AGREEMENT
EXHIBIT
1
AGREEMENT
This
Agreement dated this 25th day of February, 2010 (this “Agreement”), is made by and
among Discovery Equity Partners, L.P., an Illinois limited partnership (“Discovery Equity Partners”),
Discovery Group I, LLC, a Delaware limited liability company (“Discovery Group I”), Xxxxxx
X. Xxxxxxxx (“Xx.
Xxxxxxxx”), and Xxxxxxx X. Xxxxxx (“Xx. Xxxxxx,” and collectively
with Discovery Equity Partners, Discovery Group I, Xx. Xxxxxxxx, and their
respective Affiliates (as hereafter defined), “Discovery Group”), and Tier
Technologies, Inc., a Delaware corporation (together with its subsidiaries, the
“Company”).
WHEREAS,
the Company intends to file a proxy statement on Schedule 14A with the
Securities and Exchange Commission (the “SEC”) setting forth its
intent to solicit proxies for use at the Company’s 2010 annual meeting of
stockholders (the “Annual
Meeting”) in connection with the election of the Board of Directors of
the Company (the “Board”);
WHEREAS,
Discovery Group (1) notified the Company by letter dated January 6,
2010 (the “Notice of Intent to
Nominate”) that Discovery Group intends to nominate three individuals for
election to the Board at the Annual Meeting and may conduct a solicitation
permitted under Rule 14a-2(b)(2) of the rules and regulations under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and
(2) filed an amendment to its Schedule 13D (the “Schedule 13D”) on
January 7, 2010 with the SEC reflecting the Notice of Intent to Nominate;
and
WHEREAS,
the Company and Discovery Group have determined that the interests of the
Company and its stockholders would best be served by avoiding the substantial
expense, disruption, and adverse publicity that would result from a proxy
contest in connection with the Annual Meeting;
NOW,
THEREFORE, in consideration of the foregoing premises and the respective
representations, warranties, and agreements hereinafter set forth, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, hereby
agree as follows
Section
1. Board Composition;
Recommendation; Proxy Statement.
(a) The Board’s
nominees for election to the Board at the Annual Meeting will be Xxxxxxx X.
Xxxxxx, Xxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxx, Xxxxx X. Xxx,
Xxxxxx X. Xxxxxxxx, and Xxxxxxx X. Xxxxx (collectively, the “Nominees”), each of whom
currently serves on the Board. The Board will recommend that the
stockholders of the Company vote to elect the Nominees as all the directors of
the Company.
(b) Simultaneously with
the Company’s execution of this Agreement, the Board has set the size of the
Board, as of the date of the Annual Meeting, at seven directors and, at the
recommendation of the Company’s Governance and Nominating Committee (the “Nominating Committee”), has
nominated each of the Nominees.
(c) The Company
shall prepare and file with the SEC a preliminary proxy statement and a
definitive proxy statement (the “Proxy Statement”), in each
case that gives effect to the foregoing.
Section
2. Discovery Group; Voting and
Recommendation.
(a)
Discovery Group shall promptly file an amendment to the Schedule 13D,
reporting the execution and delivery of this Agreement, amending applicable
items to set forth the matters contained in this Agreement, and appending this
Agreement as an exhibit thereto.
(b) Discovery
Group shall not nominate any of the individuals named in the Notice of Intent to
Nominate, or any other individuals, for election to the Board at the Annual
Meeting. Discovery Group shall cease any and all efforts with respect
to the solicitation of proxies for the Annual Meeting and shall not conduct any
solicitation of proxies, including a solicitation permitted under Rule
14a-2(b)(2) under the Exchange Act, in connection with the Annual
Meeting.
(c) Discovery
Group shall cause all shares of the Voting Securities (as hereafter defined)
that it beneficially owns (as determined pursuant to Rule 13d-3 of the Exchange
Act) as of the record date for the Annual Meeting to be present for quorum
purposes at the Annual Meeting and shall vote all such shares or cause all such
shares to be voted in favor of the election of each of the Nominees at the
Annual Meeting. Discovery Group shall not vote or cause to be voted
any shares as proxy for any other person except in favor of the election of each
of the Nominees at the Annual Meeting.
