actions necessary to effect the Company Stockholder Meeting (as defined below) or (v) approve any other action by the Company which adversely affects the interests of the stockholders of the Company (other than Parent, Purchaser and their affiliates) with respect to the Transactions. Company Stockholder Meeting. Pursuant to the Merger Agreement, if required by applicable law in order to consummate the Merger, the Company, acting through its Board of Directors, will, 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 approval and adoption of the Merger Agreement; (ii) prepare and file with the SEC a proxy statement and related proxy materials (the "Proxy Statement"), respond (after consultation with Parent) to any comments made by the SEC with respect to such Proxy Statement and cause such Proxy Statement to be mailed to stockholders of the Company, 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 the Merger Agreement and (iv) use its commercially reasonable efforts to solicit from holders of Shares proxies in favor of the Merger and 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 by-laws to effect the Merger. The Merger Agreement provides that Parent will provide the Company with the information concerning Parent and Purchaser required to be included in the Proxy Statement. Parent will vote, or cause to be voted, all of the Shares then owned by it, Purchaser or any of its other subsidiaries or affiliates controlled by Parent in favor of the approval of the Merger and the approval and adoption of the Merger Agreement. Company Stock Option Plans. The Merger Agreement provides that Parent and the Company will take all actions necessary or appropriate to provide that each outstanding Company Stock Option granted under any stock option or stock purchase plan, program or agreement to which the Company is a party which is outstanding immediately prior to the consummation of the Offer, whether or not then exercisable, will be cancelled as of the consummation of the Offer and the holder thereof will be entitled to receive an amount in cash payable at the time of cancellation 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 will be reduced by all applicable federal, state and local Taxes to be withheld in respect of such payment. The surrender of a Company Stock Option will be deemed a release of any and all rights the holder had or may have had in respect thereof. Conduct of Business. Pursuant to the Merger Agreement, the Company has covenanted and agreed that, except as otherwise expressly permitted or contemplated by the Merger Agreement or except as consented to in writing by Parent (in certain cases, such consent not to be unreasonably withheld or delayed), during the period from the date of the Merger Agreement to the earlier of the Effective Time and the appointment or election of Parent's designees to the Company Board (such earlier time, the "Control Time"), the Company will 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 organizations, to keep available the services of its current officers and other 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 the Merger Agreement to the Control Time, the Company will not, and will not permit its subsidiary to: (i) (A) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, (B) split, combine or reclassify 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 May 30, 2002 in accordance with their present terms or issued in accordance with the terms of the Merger Agreement, (C) except pursuant to agreements entered into with respect to the Company Stock Option Plans, purchase, 18 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; (ii) 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 Company Stock Options granted under clause (ii)(B) below or the issuance of Company Common Stock upon the exercise of Company Stock Options or in connection with other awards under the Company Stock Option Plans (A) outstanding as of May 30, 2002 in accordance with their present terms or (B) granted after May 30, 2002 with the written consent of Parent; (iii) amend its Certificate of Incorporation or by-laws; (iv) 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; (v) 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; (vi) 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; (vii) 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 Offer conditions or any of the conditions precedent to the Merger set forth in the Merger Agreement 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 of the Merger Agreement or materially delay such consummation; (viii) alter the corporate structure or ownership of the Company or its subsidiary; (ix) (A) increase the compensation payable or to become payable to the Company's or its subsidiary's 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 its subsidiary (except with respect to payment of severance to non-continuing employees as permitted by the Merger Agreement), (B) establish, adopt, enter into, or (except as required to comply with applicable law or as permitted by the Merger Agreement) 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, 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 as related to employees in the ordinary course of business and to the extent such action does not (and is not expected to) result in increased expenses, costs or liabilities in excess of $50,000 in the aggregate; (x) knowingly violate or knowingly fail to perform, in any material respect, any obligation or duty imposed upon the Company or its subsidiary by any applicable federal, state or local law, rule, regulation, guideline or ordinance; (xi) 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); (xii) 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; (xiii) settle or compromise any claims or litigation, including any federal, state, local or foreign income tax dispute, where (A) the consideration paid by the Company, in the aggregate, has a fair market value in excess of $100,000 or (B) there are potential criminal liabilities; (xiv) 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 that this shall not prevent the Company from renewing any existing contract with any Governmental Entities), (A) having a remaining 19 term in excess of six months and (B) which involves or is expected to involve future receipt or payment of $100,000 or more during the term thereof, or waive, release or sign any material rights or claims under which 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; (xv) pay, discharge or satisfy any claims, liabilities or obligations in excess 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 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 (xvi) authorize, recommend, propose, commit or agree to take, or announce any intention to take any of the foregoing actions. Indemnification. The Merger Agreement provides that Parent will, or will 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 its subsidiary as provided in their respective certificates of incorporation or by-laws (or comparable organizational documents) and to cause the Surviving Corporation to assume as of the Effective Time any indemnification agreements in effect as of May 30, 2002; provided that (x) those persons entitled to recovery pursuant to the terms of certain insurance policies (including any endorsements and/or replacements to such policies) issued to Imperial Bancorp and Comerica Incorporated (the "Insurance Policies") shall not be entitled to duplication of recovery under the Insurance Policies and from Parent or Surviving Corporation and (y) Parent and Surviving Corporation shall be subrogated to the rights of those persons entitled to recover pursuant to the Insurance Policies. Pursuant to the Merger Agreement, the timing and amount of any recovery under the Insurance Policies will not affect Parent's or the Surviving Corporation's indemnification obligations as described in the preceding sentence. Subject to clauses (x) and (y) above, Parent has also agreed to advance expenses to any such person promptly upon receipt of an undertaking from such person that such expenses will 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' certificates of incorporation and by-laws, 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. The Company and Comerica Incorporated have also entered into an Executive Liability and Indemnification Policies Maintenance Agreement, dated as of May 30, 2002, under which Comerica Incorporated has agreed, among other things, to maintain in full force and effect the Insurance Policies for the benefit of the Company and its current and former employees and directors, as applicable. The Merger Agreement further provides that, in the event the Surviving Corporation or any of its successors or assigns (x) consolidates with or merges into any other person and is not the continuing or surviving corporation or entity of such consolidation or merger or (y) 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 case, proper provision will be made so that successors and assigns of the Surviving Corporation assume the indemnification obligations set forth in the Merger Agreement. Pursuant to the Executive Liability and Indemnification Policies Maintenance Agreement between the Company and Comerica Incorporated, dated as of May 30, 2002, the Company, Parent and Purchaser have acknowledged that the Company's directors and officers shall be insured for any acts or omissions occurring prior to the Effective Time pursuant to the Insurance Policies. Parent will, or will cause the Surviving Corporation, to make all deductible payments relating to claims under the Insurance Policies. No Solicitation. Pursuant to the Merger Agreement, the Company has agreed that it and its 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) will immediately cease any discussions or negotiations with any other parties that may be ongoing with respect to any Company Takeover Proposal (as defined below). From May 30, 2002 through the Effective Time, the Company will not, nor will it permit any of its subsidiaries to, nor will 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 20 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, (ii) enter into any agreement with respect to any proposal for the Company Takeover Proposal or (iii) participate in any discussions or negotiations regarding any Company Takeover Proposal; provided, however, that if, at any time, the Company Board determines in good faith, after consultation with outside counsel, that it would be inconsistent with the Company Board's fiduciary duties to the Company or 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 paragraph that the Company Board believes in good faith would result in a Company Superior Proposal (as defined below), 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 material terms and conditions of such proposal (the "Company Notice") and compliance with this paragraph, following delivery of the Company Notice (x) 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 obligations, if such standstill obligation has not previously been released), and (y) 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 the Merger Agreement by the Company. For purposes of the Merger Agreement, "Company Takeover Proposal" means any inquiry, proposal or offer from any person relating to any (r) 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, (s) direct or indirect acquisition or purchase of a substantial interest in any class of equity securities of the Company, (t) 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, (u) merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company, other than the transactions contemplated by the Merger Agreement or (v) 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 the Merger Agreement or the Stockholders Agreement. The Merger Agreement provides that except as expressly permitted by the terms discussed below, neither the Company Board nor any committee thereof will (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 the Company Board or such committee of the Merger or the Merger 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 Company Board determines in good faith, based on advice from outside legal counsel and after consultation with a nationally recognized investment banking firm serving as financial advisor to the Company, that the value of 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 Company Board 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 the Merger 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 Company Board is prepared to terminate the Merger 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 the Merger Agreement as would enable Parent to proceed with the Transactions on terms and conditions substantially equivalent to the Company Superior Proposal; provided that should Parent not seek to proceed with the Transactions on such adjusted terms, the Company may solicit additional Company Takeover Proposals. For purposes of the Merger 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, 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 Company Board determines in its good faith judgment to be more favorable to the Company's stockholders than the Offer and the Merger and for which financing, to the extent required, is then committed or which, in the good faith judgment of the Company Board, is highly likely to be obtained by such third party. 21 Pursuant to the Merger Agreement, the Company will 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 which were not previously provided to Parent. Termination. The Merger 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 the Merger Agreement without any Shares being purchased therein; provided, however, that the right to terminate the Merger Agreement under this subparagraph (b)(i) will not be available to any party whose failure to fulfill any obligation under the Merger 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 the Merger Agreement results from facts or circumstances that constitute a breach of any representation or warranty under the Merger 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 properly extended; provided, that the right to terminate under this subparagraph (b)(ii) shall not be available to any party whose failure to perform any of its obligations under the Merger 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 the Merger Agreement by such party; or (iii) if any Restraint which in effect prevents the consummation of the Merger shall be in effect and shall have become final and nonappealable; provided, that the party seeking to terminate the Merger Agreement pursuant to this subparagraph (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 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 the Merger Agreement which breach or failure to perform (A) would give rise to the failure of a condition precedent to the Merger as provided in the Merger Agreement 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 Company Board shall have exercised its termination rights pursuant to the terms of the Merger Agreement and in connection with the receipt of a Company Superior Proposal; provided that, in order for the termination of the Merger Agreement pursuant to this subparagraph (c)(ii) to be deemed effective, the Company shall have complied with (A) the non-solicitation provisions in the Merger Agreement, including the notice provisions therein and (B) the obligation to simultaneously pay to Parent the Termination Fee in connection with such termination of the Merger Agreement; or (iii) if Parent, Purchaser or any of their affiliates shall have failed to commence the Offer in accordance with the terms of the Merger Agreement; provided, that the Company may not terminate the Merger Agreement pursuant to this subparagraph (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 the Merger Agreement (except where the breach of such representations or warranties results from 22 changes specifically permitted by the Merger Agreement or from any transaction expressly consented to in writing by Parent) which (A) would give rise to the failure of the Offer conditions set forth in the Merger Agreement and described in Section 14 herein 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 under the Merger Agreement, which makes it impossible to satisfy any of the Offer conditions set forth in the Merger Agreement and described in Section 14 hereof, Parent, Purchaser, or any of their affiliates shall have failed to commence the Offer in accordance with the terms of the Merger Agreement; (iii) if either Parent or Purchaser is entitled to terminate the Offer as a result of the Company's entering into any Company Acquisition Agreement with respect to any Company Superior Proposal in accordance with the terms of the Merger Agreement, the Company Board's withdrawing or modifying its approval or recommendation of the Merger in accordance with the terms of the Merger Agreement or the Company's or its directors or representatives having taken any other action, whether or not in accordance with the Merger Agreement, that permits Parent to terminate the Merger Agreement in accordance with its terms; or (iv) if (A) the Company Board 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 the Merger Agreement, or approved or recommended any Company Takeover Proposal (whether or not in compliance with the obligation to simultaneously pay to Parent the Termination Fee in connection with such termination of the Merger Agreement) or (B) the Company Board shall have resolved to take any of the foregoing actions. Termination Fee. The Merger Agreement provides that in the event that (i) the Merger Agreement is terminated by the Company pursuant to subparagraph (c)(ii) of the immediately preceding section, or (ii) the Merger Agreement is terminated by Parent pursuant to subparagraph (d)(iv) of the immediately preceding section then simultaneously with such termination, the Company will pay Parent a fee of $1.75 million by wire transfer of same day funds (the "Termination Fee"). In addition, in the event that (A) a Pre-Termination Takeover Proposal Event (as defined below) occurs and thereafter the Merger Agreement is terminated by either Parent or the Company pursuant to subparagraph (b)(i) of the immediately preceding section 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 will, upon the date the transactions set forth in such Company Acquisition Agreement are consummated, pay Parent the Termination Fee. A "Pre-Termination Takeover Proposal Event" will be deemed to occur if a Company Takeover Proposal will have been publicly made directly to the Company's stockholders generally or any person will have publicly announced an intention (whether or not conditional) to make a Company Takeover Proposal. Additional Agreements; Employee Benefit Matters. Pursuant to the Merger Agreement, Parent has agreed that individuals identified as continuing employees ("Continuing Employees") 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 will 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 Offer conditions set forth in the Merger Agreement and described in Section 14 hereof upon an extension of the Offer. Each such terminated employee will receive severance pay as provided under the Merger Agreement. Each Continuing Employee identified as a transition employee (a "Transition Employee") will receive severance pay 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), or (ii) the completion of the respective Transition Employee's transition period. Prior to the consummation of the Offer, the Company will assist Parent in causing, and Parent will reasonably endeavor to cause, each Continuing Employee who is identified by the Company as a key employee ("Key Employee") to enter an employment agreement substantially in the form provided by Parent to Company (the "Employment Agreement") which will provide for base salary equal to or exceeding the respective employee's salary on May 30, 2002. This foregoing summary is not a complete description of the terms and conditions of the Employment Agreement and is qualified in its entirety by reference to the full text of the Employment Agreement incorporated herein by reference and a copy of which has been filed with the SEC as an exhibit to the Schedule TO. The Employment Agreement may be examined, and copies obtained, as set forth in Section 8 herein. Except as modified or amended with the consent of a Continuing 23 Employee, or actions taken in furtherance thereof, Parent has agreed, and agreed to cause the Surviving Corporation, to comply with the terms and make required payments when due under (and not to attempt to invalidate), certain contracts and agreements identified by the Company. Nothing in this paragraph nor any other provision of the Merger Agreement will 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). Parent has further agreed that, from and after the Closing, for purposes of all employee benefit plans, programs and arrangements maintained by or contributed to by Parent, Parent will use commercially reasonable efforts, or will 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, that such crediting of service will 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 will 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 further agreed to 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 will cause the Company and its subsidiaries to provide such paid vacation. The Merger Agreement further provides that, for a period of eleven months following the Effective Time, Parent will provide, or will cause the Surviving Corporation, the Company or their affiliates to provide to each Continuing Employee with each such entity with employee benefits that are no less favorable in the aggregate than those provided to comparable employees of Parent. In addition, Parent will, or will cause the Surviving Corporation, to provide certain specified severance pay to any Continuing Employee whose employment is terminated by Parent or the Surviving Corporation (other than a termination for cause), or any of their respective subsidiaries, during the period beginning on the Closing Date and ending eleven months following the Effective Time. Stockholders Agreement The following is a summary of the material terms of a Stockholders Agreement (the "Stockholders Agreement"), dated as of May 30, 2002, among Parent, Purchaser, Comerica Incorporated, Beranson Holdings, Inc. and Michaella Stern (each, a "Stockholder"). This summary is not a complete description of the terms and conditions of the Stockholders Agreement and is qualified in its entirety by reference to the full text of the Stockholders Agreement , which is incorporated herein by reference and a copy of which has been filed with the SEC as an exhibit to Schedule TO. The Stockholders Agreement may be examined, and copies obtained, as set forth in Section 8 herein. Capitalized terms used in the summary below but not otherwise defined below have the meaning set forth in the Stockholders Agreement. Voting Agreement. The Stockholders Agreement provides that each Stockholder, at any meeting of the stockholders of the Company, however called, or in connection with any written consent of the holders of Company Common Stock, will vote his or her Shares (a) in favor of the adoption of the Merger Agreement and in favor of any other matter necessary or appropriate for the consummation of the transactions contemplated by the Merger Agreement, the Merger and all the transactions contemplated by the Merger Agreement and the Stockholders Agreement and any other actions required in furtherance of the Merger Agreement or the Stockholders Agreement; and (b) against the adoption of any Adverse Proposal. For purposes of the Stockholders Agreement, the term "Adverse Proposal" means (a) any Company Takeover Proposal, (b) any proposal or action that would reasonably be expected to result in a breach of any covenant, agreement, representation or warranty of the Company set forth in the Stockholders Agreement or the Merger Agreement, or (c) the following actions (other than the Offer, the Merger and the other transactions contemplated by the Merger Agreement): (i) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company or its subsidiary; (ii) a sale, lease, disposition or transfer of a material amount of assets of the Company or its subsidiary, or a reorganization, recapitalization, dissolution or liquidation of the Company or its subsidiary; and (iii) (1) any change in a majority of the persons who constitute the Company Board as of May 30, 2002; (2) any change in the capitalization of the Company as of May 30, 2002, or any amendment of the Company's certificate of incorporation or bylaws, as amended to May 30, 2002; (3) any other material change in the Company's corporate structure or business; or (4) any other action that is intended, or could reasonably be expected, to impede, interfere with, delay, postpone, or 24 adversely affect the Offer or the Merger and the other transactions contemplated by the Stockholders Agreement and the Merger Agreement or increase the likelihood that such transactions will not be consummated. The Stockholders Agreement further provides that each Stockholder appointed Parent and any designee of Parent such Stockholder's irrevocable proxy and attorney-in-fact with full power of substitution to vote or act by written consent with respect to all of such Shareholder's Subject Shares which it has the right to vote in accordance with the immediately preceding paragraph. Agreement to Tender. The Stockholders Agreement further provides that, each Stockholder will validly tender, or cause to be validly tendered (and not withdrawn) all of the Stockholder's Subject Shares not later than the tenth business day after the commencement of the Offer in accordance with the terms and conditions of the Offer. Each Stockholder acknowledged that Purchaser's obligation to accept for payment and pay the Offer Price for Shares (including such Stockholder's Subject Shares) pursuant to the Offer is subject to the terms and conditions of the Offer set forth in the Merger Agreement. Covenants. The Stockholder Agreement provides that no Stockholder will, directly or indirectly: (a) except pursuant to the terms of the Stockholders Agreement and for the conversion of Subject Shares into the right to receive the Offer Price at the Effective Time pursuant to the terms of the Merger Agreement, offer for sale, sell, transfer, tender, pledge, encumber, gift, assign or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to or consent to the offer for sale, sale, transfer, tender, pledge, encumbrance, gift-over, assignment or other disposition of, any or all of such Stockholder's Subject Shares; (b) acquire any Shares or other securities of the Company (other than as permitted by the Stockholders Agreement) or enter into any contract, option, arrangement or other undertaking with respect to the direct or indirect acquisition of any interest in or the voting of any Subject Shares or any other securities of the Company; (c) except pursuant to the terms of the Stockholders Agreement, grant any proxies or powers of attorney, deposit any Subject Shares into a voting trust or enter into a voting agreement with respect to any Subject Shares; or (d) take any action that would reasonably be expected to make any of its representations or warranties contained in the Stockholders Agreement untrue or incorrect or have the effect of impairing the ability of such Stockholder to perform such Stockholder's obligations under the Stockholders Agreement or preventing or delaying the consummation of any of the transactions contemplated by the Stockholders Agreement. Further, each Stockholder will not and will not authorize or permit its officers, directors, employees, agents or representatives (including any investment banker, financial advisor, attorney or accountant for such Stockholder) ("Representatives") to directly or indirectly to (i) initiate, solicit or encourage (including by way of furnishing information or assistance), or take any other action to facilitate the making of, any offer or proposal which constitutes or is reasonably likely to lead to any Company Takeover Proposal, (ii) enter into any agreement with respect to any Company Takeover Proposal, or (iii) in the event of an unsolicited Company Takeover Proposal for the Company, engage in negotiations or discussions with, or provide any information or data to, any person (other than Parent or any of its affiliates or representatives) relating to any Company Takeover Proposal. Notwithstanding the foregoing sentence, (a) if any Stockholder is a member of the Company Board, such member of the Company Board may take actions in such capacity to the extent permitted by the Merger Agreement, and (b) if any Stockholder is an officer of the Company, such officer may take actions in such capacity to the extent directed to do so by the Company Board in compliance with the Merger Agreement. Share Ownership. The number of Shares (or shares of Common Stock underlying Company Stock Options) subject to the terms and conditions of the Stockholders Agreement owned by each of the Stockholders is as follows:
NAME SHARES OPTIONS - ---- ------ ------- Comerica Incorporated ............ 12,000,000 Beranson Holdings, Inc. .......... 2,642,000 Michaella Stern .................. 199,252
Confidentiality Agreement The following is a summary of the material provisions of a Confidentiality Agreement, dated April 17, 2002, between Parent and the Company (the "Confidentiality Agreement"). This summary is not a complete description of the terms and conditions of the Confidentiality Agreement and is qualified in its entirety by reference to the full text of the Confidentiality Agreement, which is incorporated herein by reference and a copy of which has been filed with the SEC as an exhibit to Schedule TO. The Confidentiality Agreement may be examined, and copies obtained, as set forth in Section 25 8 herein. Capitalized terms used in the summary below but not otherwise defined below have the meanings set forth in the Confidentiality Agreement. Pursuant to the terms of the Confidentiality Agreement, Parent agreed to treat as confidential Evaluation Material provided by the Company to Parent in connection with Parent's consideration of a possible transaction with the Company. In addition, Parent agreed that, without the prior written consent of the Company, it would not, and would direct its Representatives not to, disclose to any person (i) the existence of the Confidentiality Agreement and that the Evaluation Material has been made available to Parent or its Representatives; (ii) that discussions or negotiations are taking place concerning a possible transaction between the Company and Parent; or (iii) any terms, conditions or other facts with respect to any such possible transaction, including the status thereof. Further, Parent agreed not to, and to cause its Representative not to, initiate or maintain contact (except in the ordinary course of business) in connection with a potential transaction between the Company and Parent with any officer, director or employee of the Company or any third party with whom the Company has a business relationship regarding the Company's business, operations, prospects or finances, except with the express written permission of the Company. Parent also agreed that for a period of three years from the date of the Confidentiality Agreement that it would not, directly or indirectly, solicit for employment any officer, director or senior level employee of the Company or any of its subsidiaries except that Parent will not be precluded from hiring any such employee who has been terminated by the Company or its subsidiaries prior to commencement or employment discussions between Parent and such employee or who has come to Parent of their own initiative or in response to a general advertisement of employment opportunities by Parent. Parent further agreed that, for a period of three years from the date of the Confidentiality Agreement, without the prior written consent of the Company, neither Parent nor any of its affiliates will, directly or indirectly, alone or in concert with others: (i) purchase, offer or agree to purchase, or announce an intention to purchase any securities or assets of the Company or any subsidiary or rights or options to acquire the same; (ii) make, or in any way participate in any "solicitation" of "proxies" to vote or "consents" (as such terms are used in the rules and regulations of the SEC), or seek to advise or influence any person with respect to the voting of any voting securities of the Company; (iii) initiate or support any stockholder proposal with respect to the Company; (iv) make any public statements and/or announcement with respect to, or submit a proposal for, or offer of (with or without conditions) any extraordinary transaction involving the Company or its securities, assets or business or any subsidiary or division thereof, or of any successor thereto or any controlling person thereof; (v) seek or propose to influence or control the Company's management, board of directors, policies or affairs; (vi) disclose any intention, plan or arrangement inconsistent with the foregoing; (vii) form, join or in any participate in a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934 in connection with any of the foregoing; (viii) take any action that, in the sole judgment of the Company, may require the Company to make a public announcement concerning any of the foregoing; or (ix) encourage any of the foregoing. The Company has released Parent from the "standstill" restrictions described in this paragraph in order to allow Parent to commence the Offer. Appraisal Rights Holders of Shares do not have appraisal rights in connection with the Offer. However, if the Merger is consummated, holders of Shares at the Effective Time will have certain rights pursuant to the provisions of Section 262 of the DGCL, including the right to dissent and demand appraisal of, and to receive payment in cash of the fair value of, their Shares. Under Section 262 of the DGCL, dissenting stockholders of the Company who comply with the applicable statutory procedures will be entitled to receive a judicial determination of the fair value of their Shares (exclusive of any element of value arising from the accomplishment or expectation of the Merger) and to receive payment of such fair value in cash, together with a fair rate of interest thereon, if any. Any such judicial determination of the fair value of the Shares could be based upon factors other than, or in addition to, the price per Share to be paid in the Merger or the market value of the Shares. The value so determined could be more or less than the price per Share to be paid in the Merger. THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS UNDER THE DGCL DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS DESIRING TO EXERCISE ANY APPRAISAL RIGHTS AVAILABLE UNDER THE DGCL. THE PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE DGCL. The foregoing summary is qualified in its entirety by reference to the full text of Section 262 attached hereto as Annex A and incorporated herein by reference. 26 Rule 13e-3 The SEC has adopted Rule 13e-3 under the Exchange Act which is applicable to certain "going private" transactions and which may under certain circumstances be applicable to the Merger or another business combination following the purchase of Shares pursuant to the Offer in which Purchaser seeks to acquire the remaining Shares not held by it. Purchaser believes, however, that Rule 13e-3 will not be applicable to the Merger because it is anticipated that the Merger would be effected within one (1) year following consummation of the Offer and in the Merger stockholders would receive the same price per Share as paid in the Offer. If Rule 13e-3 were applicable to the Merger, it would require, among other things, that certain financial information concerning the Company, and certain information relating to the fairness of the proposed transaction and the consideration offered to minority stockholders in such a transaction, be filed with the SEC and disclosed to minority stockholders prior to consummation of the transaction. 12. SOURCE AND AMOUNT OF FUNDS The total amount of funds required by Purchaser and Parent to consummate the Offer, exclusive of customary related fees and expenses, is estimated to be approximately $68.8 million; the total amount of funds required by Purchaser and Parent pursuant to the Merger to pay for the cash-out of all remaining Company Stock Options following the consummation of the Offer is estimated to be approximately $5.4 million. Purchaser will obtain the funds required to consummate such transactions with funds provided through capital contributions or advances made by Parent. Parent expects to fund any necessary capital contributions or advances to Purchaser through the use of cash on hand, existing lines of credit and other internally generated funds. The Offer is not subject to any financing arrangements. 13. DIVIDENDS AND DISTRIBUTIONS The Merger Agreement provides that the Company will not, and will not permit any of its subsidiaries to, between the date of the Merger Agreement and the earlier of the Effective Time and the appointment or election of Parent's designees to the Company Board, without the prior consent of Parent, (a) 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 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 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 May 30, 2002 in accordance with their present terms or issued pursuant to paragraph (b) below 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; or (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 Common Stock upon the exercise of Company Stock Options or in connection with other awards under the Company Stock Option Plans (x) outstanding as of May 30, 2002 in accordance with their present terms or (y) granted after May 30, 2002 with the written consent of Parent. 14. CERTAIN CONDITIONS OF THE OFFER For the purposes of this Section 14, capitalized terms used but not defined herein will have the meanings set forth in the Merger Agreement. 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 May 30, 2002 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): 27 (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 the Merger Agreement, the Company Board has withdrawn or modified the approval or recommendation by such Board of the Merger in accordance with the Merger 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 the Merger Agreement in accordance with its terms; (c) any of the representations and warranties of the Company set forth in the Merger 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 warranties to be so true and correct results directly from changes specifically permitted by the Merger 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 the Merger 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 identified by the Company in the Company Disclosure Schedule delivered to Parent; (f) twenty percent or more of the Key Employees shall not have entered into written employment agreements with the Company as provided in the Merger 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) the Merger 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. Under the Merger Agreement, "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) the Merger Agreement or the transactions expressly contemplated thereby 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. 28 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. 