Section
3. Unavailable
Nominees. If, prior to the Annual Meeting, a Nominee becomes
unavailable for any reason to stand for election or to serve as a director, the
Nominating Committee, which currently includes Xx. Xxxxxx, shall recommend the
substitution of a replacement candidate, and the Board shall promptly nominate
and recommend such replacement candidate for the vacant Board
seat. Each person nominated in accordance with the preceding sentence
shall be a “Nominee” for purposes of this Agreement, including Section 2(c)
hereof.
Section
4. Expenses. Within
five business days after the Annual Meeting, the Company shall pay Discovery
Group $175,000, which the parties agree is the amount required to reimburse
Discovery Group for its actual out-of-pocket fees and expenses (including,
without limitation, fees and disbursements of counsel) incurred by Discovery
Group in connection with the Company’s 2009 annual meeting of
stockholders. All other fees and expenses incurred by each of the
parties hereto in connection with the matters contemplated by this Agreement
shall be borne by such party.
Section
5. Board Leadership
Structure. At the organizational meeting of the Board
occurring after the Annual Meeting, or if the Board does not hold an
organizational meeting, then no later than the close of the first meeting of the
Board after the Annual Meeting, the Board will separate the board chair and
principal executive officer positions by electing as chairman an individual who
is not also serving as the Company’s chief executive officer.
Section
6. Acceleration of
Vesting. The Company shall accelerate the vesting of the
unvested portion of the 9,000 restricted stock units (“RSUs”) that were issued to
Xx. Xxxxxxxx upon his election to the Board, and the unvested portion of the
9,000 RSUs that were issued to Xx. Xxxxxx upon his election to the Board, each
such acceleration to be effective upon the expiration of the term of Xx. Xxxxxx
and Xx. Xxxxxxxx as a director. Xx. Xxxxxx and Xx. Xxxxxxxx
acknowledge that they will receive payment of their RSUs on the third
anniversary of the date of grant of the RSUs, unless payment is accelerated in
connection with a “Change in Control” as provided in their respective RSU grant
agreements.
Section
7. Public
Statements. Upon execution of this Agreement, the Company and
Discovery Group shall issue a joint press release in the form attached hereto as
Exhibit A. None of the parties hereto shall (and the Company
shall instruct its directors and officers not to) make any public statements
(including in any filing with the SEC or any other regulatory or governmental
agency, including any stock exchange) that are inconsistent with, or otherwise
contrary to, the statements in the first three paragraphs of the press release
issued pursuant to this Section 7 or the terms of this Agreement, except
(a) with the prior written consent of the other party or (b) as
required by applicable law, rules, regulations, or court order, or the rules of
any stock exchange on which such party’s securities are traded; provided that in the case of
clause (b), the disclosing party shall, to the extent reasonably practicable,
provide the other parties with an opportunity to review such statements prior to
release to the extent feasible in complying with applicable law.
Section
8. Representations and
Warranties.
(a)
Discovery Group represents and warrants as follows:
(i)
Discovery Group has the power and authority to execute, deliver, and carry
out the terms and provisions of this Agreement and to consummate the
transactions contemplated hereby and thereby.
(ii) This
Agreement has been duly and validly authorized, executed, and delivered by
Discovery Group, constitutes a valid and binding obligation and agreement of
Discovery Group, and is enforceable against Discovery Group in accordance with
its terms.
(iii) The
members of Discovery Group beneficially own, directly or indirectly, an
aggregate of 2,459,404 shares of Common Stock, and such shares of Common Stock
constitute all of the Voting Securities of the Company beneficially owned by the
members of Discovery Group.
(b) The
Company represents and warrants as follows:
(i)
The Company has the power and authority to execute, deliver, and
carry out the terms and provisions of this Agreement and to consummate the
transactions contemplated hereby.