15. CERTAIN LEGAL MATTERS; REQUIRED REGULATORY APPROVALS Except as set forth in this Offer to Purchase, based on its review of publicly available filings by the Company with the SEC and other publicly available information regarding the Company, Purchaser is not aware of any licenses or regulatory permits that would be material to the business of the Company and its subsidiaries, taken as a whole, and that might be adversely affected by Purchaser's acquisition of Shares (and the indirect acquisition of the stock of the Company's subsidiaries) as contemplated herein, or, except to the extent required by any foreign regulatory authorities, any filings, approvals or other actions by or with any domestic, foreign or supranational governmental authority or administrative or regulatory agency that would be required prior to the acquisition of Shares (or the indirect acquisition of the stock of the Company's subsidiaries) by Purchaser pursuant to the Offer as contemplated herein. Should any such approval or other action be required, there can be no assurance that any such additional approval or action, if needed, would be obtained without substantial conditions or that adverse consequences might not result to the Company's business, or that certain parts of the Company's or Purchaser's business might not have to be disposed of or held separate or other substantial conditions complied with in order to obtain such approval or action or in the event that such approvals were not obtained or such actions were not taken. Purchaser's obligation to purchase and pay for Shares is subject to certain conditions, including conditions with respect to governmental actions. See the Introduction and Section 14 for a description of certain conditions to the Offer, including with respect to litigation and governmental actions. State Takeover Laws. A number of states (including Delaware, where the Company is incorporated) have adopted takeover laws and regulations which purport, to varying degrees, to be applicable to attempts to acquire securities of corporations which are incorporated in such states or which have substantial assets, security holders, principal executive offices or principal places of business therein. In Edgar v. MITE Corp., the Supreme Court of the United States (the "Supreme Court") invalidated on constitutional grounds the Illinois Business Takeover statute, which, as a matter of state securities law, made certain corporate acquisitions more difficult. However, in 1987, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of Indiana may, as a matter of corporate law and, in particular, with respect to those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without the prior approval of the remaining stockholders. The state law before the Supreme Court was by its terms applicable only to corporations that had a substantial number of stockholders in the state and were incorporated there. Parent and Purchaser do not believe that the antitakeover laws and regulations of any state other than the State of Delaware will by their terms apply to the Offer, and except as described herein, Purchaser has not attempted to comply with any state takeover statutes in connection with the Offer. Purchaser reserves the right to challenge the validity or applicability of any state law allegedly applicable to the Offer and nothing in this Offer to Purchase nor any action taken in connection herewith is intended as a waiver of that right. In the event that any state takeover statute is found applicable to the Offer, Purchaser might be unable to accept for payment or purchase Shares tendered pursuant to the Offer or might be delayed in continuing or consummating the Offer. In such case, Purchaser may not be obligated to accept for purchase, or pay for, any Shares tendered. See Section 14. Antitrust. Under the HSR Act, and the rules and regulations that have been promulgated thereunder by the FTC, certain acquisition transactions may not be consummated until certain information and documentary material has been furnished for review by the Antitrust Division and the FTC and certain waiting period requirements have been satisfied. The acquisition of Shares pursuant to the Offer is subject to such requirements. On June 5, 2002, Parent filed a Premerger Notification and Report Form with the Antitrust Division and the FTC in connection with the purchase of Shares pursuant to the Offer. The Company is expected to file a Premerger Notification and Report Form with the Antitrust Division and the FTC on or before June 17, 2002. Under the provisions of the HSR Act applicable to the Offer, the purchase of Shares pursuant to the Offer may not be consummated until the expiration of a 15-calendar-day waiting period following the filing by Purchaser, unless such waiting period is earlier terminated by the FTC and the Antitrust Division. Accordingly, the waiting period under the HSR Act which is applicable to the Offer will expire at 11:59 p.m., New York City time, on June 20, 2002, unless earlier terminated by the Antitrust Division and the FTC or Parent receives a request for additional information or documentary material from the Antitrust Division or the FTC prior thereto. If either the FTC or the Antitrust Division were to request 29 additional information or documentary material from Parent, the waiting period with respect to the Offer would expire at 11:59 p.m., New York City time, on the tenth calendar day after the date of substantial compliance with such request by Parent. Thereafter, the waiting period could be extended only by court order or with the consent of Parent. The additional 10-calendar-day waiting period may be terminated sooner by the FTC and the Antitrust Division. Although the Company is required to file certain information and documentary material with the Antitrust Division and the FTC in connection with the Offer, neither the Company's failure to make such filings nor a request made to the Company from the Antitrust Division or the FTC for additional information or documentary material will extend the waiting period with respect to the Offer. The Antitrust Division and the FTC frequently scrutinize the legality under the antitrust laws of transactions such as the acquisition of Shares by Purchaser pursuant to the Offer. At any time before or after Purchaser's purchase of Shares, the Antitrust Division or the FTC could take such action under the antitrust laws as either deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer, the divestiture of Shares purchased pursuant to the Offer or the divestiture of substantial assets of the Company or Purchaser. Private parties as well as state attorneys general may also bring legal actions under the antitrust laws under certain circumstances. See Section 14. In addition, the parties may also be subject to certain foreign competition statutes. Based upon an examination of publicly available information provided by the Company relating to the businesses in which the Company is engaged, Parent and Purchaser believe the acquisition of Shares pursuant to the Offer will not violate the antitrust laws. Nevertheless, there can be no assurance that a challenge to the Offer on antitrust grounds will not be made, or, if such challenge is made, what the result will be. See Section 14. 16. CERTAIN FEES AND EXPENSES. Adams, Harkness & Hill is acting as Dealer Manager in connection with the Offer, and served as investment banker to Parent in connection with the proposed acquisition of the Company under an agreement effective as of May 16, 2002. Parent has agreed to pay Adams, Harkness & Hill a fee for its services of $809,000. In addition, Parent has agreed to reimburse Adams, Harkness & Hill for all reasonable expenses incurred in connection with such engagement, including fees of outside counsel and of other professional advisors and to indemnify Adams, Harkness & Hill and certain related persons against certain liabilities and expenses, including certain liabilities under the federal securities laws. In the ordinary course or its business, Adams, Harkness & Hill and its affiliates may actively trade in the Shares for its own account and for the account of its customers, and accordingly, may at any time hold a long or short positions in the Shares. Mellon Investor Services has been retained by Purchaser as Information Agent in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telex, telegraph and personal interview and may request brokers, dealers and other nominee stockholders to forward material relating to the Offer to beneficial owners. Customary compensation will be paid for all such services in addition to reimbursement of reasonable out-of-pocket expenses. Purchaser has agreed to indemnify the Information Agent against certain liabilities and expenses, including liabilities under the federal securities laws. In addition, Mellon Investor Services has been retained as the Depositary. The Depositary has not been retained to make solicitations or recommendations in its role as Depositary. The Depositary will receive reasonable and customary compensation for its services in connection with the Offer, will be reimbursed for its reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection therewith. Except as set forth above, Purchaser will not pay any fees or commissions to any broker, dealer or other person (other than the Information Agent and the Dealer Manager) for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust companies and other nominees will, upon request, be reimbursed by Purchaser for customary clerical and mailing expenses incurred by them in forwarding materials to their customers. 17. MISCELLANEOUS The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares residing in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the securities, blue sky or other laws of such jurisdiction. However, Purchaser may, in its discretion, take such action as it may deem necessary to make the Offer in any jurisdiction and extend the Offer to holders of Shares in such jurisdiction. 30 In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of Purchaser by the Dealer Manager or one or more registered brokers or dealers that are licensed under the laws of such jurisdiction. Purchaser has filed with the SEC the Schedule TO, together with exhibits, pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, furnishing certain additional information with respect to the Offer, and may file amendments thereto. Such Schedule TO and any amendments thereto, including exhibits, may be examined and copies may be obtained from the offices of the SEC in the same manner as described in Section 8 with respect to information concerning the Company, except that they will not be available at the regional offices of the SEC. No person has been authorized to give any information or to make any representation on behalf of Purchaser not contained in this Offer to Purchase or in the Letter of Transmittal and, if given or made, any such information or representation must not be relied upon as having been authorized. Neither the delivery of the Offer to Purchase nor any purchase pursuant to the Offer will, under any circumstances, create any implication that there has been no change in the affairs of Purchaser or the Company since the date as of which information is furnished or the date of this Offer to Purchase. KINGFISH ACQUISITION CORPORATION June 11, 2002 31 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER 1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The following table sets forth the name, present principal occupation or employment, and material occupations, positions, offices or employments for the past five years, of each director and executive officer of Parent. The business address and telephone number of each such person is c/o Tier Technologies, Inc., 1350 Treat Boulevard, Suite 250, Walnut Creek, CA 94596, (925) 937-3950. Except as otherwise disclosed below, each person listed below is a citizen of the United States.
- ------------------------------------------------------------------------------------------------------------------ PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL NAME AND TITLE POSITIONS HELD DURING THE PAST FIVE YEARS - ------------------------------------------------------------------------------------------------------------------ James L. Bildner Mr. Bildner joined Parent as Chairman of the Board in November 1995, Chairman of the Board and became Chief Executive Officer in December 1996 and served as President Chief Executive Officer from July 2000 to January 2002. Mr. Bildner serves on the Board of Visitors of the Tucker Foundation of Dartmouth College and the Board of Visitors of Case Western Reserve School of Law. Mr. Bildner is also a trustee of Lesley University, an Overseer of Children's Hospital of Boston, a member of the corporation of Northeast Medical Systems, Inc., a member of the National Council of Environmental Defense, a Trustee of the Trustees of the Reservation and serves on the Board of Directors of Australia's Lizard Island Reef Research Foundation. Mr. Bildner holds an A.B. from Dartmouth College and a J.D. from Case Western Reserve School of Law. - ------------------------------------------------------------------------------------------------------------------ Charles W. Berger Mr. Berger has served as a Director of Parent since January 2002. He has served as Director President and Chief Executive Officer of Vicinity Corporation, a provider of enterprise location services, since December 2001. Before that time, Mr. Berger was the managing director of Volatilis, LLC, a private investment and aviation services firm, since its founding in June 2001. Prior to forming Volatilis, Mr. Berger served as Chairman and Chief Executive Officer of AdForce, Inc., an online advertising company, from July 1997 to June 2001. Previously, Mr. Berger served as Chairman and Chief Executive Officer of Radius, Inc., a maker of peripheral products for graphics and video applications, from 1993 to 1997. Mr. Berger is also on the Board of Directors of Center Court, Inc., Efficient Market Services and FreeFlyer, Inc. Mr. Berger received a B.S. from Bucknell University and an MBA from the University of Santa Clara. - ------------------------------------------------------------------------------------------------------------------ Samuel Cabot III Mr. Cabot has served as a Director of Parent since January 1997. He has served Director as President of Samuel Cabot Inc., a manufacturer and marketer of premium quality exterior stains and architectural coatings, since 1978, and as Chairman of its Board of Directors since February 2000. He is also on the Board of Directors of Plasticolors, Inc., Blue Cross and Blue Shield of Massachusetts, Inc., Fiduciary Trust Co. and Reed & Barton Inc. Mr. Cabot also served two years in Chile as a Peace Corps volunteer. Mr. Cabot received an A.B. from Dartmouth College and an MBA from Boston University. - ------------------------------------------------------------------------------------------------------------------ Morgan P. Guenther Mr. Guenther has served as a Director of Parent since August 1999. Since Director October 2001, Mr. Guenther has served as President of TiVo, Inc., a technology firm specializing in the creation of personalized television services. From June 1999 through October 2001, Mr. Guenther served as Vice President of Business Development and Senior Vice President of Business Development and Revenue Operations at TiVo. From August 1998 to June 1999, Mr. Guenther was a partner at Paul, Hastings, Janofsky & Walker LLP, an international law firm. From 1990 to March 1998, Mr. Guenther was a partner at the law firm of Farella Braun & Martel LLP. Mr. Guenther is also on the Board of Directors of Integral Development Corp., a software developer providing e-commerce solutions for capital market transactions to banks and other financial institutions. Mr. Guenther holds a B.A. and a J.D. from the University of Colorado and an MBA from the University of San Francisco. - ------------------------------------------------------------------------------------------------------------------
32
- ------------------------------------------------------------------------------------------------------------------ PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL NAME AND TITLE POSITIONS HELD DURING THE PAST FIVE YEARS - --------------------------- ------------------------------------------------------------------------------- Ronald L. Rossetti Mr. Rossetti has served as a Director of Parent since November 1995. Since Director February 1997, he has been President of Riverside Capital Partners, Inc., a venture capital investment firm. Mr. Rossetti is on the advisory board of Hamilton Associates and serves as a trustee of Northeastern University. He received a B.S. from Northeastern University. - ------------------------------------------------------------------------------------------------------------------ William C. Van Faasen Mr. Van Faasen has served as a Director of Parent since June 1999. Since Director September 1992, Mr. Van Faasen has been President and Chief Executive Officer of Blue Cross and Blue Shield of Massachusetts, Inc., a non-profit company providing health benefits, products and services. Mr. Van Faasen currently serves on the Board of Directors of IMS Health, Liberty Mutual Insurance Company and Citizens Bank of Massachusetts. Mr. Van Faasen received a B.A. from Hope College and an MBA from Michigan State University. - ------------------------------------------------------------------------------------------------------------------ Mary Agnes Wilderotter Ms. Wilderotter has served as a Director of Parent since January 2002. Director Ms. Wilderotter has been President and Chief Executive Officer of Wink Communications, Inc., a provider of enhanced broadcasting and e-commerce services on television, since January 1997. Ms. Wilderotter also serves on the Board of Directors of Airborne Express, American Tower Corporation, Electric Lightwave, Inc., Gaylord Entertainment, The McClatchy Company, Holy Cross College, National Cable & Telecommunication Association, California Cable Television Association, Women in Cable Foundation, and the Dean's Advisory Board at U.C. Davis. Ms. Wilderotter received a B.A. degree in Economics and Business Administration from Holy Cross College. - ------------------------------------------------------------------------------------------------------------------ James R. Weaver Mr. Weaver joined Parent as President, Government Services Division in President May 1998, became President, U.S. Operations in August 2000 and President in January 2002. From June 1997 until May 1998, Mr. Weaver served as Vice President, Government Solutions of BDM International, Inc., an information technology company, where he was responsible for strategic planning, policy and procedure development, client base expansion and overall business planning and development. From March 1995 until June 1997, he served as National Program Director, Public Sector for Unisys Corporation, an information technology company. Mr. Weaver received a B.A. in Psychology from California University of Pennsylvania. - ------------------------------------------------------------------------------------------------------------------ Laura B. DePole Ms. DePole has served as Parent's Senior Vice President, Chief Financial Senior Vice President, Officer, Secretary and Treasurer since January 2000 and Chief Accounting Chief Financial Officer, Officer since August 1997. Ms. DePole previously served as Senior Vice Secretary and Treasurer President, Finance from April 1999 to January 2000. From October 1998 to April 1999, Ms. DePole was Vice President, Finance and from August 1997 to October 1998, Ms. DePole was also the Corporate Controller of Parent. From July 1988 through July 1997, Ms. DePole held various positions at Ernst & Young LLP, an international public accounting firm. Ms. DePole received a B.S. in Accounting from San Francisco State University and is a Certified Public Accountant. - ------------------------------------------------------------------------------------------------------------------ Stephen McCarty Mr. McCarty joined Parent as Senior Vice President, Human Resources Senior Vice President, Management in October 1998. From January 1998 to October 1998, he served Human Resources as a Vice President of Renaissance Worldwide, Inc., a consulting firm. From Management February 1993 to January 1998, he served as a Vice President of Arthur D. Little, a consulting firm. Mr. McCarty received a B.A. in Psychology from State University of New York at Plattsburgh and an M.S. in Industrial/ Organizational Psychology from Rensselaer Polytechnic Institute. - ------------------------------------------------------------------------------------------------------------------
33
- ------------------------------------------------------------------------------------------------------------------ PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL NAME AND TITLE POSITIONS HELD DURING THE PAST FIVE YEARS - ------------------------------------------------------------------------------------------------------------------ Harry W. Wiggins Mr. Wiggins joined Parent as Senior Vice President and General Manager of Senior Vice President and Government Services in September 2001. From July 1992 to September 2001, General Manager of Mr. Wiggins served as Vice President in Lockheed Martin IMS' Children and Government Services Family Services Business Unit (now ACS State & Local Solutions, Inc., a division of Affiliated Computer Services, Inc., an information technology outsourcing company). Mr. Wiggins received a Master's degree in Business Management from Central Michigan University, a Master's degree in Public Administration from Rider College and a B.A. in Political Science from Gettysburg College. - ------------------------------------------------------------------------------------------------------------------ David Laidlaw Mr. Laidlaw joined Parent as President, International Operations in March President, International 1999. From January 1996 to February 1999, Mr. Laidlaw served as General Operations Manager for the IBM Global Services Australia Consulting and Systems Integration Unit. Mr. Laidlaw received a B.S. and M.S. in Engineering from Melbourne University. Mr. Laidlaw is an Australian citizen. - ------------------------------------------------------------------------------------------------------------------ Richard E. Kristensen Mr. Kristensen joined Parent as President, U.S. Commercial Services in March President, U.S. 2000. From January 1999 to February 2000, Mr. Kristensen served as President Commercial Services and Chief Operating Officer of The SCA Group, a management consulting firm. From September 1993 to December 1998, Mr. Kristensen served as President and Chief Executive Officer of Harris Chapman & Company, a management consulting firm. Mr. Kristensen received a B.A. in English and Psychology from Kenyon College and an M.B.A. in Organizational Behavior from the University of Pittsburgh. - ------------------------------------------------------------------------------------------------------------------ Barbara M. Pivnicka Ms. Pivnicka joined Parent as Senior Vice President and Chief Marketing Senior Vice President and Officer in August 2000. From January 1986 to August 2000, Ms. Pivnicka was Chief Marketing Officer with Deloitte & Touche LLP, an international public accounting firm, and from 1994 to 2000, served as Director of Marketing. Ms. Pivnicka received a B.A. in the Honors Program with a double major in English and Art History from the University of San Francisco. - ------------------------------------------------------------------------------------------------------------------
2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The following table sets forth the name, present principal occupation or employment, and material occupations, positions, offices or employments for the past five years, of each director and executive officer of Purchaser. The business address of each such person is c/o Tier Technologies, Inc., 1350 Treat Boulevard, Suite 250, Walnut Creek, CA 94596, (925) 937-3950. Each of the persons listed below are citizens of the United States.
- ------------------------------------------------------------------------------------------------------------------ PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL NAME AND TITLE POSITIONS HELD DURING THE PAST FIVE YEARS - ------------------------------------------------------------------------------------------------------------------ James L. Bildner See Part 1 of this Schedule I Director President and Chief Executive Officer - ------------------------------------------------------------------------------------------------------------------ Laura B. DePole See Part 1 of this Schedule I Secretary and Treasurer - ------------------------------------------------------------------------------------------------------------------
34 ANNEX A SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW 262 APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to [sec]228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholder's shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word "stockholder" means a holder of record of stock in a stock corporation and also a member of record of a nonstock corporation; the words "stock" and "share" mean and include what is ordinarily meant by those words and also membership or membership interest of a member of a nonstock corporation; and the words "depository receipt" mean a receipt or other instrument issued by a depository representing an interest in one or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository. (b)Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to [sec]251 (other than a merger effected pursuant to [sec]251(g) of this title), [sec]252, [sec]254, [sec]257, [sec]258, [sec]263 or [sec]264 of this title: (1) Provided, however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i) listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in subsection (f) of [sec]251 of this title. (2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to [sec][sec]251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything except: a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof; b. Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 holders; c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this paragraph; or d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph. (3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under [sec]253 of this title is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation. (c) Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all A-1 of the assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as is practicable. (d) Appraisal rights shall be perfected as follows: (1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section. Each stockholder electing to demand the appraisal of such stockholder's shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder's shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or (2) 1 If the merger or consolidation was approved pursuant to [sec]228 or [sec]253 of this title, then, either a constituent corporation before the effective date of the merger or consolidation, or the surviving or resulting corporation within ten days thereafter, shall notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such holder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder's shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder's shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given, provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the day on which the notice is given. (e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with subsections (a) and (d) hereof and who is otherwise entitled to appraisal rights, may file a petition in the Court of Chancery demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder shall have the right to withdraw such stockholder's demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the A-2 stockholder within 10 days after such stockholder's written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) hereof, whichever is later. (f) Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation. (g) At the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder. (h) After determining the stockholders entitled to an appraisal, the Court shall appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. In determining the fair rate of interest, the Court may consider all relevant factors, including the rate of interest which the surviving or resulting corporation would have had to pay to borrow money during the pendency of the proceeding. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, permit discovery or other pretrial proceedings and may proceed to trial upon the appraisal prior to the final determination of the stockholder entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted such stockholder's certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under this section. (i) The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Interest may be simple or compound, as the Court may direct. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Court's decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state. (j) The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney's fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal. (k) From and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder's demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of A-3 such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just. (l) The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation. A-4 Facsimile copies of the Letter of Transmittal, properly completed and duly executed, will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each stockholder of the Company or his broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of its addresses set forth below: The Depositary for the Offer Is: MELLON INVESTOR SERVICES LLC By Mail: By Hand: Mellon Investor Services LLC Mellon Investor Services LLC P.O. Box 3301 120 Broadway, 13th Floor South Hackensack, NJ 07606 New York, NY 10271 Attn.: Reorganization Department Attn.: Reorganization Department By Overnight Courier: Mellon Investor Services LLC 85 Challenger Road Mail Stop--Reorg. Ridgefield Park, NJ 07660 Attn.: Reorganization Department
Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers listed below. Additional copies of this Offer to Purchase, the Letter of Transmittal and other tender offer materials may be obtained from the Information Agent as set forth below, and will be furnished promptly at Purchaser's expense. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer Is: MELLON INVESTOR SERVICES LLC 44 Wall Street, 7th Floor New York, NY 10005 Call Toll Free: (866) 323-8166 The Dealer Manager for the Offer Is: ADAMS, HARKNESS & HILL, INC. 60 State Street Boston, MA 02109 (617) 371-3777 (call collect) EX-99 5 ex-a1c.txt Notice of Guaranteed Delivery to Tender Shares of Common Stock of Official Payments Corporation As set forth in Section 2 of the Offer to Purchase (as defined below), this instrument or one substantially equivalent to it must be used to accept the Offer (as defined below) if certificates for Shares (as defined below) are not immediately available or the certificates for Shares and all other required documents cannot be delivered to the Depositary before the Expiration Date (as defined in Section 1 of the Offer to Purchase) or if the procedure for delivery by book-entry transfer cannot be completed on a timely basis. This instrument may be delivered by hand or transmitted by telegram, telex, facsimile transmission or mail to the Depositary. The Depositary for the Offer is: Mellon Investor Services LLC By Hand By First Class By Overnight: Mellon Investor Services LLC or Express Mail: Mellon Investor Services LLC 120 Broadway Mellon Investor Services LLC 85 Challenger Road 13th Floor P.O. Box 3301 Mail Stop-Reorg New York, NY 10271 South Hackensack, NJ 07606 Ridgefield Park, NJ 07660 Attn: Reorganization Dept. Attn: Reorganization Dept. Attn: Reorganization Dept. To Confirm Receipt of Notice of Guaranteed Delivery: FAX #: (201) 296-4293 FAX Confirmation #: (201) 296-4860
Delivery of this instrument to an address other than as set forth above, or transmission of instructions via facsimile transmission or telex number other than as set forth above, will not constitute valid delivery. Ladies and Gentlemen: The undersigned tenders to Kingfish Acquisition Corporation, a Delaware corporation (the "Purchaser"), upon the terms and subject to the conditions set forth in the Offer to Purchase dated June 11, 2002 (the "Offer to Purchase") and in the related Letter of Transmittal (which together constitute the "Offer"), receipt of which is acknowledged, the number of shares of common stock (the "Shares"), indicated below of Official Payments Corporation, a Delaware corporation, pursuant to the guaranteed delivery procedure set forth in Section 2 of the Offer to Purchase. Signature(s) _____________________________ Address (escrows) _________________________ Name(s) __________________________________ ___________________________________________ Zip Code __________________________________________ Area Code and Tel. No(s). _________________ Please Type or Print Number of Shares _________________________ (Check one if Shares will be tendered by book-entry transfer) Certificate Nos. (If Available) [ ] The Depository Trust Company [ ] Philadelphia Depository Trust Company __________________________________________ Dated ____________________________________
Guarantee (Not to be used for signature guarantee) The undersigned, a firm that is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States, guarantees delivery to the Depositary of either the certificates evidencing all tendered Shares, in proper form for transfer, or delivery of Shares pursuant to the procedure for book-entry transfer into the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company (each a "Book-Entry Transfer Facility"), in either case together with the Letter of Transmittal (or a facsimile of it), properly completed and duly executed, with any required signature guarantees and any other required documents, all within three (3) New York Stock Exchange trading days after the date hereof. ______________________________________ ______________________________________ Name of Firm Authorized Signature ______________________________________ Name _________________________________ Address Please Type or Print ______________________________________ Title ________________________________ Zip Code Area Code and Tel. No. _______________ Dated ________________________________
Note: Do not send certificates for shares with this form--certificates are to be delivered with your Letter of Transmittal. EX-99 6 ex-a1d.txt Offer to Purchase for Cash All of the Outstanding Shares of Common Stock of Official Payments Corporation at $3.00 net per share by Kingfish Acquisition Corporation a wholly-owned subsidiary of Tier Technologies, Inc. The Offer and withdrawal rights will expire at 5:00 p.m., New York City time, on Tuesday, July 9, 2002 unless the Offer is extended. To Our Clients: Enclosed for your consideration is an Offer to Purchase dated June 11, 2002 (the "Offer to Purchase") and the related Letter of Transmittal relating to an offer by Kingfish Acquisition Corporation, a Delaware corporation ("Purchaser") and a wholly-owned subsidiary of Tier Technologies, Inc., a California corporation, to purchase all of the outstanding shares of Common Stock (the "Shares") of Official Payments Corporation, a Delaware corporation (the "Company"), at a purchase price of $3.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). We are the holder of record of Shares held by us for your account. A tender of your Shares can be made only by us as the holder of record and pursuant to your instructions. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender Shares held by us for your account. We request instructions as to whether you wish to have us tender on your behalf any or all of the Shares held by us for your account, pursuant to the terms and conditions set forth in the Offer to Purchase. Your attention is invited to the following: 1. The tender price is $3.00 per Share, net to you in cash. 2. The Offer is being made for all of the outstanding Shares. 3. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn before the expiration of the Offer a total of at least a majority of the outstanding Shares (on a fully diluted basis). 4. The Offer and withdrawal rights will expire at 5:00 p.m., New York City time, on Tuesday, July 9, 2002 unless the Offer is extended. 5. Tendering stockholders will not be obligated to pay brokerage fees or commissions or stock transfer taxes on the purchase of Shares pursuant to the Offer. The Offer is not being made to, nor will tenders be accepted from, or on behalf of, holders of Shares residing in any jurisdiction in which the making or acceptance of the Offer would not be in compliance with the laws of that jurisdiction. If you wish to have us tender any or all of the Shares held by us for your account, please instruct us by completing, executing and returning to us the instruction form contained in this letter. If you authorize us to tender your Shares, all of your Shares will be tendered unless otherwise specified in the instruction form. Your instruction should be forwarded to us in ample time to permit us to submit a tender on your behalf before the expiration of the Offer. Instructions with Respect to the Offer to Purchase All of the Outstanding Shares of Common Stock of Official Payments Corporation The undersigned acknowledge(s) receipt of your letter enclosing the Offer to Purchase dated June 11, 2002 (the "Offer to Purchase") and the related Letter of Transmittal pursuant to an offer by Kingfish Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of Tier Technologies, Inc., a California corporation, to purchase all of the outstanding shares of Common Stock (the "Shares") of Official Payments Corporation, a Delaware corporation. This will instruct you to tender the number of Shares indicated below (or, if no number is indicated below, all Shares which are held by you for the account of the undersigned), upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal furnished to the undersigned. Number of Shares to be Tendered: SIGN HERE ____________ shares ___________________________________ Signature ___________________________________ Please print name(s) ___________________________________ ___________________________________ Address Area Code & Telephone Number ___________________________________ Tax Identification or Social Security Number(s) ___________________________________
EX-99 7 ex-a1e.txt Offer to Purchase for Cash All of the Outstanding Shares of Common Stock of Official Payments Corporation at $3.00 net per share by Kingfish Acquisition Corporation A wholly-owned subsidiary of Tier Technologies, Inc. The Offer and withdrawal rights will expire at 5:00 p.m., New York City time, on Tuesday, July 9, 2002 unless the Offer is extended. To: Brokers, Dealers, Commercial Banks, Trust, Companies and Other Nominees: We are asking you to contact your clients for whom you hold shares of Common Stock (the "Shares") of Official Payments Corporation, a Delaware corporation (the "Company"). Please bring to their attention as promptly as possible the offer being made by Kingfish Acquisition Corporation (the "Purchaser"), a Delaware corporation and a wholly-owned subsidiary of Tier Technologies, Inc., a California corporation ("Tier"), to purchase all of the outstanding Shares, at a purchase price of $3.00 per Share net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated June 11, 2002 (the "Offer to Purchase") and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). Enclosed for your information and for forwarding to your clients, for whose account you hold Shares registered in your name or in the name of your nominee, or hold Shares registered in their own names, are copies of the following documents: 1. The Offer to Purchase dated June 11, 2002; 2. The Letter of Transmittal to be used in accepting the Offer. Facsimile copies of the Letter of Transmittal may be used to accept the Offer; 3. A printed form of letter which may be sent to your clients for whose account you hold Shares in your name or in the name of your nominee, with space provided for obtaining the client's instructions with regard to the Offer; 4. A Notice of Guaranteed Delivery to be used to accept the Offer if certificates for Shares are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis; 5. Letter from the Company with attached Schedule 14D-9 (without exhibits); and 6. Guidelines of the Internal Revenue Service for certification of Taxpayer Identification Number on Substitute Form W-9. The board of directors of the Company has unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger are advisable, fair to, and in the best interest of, the Company's stockholders and has approved the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger and unanimously recommends that the Company's stockholders accept the Offer and tender their Shares pursuant thereto. We are asking you to contact your clients for whom you hold Shares registered in your name (or in the name of your nominee) or who hold Shares registered in their own names. Please bring the Offer to their attention as promptly as possible. The Purchaser will not pay any fees or commissions to any broker or dealer or any other person (other than the Information Agent) for soliciting tenders of Shares pursuant to the Offer. You will be reimbursed by the Purchaser for customary mailing expenses incurred by you in forwarding any of the enclosed materials to your clients. The Purchaser will pay or cause to be paid any stock transfer taxes payable on the sale and transfer of Shares to it or its order, except as otherwise provided in Instruction 6 of the Letter of Transmittal. Your prompt action is requested. We urge you to contact your clients as promptly as possible. Please note that the Offer and withdrawal rights will expire at 5:00 p.m., New York City time, on Tuesday, July 9, 2002 unless the Offer is extended. In order to take advantage of the Offer, (1) a duly executed and properly completed Letter of Transmittal, and, if necessary, any other required documents should be sent to the Depositary and (2) either certificates representing the tendered Shares should be delivered to the Depositary, or the Shares should be tendered by book-entry transfer into the Depositary's account at one of the book-entry transfer facilities (as defined in the Offer to Purchase), all in accordance with the instructions set forth in the Letter of Transmittal and the Offer to Purchase. If holders of Shares wish to tender, but it is impracticable for them to forward their certificates or other required documents to the Depositary before the expiration of the Offer or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures specified in Section 2 of the Offer to Purchase. Any inquiries you may have with respect to the Offer should be addressed to the Information Agent at the address and telephone number set forth on the back cover