(ii) This
Agreement has been duly and validly authorized, executed, and delivered by the
Company, constitutes a valid and binding obligation and agreement of the
Company, and is enforceable against the Company in accordance with its
terms.
Section
9. Specific
Performance. Each of Discovery Group, on the one hand, and the
Company, on the other hand, acknowledges and agrees that irreparable injury to
the other party hereto would occur in the event any of the provisions of this
Agreement were not performed in accordance with its specific terms or were
otherwise breached, and that such injury would not be adequately compensable in
damages. It is accordingly agreed that Discovery Group, on the one
hand, and the Company, on the other hand, shall each be entitled to specific
enforcement of, and injunctive relief to prevent any violation of, the terms
hereof and the other party hereto will not take any action, directly or
indirectly, in opposition to the party seeking relief on the grounds that any
other remedy or relief is available at law or in equity, and each party further
agrees to waive any requirement for the security or posting of any bond in
connection with such remedy.
Section
10. Certain
Definitions. As used in this Agreement, (a) the term
“Affiliate” has the
meaning specified by Rule 12b-2 under the Exchange Act; (b) the term “Common Stock” shall mean the
common stock of the Company, par value $0.01 per share; (c) the term “Person” shall mean any
individual, partnership (whether general or limited), corporation, limited
liability company, joint venture, or other entity, group, syndicate, trust,
government or agency thereof, or any other association or entity whatsoever;
(d) the term “Voting
Securities” shall mean the Common Stock and any other securities of the
Company entitled to vote in the election of directors, or securities convertible
into, or exercisable or exchangeable for Common Stock or other securities
entitled to vote in the election of directors, whether or not subject to the
passage of time, contingencies, contractual restrictions, or any combination
thereof (including any derivative securities representing interests in Common
Stock); (e) the term “Business Day” shall mean each
Monday, Tuesday, Wednesday, Thursday, and Friday that is not a day on which
banking institutions in New York City are generally authorized or obligated by
law or executive order to close; and (f) “beneficial ownership” is
determined pursuant to Rule 13d-3 of the Exchange Act, and the terms
“beneficially own,” “beneficial owner,” “beneficial ownership,” and variations
thereof have the meanings determined in accordance with Rule 13d-3 of the
Exchange Act.
Section
11. No
Waiver. Any waiver by any party of a breach of any provision
of this Agreement shall not operate as or be construed to be 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 on one or more occasion shall not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement.
Section
12. Successors and Assigns;
Assignment. All the terms and provisions of this Agreement
shall inure to the benefit of, and shall be enforceable by, the successors and
assigns of each of the parties hereto. No party may assign either
this Agreement or any of its rights, interests, or obligations hereunder without
the prior written approval of the other parties.
Section
13. Entire Agreement;
Amendments; Interpretation and Construction.
(a) This
Agreement contains the entire understanding of the parties with respect to its
subject matter. There are no restrictions, agreements, promises,
representations, warranties, covenants, or other undertakings among the parties
with respect to the subject matter of this Agreement other than those expressly
set forth in this Agreement.
(b) This
Agreement may be amended only by a written instrument duly executed by the
parties hereto or their respective successors or permitted assigns.
(c) Each
of the parties hereto acknowledges that it has been represented by counsel of
its choice throughout all negotiations that have preceded the execution of this
Agreement, and that it has executed the same with the advice of said
counsel. Each party and its counsel cooperated and participated in
the drafting and preparation of this Agreement and the documents referred to
herein, and any and all drafts relating thereto exchanged among the parties
shall be deemed the work product of all of the parties and may not be construed
against any party by reason of its drafting or
preparation. Accordingly, any rule of law or any legal decision that
would require interpretation of any ambiguities in this Agreement against any
party that drafted or prepared it is of no application and is hereby expressly
waived by each of the parties hereto, and any controversy over interpretations
of this Agreement shall be decided without regard to events of drafting or
preparation.
(d) When
reference is made in this Agreement to a Section or subsection, such reference
shall be to a Section or subsection of this Agreement unless otherwise
indicated. 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,” “hereby,” 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.