page of the Offer to Purchase. Additional copies of the above documents may be obtained from the Information Agent, at the address and telephone number set forth on the back cover of the Offer to Purchase. Very truly yours, KINGFISH ACQUISITION CORPORATION Nothing contained herein or in the enclosed documents shall constitute you or any person the agent of the Purchaser, Tier, the Company or the Depositary, or as agent of any affiliate of any of them, or authorize you or any other person to make any statements on behalf of any of them with respect to, or use any document in connection with, the Offer, except for statements expressly made in the Offer to Purchase or the Letter of Transmittal and the documents included herewith. EX-99 8 ex-a1g.txt [LOGO] FOR: Tier Technologies, Inc. Tier 1350 Treat Boulevard Expect A Lot Suite 250 Walnut Creek, CA 94596 CONTACT: Lori B. DePole, CFO Barbara Pivnicka, CMO 925-937-3950 For Immediate Release Corey Cutler/Kirin Smith Morgen-Walke Associates 212-850-5600 TIER TECHNOLOGIES COMMENCES TENDER OFFER FOR OFFICIAL PAYMENTS COMMON STOCK Walnut Creek, CA, June 11, 2002 - Tier Technologies, Inc. (Nasdaq: TIER) announced today that Kingfish Acquisition Corporation, its wholly-owned subsidiary, has commenced a cash tender offer to purchase all outstanding shares of common stock of Official Payments Corporation at a price of $3.00 per share, net to the seller in cash, without interest thereon. The offer is being made pursuant to the previously announced merger agreement among Tier Technologies, Inc., Kingfish Acquisition Corporation and Official Payments Corporation, and is conditioned upon, among other things, the tender of that number of shares of common stock which represents at least a majority of the shares outstanding on a fully-diluted basis (for purposes of the foregoing calculation, "fully-diluted" 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) and the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The offer and withdrawal rights are scheduled to expire at 5:00 p.m., New York City time, on July 9, 2002, unless the offer is extended. Adams, Harkness & Hill, Inc. is acting as the dealer manager for the offer and Mellon Investor Services LLC is acting as Information Agent and Depositary for the offer. Questions and requests for assistance or additional copies of the Offer to Purchase, Letter of Transmittal and other tender offer documents may be directed to Mellon at (866) 323-8166 or Adams, Harkness & Hill at (617) 371-3777. Tier is a vertically-focused consulting firm that provides business and information technology consulting, systems design and integration, transaction processing, business process outsourcing and business process reengineering for its clients primarily in the state and local government, healthcare, insurance and utilities markets. Tier brings specific industry knowledge, proven delivery capability and proprietary applications to its client relationships. The combination of domain expertise and technical capability allow Tier to provide solutions that link increased operating efficiencies with systems and technology improvements. Tier serves Fortune 1000 companies and government entities. This press release is neither an offer to purchase nor a solicitation of an offer to sell securities. The tender offer is made only through the Offer to Purchase and the related Letter of Transmittal which is being mailed to stockholders today. We urge investors and security holders to read the following documents regarding the tender offer and merger because they contain important information: (i) Tier's Tender Offer Statement on Schedule TO, including the Offer to Purchase, Letter of Transmittal and Notice of Guaranteed Delivery and (ii) Official Payment's Solicitation/Recommendation Statement on Schedule 14D-9. These documents and any amendments to these documents will be filed with the United States Securities and Exchange Commission, and may be obtained for free at the SEC's website (www.sec.gov). You may also obtain for free each of these documents from Mellon at (866) 323-8166 and 44 Wall Street, 7th Floor, New York, New York 10005. #### Tier..Expect A Lotsm EX-99 9 ex-a1h.txt This announcement is neither an offer to purchase nor a solicitation of an offer to sell these securities. The Offer is made only by the Offer to Purchase, dated June 11, 2002 (the "Offer to Purchase") and the related Letter of Transmittal and is being made to all holders of Shares. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction or any administrative or judicial action pursuant thereto. Notice of Offer to Purchase All Outstanding Shares of Common Stock of OFFICIAL PAYMENTS CORPORATION at $3.00 Net Per Share in Cash by Kingfish Acquisition Corporation a Wholly-Owned Subsidiary of TIER TECHNOLOGIES, INC. Tier Technologies, Inc., a California corporation ("Parent"), and its wholly-owned subsidiary, Kingfish Acquisition Corporation, a Delaware corporation ("Purchaser"), hereby offers to purchase all outstanding shares of common stock, par value $0.01 per share (the "Shares"), of Official Payments Corporation, a Delaware corporation (the "Company"), at a price of $3.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, constitute the "Offer"). - -------------------------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 p.m., NEW YORK CITY TIME, ON TUESDAY, JULY 9, 2002, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- The Offer is conditioned upon, among other things, there being validly tendered and not properly withdrawn prior to the Expiration Date that number of shares which would represent at least a majority of the Shares outstanding on a fully diluted basis (provided that for the purposes of the foregoing calculation, "fully-diluted" 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 is being made pursuant to an Agreement and Plan of Merger, dated as of May 30, 2002 (the "Merger Agreement"), by and among Parent, Purchaser and the Company. Pursuant to the Merger Agreement and in accordance with the Delaware General Corporation Law (the "DGCL"), as soon as practicable after the completion of the Offer and satisfaction or waiver, if permissible, of all conditions, including the purchase of Shares pursuant to the Offer and the approval and adoption of the Merger Agreement by the stockholders of the Company (if required by applicable law), Purchaser will be merged with and into the Company (the "Merger"), with the Company as the surviving corporation. At the effective time of the Merger, each Share then outstanding, other than Shares held by (i) the Company or any of its subsidiaries, (ii) Parent, Purchaser or any of its subsidiaries and (iii) stockholders who have properly exercised their dissenters' rights under the DGCL, will be cancelled and converted automatically into the right to receive $3.00 in cash, or any higher price per Share paid in the Offer, without interest. In connection with the Merger Agreement, certain stockholders of the Company, representing approximately 55.8% of the Shares outstanding on a fully-diluted basis, have executed a Stockholders Agreement, pursuant to which each such person has agreed to tender all Shares owned pursuant to the Offer, and in any event to vote in favor of the Merger Agreement and the Merger and against certain competing proposals to purchase the Company with respect to any Shares such stockholder may own as of the record date of a stockholder's meeting at which such matters will be considered. The Board of Directors of the Company has unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, are advisable, fair to, and in the best interests of, the Company's stockholders and has approved the Merger Agreement and the transactions contemplated thereby, including the Offer and Merger and unanimously recommends that the Company's stockholders accept the Offer and tender their Shares pursuant thereto. For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and therefore purchased, Shares that are validly tendered and not withdrawn only when and if it gives written notice to Mellon Investor Services LLC (the "Depositary") of its acceptance of the Shares for payment pursuant to the Offer. For Shares to be validly tendered pursuant to the Offer (a) the certificates for such Shares (or confirmation of receipt of such Shares pursuant to the procedure for book-entry transfer), together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), including any required signature guarantees, and any other documents required by the Letter of Transmittal, must be received prior to the Expiration Date by the Depositary at its address set forth on the back cover of the Offer to Purchase, or (b) the tendering stockholder must comply with the guaranteed delivery procedure set forth in the Offer to Purchase. If, prior to the Expiration Date, Purchaser increases the consideration offered to holders of Shares pursuant to the Offer, such increased consideration will be paid to all holders of Shares that are purchased pursuant to the Offer, whether or not such Shares were tendered prior to such increase in consideration. Under no circumstances will interest on the purchase price for Shares be paid by Purchaser by reason of any delay in making such payment. The term "Expiration Date" means 5:00 p.m., New York City time, on July 9, 2002, unless and until Purchaser, in accordance with the terms of the Offer and subject to the limitations in the Merger Agreement, shall have extended the period of time for which the Offer is open, in which event the term "Expiration Date" will mean the time and date at which the Offer, as so extended by Purchaser, will expire. Purchaser expressly reserves the right, subject to the terms of the Merger Agreement, to extend the Offer as more fully described in Section 1 of the Offer to Purchase. Any such extension will be followed by a public announcement thereof by no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the right of a tendering stockholder to withdraw such Shares. Without limiting the manner in which Purchaser may choose to make any public announcement, Purchaser currently intends to make announcements by issuing a press release to the Business Wire news service. Pursuant to Rule 14d-11 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), Purchaser may, subject to certain conditions, include a subsequent offering period following the expiration of the Offer. A subsequent offering period, if one is included, is not an extension of the Offer. A subsequent offering period would be an additional period of time, following the expiration of the Offer, within which stockholders may tender Shares not tendered in the Offer. Purchaser does not currently intend to include a subsequent offering period in the Offer, although it reserves the right to do so in its sole discretion. Except as otherwise provided below or as provided by applicable law, tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time on or prior to the Expiration Date and, unless theretofore accepted for payment as provided herein, may also be withdrawn at any time after August 10, 2002 (or such later date as may apply in case the Offer is extended). To be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution (as defined in the Offer to Purchase), the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been delivered pursuant to the procedures for book-entry transfer as set forth in the Offer, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures. Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn will be deemed not validly tendered for purposes of the Offer, but may be retendered at any subsequent time prior to the Expiration Date by following any of the procedures described in Offer. No withdrawal rights will apply to Shares tendered during any subsequent offering period and no withdrawal rights apply during any such subsequent offering period with respect to shares tendered in the Offer and accepted for payment. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by Purchaser, in its sole discretion, whose determination will be final and binding. The receipt of cash in exchange for Shares pursuant to the Offer (or the Merger) will be a taxable transaction for federal income tax purposes and may also be a taxable transaction under applicable state, local or foreign tax laws. Generally, a stockholder who receives cash in exchange for Shares pursuant to the Offer (or the Merger) will recognize gain or loss for federal income tax purposes equal to the difference (if any) between the amount of cash received and such stockholder's adjusted tax basis in the Shares exchanged therefor. Provided that such Shares constitute capital assets in the hands of the stockholder, such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the holder has held the Shares for more than one year at the time of the exchange. All stockholders should consult with their tax advisors as to the particular tax consequences of the Offer and the Merger to them, including the applicability and effect of the alternative minimum tax and any state, local or foreign income and other tax laws and of changes in such tax laws. For a more complete description of certain U.S. federal income tax consequences of the Offer and the Merger, see Section 5 of the Offer to Purchase. The Information required to be disclosed by paragraph (d)(1) of Rule 14d-6 under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Company has provided Purchaser with the Company's stockholder lists and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase, the related Letter of Transmittal and other materials will be mailed to record holders of Shares and will be furnished to brokers, dealers, banks and similar persons whose names, or the names of whose nominees, appear on the stockholder lists or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. The Offer to Purchase, the related Letter of Transmittal and Official Payment's Solicitation/Recommendation Statement on Schedule 14D-9 contain important information that should be read before any decision is made with respect to the Offer. These documents and any amendments to these documents will be filed with the United States Securities and Exchange Commission, and may be obtained for free at the SEC's website (www.sec.gov). Any questions or requests for assistance or for copies of the Offer to Purchase and the related Letter of Transmittal and other tender offer materials may be directed to the Information Agent as set forth below, and copies will be furnished promptly at the Company's expense. No fees or commissions will be payable to brokers, dealers or other persons (other than the Information Agent/Depositary and Dealer Manager) for soliciting tenders of Shares pursuant to the Offer. The Information Agent/Depositary for the Offer is: Mellon Investor Services LLC 44 Wall Street, 7th Floor New York, New York 10005 Call Toll Free: (866) 323-8166 The Dealer Manager for the Offer is: Adams, Harkness & Hill, Inc. 60 State Street Boston, Massachusetts 02109 (617) 371-3777 June 11, 2002 EX-99 10 ex-d1.txt 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 i 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 ii 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 iii 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 iv 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 1 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 2 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." 6 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 30 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 31 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. 33 (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. 35 (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. 39 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. 43 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 EX-99 11 ex-d2.txt STOCKHOLDERS AGREEMENT THIS STOCKHOLDERS AGREEMENT, dated as of May 30, 2002 (this "Agreement"), by and among Tier Technologies, Inc., a California corporation ("Parent"), Kingfish Acquisition Corporation, a Delaware corporation and wholly owned subsidiary of Parent ("Purchaser"), and each of the stockholders of the Company set forth on Schedule A hereto (each, a "Stockholder" and, collectively, the "Stockholders"). RECITALS: A. Parent, Purchaser and Official Payments Corporation, a Delaware corporation (the "Company") propose to enter into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to which Purchaser will acquire the Company in a tender offer followed by a merger on the terms and subject to the conditions set forth in the Merger Agreement. Except as otherwise defined herein, terms used herein with initial capital letters have the respective meanings ascribed thereto in the Merger Agreement. B. As of the date hereof, each Stockholder beneficially owns and is entitled to dispose of (or to direct the disposition of) and to vote (or to direct the voting of) the number of Shares of the Company set forth opposite such Stockholder's name on Schedule A hereto (such Shares, together with any other Shares the beneficial ownership of which is acquired by such Stockholder, through the exercise of the Stock Options as set forth on Schedule A or otherwise, during the period from and including the date hereof through and including the date on which this Agreement is terminated pursuant to Section 5.2 hereof, are collectively referred to herein as such Stockholder's "Subject Shares"). C. As a condition and inducement to their willingness to enter into the Merger Agreement, Parent and Purchaser have requested that each Stockholder agree, and each Stockholder has agreed, to enter into this Agreement. NOW, THEREFORE, in consideration of the foregoing and the representations, warranties and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: I. TENDER OF SUBJECT SHARES 1.1 Agreement to Tender Shares. Each Stockholder will tender or cause to be validly tendered (and not withdrawn) pursuant to and in accordance with the terms of the Offer and Rule 14d-2 promulgated under the Securities Exchange Act of 1934, not later than the tenth business day after commencement of the Offer and will cause to remain validly tendered and not withdrawn until termination of this Agreement, all of such Stockholder's Subject Shares. Each Stockholder hereby acknowledges that Purchaser's obligation to accept for payment and pay the Offer Price for Shares (including such Stockholder's Subject Shares) pursuant to the Offer is subject to the terms and conditions of the Offer set forth in the Merger Agreement. II. VOTING OF SUBJECT SHARES 2.1 Agreement to Vote Subject Shares. From the date hereof until this Agreement is terminated pursuant to Section 5.2, at any meeting of the stockholders of the Company called to consider and vote upon the adoption of the Merger Agreement (and at any and all postponements and adjournments thereof), and in connection with any action to be taken in respect of the adoption of the Merger Agreement by written consent of stockholders of the Company, each Stockholder will vote or cause to be voted (including by written consent, if applicable) all of such Stockholder's Subject Shares which it has the right to vote in favor of the adoption of the Merger Agreement and in favor of any other matter necessary or appropriate for the consummation of the transactions contemplated by the Merger Agreement that is considered and voted upon at any such meeting or made the subject of any such written consent, as applicable. At any meeting of the stockholders of the Company called to consider and vote upon any Adverse Proposal (and at any and all postponements and adjournments thereof), and in connection with any action to be taken in respect of any Adverse Proposal by written consent of stockholders of the Company, each Stockholder will vote or cause to be voted (including by written consent, if applicable) all of such Stockholder's Subject Shares which it has the right to vote against the adoption of such Adverse Proposal. For purposes of this Agreement, the term "Adverse Proposal" means (a) any Company Takeover Proposal, (b) any proposal or action that would reasonably be expected to result in a breach of any covenant, agreement, representation or warranty of the Company set forth in this Agreement or the Merger Agreement, or (c) the following actions (other than the Offer, the Merger and the other transactions contemplated by the Merger Agreement): (i) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company or the Company Subsidiary; (ii) a sale, lease, disposition or transfer of a material amount of assets of the Company or the Company Subsidiary, or a reorganization, recapitalization, dissolution or liquidation of the Company or the Company Subsidiary; and (iii) (1) any change in a majority of the persons who constitute the Company Board as of the date hereof; (2) any change in the present capitalization of the Company or any amendment of the Company's certificate of incorporation or bylaws, as amended to date; (3) any other material change in the Company's corporate structure or business; or (4) any other action that is intended, or could reasonably be expected, to impede, interfere with, delay, postpone, or adversely affect the Offer or the Merger and the other transactions contemplated by this Agreement and the Merger Agreement or increase the likelihood that such transactions will not be consummated. 2.2 Irrevocable Proxy. (a) Grant of Proxy. Each Stockholder hereby appoints Parent and any designee of Parent, each of them individually, such Stockholder's proxy and attorney-in-fact, with full power of substitution and resubstitution, to vote or act by written consent with respect to all of such Stockholder's Subject Shares which it has the right to vote (i) in accordance with Section 2.1 hereof and (ii) to sign its name (as a stockholder) to any consent, certificate or other document relating to the Company that the law of the State of Delaware may permit or require in connection with any matter referred to in Section 2.1. This proxy is given to secure the performance of the duties of such Stockholder under this Agreement and its existence will not be deemed to relieve the Stockholders of their obligations under Section 2.1. Each Stockholder affirms that this proxy is coupled with an interest and is irrevocable until termination of this 2 Agreement pursuant to Section 5.2, whereupon such proxy and power of attorney shall automatically terminate. Each Stockholder will take such further action or execute such other instruments as may be necessary to effectuate the intent of this proxy. For Subject Shares as to which the Stockholder is the beneficial but not the record owner, the Stockholder will cause any record owner of such Subject Shares to grant to Parent a proxy to the same effect as that contained herein. (b) Other Proxies Revoked. Each Stockholder represents that any proxy heretofore given in respect of such Stockholder's Subject Shares is not irrevocable, and hereby revokes any and all such proxies. III. REPRESENTATIONS AND WARRANTIES 3.1 Certain Representations and Warranties of the Stockholders. Each Stockholder, severally and not jointly, represents and warrants to Parent and Purchaser, as of the date hereof, as follows: (a) Ownership. Such Stockholder is the sole record and beneficial owner of the number of Shares and Stock Options set forth opposite such Stockholder's name on Schedule A hereto, has full and unrestricted power to dispose of and to vote such Shares. The Subject Shares are now, and at all times during the term hereof will be, held by such Stockholder, or by a nominee or custodian for the benefit of such Stockholder, free and clear of all Liens and proxies, except for any Liens or proxies arising hereunder. Except as set forth opposite the Stockholder's name on Schedule A hereto, such Stockholder (i) does not beneficially own any securities of the Company on the date hereof; (ii) does not, directly or indirectly, beneficially own or have any option, warrant or other right to acquire any securities of the Company that are or may by their terms become entitled to vote or any securities that are convertible or exchangeable into or exercisable for any securities of the Company that are or may by their terms become entitled to vote, nor is the Stockholder subject to any contract, commitment, arrangement, understanding or relationship (whether or not legally enforceable), other than this Agreement, that allows or obligates him to vote, dispose of or acquire any securities of the Company; and (iii) holds exclusive power to vote the Subject Shares and has not granted a proxy to any other person to vote the Subject Shares, subject to the limitations set forth in this Agreement. (b) Power and Authority; Execution and Delivery. Each Stockholder that is a limited partnership, limited liability company or corporation is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. Each Stockholder has all requisite power and authority, and if an individual, the legal capacity, to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and has taken all necessary action to authorize the execution, delivery and performance of this Agreement. This Agreement has been duly executed and delivered by the Stockholder and constitutes a valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms. (c) No Conflicts. The execution and delivery of this Agreement do not, and, subject to compliance with the HSR Act and appropriate filings under securities laws (which each Stockholder agrees to make promptly), to the extent applicable, the consummation of the 3 transactions contemplated hereby and compliance with the provisions hereof will not, conflict with, result in a violation or breach of, or constitute a default (or an event that, with notice or lapse of time or both, would result in a default) or give rise to any right of termination, amendment, cancellation, notice or acceleration under, (i) the Stockholder's certificate of incorporation, certificate of limited partnership, articles of organization, operating agreement, partnership agreement or similar constituent documents, (ii) any material contract, commitment, agreement, understanding, arrangement or restriction of any kind to which the Stockholder is a party or by which the Stockholder is bound, (iii) any injunction judgment, writ, decree, order or ruling applicable to the Stockholder or (iv) any law, statute, rule or regulation applicable to the Stockholder; except in the case of clauses (ii) and (iii) for violations, breaches or defaults that would not (1) impair the ability of the Stockholder to perform its obligations under this Agreement or (2) prevent or delay the consummation of any of the transactions contemplated hereby. (d) Brokers. Except as set forth in Section 3.01(n) of the Merger Agreement, no broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement or the Merger Agreement based upon arrangements made by or on behalf of the Stockholder that is or will be payable by the Company or the Company Subsidiary. 3.2 Representations and Warranties of Parent. Parent hereby represents and warrants as of the date hereof, that: (a) Due Incorporation. Each of the Parent and Purchaser is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has the corporate power to carry on its business as it is now being conducted and to own, operate or lease all of its properties and assets. (b) Due Authorization of Transaction; Binding Obligation. Each of Parent and Purchaser has full corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and the execution, delivery and performance of this Agreement by Parent and Purchaser 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 is the valid and binding obligation of Parent and Purchaser enforceable in accordance with its terms, subject to the qualification, however, that enforcement of the rights and remedies created hereby is subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general application relating to or affecting creditors' rights and to general equity principles. (c) Non-Contravention. The execution, delivery and performance of this Agreement by Parent and Purchaser and the consummation of the transactions contemplated hereby do not and will not (a) contravene the certificate of incorporation or bylaws or other charter or organizational documents of Parent or Purchaser, and (b) conflict with or result in a breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in any loss of any material benefit, or the creation of any Lien on any of the property or assets of the Parent and each of its subsidiaries pursuant to any judgment, decree, 4 order or ruling to which Parent and each of its subsidiaries is a party or by which it or any of its assets or properties is bound or affected, except for such contraventions, violations, conflicts, breaches, defaults, rights creation or lien creation which individually or in the aggregate would not prevent or materially delay the consummation of the transactions contemplated hereby or the performance by Parent or Purchaser of any of their respective obligations hereunder. IV. CERTAIN COVENANTS OF STOCKHOLDERS 4.1 Restriction on Transfer of Subject Shares, Proxies and Noninterference. No Stockholder will, directly or indirectly: (a) except pursuant to the terms of this Agreement and for the conversion of Subject Shares into the right to receive the Offer Price at the Effective Time pursuant to the terms of the Merger Agreement, offer for sale, sell, transfer, tender, pledge, encumber, gift, assign or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to or consent to the offer for sale, sale, transfer, tender, pledge, encumbrance, gift-over, assignment or other disposition of, any or all of such Stockholder's Subject Shares; (b) acquire any Shares or other securities of the Company (other than in connection with a transaction of the type described in Section 4.2) or enter into any contract, option, arrangement or other undertaking with respect to the direct or indirect acquisition of any interest in or the voting of any Subject Shares or any other securities of the Company; (c) except pursuant to the terms of this Agreement, grant any proxies or powers of attorney, deposit any Subject Shares into a voting trust or enter into a voting agreement with respect to any Subject Shares; or (d) take any action that would reasonably be expected to make any of its representations or warranties contained herein untrue or incorrect or have the effect of impairing the ability of such Stockholder to perform such Stockholder's obligations under this Agreement or preventing or delaying the consummation of any of the transactions contemplated hereby. 4.2 Adjustments. In the event (a) of any stock dividend, stock split, recapitalization, reclassification, combination or exchange of shares of capital stock or other securities of the Company on, of or affecting the Shares or the like or any other action that would have the effect of changing a Stockholder's ownership of the Company's capital stock or other securities or (b) a Stockholder becomes the beneficial owner of any additional Shares or other securities of the Company, then the terms of this Agreement will apply to the shares of capital stock held by the Stockholder immediately following the effectiveness of the events described in clause (a) or the Stockholder becoming the beneficial owner thereof, as described in clause (b), as though they were Subject Shares hereunder. Each Stockholder hereby agrees, while this Agreement is in effect, to promptly notify Parent of the number of any new Shares acquired by the Stockholder, if any, after the date hereof. 4.3 Takeover Proposals; Non-Solicitation. (a) Company Takeover Proposal. Each Stockholder will, and will cause its officers, directors, employees, agents or representatives (including any investment banker, financial advisor, attorney or accountant for such Stockholder) ("Representatives") to notify Parent, the Purchaser and the Company promptly, and in all events within 24 hours, (or will determine that Parent, the Purchaser and the Company have been notified) if any proposals are received by, any information is requested from, or any negotiations or discussions are sought to 5 be initiated or continued with such Stockholder or its Representatives in connection with any Company Takeover Proposal indicating, in connection with such notice, the name of the person indicating such Company Takeover Proposal and the material terms and conditions of any proposals or offers. Each Stockholder agrees, severally and not jointly, that he, she or it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to the possibility or consideration of any Company Takeover Proposal and will not take, authorize or permit any of its Representatives to take, any action that the Company would be prohibited from taking under Section 4.02 of the Merger Agreement. Such Stockholder will keep Parent, the Purchaser and the Company fully informed, on a current basis, of the status and terms of any Company Takeover Proposal. (b) Non-Solicitation. Each Stockholder shall not and shall not authorize or permit its Representatives to directly or indirectly to (i) initiate, solicit or encourage (including by way of furnishing information or assistance), or take any other action to facilitate the making of, any offer or proposal which constitutes or is reasonably likely to lead to any Company Takeover Proposal, (ii) enter into any agreement with respect to any Company Takeover Proposal, or (iii) in the event of an unsolicited Company Takeover Proposal for the Company, engage in negotiations or discussions with, or provide any information or data to, any person (other than Parent or any of its affiliates or representatives) relating to any Company Takeover Proposal. (c) Fiduciary Responsibilities. Notwithstanding any provision of this Section 4.3 or Section 4.6 of this Agreement to the contrary, (a) if any Stockholder is a member of the Company Board, such member of the Company Board may take actions in such capacity to the extent permitted by Section 4.02 of the Merger Agreement, and (b) if any Stockholder is an officer of the Company, such officer may take actions in such capacity to the extent directed to do so by the Company Board in compliance with Section 4.02 of the Merger Agreement. 4.4 Waiver of Appraisal Rights. Each Stockholder hereby waives any rights of appraisal or rights to dissent from the Merger that such Stockholder may have. 4.5 Nonexercise of Rights of First Refusal. No Stockholder will exercise any purchase right or right of first refusal that it may have with respect to any Shares of any other person in connection with any tender by such other person of such Shares pursuant to the Offer. 4.6 Cooperation. Each Stockholder will cooperate fully with Parent, Purchaser and the Company in connection with their respective reasonable best efforts to fulfill the conditions to (a) the Offer set forth in Annex A to the Merger Agreement and (b) the Merger set forth in Article V of the Merger Agreement. 4.7 Disclosure. Each Stockholder hereby authorizes Parent and Purchaser to publish and disclose in the Offer Documents, any announcement or disclosure required by the SEC and the NASDAQ Stock Market and, if approval of the Company's stockholders is required under applicable law, the Proxy Statement (including all documents and schedules filed with the SEC in connection with either of the foregoing), its identity and ownership of the Subject Shares and the nature of its commitments, arrangements and understandings under this Agreement. 6 V. MISCELLANEOUS 5.1 Fees and Expenses. Each party hereto will pay its own expenses incident to preparing for, entering into and carrying out this Agreement and the consummation of the transactions contemplated hereby. 5.2 Termination. This Agreement will terminate on the earliest to occur of (a) the Effective Time, (b) the date the Merger Agreement is terminated in accordance with its terms, or (c) September 30, 2002. This Agreement may be earlier terminated by the mutual consent of the Board of Directors of Parent and the Stockholders representing a majority of the Subject Shares subject to this Agreement. Except as set forth below, in the event of termination of this Agreement pursuant to this Section 5.2, this Agreement will become null and void and of no effect with no liability on the part of any party hereto and all proxies granted hereby will be automatically revoked; provided, however, that no such termination will relieve any party hereto from any liability for any breach of this Agreement occurring prior to such termination. Notwithstanding anything to the contrary contained in this Agreement, (a) if this Agreement is terminated for any reason, Sections 5.1, 5.5, 5.15 and 5.16 and this Section 5.2 will survive any termination of this Agreement indefinitely. 5.3 Extension; Waiver. Any agreement on the part of a party to waive any provision of this Agreement, or to extend the time for any performance hereunder, will be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise will not constitute a waiver of such rights. Any waiver by any party of a breach of any provision of this Agreement will not operate as or be construed as a waiver of any other breach of such provision or of any breach of any other provision of this Agreement. The failure of a party to insist upon strict adherence to any term of this Agreement or one or more sections hereof will not be considered a waiver or deprive that party of a right thereafter to insist upon strict adherence to that term or any other term of this Agreement. 5.4 Entire Agreement; No Third-Party Beneficiaries; Several Obligations. This Agreement and the Merger Agreement constitute the entire agreement among the parties hereto with respect to the subject matter hereof, and supersede all prior agreements and understandings, both written and oral, among the parties with respect to such matters. Neither the Merger Agreement nor this Agreement is intended to confer upon any person other than the parties hereto any rights or remedies. The obligations of, and the representations and warranties made by, each Stockholder shall be several and not joint and shall relate only to such Stockholder. 