Section
14. Headings. The
section headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement.
Section
15. Notices. All
notices, demands, and other communications to be given or delivered under, or by
reason of, the provisions of this Agreement shall be in writing and shall be
deemed to have been given (a) when delivered by hand (with written
confirmation of receipt), (b) upon sending (on the date sent if a Business
Day, or if not sent on a Business Day, the first Business Day thereafter) if
sent by facsimile to the facsimile number below, with electronic confirmation of
sending, provided,
however, that in each case notice by facsimile shall be deemed to have
been given only if a copy is sent within one Business Day thereafter by
registered mail, return receipt requested, in each case to the appropriate
mailing addresses set forth below, (c) one (1) Business Day after being
sent by a nationally recognized overnight carrier to the addresses set forth
below, or (d) when actually delivered if sent by any other method that
results in delivery (with written confirmation of receipt):
If to Discovery Group,
to:
Discovery
Equity Partners, L.P.
c/o
Discovery Group I, LLC
000 Xxxxx
Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxxxxx 00000
Attention: Xxxxxxx
X. Xxxxxx
Facsimile: 000-000-0000
If to the Company,
to:
Tier
Technologies, Inc.
00000
Xxxxxxxxx Xxxx., 0xx xxxxx
Xxxxxx,
XX 00000
Attention: Chief
Executive Officer
Facsimile: 000-000-0000
in each
case, or to such other address as the Person to whom notice is given may have
previously furnished to the others in writing in the manner set forth
above.
Section
16. Governing
Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware without reference
to the conflict of laws principles thereof.
Section
17. Consent to
Jurisdiction. The parties hereby irrevocably and
unconditionally consent to the exclusive jurisdiction of the courts of the State
of Delaware located in Wilmington, Delaware for any action, suit, or proceeding
arising out of or relating to this Agreement. The parties further
hereby irrevocably and unconditionally waive any objection to the laying of
venue of any action, suit, or proceeding arising out of or relating to this
Agreement in such courts and hereby further irrevocably and unconditionally
waive and agree not to plead or claim in any such court that any such action,
suit, or proceeding brought in any such court has been brought in an
inconvenient forum.
Section
18. Counterparts. This
Agreement may be executed in counterparts and may be exchanged by PDF or
facsimile, each of which shall be an original, but all of which together shall
constitute one and the same Agreement.
Section
19. Severability. If
any provision of this Agreement or the application thereof to any Person or
circumstance is determined by a court of competent jurisdiction to be invalid,
void, or unenforceable, the remaining provisions hereof, or the application of
such provision to Persons or circumstances other than those as to which it has
been held invalid or unenforceable, will remain in full force and effect and
shall in no way be affected, impaired, or invalidated thereby, so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such an
occurrence, the parties shall negotiate in an effort to agree upon a suitable
and equitable substitute provision to effect the original intent of the
parties.
Section
20. No Third Party
Beneficiaries. This Agreement is solely for the benefit of the
parties hereto and is not enforceable by any other Person.
[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as
of the day and year first above written.
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DISCOVERY
EQUITY PARTNERS, L.P.
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By:
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Discovery
Group I, LLC,
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its
general partner
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By:
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/s/ Xxxxxxx X. Xxxxxx
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Name:
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Xxxxxxx
X. Xxxxxx
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Title:
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Managing
Member
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DISCOVERY
GROUP I, LLC
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By:
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/s/ Xxxxxxx X. Xxxxxx
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Name:
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Xxxxxxx
X. Xxxxxx
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Title:
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Managing
Member
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/s/ Xxxxxx X. Xxxxxxxx
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Name:
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Xxxxxx
X. Xxxxxxxx
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/s/ Xxxxxxx X. Xxxxxx
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Name:
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Xxxxxxx
X. Xxxxxx
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TIER
TECHNOLOGIES, INC.
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By:
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/s/ Xxxxxx X. Xxxxxxxx
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Name:
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Xxxxxx
X. Xxxxxxxx
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Title:
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Chief
Executive Officer and
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Chairman
of the Board
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