5.5 Governing Law. This Agreement will 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. 5.6 Notices. Any notice required to be given hereunder will be sufficient if in writing, and sent by facsimile transmission and by courier service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid), addressed as follows: 7 If to Parent or Purchaser: Tier Technologies, Inc. 1350 Treat Boulevard, Suite 250 Walnut Creek, CA 94596 Telecopy No.: (925) 937-3902 Attention: James L. Bildner With copies to: Farella Braun + Martel LLP 235 Montgomery St. San Francisco, CA 94104 Telecopy No.: (415) 954-4480 Attention: Bruce R. Deming, Esq. If to any Stockholder: To the address listed in Schedule A hereto. With copies to: The recipient listed in Schedule A hereto, or to such other address as any party specifies by written notice, such notice being deemed to have been delivered as of the date so telecommunicated, personally delivered or mailed. 5.7 Assignment. Neither this Agreement nor any of the rights, interests, or obligations under this Agreement may be assigned or delegated, in whole or in part (except by operation of law or otherwise), by any Stockholder without the prior written consent of Parent or by Parent without the consent of the applicable Stockholder (and then only with respect to such Stockholder), and any such assignment or delegation that is not consented to will be null and void; provided that this Agreement, together with any rights, interests, or obligations of Parent hereunder, may be assigned or delegated, in whole or in part, by Parent to any direct or indirect wholly owned subsidiary of Parent without the consent of or any action by any Stockholder upon notice by Parent to each Stockholder affected thereby as herein provided. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns (including, without limitation, any person to whom any Subject Shares are sold, transferred or assigned). 5.8 Further Assurances. Each Stockholder will execute and deliver such other documents and instruments and take such further actions as may be necessary or appropriate or as may be reasonably requested by Parent in order to ensure that Parent and Purchaser receive the full benefit of this Agreement. 5.9 Publicity. Parent, Purchaser, the Company and each Stockholder will consult with each other party before issuing any press release or otherwise making any public statements with respect to this Agreement or the Merger Agreement or the other transactions contemplated 8 hereby or thereby and will not issue any such press release or make any such public statement before such consultation, except as may be required by law or applicable stock exchange rules. 5.10 Enforcement. Irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, the parties will be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled at law or in equity. 5.11 Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such a manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. 5.12 Counterparts. This Agreement may be executed in one or more counterparts, all of which will be considered one and the same instrument and will become effective when one or more counterparts have been signed by each party and delivered to the other parties. 5.13 Headings. The descriptive headings contained herein are for convenience and reference only and will not affect in any way the meaning or interpretation of this Agreement. 5.14 Remedies Not Exclusive. All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity will be cumulative and not alternative, and the exercise of any thereof by either party will not preclude the simultaneous or later exercise of any other such right, power or remedy by such party. 5.15 Jurisdiction; Consent to Service of Process. 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. 5.16 Several Parties. All representations, warranties, covenants and agreements of each of the Stockholders shall be the several and not joint, representations, warranties, covenants and agreements of such Stockholders. 5.17 Waiver of Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUR OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 9 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be signed as of the day and year first written above. PARENT: Tier Technologies, Inc., a California corporation By: /s/ Jim Bildner -------------------------- Name: Jim Bildner Title: its CEO PURCHASER: Kingfish Acquisition Corporation, a Delaware corporation By: /s/ Jim Bildner -------------------------- Name: Jim Bildner Title: its CEO STOCKHOLDERS: Comerica Incorporated: Michaella Stern: By: /s/ Michael H. Michalak -------------------------- Name: Michael H. Michalak By: /s/ Michaella Stern Title: Senior Vice President ------------------- Name: Michaella Stern Title: n/a Beranson Holdings, Inc. By: /s/ Michaella Stern -------------------------- Name: Michaella Stern Title: President 10 Acknowledged and Approved Only For Purposes of Section 203 of the Delaware General Corporation Law: COMPANY: Official Payments Corporation, a Delaware corporation By: /s/ Thomas R. Evans -------------------------- Name: Thomas R. Evans Title: Chairman & CEO [Signature Page to Stockholders Agreement] 11 SCHEDULE A NAME AND ADDRESS OF STOCKHOLDER COMMON SHARES STOCK OPTIONS - ------------------------------- ------------- ------------- Comerica Incorporated 12,000,000 0 500 Woodward Avenue Detroit, Michigan 48275-4013 Attn: Corporate Planning & Development With copies to: Comerica Incorporated 500 Woodward Avenue Detroit, Michigan 48275-3391 Attn: General Counsel Beranson Holdings, Inc. 2,642,000 2328 Saddleback Dr. Danville, CA 94506 Attn: Michaella Stern With copies to: Gary Brett Beeler 18 Crow Canyon Court Suite 320 San Ramon, CA 94583 Michaella Stern 2328 Saddleback Dr. 199,252 Danville, CA 94506 Attn: Michaella Stern With copies to: Gary Brett Beeler 18 Crow Canyon Court Suite 320 San Ramon, CA 94583 TOTAL 14,642,000 199,252 EX-99 12 ex-d3.txt STRICTLY CONFIDENTIAL April 17, 2002 Tier Technologies Inc. 30 Rowes Wharf Suite 530 Boston, MA 02110 Attention: James Bildner Ladies and Gentlemen: In connection with your consideration of a possible transaction involving Official Payments Corporation (the "Company") you have requested information concerning the Company. As a condition to your being furnished with such information, you agree to treat any information concerning the Company which is furnished to you by or on behalf of the Company, whether furnished before or after the date of this letter and regardless of the manner in which it is furnished, together with analyses, compilations, studies or other documents or records prepared by you or any of your directors, officers, employees, affiliates, agents or advisors (including, without limitation, attorneys, accountants, consultants, bankers, financial advisors and any representatives of your advisors) (collectively, "Representatives") to the extent that such analyses, compilations, studies, documents or records contain or otherwise reflect or are generated from such information (hereinafter collectively referred to as the "Evaluation Material"), in accordance with the provisions of this agreement. The term "Evaluation Material" does not include information which (i) was or becomes generally available to the public other than as a result of a disclosure by you or your Representatives, (ii) was or becomes available to you on a non-confidential basis from a source other than the Company or its advisors provided that such source is not known to you to be bound by a confidentiality agreement with the Company or otherwise prohibited from transmitting the information to you by a contractual, legal or fiduciary obligation or (iii) was within your possession prior to its being furnished to you by or on behalf of the Company, as evidenced by your prior internal documentation, provided that the source of such information was not bound by a confidentiality agreement with the Company or otherwise prohibited from transmitting the information to you by a contractual, legal or fiduciary obligation. Any combination of information shall not be deemed to be within the foregoing exceptions because individual features of the information are in the public domain. You hereby agree that the Evaluation Material will be used solely for the purpose of evaluating a possible transaction between the Company and you, and not used for any commercial purpose, and that such Evaluation Material will be kept confidential by you and your Representatives and will not be disclosed to any third parties; provided, however, that (a) such Evaluation Material may be disclosed to your Representatives who need to know such information for the purpose of evaluating any such possible transaction between the Company and you (it being understood that such Representatives shall have been informed by you of the confidential and proprietary nature of the Evaluation Material, advised of this agreement and shall have agreed to be bound by the provisions hereof), and (b) any disclosure of such Evaluation Material may be made to which the Company consents in writing prior to disclosure. In any event, you shall be responsible for any breach of this agreement by any of your Representatives and you agree, at your sole expense, to take all reasonable measures (including but not limited to court proceedings) to restrain your Representatives from prohibited or unauthorized disclosure or use of the Evaluation Material. You further agree that the Evaluation Material that is in written form shall not be copied or reproduced at any time without the prior written consent of the Company, except for distribution to your Representatives in accordance with and subject to the provisions of this agreement. In addition, without the prior written consent of the Company, you will not, and will direct your Representatives not to, disclose to any person (i) the existence of this agreement and that the Evaluation Material has been made available to you or your Representatives, (ii) that discussions or negotiations are taking place concerning a possible transaction between the Company and you or (iii) any terms, conditions or other facts with respect to any such possible transaction, including the status thereof. In the event that you are requested or required (by oral questions, interrogatories, requests for information or documents, subpoena, civil investigative demand or other process) to disclose any Evaluation Material, it is agreed that you will provide the Company with prompt notice of any such request or requirement (written if practical) so that the Company may seek an appropriate protective order or waive your compliance with the provisions of this agreement. If, failing the entry of a protective order or the receipt of a waiver hereunder, you are, after consultation with the Company and after providing the Company with written opinion of legal counsel to that effect, legally compelled to disclose Evaluation Material, you may disclose only that portion of the Evaluation Material which you are legally compelled to disclose and will exercise reasonable efforts to obtain assurance that confidential treatment will be accorded to that portion of the Evaluation Material which is being disclosed. In any event, you will not oppose action by the Company to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Evaluation Material. You agree not to, and will cause your Representatives not to, initiate or maintain contact (except for those contacts made in the ordinary course of business) in connection with a potential transaction between you and the Company with any officer, director or employee of the Company or any other third party with whom the Company has a business relationship (including customers or suppliers) regarding the Company's business, operations, prospects or finances, except with the express written permission of the Company. For a period of three (3) years following the date hereof, you will not, directly or indirectly, solicit for employment any officer, director or senior level employee of the Company or any of its subsidiaries except that you shall not be precluded from hiring any such employee who has been terminated by the Company or its subsidiaries prior to commencement of employment discussions between you and such employee or who has come to you of their own initiative or in response to a general advertisement of employment opportunities by you. All (i) communications regarding this transaction, (ii) requests for additional information, (iii) requests for facility tours or management meetings, and (iv) discussions or questions regarding procedures, should be submitted only to persons at the Company specifically identified to you for this purpose. In consideration of your being furnished the Evaluation Materials and in view of the fact that the Evaluation Materials consist and will consist of confidential, non-public and proprietary information, you agree that for a period of three (3) years from the date of this agreement, that, without the prior written consent of the Company, neither you nor any of your affiliates will, directly or indirectly, alone or in concert with others: (i) purchase, offer or agree to purchase, or announce an intention to purchase any securities or assets of the Company or any subsidiary or rights or options to acquire the same; (ii) make, or in any way participate in any "solicitation" of "proxies" to vote or "consents" (as such terms are used in the rules and regulations of the Securities and Exchange Commission), or seek to advise or influence any person with respect to the voting of any voting securities of the Company; (iii) initiate or support any stockholder proposal with respect to the Company; (iv) make any public statements and/or announcement with respect to, or submit a proposal for, or offer of (with or without conditions) any extraordinary transaction involving the Company or its securities, assets or business or any subsidiary or division thereof, or of any successor thereto or any controlling person thereof; (v) seek or propose to influence or control the Company's management, board of directors, policies or affairs; (vi) disclose any intention, plan or arrangement inconsistent with the foregoing; (vii) form, join or in any way participate in a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Exchange Act") in connection with any of the foregoing, (viii) take any action that, in the sole judgement of the Company, may require the Company to make a public announcement concerning any of the foregoing, or (ix) encourage any of the foregoing. You understand and acknowledge that any and all information contained in the Evaluation Material is being provided without any representation or warranty, express or implied, as to the accuracy or completeness of the Evaluation Material, on the part of the Company. You agree that neither the Company nor any of its respective affiliates or representatives shall have any liability to you or any of your Representatives by virtue of this agreement. It is understood that the scope of any representations and warranties to be given by the Company will be negotiated along with other terms and conditions in arriving at a mutually acceptable form of definitive agreement should discussions between you and the Company progress to such a point. All Evaluation Material disclosed by the Company shall be and shall remain the property of the Company. In the event that the parties do not proceed with the transaction that is the subject of this letter within a reasonable time or within five days after being so requested by the Company, you shall return or destroy all documents thereof furnished to you by the Company. You will also return to Company or destroy all written material, memoranda, notes, copies, excerpts and other writings or recordings whatsoever prepared by you or your Representatives based upon, containing or otherwise reflecting any Evaluation Material. Any destruction of materials shall be verified by you in writing by one of your duly authorized officers. You agree that unless and until a definitive agreement regarding a transaction between the Company and you has been executed, neither the Company nor you will be under any legal obligation of any kind whatsoever with respect to such a transaction by virtue of this agreement except for the matters specifically agreed to herein. You further acknowledge and agree that the Company reserves the right, in its sole discretion, to reject any and all proposals made by you or any of your Representatives with regard to a transaction between the Company and you, to terminate discussions and negotiations with you or your Representatives at any time, to hold discussions and negotiations with one or more other parties regarding a potential transaction involving the Company, and to conduct any process for a transaction involving the Company as it may determine. It is understood and agreed that money damages would not be a sufficient remedy for any breach of this agreement and that the Company shall be entitled to specific performance and injunctive or other equitable relief as a remedy for any such breach and you further agree to waive any requirement for the security or posting of any bond in connection with such remedy. Such remedy shall not be deemed to be the exclusive remedy for breach of this agreement but shall be in addition to all other remedies available at law or equity to the Company. In the event of litigation relating to this agreement, if a court of competent jurisdiction determines in a final, non-appealable order that you or your Representatives have breached this agreement, then you shall reimburse the Company for its reasonable legal fees and expenses incurred in connection with such litigation, including any appeals therefrom. This agreement shall be governed and construed in accordance with the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof. You agree, on behalf of yourself and your Representatives, to submit to the jurisdiction of any court of competent jurisdiction located in the state of New York, County of New York to resolve any dispute relating to this agreement and waive any right to move to dismiss or transfer any such action brought in any such court on the basis of any objection to personal jurisdiction or venue. Your obligations under this agreement shall expire three (3) years from the date hereof, except as otherwise explicitly stated above. This agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. Please confirm that the foregoing is in accordance with your understanding of our agreement by signing and returning to us a copy of this letter. Very truly yours, OFFICIAL PAYMENTS CORPORATION By: /s/ Thomas R. Evans -------------------------------------------- Thomas R. Evans Chairman and Chief Executive Officer Accepted and agreed as of the date first written above: TIER TECHNOLOGIES INC. By: /s/ Jim Bildner -------------------------------------------- Name: Jim Bildner Title: its CEO EX-99 13 ex-d4.txt SECTION 5.06(a)(1) EMPLOYMENT AGREEMENT This agreement (the "Agreement") between OFFICIAL PAYMENTS CORPORATION, a Delaware corporation (the "Company") and wholly-owned subsidiary of Tier Technologies, Inc., a California Corporation ("Tier"), and ______________ (the "Employee"), is entered into as of this ___ day of May, 2002. This Agreement shall become effective only if, and when, the Company consummates the merger transaction (the "Effective Date") contemplated by the Agreement and Plan of Merger between the Company and Tier, dated as of May 30, 2002 and otherwise shall be null and void in its entirety. AGREEMENT In consideration of the mutual benefits derived from this Agreement and of the agreements, covenants and provisions hereof, the parties hereto agree as follows: 1. AT-WILL EMPLOYMENT. The Company hereby employs Employee in the capacity of _________. Employee agrees to perform such services as are customary to such office and as shall from time to time be assigned to him by the Company. The parties agree that employment at the Company is at will and may be terminated by either the Company or Employee at any time with or without cause and with or without notice. Employee acknowledges that Employee has no right to be employed for a specific term and no right to insist on specific grounds for termination. Employee acknowledges and agrees that the at will nature of this Agreement extends to all employment decisions and that any change in the terms and conditions of employment, including without limitation work assignments, production standards, job responsibilities, compensation and promotions, shall be at the Company's sole discretion. 2. COMPENSATION AND BENEFITS 2.1 Base Salary. In consideration of and as compensation for the services to be performed by the Employee hereunder, the Company shall pay the Employee a base salary (the "Base Salary") of not less than ____________ per year, payable semi-monthly in arrears in accordance with the Company's regular payroll practices. The Company shall review the Employee's Base Salary no less frequently than annually during the Term and, in its sole discretion, may increase the amount of the Employee's Base Salary to appropriately reflect the Employee's performance and any expansion of Employee's responsibilities. 2.2 Bonus. In the Company's sole discretion, Employee may be eligible to receive additional discretionary bonus compensation of up to $______ per year based on the Company's achievements and Employee's performance, in each case as determined by the Company. 2.3 Participation in Benefit Plans. The Employee shall be entitled to participate in any pension plans, profit-sharing plans and group insurance, medical, hospitalization, disability and other benefit plans maintained by Tier from time to time, as such are generally applicable to 1. employees of the Tier and to the extent Employee is eligible under the general provisions thereof. 2.4 Reimbursement of Expenses. The Company shall reimburse the Employee for all business expenses, including, without limitation, traveling, entertainment and similar expenses, incurred by the Employee on behalf of the Company if such expenses are ordinary and necessary business expenses incurred on behalf of the Company pursuant to the Company's standard expense reimbursement policy. The Employee shall provide the Company with such itemized accounts, receipts or documentation for such expenses as are required under the Company's policy regarding the reimbursement of such expenses. 2.5 Vacation and Personal Leave. The Employee shall accrue ______ days of paid vacation per year, pro-rated for any partial year of employment, subject to Company policy. The Employee shall also be entitled to paid personal leave in accordance with Company policy. 3. TERM AND TERMINATION 3.1 Termination. (a) Termination for Cause. The Company may terminate Employee's employment under this Agreement, in its sole discretion, "for cause." Grounds for the Company to terminate this Agreement "for cause" shall be limited to the occurrence of any of the following events: (i) the Employee's failure to substantially perform Employee's duties with the Company in good faith (provided in the case of illness, injury or disability that the Company has provided reasonable accommodation under applicable disabilities laws), after a demand for substantial performance is delivered to Employee by the Company which identifies, in reasonable detail, the manner in which the Company believes that the Employee has not substantially performed Employee's duties in good faith and such Employee has not, in the sole discretion of the Company, improved the performance of Employee's duties during a period of fourteen (14) days from such demand for substantial performance; (ii) the Employee's commission of any act which detrimentally affects the Company, including, without limitation, an act of dishonesty, fraud, willful disobedience, gross misconduct or breach of duty; (iii) the Employee's commission of any act in contravention of Employee's undertakings contained in Section 4 hereof; or (iv) the Employee's conviction of a felony or a misdemeanor involving dishonesty or moral turpitude. (b) Termination Without Cause. The Company may terminate Employee's employment under this Agreement without cause or notice at any time. (c) Effect of Termination. 2. (i) Upon the termination of the Employee's employment as a result of Employee's disability, the Employee shall be entitled to receive for an additional thirty (30) days after the date of such termination, Employee's Base Salary in effect at the time of termination and any and all benefits to which Employee is entitled on the date of such termination under the Company's pension, life, disability, accident and health and other benefit plans in accordance with the provisions of such plans. (ii) Upon termination of the Employee's employment as a result of Employee's death, the Employee's heirs, devisees, executors or other legal representatives shall receive for an additional thirty (30) days from the date of death, Employee's Base Salary in effect at the time of death. (iii) If the Employee's employment hereunder shall be terminated by the Company without cause, then the Employee shall be entitled to the Employee's Base Salary and accrued and unused vacation earned through the date of termination, subject to standard deductions and withholdings, and upon the Employee's furnishing to the Company an executed waiver and release of claims, in the form of which is attached hereto as Exhibit A, the Employee shall also be entitled to continuation of the Employee's Base Salary in effect at the time of termination for a period of _____ months, subject to standard deductions and withholdings. (iv) If the Employee's employment hereunder shall be terminated by the Company for cause or by the Employee by resignation, the Company shall have no further obligation to the Employee under this Agreement other than accrued Base Salary and other accrued benefits required by law, prorated to the date of termination. 4. NON-COMPETITION, NON-SOLICITATION AND CONFIDENTIALITY 4.1 Non-Competition. For a period of ____ months after the termination of Employee's employment, Employee shall not, either individually or as a partner, joint venturer, consultant, shareholder, member or Representative of another Person or otherwise, directly or indirectly, participate in, engage in, or have a financial or management interest in, promote, or assist any other Person in any business operation or any enterprise if such business operation or enterprise engages, or would engage, in a Restricted Business in a Restricted Area; provided, however, that Employee may own up to one percent of the outstanding equity securities of any Person. 4.2 Non-solicitation. For a period of one year after the termination of Employee's employment, Employee shall not, directly or indirectly (i) employ or seek to employ any Person who at the date of such termination, or within the twelve-month period preceding the date of such termination, was an employee, contractor or consultant of the Company, or otherwise solicit, encourage, cause or induce any such employee, contractor or consultant to terminate such relationship with the Company, or (ii) take any action that would interfere with the relationship of the Company with its respective clients or vendors. 4.3 Confidential Information. (a) The Employee acknowledges that the Confidential Information (as hereinafter defined) of the Company is valuable, special and unique to the Company; and that the 3. Company wishes to protect such Confidential Information by keeping it confidential for the use and benefit of the Company. Based on the foregoing, the Employee undertakes: (i) to keep any and all Confidential Information in trust for the use and benefit of the Company; (ii) except as required by the Employee's duties hereunder or as may be authorized in writing by the Company not at any time to disclose or use, directly or indirectly, any Confidential Information of the Company; (iii) to take all reasonable steps necessary, or reasonably requested by the Company, to ensure that all Confidential Information of the Company is kept confidential for the use and benefit of the Company; and (iv) upon termination of Employee's employment with the Company or at any other time the Company may in writing so request, to promptly deliver to the Company all materials constituting Confidential Information (including all copies thereof) that are in Employee's possession or under Employee's control. Further, the Employee undertakes that, if requested by the Company, Employee shall return any Confidential Information pursuant to this subsection and shall not make or retain any copy of or extract from such materials. 4.4 For purposes of this Agreement, "Person" means an individual, a partnership, a limited liability company, a joint venture, a corporation, a trust, an unincorporated organization, a division or operating group of any of the foregoing, a government or any department or agency thereof or any other entity. "Representative" means any officer, director, principal, agent, employee, consultant or other representative of a Person. "Restricted Business" means any business involved in the processing of payments to government entities or any other business in which Company is actively engage on the date of the termination of Employee's employment. "Restricted Area" means any country in which Company conducts a Restricted Business on the date of the termination of Employee's employment with Company. "Confidential Information" means any and all information developed by or for the Company of which the Employee gained knowledge by reason of Employee's employment with the Company or Tier under this Agreement that is not generally known in the industry in which the Company is or may become engaged. Confidential Information includes, but is not limited to, any and all information developed by or for the Company or Tier or customers of the Company or Tier, concerning plans, marketing and sales methods, materials, processes, business forms, procedures, devices used by the Company or contractors or customers with which the Company has dealt during the period of employment, plans for development of new products, services and expansion into new areas or markets, internal operations and any trade secrets and proprietary information of any type owned by the Company together with all written, graphic and other materials relating to all or any part of the same. 4.5 Remedies. (a) Injunctive Relief. Employee acknowledges and agrees that the covenants and obligations contained in Sections 4.1, 4.2 and 4.3 hereof relate to special, unique and extraordinary matters and that a violation of any of the terms of said Sections will cause the 4. Company irreparable injury for which adequate remedy at law is not available. Therefore, Employee agrees that the Company shall be entitled to an injunction, restraining order, or other equitable relief from any court of competent jurisdiction, restraining the Employee from committing any violation of such covenants and obligations. (b) Remedies Cumulative. The Company's rights and remedies in respect of this Section are cumulative and are in addition to any other rights and remedies the Company may have at law or in equity. 5. MISCELLANEOUS 5.1 Notices. Any written notice, required or permitted under this Agreement, shall be deemed sufficiently given if either hand delivered or by fax (with written confirmation of receipt) or nationally recognized overnight courier. Written notices must be delivered to the receiving party at its address or facsimile number on the signature page of this Agreement. The parties may change the address or facsimile number at which written notices are to be received in accordance with this Section. 5.2 Arbitration. All parties agree that to the fullest extent permitted by law, any and all controversies between them, including whether any termination is with or without cause shall be submitted for resolution to binding arbitration. This means that all parties agree that arbitration shall be their exclusive forum for resolving disputes between them. All parties expressly waive their entitlement, if any, to have controversies between them decided by a court or jury. 5.3 Prevailing Party. If any dispute arises between the parties hereto concerning this Agreement or their respective rights, duties and obligations hereunder, the party prevailing in such proceeding shall be entitled to reasonable attorney's fees and costs, in addition to any other relief that may be granted. 5.4 Assignment. The Employee may not assign, transfer or delegate his rights or obligations hereunder, and any attempt to do so shall be void. This Agreement shall be binding upon and shall inure to the benefit of the Company and its successors and assigns. 5.5 Entire Agreement. This Agreement contains the entire agreement of the parties hereto with respect to the subject matter hereof, and all other prior agreements, written or oral, are hereby merged herein and are of no further force or effect. This Agreement may be modified or amended only by a written agreement that is signed by the Company and the Employee. No waiver of any section or provision of this Agreement shall be valid unless such waiver is in writing and signed by the party against whom enforcement of the waiver is sought. The waiver by the Company of any section or provision of this Agreement shall not apply to any subsequent breach of this Agreement. Captions to the various Sections of this Agreement are for the convenience of the parties only and shall not affect the meaning or interpretation of this agreement. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but together they shall constitute one and the same instrument. 5.6 Severability. The provisions of this Agreement shall be deemed severable, and if any part of any provision is held illegal, void or invalid under applicable law, such provision may 5. be changed to the extent reasonably necessary to make the provision, as so changed, legal valid and binding. If any provision of this Agreement is held illegal, void or invalid in its entirety, the remaining provisions of this Agreement shall not in any way be affected or impaired but shall remain binding in accordance with their terms. 5.7 Continuing Obligations. The provisions contained in Sections 4, 5.2, 5.4 and 5.7 of this Agreement shall continue and survive the termination of this Agreement. 5.8 Applicable Law. This Agreement and the rights and obligations of the Company and the Employee hereunder shall be governed by and construed and enforced under the laws of the __________, without reference to any principles of conflict of laws. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. OFFICIAL PAYMENTS CORPORATION By: -------------------------------- Print Name: --------------------- Title: -------------------------- ----------------------------------------- [EMPLOYEE] Address: Facsimile: ------------------------------- 6. EXHIBIT A RELEASE AND WAIVER OF CLAIMS In consideration of the payments and other benefits set forth in Section 3.2(d)(iii) of the Employment Agreement dated May __ 2002, to which this form is attached, I, ________, hereby furnish Tier Technologies, Inc. (the "Company"), with the following release and waiver (the "Release and Waiver"). I hereby release, and forever discharge the Company, its officers, directors, agents, employees, stockholders, successors, assigns, affiliates, parent, subsidiaries, and benefit plans, of and from any and all claims, liabilities, demands, causes of action, costs, expenses, attorneys' fees, damages, indemnities and obligations of every kind and nature, in law, equity, or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed, arising at any time prior to and including my employment termination date with respect to any claims, including but not limited to those claims relating to my employment and the termination of my employment; including but not limited to, claims pursuant to any federal, state or local law relating to employment, including, but not limited to, discrimination claims, claims under any local statute governing discrimination, and the Federal Age Discrimination in Employment Act of 1967, as amended ("ADEA"), or claims for wrongful termination, breach of the covenant of good faith, contract claims, tort claims, and wage or benefit claims, including but not limited to, claims for salary, bonuses, commissions, stock, stock options, vacation pay, fringe benefits, severance pay or any form of compensation. I also acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." I hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to any claims I may have against the Company. I acknowledge that, among other rights, I am waiving and releasing any rights I may have under ADEA, that this Release and Waiver is knowing and voluntary, and that the consideration given for this Release and Waiver is in addition to anything of value to which I was already entitled as an employee of the Company. I further acknowledge that I have been advised, as required by the Older Workers Benefit Protection Act, that: (a) the Release and Waiver granted herein does not relate to claims which may arise after this Release and Waiver is executed; (b) I have the right to consult with an attorney prior to executing this Release and Waiver (although I may choose voluntarily not to do so); and if I am over 40 years of age upon execution of this Release and Waiver: (c) I have twenty-one (21) days from the date of termination of my employment with the Company in which to consider this Release and Waiver (although I may choose voluntarily to execute this Release and Waiver earlier); (d) I have seven (7) days following the execution of this Release and Waiver to revoke my consent to this Release and Waiver; and (e) this Release and Waiver shall not be effective until the seven (7) day revocation period has expired. Date: __________________ By: ------------------------------------- Print Name: ____________ -----END PRIVACY-ENHANCED MESSAGE-----